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2012 (9) TMI 86 - AT - Income TaxAddition made u/s. 69C - survey conducted u/s. 133A - Held that - It is seen from the Agreement of Sale that an agreement is entered into between Shri N.R. Srinivas and others on the one hand and the assessee-company and Shri M. Sudhakar Reddy on the other hand for purchase of 12 acres 38 guntas of agricultural land for a total consideration of Rs. 1.95 crores, thus when the Agreement of Sale as well as the cash receipts indicate that the assessee-company is not the only one but transaction for purchase was made jointly with others addition should not have been made at the hands of assessee alone. As one of the promoters of the company had claimed that the entire amount of Rs. 1.95 crores was advanced by him for payment to the vendors with the confirmation letter it was the duty of the AO to make proper enquiry for finding out the genuineness of the confirmation letter and claim of payment but neither the promoter was summoned for examination nor has made any attempt to find out whether sufficient fund was available with promoter for making payment of Rs. 1.95 crores in cash - restore the matter back to the Assessing Officer who shall conduct necessary enquiry with regard to the payment - in favour of assessee for statistical purposes. Disallowance made u/s. 40 (a) (ia) - Held that - As decided in case of Merilyn Shipping & Transports 2012 (4) TMI 290 - ITAT VISAKHAPATNAM section 40(a)(ia) is applicable only to expenditure which is payable as on 31st March of every year and cannot be invoked to disallow the amounts which are already been paid during the previous year, without deducting tax at source - Since the amount has been paid during the relevant previous year, no disallowance could be made u/s. 40 (a) (ia) - in favour of assessee.
Issues:
1. Addition made under section 69C of the Income-tax Act, 1961. 2. Disallowance under section 40A(3) of the Act. 3. Disallowance under section 40(a)(ia) of the Act. Addition under section 69C of the Income-tax Act: The case involved an appeal against an order of the CIT(A) regarding an addition made under section 69C of the Income-tax Act. The dispute arose from an Agreement of Sale for land where the assessee-company and another individual were to purchase land for Rs. 1.95 crores. The Assessing Officer contended that the entire amount was paid in cash by the assessee-company and another individual, leading to the addition under section 69C. The CIT(A) upheld the addition, emphasizing that the payment was made by the assessee-company based on the Agreement of Sale and cash receipts. However, the appellant argued that the payment was made by a promoter of the company, and proper enquiry was necessary to establish the source of funds. The Tribunal agreed, directing the Assessing Officer to investigate the payment source and the genuineness of the promoter's claim, emphasizing the need for conclusive evidence before making such additions. Disallowance under section 40A(3) of the Act: The issue of disallowance under section 40A(3) of the Act was raised as a consequential matter to the addition under section 69C. The Tribunal directed the Assessing Officer to re-examine the disallowance of Rs. 39 lakhs under section 40A(3) along with the primary issue of addition under section 69C. The Tribunal highlighted the necessity for a proper investigation into the payment sources and the involvement of the promoter in making the payment, emphasizing the need for conclusive evidence before disallowing expenses under this section. Disallowance under section 40(a)(ia) of the Act: Regarding the disallowance under section 40(a)(ia) of the Act amounting to Rs. 2,20,842, the Tribunal directed the deletion of the addition. The Revenue Authorities had disallowed the amount for failure to deduct tax on certain payments. However, based on a Special Bench decision, the Tribunal ruled that since the payment was made during the relevant previous year, no disallowance could be imposed under section 40(a)(ia). Consequently, the Tribunal directed the deletion of the disallowance amount, allowing the appellant's ground on this issue. In conclusion, the Tribunal partially allowed the appeal, directing the Assessing Officer to conduct further investigations into the payment sources and the involvement of the promoter in making the payment, particularly in the context of the addition under section 69C and the consequential disallowance under section 40A(3). Additionally, the Tribunal directed the deletion of the disallowance amount under section 40(a)(ia) based on the relevant legal precedent.
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