2013 (2) TMI 379 - AT - Income Tax

Jurisdiction of AO to pass assessment order - The return was filed with the ACIT, Circle-1 - Notice u/s. 143(2)/142(1) were issued by the ACIT - Subsequently, the case was transferred and commenced by the ACIT, Circle-1, Jodhpur Held that - the Addl. CIT, Range-1, Jodhpur was having proper jurisdiction over the case of the assessee to pass the assessment order in the matter. There is compliance of section 127 of the IT Act in the matter and the assessee has not raised any objection of jurisdiction within the period of limitation as provided u/s. 124(3) of the Act. Therefore, the objection of the assessee has been rightly rejected. In favour of revenue Disallowance u/s 40A(3) Rule 6DD Staggered the payment - Cash payment of expenditure in excess of Rs. 20,000 - Payment, which has been staggered over a period of time - Purchase of agricultural land in cash - The assessee is dealing in Real Estate and land purchased is stock in trade The assessee has credited the whole amount in the account of the parties - Staggered the payment almost every day at less than Rs. 20,000/- in a day - Credit balance was carried forward in the next year. Held that - It is very clear that the assessee consciously split up the payments in whole of the year, which is impracticable, illogical as noted above and it was done just to circumvent the provisions of law. There was no justification for the assessee to split up the transactions of crores of rupees in small payments of Rs. 15,000/- to Rs. 20,000/- everyday. Whatever plea was taken before the authorities below was not supported by any evidence. Therefore, the assessee failed to prove any business expediency or other facts for making staggered payments in cash. The assessee deliberately and consciously split up the payments in part so as to circumvent the provisions of law. In favour of revenue

Summary

Issues Involved:

1. Jurisdiction of the Assessing Officer (AO).
2. Disallowance under Section 40A(3) of the Income Tax Act.
3. Charging of interest under Sections 234A, 234B, and 234C of the Income Tax Act.

Detailed Analysis:

1. Jurisdiction of the Assessing Officer (AO):

The assessee challenged the jurisdiction of the Assessing Officer (Addl. CIT, Range-I, Jodhpur) in passing the assessment order. The assessee contended that the return was filed with the ACIT, Circle-1, and notices under Sections 143(2) and 142(1) were issued by the ACIT. However, the case was subsequently transferred, and the assessment order was passed by the Additional CIT. The CIT(A) dismissed this objection, stating that the assessee participated in the proceedings before the Additional CIT without raising any jurisdictional objections. The CIT(A) relied on Section 124(3) of the IT Act, which restricts questioning the jurisdiction of an AO after certain stages. The Tribunal upheld the CIT(A)'s decision, emphasizing that the assessee did not raise any jurisdictional objections within the stipulated period and actively participated in the assessment proceedings. The Tribunal also noted that the Additional CIT had concurrent jurisdiction and the transfer order under Section 127 was valid.

2. Disallowance under Section 40A(3):

The assessee challenged the disallowance of Rs. 1,12,00,000 under Section 40A(3) for cash payments made for the purchase of land. The AO found that the assessee made substantial cash payments, which were staggered into smaller amounts to circumvent the provisions of Section 40A(3). The assessee argued that the payments were made for agricultural land, which should not be considered an expenditure under Section 40A(3) until the land is converted for non-agricultural use. The CIT(A) dismissed this argument, stating that the land was stock-in-trade for the assessee's real estate business, making the payments subject to Section 40A(3). The Tribunal upheld the CIT(A)'s decision, noting that the assessee failed to provide evidence of business exigency or other relevant factors justifying cash payments. The Tribunal also observed that the payments were deliberately staggered to evade the provisions of Section 40A(3).

3. Charging of Interest under Sections 234A, 234B, and 234C:

The assessee challenged the charging of interest under Sections 234A, 234B, and 234C. The Tribunal noted that the assessee did not argue this ground and stated that charging of interest is mandatory and consequential in nature. Therefore, this ground was dismissed.

Conclusion:

The Tribunal dismissed the appeal of the assessee, upholding the jurisdiction of the Additional CIT, the disallowance under Section 40A(3), and the charging of interest under Sections 234A, 234B, and 234C. The stay granted was vacated.