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2019 (7) TMI 538 - AT - Income TaxDisallowance u/s 40A(3) - payment in cash in excess of the limit prescribed u/s 40A(3) for making payment for purchase of land - HELD THAT - The details of payment through cheque and cash were provided in the sale deed placed before the registering authority along with the identity of the payers and sellers and the same was duly registered. Genuineness of the transaction as well as the concerned parties is not under dispute. But since the land purchased by the assessee forms part of stock and trade the provisions of Section 40A(3) comes into operation. During the course of hearing when the question was asked the assessee that what would be situation if the assessee will claim the cost of land as expenditure in subsequent years then will it not violate the provisions of Section 40A(3) in the year of claim. Assessee in his capacity as Officer of the court stated that the assessee will give an undertaking to the effect that the impugned amount will not be claimed as expenditure in subsequent years against the revenue/gross turn over. Ld. Departmental Representative also did not oppose to the statement given by the assessee. In view of the undertaking which shall be given by the assessee before the Ld. Assessing Officer of not claiming the alleged amount as expenditure in subsequent years, set aside the finding of Ld. CIT(A) and allow the sole ground raised by the assessee and delete the disallowance made u/s 40A(3) -. Appeal of the assessee allowed.
Issues Involved:
1. Disallowance under Section 40A(3) of the Income Tax Act for cash payments exceeding the prescribed limit for the purchase of land. Issue-Wise Detailed Analysis: 1. Disallowance under Section 40A(3) for Cash Payments Exceeding the Prescribed Limit: The primary issue in the appeals for Assessment Years 2012-13 and 2013-14 is the disallowance under Section 40A(3) of the Income Tax Act, 1961. The disallowance pertains to cash payments made by the assessee for the purchase of land, which exceeded the limit prescribed under the said section. For Assessment Year 2012-13, the disallowance amount was ?4,26,060, and for Assessment Year 2013-14, it was ?18,50,000. Facts and Arguments: - The assessee, a company engaged in construction and real estate, made cash payments for land purchases, which were part of its stock in trade. - The transactions were genuine, and the identity of the payees was established. - The cash payments were made due to business exigencies and the insistence of the sellers, who were farmers. - The assessee argued that the payments were recorded in the books of accounts and supported by registered sale deeds. Tribunal's Observations and Rulings: - The Tribunal noted that the genuineness of the transactions was not in dispute. - The assessee had not claimed the purchase as an expenditure during the year but had carried forward the cost as closing stock. - The Tribunal referred to a similar case (DCIT V/s M/s. Brilliant Sare Reality Pvt. Ltd) where disallowance under Section 40A(3) was deleted, emphasizing business expediency and genuine transactions. Legal Provisions and Judicial Precedents: - Section 40A(3) disallows deductions for expenditures exceeding ?20,000 paid in cash. - Rule 6DD provides exceptions where such disallowances are not applicable. - The Tribunal cited multiple judicial precedents, including: - Attar Singh Gurmukh Singh v ITO (Supreme Court) - Smt. Harshila Chordia vs. ITO (Rajasthan High Court) - Gurdas Garg Vs. CIT(A) Bathinda (Punjab & Haryana High Court) - Anupam Teleservices Vs. ITO (Gujarat High Court) Conclusion: - The Tribunal, following the decision in the case of DCIT V/s M/s. Brilliant Sare Reality Pvt. Ltd, allowed the appeals. - The Tribunal accepted the assessee's undertaking not to claim the impugned amount as expenditure in subsequent years. - The disallowances of ?4,26,060 for Assessment Year 2012-13 and ?18,50,000 for Assessment Year 2013-14 were deleted. Result: - Both appeals for Assessment Years 2012-13 and 2013-14 were allowed, and the disallowances under Section 40A(3) were deleted. The order was pronounced in the open Court on 09.07.2019.
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