2022 (2) TMI 939 - AT - Income Tax

Disallowance u/s 40A(3) - cash payments for acquiring land - HELD THAT - Undoubtedly, the issue is decided by the coordinate benches in 38 cases of the group concerns where the identical disallowance u/s 40 A (3) of the income tax act has been deleted. On perusal of the most of the decisions, it is found that the coordinate benches have followed the decision passed by the coordinate bench in case of M/s West Land Developers Private Limited 2014 (12) TMI 254 - ITAT DELHI . DR could not show us any reason or fresh material that why should we deviate from the orders of the coordinate benches. Even otherwise, judicial discipline, rule of consistency and rule of precedence requires that unless those orders are upset, same should be followed. Therefore respectfully following the decision of the coordinate benches, we direct the learned assessing officer to delete the disallowance as under section 40A (3). Addition on account of interest on PDCs paid out of books of account - interest paid in cash outside the books of account on Post Dated Cheques (PDCs) - HELD THAT - Undoubtedly, the issue is decided by the coordinate benches in cases of the group concerns COUNTRYWIDE PROMOTERS PVT. LTD. AND VICE - VERSA 2021 (5) TMI 897 - ITAT DELHI where the identical addition made on account of PDCs Interest has been deleted on similar facts. DR was unable to bring on record any fresh evidence or material to show us any valid and justifiable reason to deviate from the earlier orders of the coordinate benches as discussed above. The judicial discipline, rule of consistency and rule of precedence requires that unless those orders on same facts in case of other group companies are upset or facts are different or any fresh material or any evidence is brought on record to deviate from earlier decisions, same should be followed. Therefore respectfully following the decision of the coordinate benches, we direct the learned assessing officer to delete the whole addition on account of PDC Interest . Disallowance of Additional Payment made in view of the provisions of Section 37(1) on the basis of violation of Stamp Duty Act, 1899 - HELD THAT - Undoubtedly, the issue is decided by the Co-ordinate Benches in almost 30 cases of the group concerns. Further, the appeal of department stands dismissed by Hon ble Delhi High Court in case of one of Group Company of assessee on identical facts in case of Vasundhra Promoters Pvt. Ltd 2018 (6) TMI 74 - DELHI HIGH COURT wherein the identical addition made on account of disallowance of additional payment has been dismissed. Considering most of the decisions of ITAT, it is found that Co-ordinate Benches have followed the decisions in the case of M/s West Land Developers Pvt. Ltd. 2014 (12) TMI 254 - ITAT DELHI - CIT DR could not show us any reason or fresh material that why earlier decisions of the coordinate benches should not be followed.- Decided against revenue. Deemed dividend under section 2 (22)(e) - HELD THAT - As the assessee is not share holder of payer group companies who paid loan/advance to the assessee and considering the legal position that dividend is to be received by shareholder only, the amount received by the assessee is not to be treated as deemed dividend in the hands of assessee. Moreover, this view is fully supported by decision of the Hon ble Delhi High Court in case of CIT vs. M/s Ankitech Pvt. Ltd. 2011 (5) TMI 325 - DELHI HIGH COURT - Decided against revenue.

Summary

Issues Involved:
1. Disallowance under Section 40A(3) of the Income Tax Act.
2. Addition of interest on Post Dated Cheques (PDCs) paid outside the books of account.
3. Disallowance of additional payment under Section 37(1) of the Income Tax Act due to alleged violation of the Stamp Duty Act.
4. Addition on account of deemed dividend under Section 2(22)(e) of the Income Tax Act.

Detailed Analysis:

Issue 1: Disallowance under Section 40A(3) of the Income Tax Act
The assessee, engaged in land aggregation and consolidation, made cash payments amounting to ?26,55,623 for acquiring land. The Assessing Officer (AO) disallowed 20% of this amount, invoking Section 40A(3), which was confirmed by the CIT(A). The assessee argued that the expenditure was reimbursed and not debited to the profit and loss account. The Tribunal noted that similar disallowances were deleted in 38 cases of group companies following the decision in Westland Developers Pvt. Ltd., where it was held that Section 40A(3) does not apply if no expense is claimed in the profit and loss account. The Tribunal directed the AO to delete the disallowance of ?5,31,124.

Issue 2: Addition of Interest on PDCs Paid Outside the Books of Account
During a search on the BPTP group, documents indicated that interest was paid in cash on PDCs. The AO made additions based on these documents. The Tribunal found that no seized documents belonged to the assessee, and no inquiries were made from the alleged recipients of the interest. The Tribunal followed its earlier decisions in similar cases, including Green Valley Tower Pvt. Ltd. and Countrywide Promoters Pvt. Ltd., where it was held that additions cannot be made based on suspicion without corroborative evidence. The Tribunal directed the AO to delete the addition of ?1,25,33,522.

Issue 3: Disallowance of Additional Payment under Section 37(1) of the Income Tax Act
The AO disallowed an additional payment of ?1,40,90,457, considering it a violation of the Stamp Duty Act. The CIT(A) found no violation of the Stamp Duty Act and held that the provisions of Section 37(1) were not applicable. The Tribunal noted that similar disallowances were deleted in other group companies, following the decision in Westland Developers Pvt. Ltd. The Tribunal also referred to the Delhi High Court's decision in Vasundara Promoters Pvt. Ltd., which held that not every violation of law results in a penal consequence under Section 37(1). The Tribunal dismissed the Revenue's ground and upheld the deletion of the disallowance.

Issue 4: Addition on Account of Deemed Dividend under Section 2(22)(e) of the Income Tax Act
The AO added ?4,58,000 as deemed dividend under Section 2(22)(e), considering amounts received by the assessee from group companies. The assessee argued that it was not a shareholder of the payer companies, and thus, the amount could not be treated as deemed dividend. The Tribunal referred to the Delhi High Court's decision in CIT vs. M/s Ankitech Pvt. Ltd., which held that deemed dividend can only be taxed in the hands of shareholders. The Tribunal dismissed the Revenue's ground and deleted the addition.

Conclusion:
The Tribunal allowed the assessee's appeals and dismissed the Revenue's appeals, directing the deletion of disallowances and additions made by the AO under various sections of the Income Tax Act. The decisions were based on precedents and the principle of judicial consistency.