2013 (9) TMI 641 - AT - Income Tax

Deemed dividend - section 2(22)(e) - Loan or advances - assessee claimed that this amount shown as loan in the assessee s balance-sheet was not a loan but an advance received for sale/purchase of land - Held that - it would be in the fitness of things for the issue of deemed dividend under section 2(22)(e) of the Act to be remitted to the file of the learned Commissioner (Appeals) for de novo consideration by him - matter remanded back. Cash payment of expenditure in excess of ₹ 20,000 - Section 43A(3) r.w.r. 6DD - Held that - assessee s arguments that the transactions were genuine; that the cash payments were made in the absence of proper banking facilities being available in Devanahalli, that the payments were made on consideration of business expediency, etc., are not acceptable as the assessee has failed to prove with any cogent evidence that it was covered by exceptional circumstances as per the exemption clause under section 40A(3) read with rule 6DD. It is also seen that the assessee has failed to establish that Devana halli taluk of Bangalore District had no banking facilities at the time these payments were made. In this view of the matter, we have no hesitation in upholding and sustaining the disallowance of ₹ 17,58,527 (being 20 percent. of the amount paid in cash, i.e., ₹ 87,92,635) made by the Assessing Officer under section 40A(3) of the Act - Decided against assessee. Disallowance of Commission and brokerage expenses - Held that - Out of the total expenses of ₹ 92,20,663 claimed under the head brokerage and commission, we find that the Assessing Officer holding that in this line of business of land transaction the average percentage of commission and brokerage is one per cent., disallowed the balance of ₹ 33,52,658. It is seen that the learned Commissioner (Appeals) examined the matter in detail and came to the view that expenses on commission and brokerage charges, on which TDS had been deducted and remitted to the treasury in the instant case were genuine as per the facts placed before him and accordingly allowed the assessee relief of ₹ 29,10,316 and sustained the disallowance to ₹ 4,44,342. Before us learned counsel for the assessee has merely reiterated the submission made before the learned Commissioner (Appeals). No cogent evidence has been brought on record to establish that any part of the expenses, brokerage and commission out of ₹ 4,44,342 were genuine - Decided against assessee.

Issues Involved:
1. Deletion of addition under section 2(22)(e) of the Income-tax Act, 1961 for the assessment years 2006-07 and 2007-08.
2. Disallowance under section 40A(3) for payments made for the purchase of land.
3. Disallowance of commission and brokerage expenses.
4. Disallowance of levelling and fencing charges.

Issue-wise Detailed Analysis:

1. Deletion of Addition under Section 2(22)(e):

For the assessment year 2006-07, the Revenue challenged the deletion of Rs. 3,05,48,000 made under section 2(22)(e) by the Commissioner of Income-tax (Appeals). The Revenue argued that the Commissioner (Appeals) erroneously accepted the assessee's claim that the amount shown as a loan was an advance received for the sale of land based on a memorandum of understanding (MoU) with M/s. Dynasty Developers P. Ltd., despite the land not being sold to the assessee at that time. The Tribunal noted that the Commissioner (Appeals) failed to provide a detailed discussion or reasons for his decision and remitted the issue back to the Commissioner (Appeals) for de novo consideration, emphasizing the need for a speaking and reasoned order.

Similarly, for the assessment year 2007-08, the Revenue challenged the deletion of Rs. 3,26,07,860 under section 2(22)(e). The Revenue contended that the amount received exceeded the agreed consideration in the MoU, and thus could not be termed as an advance. The Tribunal again noted the lack of a detailed discussion or reasons in the Commissioner (Appeals)'s order and remitted the issue back for fresh consideration.

2. Disallowance under Section 40A(3):

The assessee challenged the disallowance of Rs. 17,58,527 under section 40A(3) for payments made for the purchase of land. The assessee argued that the payments were made to agriculturists and farmers who insisted on cash payments, and that these transactions were genuine and made under exceptional circumstances. However, the Tribunal upheld the disallowance, noting that the assessee failed to provide cogent evidence to demonstrate that the payments were made under exceptional circumstances as per the exemption clause under section 40A(3) read with rule 6DD. The Tribunal found that Devanahalli taluk had adequate banking facilities, and thus, the disallowance was justified.

3. Disallowance of Commission and Brokerage Expenses:

The assessee contested the disallowance of Rs. 4,44,342 out of the total commission and brokerage expenses claimed. The Tribunal noted that the Commissioner (Appeals) had allowed expenses on which TDS was deducted and remitted, amounting to Rs. 87,76,321, and disallowed the remaining Rs. 4,44,342 for which no cogent evidence was provided. The Tribunal upheld the disallowance, as the assessee failed to establish the genuineness of the disallowed expenses with any evidence.

4. Disallowance of Levelling and Fencing Charges:

The assessee also challenged the disallowance of Rs. 7,32,280 out of the levelling and fencing charges claimed. The Tribunal observed that the Commissioner (Appeals) had examined the details and agreements for such expenses and found that while the expenses appeared genuine, some were supported only by self-vouchers and cash receipts, which were not verifiable. The Commissioner (Appeals) had reduced the disallowance from Rs. 91,53,500 to Rs. 7,32,280. The Tribunal upheld this disallowance, noting that the assessee did not provide any cogent evidence to verify the expenses.

Conclusion:

The Tribunal allowed the Revenue's appeals for statistical purposes by remitting the issues related to section 2(22)(e) back to the Commissioner (Appeals) for fresh consideration. The Tribunal upheld the disallowances under section 40A(3), commission and brokerage expenses, and levelling and fencing charges, as the assessee failed to provide sufficient evidence to justify these expenses. The order was pronounced in the open court on October 5, 2012.

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