2015 (6) TMI 363 - AT - Income Tax

Disallowance u/s 40A(3) - 1/5th of total expenditure incurred otherwise than by crossed cheque - CIT(A) deleted disallowance - Held that - The assessee s claim has been that these payments were Bayana token money in cash outside the banking hours for sales effected to parties ultimately to whom major payments were made by cheque payments remains unsupported on record as the assessee also pleads that no expenditure has been claimed in the year under consideration. None of these facts have been confronted to the AO. Facts not brought out in the assessment order namely that the assessee had purchased a land measuring 175.432 acres for ₹ 15,60,77,500/- and in para 6.2 the CIT(A) has taken the fact that from the records and evidence available that upto the assessment year 2007-08 closing work in progress in land to the tune of ₹ 18,13,70,146/- had been shown which comprises of opening work in progress, purchases and development cost but no amount has been claimed as expenditure in the year under consideration is a finding of fact which was not confronted to the AO in the light of multi-faceted arguments advanced. None of these facts are coming out from the assessment order and in the absence of the correctness of the finding available on record being established, we are of the view that blindly relying upon the order of the CIT(A) in the case of the issue being covered by the decision of the ITAT in the case of Vansidhar Projects (a sister concern) would not be appropriate. The facts therein would have been to be looked into by the ITAT. Accordingly in view of the above, we are of the view that in the peculiar facts and circumstances, the issue needs to be restored to the file of the AO. - Decided in favour of revenue for statistical purposes. Undisclosed income - CIT(A) deleted addition - Held that - Perusal of the explanation filed by the assessee before the AO in the assessment order demonstrates that the assessee submitted that the assessee as per record had withdrawn ₹ 1.15 crores and it is out of this ₹ 86.90 lacs were transferred to the Oriental Bank of Commerce Bank at Mathura. A perusal of the impugned order shows that the assessee s claim was that infact total cash withdrawn from the banks was ₹ 1,97,00,000/- and the amounts found deposited were only ₹ 86.90 lacs. The assessee has also taken the plea that this was for disbursement of the funds for the purchases at Mathura. It has not been explained as to why these amounts withdrawn needed to be deposited in cash in Mathura as the transaction could have been done intra bank. Further no evidence appears to have been led before the CIT(A) by way of evidence to explain that there was any specific need at Mathura on a specific date when the balance in Oriental Bank of Commerce did not have sufficient funds to honour the cheques. The linkage without the dates by way of payments by cheque for sale on a specific date in Mathura due to inadequacies in the bank account at Mathura has not been attempted. The said facts and evidence as has rightly been observed by the AO can be demonstrated by way of a cash flow statement relating the same to the instances of sale needs to be established and it is only then it can be considered whether the amounts were to be added u/s 69 or not. In the absence of relevant evidence on record, the afore-quoted finding of the CIT(A) is set aside and the issue is restored back to the file of the AO by allowing Ground No.-2 of the Revenue. The AO shall re-consider the issue afresh after giving the assessee a reasonable opportunity of being heard and decide the same in accordance with law. - Decided in favour of revenue.

Summary

Issues Involved:
1. Disallowance under section 40A(3) of the Income Tax Act
2. Addition of undisclosed income under the Income Tax Act, 1961

Issue 1: Disallowance under section 40A(3) of the Income Tax Act

The appeal filed by the Revenue challenged the order of the CIT(A) regarding the disallowance of Rs. 15,04,300 made under section 40A(3) of the Income Tax Act. The Assessing Officer disallowed 20% of cash payments totaling Rs. 75,21,500 for the purchase of land, leading to the addition. The assessee contended that the actual cash payment was Rs. 72,70,500, not Rs. 75,21,500, and these payments were made as advances ("bayana") to farmers for land purchase outside banking hours. The CIT(A) accepted the explanation, limiting the disallowance to Rs. 14,54,100. However, the Tribunal found discrepancies in the facts presented, noting that the AO was not confronted with crucial details. Consequently, the Tribunal set aside the CIT(A) order and directed the AO to re-examine the issue with proper consideration of all facts, allowing the Revenue's appeal on this ground.

Issue 2: Addition of undisclosed income under the Income Tax Act, 1961

The second issue revolved around the addition of Rs. 56,22,088 as undisclosed income based on cash deposits in the assessee's bank account. The CIT(A) deleted this addition, stating that the cash deposits were from withdrawals made from another bank account, which were duly recorded in audited accounts. The Revenue appealed this decision, arguing that the CIT(A) did not address the specific observations of the AO and lacked a cash flow statement to support the claim. The Tribunal found that the explanation provided by the assessee lacked clarity on the necessity of cash deposits in another bank and the specific utilization of funds. As a result, the Tribunal set aside the CIT(A) order, directing the AO to re-examine the issue with a focus on establishing the linkage between withdrawals and deposits for specific transactions, allowing the Revenue's appeal on this ground.

In conclusion, the Tribunal's judgment emphasized the importance of presenting accurate and detailed explanations, ensuring proper confrontation of facts to the Assessing Officer, and providing necessary evidence to support claims. The cases were remanded to the AO for a fresh assessment in accordance with the law, granting the parties a fair opportunity to present their case.