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2017 (6) TMI 1037 - AT - Income TaxRevision u/s 263 - cash payments u/s 40A(3) addition - Held that - There is no merit in the findings of the CIT, for the reason that during the assessment proceedings, the A.O. has verified cash payments with reference to books of accounts and bank statement filed by the assessee and disallowed certain cash payments u/s 40A(3). CIT failed to point out specific defects in the books of accounts and did not make out even a prima facie case of any prejudice caused to the interest of the revenue. The CIT, merely on suspicious grounds directed the A.O. to disallow certain payments on the pretext of banking transaction tax debited by the bank in the statement. On perusal of the bank statement filed by the assessee, we find that on the date mentioned by the CIT in his order, there is no cash payments or bearer/cash cheques payments towards purchase of land. Therefore,the assessment order passed by the A.O. is neither erroneous nor prejudicial to the interest of the revenue. Hence, we set aside the order passed by the CIT, u/s 263 and restore the assessment order passed by the A.O. u/s 143(3) of the Act. - Decided in favour of assessee.
Issues involved:
1. Revision of assessment order under section 263 of the Income Tax Act, 1961 for the assessment year 2009-10. 2. Application of section 40A(3) of the Act for cash payments exceeding ?20,000 in real estate business. 3. Jurisdiction of the Commissioner of Income Tax (CIT) to modify the assessment order. Issue 1: Revision of assessment order under section 263: The appeal was against the order of the CIT, Guntur, dated 4.3.2014, under section 263 of the Income Tax Act, 1961, for the assessment year 2009-10. The CIT proposed to revise the assessment order due to omissions and commissions, particularly related to the applicability of section 40A(3) for cash payments exceeding ?20,000. The CIT observed that the assessing officer (A.O.) failed to consider these aspects, rendering the assessment order prejudicial to the interest of the revenue. Issue 2: Application of section 40A(3) for cash payments in real estate business: The CIT found that the A.O. did not adequately examine the applicability of section 40A(3) concerning cash payments for land acquisition. Despite some disallowances made by the A.O., the CIT believed that more payments should have been disallowed based on banking transaction tax evidence. The CIT set aside the assessment order and directed the A.O. to modify it to consider the provisions of section 40A(3) correctly. Issue 3: Jurisdiction of the CIT to modify the assessment order: The assessee argued that the assessment order was not erroneous or prejudicial to revenue, as the A.O. had already verified and disallowed certain cash payments under section 40A(3). The CIT's directive to enhance the disallowance was contested, claiming lack of specific defects in the details submitted. The Tribunal found that the CIT's assumptions were not supported by evidence, as the A.O. had examined cash payments and the CIT's suspicions were not substantiated by the bank statements. In conclusion, the Tribunal allowed the appeal, setting aside the CIT's order under section 263 and restoring the assessment order passed by the A.O. under section 143(3) of the Act. The Tribunal found that the A.O. had appropriately examined the cash payments, and the CIT's concerns lacked merit, leading to the decision in favor of the assessee.
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