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2020 (11) TMI 480 - AT - Income TaxAddition u/s 40A - sum paid in cash in respect of purchase of the two immoveable properties - HELD THAT - The genuineness and the bonafide of both the transactions have been established as evidenced by sale deeds and assessee s books of accounts wherein the transaction particulars have been duly reflected. In terms of business expediency, the assessee has explained that the seller Smt Teeja Devi is a resident of village Chosla which has no banking facility and therefore, she doesn t had an occasion to open any bank account in absence of any bank and in fact, she doesn t have any bank account opened and maintained in her name as on the date of execution of the sale deed and therefore, in such circumstances, the assessee had no option but to discharge the sale consideration in cash. A/R has submitted the affidavit of the assessee as well as a confirmation issued by the Sarpanch which remain uncontroverted before us - where the seller resides in a village which doesn t have a banking facility and therefore, the seller doesn t have a bank account in her name and both the parties agree to execute a sale deed for sale and purchase of land and the consideration is discharged in cash, it is clearly a case of business expediency which has necessitated the assessee who wants to acquire the said piece of land to discharge the sale consideration in cash due to lack of formal banking facility and in absence of any bank account in name of the seller. Sale deed has been executed on 18.8.2013 and the payment has been made on the said date which happens to be Sunday and thus a bank holiday again necessitating the payment in cash coupled with the fact that the seller doesn t have a bank account - in respect of second sale transaction, the test of business expediency has been met as the initial/advance payment of ₹ 1 lac as insisted by the seller has only been made in cash to secure the transaction and rest all payments have been made through cheque. As held in case of Smt. Harshila Chordia 2006 (11) TMI 117 - RAJASTHAN HIGH COURT the consequences, which were to befall on account of non-observation of sub-section (3) of section 40A must have nexus to the failure of such object. Therefore the genuineness of the transactions and it being free from vice of any device of evasion of tax is relevant consideration for which section 40A(3) has been brought on the statute books and which has been satisfied in the instant case. As relying on THE SOLUTION 2016 (5) TMI 287 - RAJASTHAN HIGH COURT no disallowance is called for under section 40A(3) of the Act and the same is directed to be deleted. In the result, the ground of the assessee s appeal is allowed. Unsecured loans taken by the assessee - Non responses to notices issued - HELD THAT - Where the assessee is in the financing business and there are loan transactions to the tune of ₹ 13.64 crores in respect of which necessary details and other confirmations have been filed and the notices have been responded, then merely because 4 persons having transactions worth ₹ 9 lacs, having received the notices, choosen not to respond to the said notices cannot be held against the assessee. It is not the case of the Revenue either that the confirmations of these parties so furnished during the course of assessment proceedings are either false or have been forged. Once these confirmations have been accepted and the transactions have been executed by the assessee as part of its normal financing business through banking channel and the transactions carry the necessary attributes of a loan transaction where the AO has taken into consideration the confirmation and other details submitted by the assessee, no adverse view can be taken against the assessee as the onus cannot be shifted back to the assessee in absence of any adverse findings on record in terms of documentation so submitted by the assessee. Given that these are existing income tax assessees, there is nothing on record that the AO has taken any further steps in terms of issuing summons u/s 131 or reaching out to jurisdictional officers for verifying their tax records, etc. As relying on UMBRELLA PROJECTS PVT. LTD. 2018 (4) TMI 379 - ITAT DELHI addition so made by the AO and confirmed by the ld CIT(A) is hereby set-aside and the ground of appeal is allowed in favour of the assessee.
Issues Involved:
1. Disallowance under Section 40A(3) of the Income Tax Act, 1961. 2. Addition of unsecured loans under Section 68 of the Income Tax Act, 1961. Issue-wise Detailed Analysis: 1. Disallowance under Section 40A(3) of the Income Tax Act, 1961: The assessee challenged the addition of ?30,60,000/- made under Section 40A(3) of the Income Tax Act, 1961. The facts reveal that the assessee purchased land from Smt. Teeja Devi and Smt. Nana Devi, making substantial cash payments. The Assessing Officer (AO) issued a show cause notice questioning why the cash payments should not be added to the income under Section 40A(3). The assessee argued that the payments were covered by exceptions under Rule 6DD of the Income Tax Rules, 1962, citing the lack of banking facilities in the seller’s village and the seller’s lack of a bank account, supported by an affidavit and a certificate from the Sarpanch. The assessee also referenced CBDT Circular No. 220, which provides exceptions for transactions where banking facilities are unavailable. The Tribunal noted that the identity of the sellers and the genuineness of the transactions were established. The assessee provided evidence that the payments were made from disclosed sources reflected in regular books of accounts. The Tribunal referenced various judicial precedents, including the Hon'ble Supreme Court's decision in Attar Singh Gurmukh Singh vs. ITO and the Hon'ble Rajasthan High Court's decision in Smt. Harshila Chordia vs. ITO, which emphasized that genuine and bona fide transactions are not excluded from Section 40A(3) and that business expediency and other relevant factors should be considered. The Tribunal found that the payments were made under business exigencies and exceptional circumstances, thus falling within the exceptions provided under Rule 6DD. The Tribunal concluded that the disallowance under Section 40A(3) was not warranted and directed its deletion. 2. Addition of Unsecured Loans under Section 68 of the Income Tax Act, 1961: The assessee contested the addition of ?9,00,000/- as unexplained unsecured loans. The AO had issued summons under Section 133(6) to verify the loans, and while most parties responded, four parties did not. The AO concluded that the identity, genuineness, and creditworthiness of these lenders were not established and made the addition under Section 68, which was confirmed by the CIT(A). The assessee provided confirmations from all parties, including PAN details and addresses, and argued that the transactions were genuine, made through banking channels, and that the lenders were regular taxpayers. The Tribunal noted that the AO accepted similar details for other loan transactions where the parties had responded to the notices. The Tribunal emphasized that merely because some parties did not respond to the notices, it could not be held against the assessee, especially when the confirmations were not found to be false or forged. The Tribunal referenced judicial precedents, including the Hon'ble Supreme Court’s decision in CIT vs. Orissa Corporation, which held that non-receipt of replies to notices under Section 133(6) does not automatically justify adverse inference against the assessee. The Tribunal concluded that the assessee had discharged the burden of proof, and the addition under Section 68 was not justified. Conclusion: The Tribunal allowed the appeal of the assessee, deleting the disallowance under Section 40A(3) and the addition under Section 68. The decision emphasized the importance of considering business expediency, genuine transactions, and the necessity of corroborative evidence before making additions under these sections. The judgment was pronounced in the open court on 11/11/2020.
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