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TMI Blog2013 (9) TMI 641X X X X Extracts X X X X X X X X Extracts X X X X ..... nking 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 lea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e following grounds: 1. The order of the learned Commissioner (Appeals) is opposed to law and facts of the case. 2. The learned Commissioner (Appeals) erred in deleting the addition of ₹ 3,05,48,000 made under section 2(22)(e) by erroneously accepting the assessee's version that the amount shown as loan in the balance-sheet was an advance received for sale of land on the basis of an memorandum of understanding with M/s. Dynasty Developers P. Ltd. The learned Commissioner (Appeals) ought to have appreciated the facts and circumstances inasmuch as the memorandum of under- standing dated June 15, 2004 has no business sense or significance as the assessee, at that point of time, was not the owner of the land agreed to be sold to the above company. The Commissioner (Appeals) ought to have enquired into the subsequent status of the deal before placing reliance on such a documents produced by the assessee. 3. For these and other grounds that may be urged at the time of hearing, it is prayed that the order of the Commissioner (Appeals) in so far as it related to the above grounds may be reversed and that the Assessing Officer may be restored. 4. The appella ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . We have heard both parties and carefully perused the material on record. We have perused the order of the learned Commissioner (Appeals) on the issue of deemed dividend under section 2(22)(e) of the Act and agree with the contention of the learned Departmental representative that the learned Commissioner (Appeals) merely recorded the submissions of the assessee at paragraphs 6 and 7 from pages 3 to 14 of his order and then in paragraph 8 allowed the appeal of the assessee in a summary manner, bereft of any discussions of the facts of the case as brought out by the Assessing Officer and the assessee and without assigning any reasons for reaching the finding he made. We, therefore, reproduce hereunder the referred paragraph 8 on page 14 of the Commissioner (Appeals)'s order which will clarify the situation: 8.0 Considering the facts and circumstances of the case and following the rationale of the above decisions, I hold that the advance of ₹ 3,05,48,000 received by the appellant from another company, also engaged in real estate developments towards sale of property in the course of business and considering the facts of the case, such advances are not hit by the pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e under 'exceptional and unavoidable circumstances'. (b) Disallowance of commission and brokerage of ₹ 4,44,342. (i) He failed to appreciate that the entire payments were supported by vouchers. (ii) The Commissioner (Appeals) failed to appreciate that non-deduction of tax could not be a reason for disallowance of expenditure. (c) Disallowance under levelling and fencing charges of ₹ 7,32,280. (i) The Commissioner (Appeals), having held that the levelling charges were allowable should not have sustained the addition of ₹ 7,32,280. (ii) He failed to appreciate that these expenses, by its very nature, could be supported by self-made vouchers and cash receipts. (iii) The appellant submits that, in any case, the additions made are excessive and unreasonable. (iv) The appellant, therefore prays that the additions may be deleted. Payments for purchase of land disallowed under section 40A(3) : ₹ 17,58,527 Learned counsel for the assessee reiterated the grounds raised by the assessee in the cross-objection that the learned Commissioner (Appeals) failed to appreciate that the payments were made to agriculturists and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Before us, learned counsel for the assessee merely reiterated the submissions made before the learned Commissioner (Appeals). On careful consideration of the facts and circumstances of the case, we find that the 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. Consequently, the assessee's objection is dismissed. 10. Commission and brokerage expenses : ₹ 4,44,342. Learn ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reason to interfere with the finding of the learned Commissioner (Appeals) and, therefore, uphold the disallowance of ₹ 4,44,342 out of commission and brokerage charges as sustained by the learned Commissioner (Appeals). The assessee's ground is accordingly dismissed. Levelling and fencing charges : ₹ 7,32,280 Learned counsel for the assessee submitted that the learned Commissioner (Appeals) should not have sustained the disallowance to the extent of ₹ 7,32,280. It was argued that these expenses by their very nature could only be supported by self vouchers and cash receipts and did not call for any disallowance and that the disallowance made were excessive and unreasonable. It was submitted that, in these circumstances, the disallowance be deleted and the assessee's appeal on this issue be allowed. Per contra, the learned Departmental representative pointed out that the Assessing Officer had made an ad hoc disallowance of ₹ 91,53,500, i.e., 25 per cent. of the expenditure of ₹ 3,66,14,000 claimed on levelling and fencing charges. The learned Commissioner (Appeals) had examined the entire details of these expenses from the books of account fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The order of the learned Commissioner (Appeals) is opposed to law and facts of the case. 2. The learned Commissioner (Appeals) erred in deleting the addition of ₹ 3,26,07,860 made under section 2(22)(e) by erroneously accepting the assessee's version that the amount shown as loan in the balance-sheet was an advance received for sale of land on the basis of an memorandum of understanding with M/s. Dynasty Developers P. Ltd. The learned Commissioner (Appeals) ought to have appreciated the facts and circumstances inasmuch as the consideration for sale as per memorandum of understanding was only ₹ 3.50 crores whereas, having already received by the assessee during the relevant previous year was far in excess of the agreed consideration and, in such circumstances, the amount received cannot be termed as advance. 3. For these and other grounds that may be urged at the time of hearing, it is prayed that the order of the Commissioner (Appeals) in so far as it related to the above grounds may be reversed and that the Assessing Officer may be restored. 4. The appellant craves leave to add, alter, amend and/or delete any of the grounds that may be urged. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... end under section 2(22)(e) of the Act be remanded to the file of the Commissioner (Appeals) for consideration afresh. We have heard both parties and carefully perused the material on record. We have perused the order of the learned Commissioner (Appeals) on the issue of deemed dividend under section 2(22)(e) of the Act and agree with the contention of the learned Departmental representative that the learned Commissioner (Appeals) merely recorded the submissions of the assessee at paragraphs 2 to 5.5 from pages 2 to 13 of his order and then in paragraph 6 of his order allowed the appeal of the assessee in a summary manner, bereft of any discussions of the facts of the case as brought out by the Assessing Officer and the assessee, and without assigning any reasons for reaching the finding he made. We, therefore, reproduce hereunder the referred paragraph 6 on page 14 of the Commissioner (Appeals)'s order which will clarify the situation : 6. Considering the facts and circumstances of the case and following the rationale of the above decisions, I hold that the advance of ₹ 3,26,07,860 received by the appellant from another company, also engaged in real estate develop ..... 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