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TMI Blog2014 (6) TMI 631X X X X Extracts X X X X X X X X Extracts X X X X ..... count will not change the character of the transaction - there is no dispute that the payments are made on Sunday where there is banking holiday on that day - the payment is not required to be made when the banks are closed i.e. after banking hours - the purpose of the disallowance u/s 40A (3) is to dissuade transactions by cash - no banking facility is available where the properties were purchased by the assessee or payments were made on holidays i.e., Sundays, therefore, there was no choice for the assessee except to make the payments in cash due to exceptional or unavoidable circumstances as provided under Rule 6DD. – thus, the disallowance u/s 40A(3) of the Act is not warranted – Decided in favour of Assessee. Estimation of income – Held that:- CIT(A) deleted the addition on the basis that books of account are not rejected to estimate income of the assessee - certain expenditure towards labour and other miscellaneous expenditure are self-vouched and not verifiable - AO estimated the income at 10% of the sales and given deduction towards interest to partners - the estimation by the AO is reasonable and was accepted by the assessee during the course of assessment by signing th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... addition of Rs. 22,83,144 on the reason that the AO has not found the books of account incomplete nor any discrepancies and he also not identified correct number of vouchers where the expenditure is not verifiable. He did not confront the assessee or given him an opportunity to contradict the material relied upon to estimate the income. Further, the CIT(A) observed that there is payment in excess of Rs. 20,000 otherwise by crossed cheque or DD, not only to the extent of Rs. 52.88 lakhs. On the other hand, it was Rs. 386.77 lakhs in respect of the following parties:- Sl. No. Date Name Address of the party Nature of payment Amount (Rs.) 1. 06.06.2007 P. Srinivas SLN Real Estate, Nizamabad 2nd instalment as per MOU 5,288,000.00 2. 13.10.2007 -do- -do- 10,709,000.00 3. 16.11.2007 -do- -do- 22,680,000.00 6. Against the deletion of addition, the Revenue is in appeal before us and against enhancement of disallowance, the assessee is in appeal before us. 7. The learned AR submitted that the assessee is in real estate business. The payments for purchase ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... usal of the seized books of the accounts, the cash payments were stated to be made on 14-10-2007 which was a Sunday. Therefore, the CIT(A) made no interference with regard to the date and the Assessing Officer's contention is accepted as it is supported by the evidence in seized that the above amounts located in Madhav Nagar, which is not facilitated by any banking service. In the confirmation letter, Mr. P. Srinivas Rao, on behalf of the AOP stated that the payments were received in cash from the assessee to make payments to the land owners. But he did not submit even a single certificate or receipt from the villagers who are the land owners to whom he paid the amounts or a statement from them that they did not possess bank accounts. The AOP also did not furnish any evidence to whom the payments were made like a) Names of land owners giving their survey No. and extent of land sold. b) Details of the advance paid to such land owners on agreement and amount paid out of cash receipt from the assessee. c) an acknowledgement of the receipt by the villagers giving the survey no. and extent of the land that represent full and final settlement towards the land sold by them. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cipal limits of Nizamabad and constitutes one village out of three villages in Pangra, Borgoan. It is also to show that though the land owners are villagers yet due to the proximity towards a town or a city of Nizamabad, they are holding the bank accounts in different banks. It is also seen from the copy of the debit voucher through which the payment was recorded to have been made to Sri P. Srinivas and Others, the address of the assessee is clearly printed. The address is printed as M/s. J.B. Constructions and Projects, Madhav Nagar, Hyderabad Road, Nizamabad-503003, A.P. From the perusal of the above example mentioned at SI. NoA, it is evident that the banking services are available at Andhra Bank, Hyderabad Road, Nizamabad. On perusal of the audit report, it is seen that the assessee paid an aggregate of an amount of Rs.3,86,77,OOO/- to M/s. Srinivas and M/s. SLN Real Estates on three different occasions. The Assessing Officer in the order mentioned that one of the members of AOP, Sri K. Narender Reddy is also a partner in M/s. SLN Real Estate and also Cl partner in the assessee's firm. Similarly, Mr. Srinivas representing the AOP is a partner in M/s. 8alaji Enterprises. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... perative bank or a rural bank or a public sector undertaking bank, etc. Therefore, the onus to prove that the payment was made in a village not having the banking facility was on the assessee which has not been discharged by any evidence. For example, if there are many streets in a locality provided by a banking service and if there is no banking service on a particular street, it does not mean that there is no banking facility available. The population of Madhavnagar Village may be less to provide a service there, but a facility is available in the close vicinity catering to the needs of few villages around it. Even on perusal of the debit voucher, it is seen that there is no serial number, names of the persons along with the designations who prepared the debit voucher, no office seal has been marked on the debit voucher. It is also seen that there are no witnesses for such a huge transaction and no acknowledgement slip was given by the recipient, i.e., Sri P. Srinivas and M/s SLN Real Estate to the assessee. 12. In the statement filed before the Assessing Officer, the assessee stated the following as the source of cash generation: Capital as on 31-12-2006 P ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... son is not an exceptional and an unavoidable circumstance but it is a habitual visit on a holiday and he should have made appropriate arrangements to disburse the payment to the AOP as per law using the banking channels as both of them i.e. the assessee as well as the AOP are maintaining accounts in their respective banks. Most of the banks are providing online facilities and the assessee should have used the banking channels to transfer the amount to the account held by the AOP. It is also a point to note that the assessee also received cash against the sale of plots. If he id not maintain an account in the bank and deposited them, which is the place that stored this cash in physical units? A perusal of the statement of Bank of Maharashtra show several cash deposits. These days most of the banks are following staggered holidays depending on their locations and business transactions. The assessee could have used the online facility either on a Saturday or on Monday and transferred the amount to the AOP via an online transaction. It is also beyond my imagination as to how the M.D of the assessee would have carried the huge amount from Hyderabad to Nizamabad or from a place where it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ceptional circumstances for such a cash payment to the AOP. 14. The DR submitted that the assessee could not discharge the onus cast on it to prove that there were some exceptional and unavoidable circumstance that compelled it to pay cash to the AOP amounting to Rs. 3,86,77,000/-. It is also evident from the above discussion that there is a banking service available in the vicinity where the assessee's office is located and the AOP could not prove that it had its Office in the village Madhav Nagar. Since the assessee and the AOP, both are into business and filing their respective returns, it is evident that they are holding account in some bank or the other and to enter into such transactions on a holiday or due to certain unavoidable circumstances has not been proved by them. Therefore, the CIT(A) enhanced the addition made by the Assessing Officer amounting to Rs. 52,88,000/- to Rs. 3,86,77,000/- and directed the Assessing Officer to pass an order accordingly. 15. We have heard both the parties and perused material on record. We have carefully gone through the Profit and Loss A/c. The assessee has debited/charged an amount of Rs. 2,51,17,649 towards purchases account-l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... amount paid by the assessee had not been claimed as deductible expenditure while computing the business income provisions of section 40A(3) cannot be applied. Mere entry in the books of account, as observed earlier, will not change the character of the transaction. Even otherwise there is no dispute that the payments are made on Sunday where there is banking holiday on that day. The Department has not disputed the fact that Sunday was a holiday. The plea of the lower authorities is that the assessee has not provide the exception as provided in Rule 6DD(J) of the IT Rules, 1962. The assessee stated before that there is no banking facility available in the village where the payment was made. 19. The exceptions to the application of sec 40A(3) is laid down in Rule 6DD(j). Rule 6DD(j) is as follows: 6DD. No disallowance under sub-section (3) of section 40A shall be made and no payment shall be deemed to be the profits and gains of business or profession under sub-section (3A) of section 40A where a payment or aggregate of payments made to a person in a day, otherwise than by an account payee cheque drawn on a bank or account payee bank draft, exceeds twenty thousand rupees in the ca ..... X X X X Extracts X X X X X X X X Extracts X X X X
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