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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 ..... d the payments made u/s. 40A(3), however, on the other hand for the other addition made by the AO, the CIT(A) states that the AO has not rejected the books of account. The CIT(A) ignored the fact that had the books of account been rejected by the AO, the question of 40A(3) payments does not arise at all. Thus the grievance of the Revenue in its appeal is that the CIT(A) erred in deleting the estimated addition of Rs. 22,83,144. 4. Brief facts of the case are that the assessee firm filed its return of income for the A.Y. 2008-09 on 24.09.2008 admitting a total income of Rs. 15,60,000. A survey operation u/s. 133A was conducted on 28.04.2008 in the case of the firm and accordingly, the case was selected for scrutiny. A notice u/s. 143(2) of Income-tax Act, 1961 was issued and served upon the assessee. After examining all the relevant material and information, assessment was completed by making the following additions vide order dated 30.12.2009: (a) Difference in estimated income Rs. 22,83,144 (b) Disallowance u/s. 40A(3) Rs. 52,88,000 Total Rs. 91,31,144 5. On appeal, the CIT(A) deleted the addition of Rs. 22,83,144 on the reason that the AO has not found the books o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eal Estate (Landlord) Account placed at page No. 24 of the Paper Book. Further, he submitted that when the income of the assessee is estimated there cannot be any addition u/s. 40A(3) of the Act. For this purpose he relied on the judgement of jurisdictional High Court in the case of Indwell Constructions vs. CIT (232 ITR 766). 8. On the other hand, the learned DR submitted that the assessee paid a cash payment to the AOP, M/s Srinivas and others (AOP) [Audit report mentioned it as M/s Srinivas & M/s SLN Real Estate] in cash on the following dates: 06-06-2007 - Rs. 52,88,000/- 13-10-2007 - Rs. 1,07,09,000/- 16-12-2007 - Rs. 2,26,80,000/- 9. The audit report submitted with the return mentioned that an amount of Rs. 1.8 Crores was paid on 13-10-2007. However, it is seen that 13-10-2007 is a Saturday. The same was confronted by the CIT(A) with the AO and he stated that this error was pointed out by him during the assessment proceedings and at the instance of the assessee on perusal 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 Offic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3- 17, Madhav Nagar, Nizamabad sold 1/5th of his share out of 38 guntas of land in Borgoan (P). He received an amount of Rs. 30,00,000/-in cash. He is maintaining a bank account in Indian Overseas Bank, Nizamabad. (d) Sri Sandagiri Bhoomreddi, 5/0 Late Sri Saya Reddy, R/o Plot No. 23, Kanuganti Gardens, Pragathi Nagar, Nizamabad. He sold 1.10 guntas of land to the assessee and received Rs. 2,00,000 by a cheque towards the sale consideration. He is maintaining an bank account in Andhra Bank, Hyderabad Road, Nizamabad. (e) Sri Mandava Subramanyeswara Rao, 5/0 Late Sri Raghavayya, R/o 3-7, Madhav Nagar, Nizamabad sold the land to the extent of 0.24 cents at Borgoan Pangra for an amount of Rs. 10 lakhs. The said amount was paid in cash and he is holding an account in Indian Bank, Nizamabad and also in Dena Bank in Bardipur, Dichpally Mandal. 11. These are few examples out of many those have been cited here only to prove that the land is located in the Municipal 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 h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Apartments, Vinayak Nagar, Hyderabad Road, Nizamabad. The AOP also filed its first return only after a survey was conducted on M/s Priya Builders on 28-2-2008 where the agreement between the AOP and the assessee was found. Consequently, after two months, a survey u/s 133A was also conducted on the assessee on 28-04-2008. From this it is clearly evident that the address on the PAN application form which the assessee submitted during the assessment proceedings is not correct where any official correspondence can be received. However, the address of the PAN Card does not authenticate an address and it is only a Permanent Account No. which is an identification number for the tax payer. Therefore, it is clearly seen that the assessee is maintaining a bank account and the office is located at a place where there is a banking service in the close vicinity. The network of the banking facility is spread to the remote villages also these days either by a rural cooperative 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 ev ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hich is surrounded by one bank or the other in the close vicinity. Therefore, the assessee should prove any exceptional or unavoidable circumstances as prescribed in Rule 6DD(j) to make payments on a holiday. Sec. 4OA(3) r.w.r. 6DD has to be seen in light of the CBDT Circular which has liberalized the residuary clause (j) of Rule 6DD so as to avoid disallowance of payments in genuine cases. The assessee has chose to make payments on a holiday i.e., Sunday and to substantiate any business expediency, he has not submitted justified reasons. The only reason given by the assessee is that the MD of the assessee firm, Sri K. Narayana Rao is based in Hyderabad and visits Nizamabad only on Sundays. This reason 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 a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ence. Therefore, the assessee could not prove, (a) That payees' office or business operations were conducted from a village where there is no banking facility. (b) Unavoidable and exceptional circumstances that compelled him to pay cash to AOP on a Sunday, when both of the persons are into their respective business and holding accounts in banks, where amount could be transferred on a day earlier i.e. Saturday or a day later i.e. Monday. No evidence to the urgency on a Sunday for its payment was furnished by the assessee. (c) The assessee, the AOP and the villagers(landlords) are all holding bank accounts in some bank or the other and the assessee did not establish the unavoidable and exceptional 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 Ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... evably. In the case before us as seen from the table produced above, the assessee has not claimed the payment of Rs. 386,77,000 as expenditure in the Profit and Loss A/c. It is an item of payment to sundry creditors viz., P. Srinivas & SLN Real Estate (Landlord) Account and not debited to the Profit and Loss A/c. as an expenditure. It is an entry in sundry creditors account and shown as a current liability in the Balance Sheet as on 31.3.2008. Thus, the amount paid by the assessee cannot be construed as an expenditure charged to Profit and Loss A/c. When the 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 bankin ..... X X X X Extracts X X X X X X X X Extracts X X X X
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