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TMI Blog2015 (4) TMI 587X X X X Extracts X X X X X X X X Extracts X X X X ..... ection 263 on the issue of the application of provisions of section 40A(1) and (2). So far as the contention of the assessee regarding the application of provisions of section 40A(3) is concerned, we find that the said issue has also not been examined by the AO. The Ld. CIT has not made any addition but has only set aside the order of the AO on the above said two issues for examination afresh after giving opportunity of hearing to the assessee. Hence, the assessee will be at liberty to present its case before the AO.- Decided against assessee. - IT APPEAL NO. 3521(MUM.) OF 2014 - - - Dated:- 14-1-2015 - R.C. SHARMA AND SANJAY GARG, JJ. For The Appellant : Ms. Aarti Sathe, A.R. For The Respondent :Ms. S. Padmaja, D.R. ORDER Sanjay Garg, Judicial Member : The present appeal has been preferred by the assessee against the order dated 27.03.2014 of the Commissioner of Income Tax [(hereinafter referred to as CIT] relevant to assessment year 2009-10 passed under section 263 of the I.T. Act vide which the Ld. CIT has set aside the assessment order dated 26.12.11 passed under section 143(3) of the Income Tax Act (hereinafter referred to as the Act) to the ext ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nder the ambit of provisions of section 40A(2)(b). Though the assessee vide letter dated 05.03.14 had contended that the assessee had not made any payments to any party covered under the provisions of section 40A(2)(b) of the Act, however, the Ld. CIT observed that the payments in excess of market rate totaling ₹ 3,44,52,835/-were made by the assessee to the partners covered under section 40A(2)(b) of the Act and hence such expenditure was not allowable as per the provisions of section 40A(2)(a) of the Act. She observed that the AO had not considered this aspect during the assessment proceedings. The ld. CIT further noticed that the assessee had made payment of ₹ 7,21,12,077/- through general entries to M/s. Shree Bal Properties Finance Pvt. Ltd. which was hit by the provisions of section 40A(3) i.e. payment being made otherwise then by banking channel beyond the prescribed limit as provided under section 40A(3) of the Act. The Ld. CIT, accordingly set aside the assessment order to the extent it related to above two issues and directed the AO to examine theses two issues in detail and amend the order under section 143(3) of the Act accordingly after giving opportunity ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ments were made before the reconstitution deed and even the issue relating to the amount of ₹ 7,21,12,077/- had not been examined by the AO. She has further contended that there was sufficient tangible material before the Ld. CIT to arrive at a conclusion that the assessment order was erroneous and prejudicial to the interest of the Revenue, hence the Ld. CIT has rightly set aside the order of the AO on the above said two issues. 4. We have considered the rival submissions of the Ld. Representatives of the parties and have examined the record carefully. It is a fact on the file that the original agreement for the sale of the land in question by Shri Ramnivas Ramratan Gupta and Shri Nikhil Ramnivas Gupta was entered into with the assessee firm on 02.06.06 for a consideration of ₹ 1,05,00,000/-. The said persons were partners of the assessee firm at that time and thus were covered under the provisions of section 40A. It is also a fact on the file that the said agreement was duly registered with the office of sub registrar and the stamp duty was duly paid thereupon. It is the case of the assessee that no consideration in pursuance to that agreement was paid by the asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reproduced as under: Consideration :- As agreed between the parties hereto the agreed consideration of the said property is ₹ 5,25,00,000/- (Rupees Five Crores Twenty Five Lacs only). The Vendor No.1 to 4 have requested to the Purchaser that, the Purchaser pay the aforesaid consideration by cheques/demand drafts issued in the name of Vendor No.1 and they will get share the consideration mutually and will not raise any dispute as to the payment and share in consideration and if any dispute is raised by any of them the same will be settled between themselves and effect of such dispute will not affect in any manner on this transaction and against that, they undertake to indemnify and keep indemnified to the Purchaser herein. On relying upon aforesaid assurances and indemnity of Vendor No.1 to 4 as per the their request the Purchaser has paid aforesaid consideration of ₹ 5,25,00,000/- (Rupees Five Crores Twenty Five Lacs only) to the Vendor No.1 to 4 by cheques and demand draft as per the request of the Vendor No1 to 4 all issued in the name of Vendor No.1 being Cheque No.60179 dated 30/05/2008 for amount of ₹ 50,00,000/-, Cheque No.60180 dated 30/05/2008 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ccruing to him therefrom so much of the expenditure as is so considered by him to be excessive or unreasonable shall not be allowed as a deduction: Provided ................ (b) The persons referred to in clause (a) are the following, namely:- ( i ) where the assessee is an individual any relative of the assessee; ( ii ) where the assessee is a company, firm, association of persons or Hindu undivided family any director of the company, partner of the firm, or member of the association or family, or any relative of such director, partner or member; . .. (Emphasis supplied) 8. A perusal of the above said provisions reveals that the expenditure in respect of which payment 'has been made' or 'is to be made' to any person referred to in clause (b), if, the same in the opinion of the AO, is excessive or unreasonable having regard to the market value of the goods services etc. for which the payment is made, then such an expenditure is hit by the provisions of section 40A. Now in this case as we have discussed above, the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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