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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 ..... e Ld. CIT, after examination of record, noticed that the assessee firm was constituted vide partnership deed dated 29.05.06 having the following partners: 1. Vrinda Sharad Bal 2. Monroe Impex Pvt. Ltd. 3. Ramnivas Ramratan Gupta 4. Nikhil Ramnivas Gupta The Ld. CIT further noticed that the assessee firm was reconstituted vide partnership deed dated 09.06.08 vide which the partners Shri Ramnivas Ramratan Gupta and Shri Nikhil Ramnivas Gupta were replaced by Indorigin Electric Ltd. having directors Mr. Sharad D. Bal and Mr. Vrinda Sharad Bal. It was also noticed by him that the assessee firm had purchased land from the erstwhile partners Shri Ramnivas Ramratan Gupta and Shri Nikhil Ramnivas Gupta and made payments to them which were in excess of market rates prevalent and that the above named persons were covered under section 40A(2)(b) being related persons. However, in the tax audit report, the assessee had disclosed such transaction as 'nil'. The Ld. CIT noticed that most of the payments towards the purchase of land were paid to the said partners Shri Ramnivas Ramratan Gupta and Shri Nikhil Ramnivas Gupta or to the persons who sold the land to the assessee via Sh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stwhile partners of the firm. She has further contended that the AO has raised certain queries on this issue which were properly replied. She has relied on paper book pages A to L in this respect showing the correspondence between the AO and the assessee made during the assessment proceedings. She has further contended that the AO had duly applied his mind on the issue. She has further contended that the partnership deed was reconstituted on 09.06.08 w.e.f. 01.04.08. Though the agreement for the purchase of land was entered into with the above said then partners of the firm on 02.06.06 for a consideration of Rs. 1,05,00,000/-; however, neither any payment was made nor the property in question was conveyed to the firm. After the reconstitution of the partnership deed, the said Shri Ramnivas Ramratan Gupta and Shri Nikhil Ramnivas Gupta did not remain the partners of the firm and thereafter the consideration was renegotiated and settled at Rs. 5,25,00,000/- and the payment was made to the said persons vide sale deed dated 11.06.08 when the said Shri Ramnivas Ramratan Gupta and Shri Nikhil Ramnivas Gupta were no more partners of the firm and hence the provisions of section 40A(2)(a) r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uestion was transacted in pursuance of the agreement dated 02.06.06. A perusal of the sale deed in question, copy of which has been produced on the file of the assessee, finds mention of this fact in para 12 of the deed. The relevant part of the said para, for the purpose of ready reference, is reproduced as under: "12. Stamp Duty And Registration Fee:- (A) ............................... (B) As agreed between the parties hereto the agreed consideration of the said property was Rs. 1,05,00,000/- as per Agreement dated 02/06/2006 on which is duly registered in the office of Sub-Registrar Haveli No.19 at Serial No.3958 on 09/06/2006. The purchaser herein had paid stamp of Rs. 1,05,000/- to the aforesaid agreement alongwith maximum registration fee. The present sale deed is executed by the Vendors in favour of the Purchaser herein in pursuance of the aforesaid agreement, subject to revision in consideration as stated in preamble of this instrument which consideration is now Rs. 5,25,00,000/- and same is paid by the Purchaser to the Vendors as stated in clause no.1 hereinabove written. The Purchaser herein has paid stamp of Rs. ________/- to this instrument alongwith proper regis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ank Limited, F.C. Road Branch, Pune and receipt of Rs. 5,25,00,000/-(Rupees Five Crores Twenty Five Lacs only) the Vendor No.1 to 4 herein doth hereby admit, accept and acknowledge and of and from the same and every part thereof forever acquit, release and discharge to the Purchaser and its nominee, assignee." (Emphasis supplied) 6. A perusal of the consideration part as reproduced above reveals that the payment of Rs. 5,25,00,000/- was agreed to be paid to the sellers Shri Ramnivas Ramratan Gupta and Shri Nikhil Ramnivas Gupta etc. through cheques and demand drafts out of which an amount of Rs. 2.25 crores was paid vide five different cheques of Rs. 50 lakhs each dated 30.05.08 i.e. the date prior to the reconstitution of the firm. Further, the demand of Rs. 3 crores was made through two banker cheques dated 07.05.08 of Rs. 1 crore and Rs. 2 crore. The said cheques were also drawn prior to the date of reconstitution of the firm. 7. Now coming to the provisions of section 40A, the relevant part of the said provisions for the sake of convenience is reproduced as under: "Expenses or payments not deductible in certain circumstances. 40A. (1) The provisions of this section sha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e since the AO has not considered this aspect of the matter. 9. So far the contention of the Ld. Counsel for the assessee that the AO had applied his mind, in our view, does not have force so far so the facts of the case in hand are concerned. A perusal of the correspondence relied upon by the Ld. Counsel as referred to page A to L of the paper book reveals that the AO has not applied his mind on this aspect of the matter. A perusal of letter dated 13.10.11 placed on the paper book at Sl. No.G reveals that the AO had sought details of retiring partners Shri Ramnivas Ramratan Gupta and Shri Nikhil Ramnivas Gupta along with return of income, capital account and balance sheet of last three years. However, the said details had not been submitted by the assessee while replying to the said letter vide letter dated 18.10.11, copy of which has been placed at Sl. No. I of the paper book. Moreover, as observed above, we find that the issue relating to the applicability of section 40A has not been examined by the AO. There was sufficient material available on the file which was enough for the Ld. CIT to form the opinion that the AO had not applied his mind on this aspect of the matter. Hence ..... X X X X Extracts X X X X X X X X Extracts X X X X
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