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TMI Blog2016 (8) TMI 642X X X X Extracts X X X X X X X X Extracts X X X X ..... etailed and proper enquiry is required to be conducted. Accordingly, we are of the view that this issue requires a proper enquiry and consequently set aside to the record of the Assessing Officer for proper enquiry and verification and then decide the same. We make it clear that so far as the disallowance made under Section 40A(3) of the Act the same is found to be proper and therefore issue of enhancement for the balance amount made by the CIT (Appeals) is set aside to the record of the Assessing Officer. Enhancement of assessment inter alia on account of suppression of profit - Held that:- Prima facie it appears that this amount of ₹ 16 lakhs was part of the opening balance of the land purchased and was not part of the expenditure claimed during the year. The CIT (Appeals) has made this addition on the basis of the reply filed by the assessee without verification of the books of accounts whether this amount was paid by the assessee in the earlier year which was already accounted for in the books of accounts or not. Further it was also not verified whether while computing the profit the assessee has suppressed this amount on account of wrong claim or this amount was not p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ocuments pertaining to Sri S. L. Natraj, one of the associate of Sri Jayaram, partner of Sri Jayaram Developers Contractors who procure land for M/s. Adarsh Developers at the Huttanahalli Village, Jala Hobli, Bangalore, were seized and marked as A/AD/6 at pages 77 to 87. Consequent to the said information, a search in the case of this assessee was conducted on 15/12/2006 and various documents pertaining to this case were also seized under section 132 of the Income Tax Act, 1961 (in short 'the Act'). During the course of consequential search, the assessee was confronted with the sale agreement and the sale deed seized from the business premises of M/s. Adarsh Developers marked as A/AD/06. In his statement recorded under section 132 (4) dated 15/12/2006, the assessee stated that he had entered into an agreement with Sri S. L. Natraj for sale of 9 acres 10 guntas at Huttanahalli village for a consideration of ₹ 4, 50,00, 000/-. Further, during the course of deposition the assessee has admitted short term capital gain of ₹ 2.3 crores arisen from the said transaction. A notice under section 153A was issued on 19/12/2007 for the assessment years 2001-02 to 2006-07 ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not claim deduction of those expenses while computing the income from business, the provisions of section 40A (3) will not be applicable. 5.2 The next contention of the Learned AR is that the recipient of the said amount offered the same to tax. Therefore, it cannot be disallowed under section 40A(3) of the Act. He has relied upon the judgment of Hon ble Supreme Court in case of Sattar Singh Gurmukh Singh Vs. ITO (1991) reported in 191 ITR 667 and submitted that the terms of section 40A(3) are held to be not absolute. The genuine and bona-fide transactions are not taken out of the sweep of the section. Thus the learned Authorised Representative has submitted that the recipient of the amount has offered the same for tax then the provisions of Section 40A(3) of the Act cannot be applied. He has referred the confirmation given by the recipient Mr. B.N. Byregowda that they have filed their return and offered the said amount of ₹ 4.5 Crores received in cash for taxation. The learned Authorised Representative has submitted that the CIT (Appeals) has reproduced the confirmation given by the recipient of the amount. He has relied upon the exception provided under Rule 6 DDJ of IT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d under Rule 6 DD of the IT Rules. It is pertinent to note that merely because the recipient of the amount has included the same in the return of income for taxation, it would absolve the assessee who has made the payment on the contravention of Section 40A(3) of the Act. The decisions relied upon by the assessee cannot be applied in the facts of the case as the same were delivered in a different context and facts. The Hon ble Calcutta High Court in the case of Bagmari Tea Co. Ltd. (supra) has held in para 5 as under : 5. With respect we are of the view that when the payment is made in contravention of s. 40A(3) though the payment is genuine that cannot be allowed, because the genuineness of payment is required in all cases but payment by account payee cheque or demand draft is additional requirement under s. 40A(3). If we follow the view that the payment is genuine, then that should not be disallowed, in that case the provision of s. 40A(3) will become redundant. Therefore, unless there is unavoidable circumstances for payment in cash that payment will hit by the provision of s. 40A(3). The finding of the AO and CIT(A) as well as Tribunal that there was no unavoidable circu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... exclusively for the business of the assessee. 6.1 Before us, the learned Authorised Representative of the assessee has submitted that the assessee proved that the payment was made to the seller as part of the cost of acquisition and therefore the same is allowable expenditure against the income from sale of the land. He has further contended that the Assessing Officer has not disputed the on money receipt and payment. However, the CIT (Appeals) disallowed the same on the ground that it was not an expenditure for acquisition of the land and transaction was not recorded in the books of accounts. The learned Authorised Representative has contended that when the payment was not in dispute and it was made to the seller of the land then no other purpose can be attributed to this payment other than the purchase consideration in cash. 6.2 On the other hand, the learned Departmental Representative has submitted that this claim of the assessee is after thought as the assessee did not disclose this payment in the statement recorded during the search and seizure action. No supporting evidence has been produced by the assessee in support of his claim. He has relied upon the orders of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... refore issue of enhancement for the balance amount made by the CIT (Appeals) is set aside to the record of the Assessing Officer. Ground No.3 is regarding addition of ₹ 28 lakhs . 7. At the time of hearing, the learned Authorised Representative of the assessee has submitted that the assessee does not press this ground and the same may be dismissed. The learned Departmental Representative has rasied no objection if the Ground No.3 is dismissed as not pressed. Accordingly, Ground No.3 of the assessee s appeal is dismissed being not pressed. Ground No.4 is regarding an addition of ₹ 16 lakhs. 8. During the course of the appellate proceedings, the CIT (Appeals) issued show cause notice for enhancement of assessment inter alia on account of suppression of profit disclosed as per the books of accounts of ₹ 16 lakhs. The CIT (Appeals) noted from the written submissions of the assessee that the profit quoted as per the books of accounts is net of all transactions including cash transaction of Sri Byregowda. It was noted that the payment to Sri Pillappa is also shown as paid for purchase of land however the said payment for purchase of land was mad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dering this payment of ₹ 16 lakhs which is not paid to Sri Byregowda but was paid to Sri Pillappa in respect of a different land transaction. Thus the learned Departmental Representative has submitted that the CIT (Appeals) was justified in enhancing the income by ₹ 16 lakhs as the assessee has concealed the income by wrongly claiming the same as an expenditure in respect of the transaction of Sri Byregowda. 11. We have considered the rival submissions as well as the relevant material on record. Prima facie it appears that this amount of ₹ 16 lakhs was part of the opening balance of the land purchased and was not part of the expenditure claimed during the year. The CIT (Appeals) has made this addition on the basis of the reply filed by the assessee without verification of the books of accounts whether this amount was paid by the assessee in the earlier year which was already accounted for in the books of accounts or not. Further it was also not verified whether while computing the profit the assessee has suppressed this amount on account of wrong claim or this amount was not part of the expenditure during the year under consideration. Accordingly in the facts a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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