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TMI Blog2014 (3) TMI 1074X X X X Extracts X X X X X X X X Extracts X X X X ..... ical and issue being materially the same respectfully following the order of the coordinate bench as aforesaid, we direct the assessing officer to verify the cash payments made by the assessee and exclude the payments made on Sundays and public holidays from the purview of section 40A(3) of the Act. - Decided in favour of assessee for statistical purposes. - ITA Nos. 614&615/Vizag/2013 - - - Dated:- 7-3-2014 - J. Sudhakar Reddy (Accountant Member) And Saktijit Dey (Judicial Member) For the Assessee : G. V. N. Hari, Advocate For the Revenue : K. V. N. Charya, CIT(DR) ORDER Saktijit Dey (Judicial Member) These are two appeals of the assessee pertaining to the assessment year 2007-08. While ITA No.615/Vizag/2013 is against the order passed u/s 263 of the Income-tax Act, ITA No.614/Vizag/2013 arises out of the consequential order passed in pursuance to the order u/s 263 of the Act. We will first deal with ITA No.615/Vizag/2013. 2. There is a delay of 603 days in filing of the aforesaid appeal. The assessee has filed a petition seeking condonation of delay. In the petition it has been stated by the assessee that the order passed u/s 263 of the Act was recei ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... substantial case in his favour and the assessee would not have gained anything by not filing the appeal in time, delay should be condoned. 3. The ld. D.R. on the other hand objected for condonation of the delay. 4. We have heard the parties and perused the materials on record. On going through the explanation of the assessee for belated filing of the appeal, we are satisfied that there was a reasonable cause for not filing the appeal in time. That besides as can be seen the issue in dispute i.e. the disallowance u/s 40A(3) of the Act stands decided in favour of the assessee by an order of the Tribunal in assessee s own case in ITA No.324/Vizag/2012 for the assessment year 2008-09. The Hon ble Bombay High Court while considering identical issue of dismissal of assessee s appeal without condonation of delay in case of Remex Constructions/Remex Electricals Vs. First Income Tax Officers and others (supra) has held as under: The grievance of Shri Pandit that the Tribunal war, very technical in not condoning the delay of about three years in filing the appeals against the orders passed under s. 263 of the Act is not without merit. The Tribunal held that the petitioner ought to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ore, considering assessee s explanation in the light of the decision of the Hon ble Bombay High Court (supra) we condone the delay and admit the appeal for hearing. 6. Reverting back to the merits of the issue, briefly, the facts are, the assessee a partnership firm is engaged in the business of purchase of lands and selling the same after developing as residential plots. For the impugned assessment year, the assessee filed its return of income on 19.10.2007 declaring total income of ₹ 20,21,670/-. Assessment for the impugned assessment year was completed u/s 143(3) of the Act vide order dated 31.12.2009 determining the total income at ₹ 25,25,790/- after making disallowance of ₹ 5,04,116/- claimed as expenditure towards commission paid to marketing agent and business promotion expenses. The CIT in exercise of power u/s 263 of the Act called for the assessment records and while examining the same, was of the view that the assessment order passed was erroneous and prejudicial to the interest of revenue on the ground that the assessing officer has not examined the cash payments made amounting to ₹ 4,79,22,915/- in contravention to the provisions of section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ty of the farmers is also established. The amounts paid to the farmers are not disputed at any stage. As the firm come into existence newly unless the firm pays cash as consideration it is not in a position to capture the deals. It is also a usual practice in the field of real estate to pay cash for the acquisition of the land. It was submitted that the provisions of section 40A(3) are enacted in the Act to curb the black money transaction. In case of assessee since there are no such deals and the entire consideration paid has been recorded in the books of accounts and necessary information has already been disclosed in the return of income, there cannot be any doubt with regard to the genuineness of the transaction. It was submitted that the assessee firm is a new entrant in the business of real estate having come into existence in September, 2006. As a new entrant and that too in the field of real estate it is difficult to acquire land that too agricultural land from the farmers as most of them deal in cash only. In order to capture the business, the assessee has to make cash transactions. If the firm does not agree to the terms and conditions imposed by the farmers, they will no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ny fault or payments made on a bank holiday outside the purview of section 40A(3) of the Act. The CIT noted that the assessee had debited the entire payment of ₹ 4,79,22,915/- being the sale consideration of land to the profit loss account under the head purchases and after deducting corresponding cost of sales, the remaining amount was disclosed as closing stock which amounted to ₹ 1,65,39,600/- including the development expenditure. This according to the CIT shows that the payment is claimed as deductible expenditure in computing the taxable income of the assessee. The CIT further noted that the assessee had made the transactions from current account of partner Sri D. Srinivasa Rao. On going through the details of transactions, he noted that the assessee has created one maiden account for the transaction of cash payments in the name of one of the partner Sri Srinivasa Rao and payments were made continuously from this account. All the payments made through this account were instantly transferred to relevant accounts as per the accounting principle and there is no balance/outstanding in this account at the end of the year. All the transactions were duly reflected in t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the CIT does not dispute the fact that the assessee is purchasing agricultural land from agriculturists. It is also not disputed that the payments were not made by the assessee directly to the agriculturists but have been made through the partner. Therefore, when the payments are being made through a partner who is acting as an agent on behalf of the firm then the payment in cash comes within the exception provided u/s sub-clause (k) or rule 6DD. Therefore, the provisions of section 40A(3) would not be applicable to such payments made in cash. It was contended by the Ld. A.R. that in some instances payments have to be made on Sundays and public holidays considering business expediency. Therefore, such payments would fall within the exception provided under clause (j) of rule 6DD and as such will also not attract the provisions of section 40A(3) of the Act. It was therefore contended by the Ld. A.R. that since the payments are covered under rule 6DD(j) of the rules, no disallowance can be made by invoking the provisions of section 40A(3) of the Act. The Ld. A.R. also submitted that the issue stands squarely covered in favour of the assessee by virtue of an order passed by the Tribu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... have sold the lands to some other persons. In these circumstances, if the assessee would have insisted for payment by way of cheque or DD or have deferred it, it might have resulted in a loss of business opportunities as the land owners would not have agreed to sale the lands to the assessee. Therefore the expression 'required to be made' understood in this context and keeping the intention of legislature in mind can be construed to mean that payments required to be for the purpose of the business of the assessee. In these circumstances, payments made on Sundays and Holidays have to be held to be coming within the ambit of Rule 6DD(j), hence provisions of section 40A(3) will not apply to such payments. Therefore, payments made in cash atleast to the extent made on Sundays and Holidays cannot be disallowed u/s 40A(3) of the-Act. We, therefore, direct the AO to verify such payments made on Sundays and Holidays and delete the addition of these amounts. 19. So far as addition of the rest of the amount sustained by the CIT(A) is concerned, though assessee has stated that such payments come within the ambit of sub-rule(g) of Rule 6DD, however, assessee is required to substan ..... X X X X Extracts X X X X X X X X Extracts X X X X
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