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TMI Blog2017 (11) TMI 1308X X X X Extracts X X X X X X X X Extracts X X X X ..... arwal, power of attorney holder of his daughter, the amount was paid on Sunday and also the seller has given the notice to release the payment by 25/3/2012, which was Sunday. Sunday was a bank holiday. Under these compelling situations, the assessee had to make payment in cash. The revenue has failed to controvert these facts, therefore, we find no merit in this ground of revenue’s appeal. The same is dismissed. As far as the assessee’s appeal is concerned, we have noticed that the evidences have been filed which establishes that the documents for registration submitted after the banking hours in respect of land purchased from Hira Lal Khetan for ₹ 13,62,658/- and from Smt. Shanta Devi Mittal for ₹ 11,75,000/-. No such evidence is available on record in respect of other purchases. The assessee has also sold his property on 15/09/2011 for which a deed was also executed in favour of M/s Ocean Seven Buildtech (P) Ltd., Gurgaon on the same day after banking hours. It was submitted that Director of M/s Ocean Seven Buildtech (P) Ltd. reached to Jaipur on 15/9/2011 after the banking hours, therefore, the payments against the sale deed were received in cash due to closure o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (a)(ia) are not attracted in the facts circumstances of the case, and hence the addition of ₹ 28,84,313/- deserves to be deleted. 1.1 That, the Ld. CIT(A) has further erred in ignoring the binding order of Hon ble Jurisdictional Bench of ITAT, Jaipur in the case of ACIT Vs. Girdharilal Bargoti ITA No. 757/JP/2012 which was binding upon the Ld. AO as well as Ld. CIT(A), particularly when the ITAT has after taking into consideration all the relevant and contradictory judgments rendered by various High Courts, has decided to follow the judgment of Hon ble Allahabad High Court in the case of CIT Vs. Vector Shipping Services (P) Ltd. [357 ITR 642] (affirmed by Supreme Court) by following the Hon ble Supreme Court s direction rendered in CIT Vs. Vegetable Products Ltd. reported in 88 ITR 192 to the effect that when two views are possible on an issue, then the one favouring assessee has to be preferred. Thus, the action of Ld. CIT(A) deserves to be hold bad in law and the addition so sustained deserves to be deleted. 1.2 That, the Ld. CIT(A) has further erred in ignoring the fact that the assessee has not been treated as assessee in default u/s 201 of the I.T. Act, 1961 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Income Tax Act, 1961 (in short the Act) at a total income of ₹ 2,65,62,990/- by making certain additions / disallowances. The ld. CIT(A) partly allowed the appeal of the assessee. Now the revenue and the assessee are in appeals before the ITAT 4. Ground No.1.1 of the assessee s appeal is not pressed, therefore, the same stands dismissed as not pressed. 5. The ground No. 1, 1.2 and 1.3 of the assessee s appeal are against upholding the disallowance of ₹ 28,84,313/- made by the Assessing Officer U/s 40(a)(ia) of the Act. The ld. CIT(A) has sustained the addition by holding as under: (i) I have duly considered the submissions of the appellant, assessment order and the material placed on record. During the year under consideration, the appellant paid interest of ₹ 28,84,313/- to the NBFCs without deduction of tax at source as per following details: Name of the Party Amount TDS Deducted Kotak Mahindra Prime Ltd. 1,98,282/- Nil Tata Capital Limited 4,33,221/- Nil ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... It is noticeable that Section 40(a) is applicable irrespective of the method of accounting followed by an assessee. Therefore, by using the term 'payable' legislature included the entire accrued liability. If assessee was following mercantile system of accounting, then the moment amount was credited to the account of payee on accrual of liability, TDS was required to be made but if assessee was following cash system of accounting, then on making payment TDS was to be made as the liability was discharged by making payment. The TDS provisions are applicable both in the situation of actual payment as well of the credit of the amount. It becomes very clear from the fact that the phrase, 'on which tax is deductible at source under Chapter XVIIB', was not there in the Bill but incorporated in the Act. This was not without any purpose. (v) The Hon'ble High Court of Himachal Pradesh in the case of Palam Gas Service Vs CIT, (2014) 89 CCH 0123 HPHC / (2015) 370 ITR 0740 (HP) held that: Lastly, insofar as the plea taken by the appellant that no disallowance can be made under Section 40 (a) (ia) as the freight charges had been paid and were not payable. S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Para8) (vii) It was another contention of the appellant that 2nd proviso to section 40(a) (ia) though inserted on the statute w.e.f. 01.04.2013, the same being curative is to be treated as applicable from 01.04.2005. The above contention deserves to be rejected because if the intention of the legislature was to make the said proviso applicable from 01.04.2005, it could said so while inserting the second proviso. Further, even if it is presumed for the time being that it was retrospective in nature, still no benefit can be given to the appellant as it failed to produce the required certificate from the chartered accountant as stipulated in 1st proviso to section 201 of the Act. Here it may be mentioned that as per the proviso to section 201 inserted w.e.f. 01.07.2012, the appellant would not be treated as assessee in default if the concerned NBFC (i) has furnished its return of income u/s 139; (ii) has taken into account such sums for computing income in such return of income; and (iii) has paid the tax due on the income declared by it in such return of income and the person furnishes a certificate to this effect from an accountant in such form as may be prescri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .f. 01.04.2013 i.e. from AY 2013-14 however, it is a beneficial provision and insertion of the same in the statute clearly shows the intention of the legislature to give relief in the case where the payee has paid due taxes, further disallowance in the hands of the payer caused to the serious hardship. The intention behind the insertion of provision of section 40(a)(ia) was to brought those persons in the tax net in whose case no TDS is deducted though they are enjoying the taxable income, thus where the payee has already paid the due taxes on the payments on which no TDS is deducted by payer, there remained no reason to make disallowance in the hands of the payer. The Hon ble Apex court in the case of CIT (Central-1) Delhi Vs. Vatika Township Pvt. Ltd. reported in 367 ITR 466 (relevant para 30-37) (APB 161-192) has held that the beneficial amendment which effect the public generally and where to confer such benefit appears to have been the legislators object, then the presumption would be that such a legislation, giving it a purposive construction, would warrant it to be given retrospective effect. Recently, the Hon ble Delhi High Court in the case of CIT Vs. Ansal Land Mark ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vation that no certificate as prescribed under proviso to Section 201(1) r.w. Rule 31ACB of the Rules certifying that the taxes in respect of interest income were duly paid by NBFCs was filed. The record shows that the assessee has submitted certificate from a Chartered Accountant namely M/s Dua Manral Associates placed at page No. 20 to 21 of the paper book, as per the proviso to Section 201(1) r.w. Rule 31ACB of the Rules certifying that the taxes in respect of interest income of ₹ 20,42,045 were duly paid by NBFCs Religare Finvest Ltd. The Hon ble Delhi High Court in the case of CIT Vs. Ansal Land Mark Township (P) Ltd. has held as under: Section 40(a)(ia) of the Income-tax Act, 1961, is aimed at ensuring that an expenditure should not be allowed as deduction in the hands of an assessee in a situation in which income embedded in such expenditure has remained untaxed due to tax withholding lapses by the assessee. It is not a penalty for tax withholding lapse but it is a sort of compensatory deduction restriction for an income going untaxed due to tax withholding lapse. The insertion of the second proviso to section 40(a)(ia) is declaratory and curative in nature and i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt made cash payments exceeding ₹ 20,000/- in violation of provisions of section 40A(3) of the Act as per the following details: Name of party Total amount paid Registry/ agreement Date of payment as per registry Date of payment as per cash book Ramesh Chand Agrawal 23,13,324/- 15.09.2011 (Thursday) No mention of specific date 15.09.2011 (Thursday) Hira Lal Khetan 9,62,658/- -do- -do- -do- Hira Lal Khetan 4,00,000/- -do- -do- -do- Smt. Shanta Devi 11,75,000/- -do- -do- -do- Shiv Pal Singh 4,50,000/- 20.07.2011 (Wednesday) 20.07.2009 (Wednesday) (through the date mentioned is 20.07.2011 but that appears to be typographical error) 20.07.2011 (Wednesday) Total ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the cash payments made by it were duly reflected in its books of accounts and were out of the cash balance available in the cash book. All the cash payments were made in urgency and out of abnormal unavoidable circumstances. The sellers to whom the cash payments were made are all genuine individuals and their identity is established. Even at the time of registry of the sale agreements, the photo ID and address proof of the buyer as well as of the seller is submitted with the Registrar, hence the identity of the seller cannot be challenged. It was the contention of the appellant that the object of the provisions of section 40A(3) is to check evasion of taxes so that the payment is made from disclosed sources only or in other words, the object of enacting section 40A(3) is to ensure that payments in respect of which deductions are claimed by the taxpayers are genuinely made and accommodation payments are not allowed as deduction. In the assessment order, the AO has never questioned about the genuineness of the source of cash payment nor the authenticity of the transaction. The purpose of the 40A(3) is not to penalize the appellant for making cash payments of an amount exceeding the s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly and also the full and final payment on the date of registry was also paid by account payee cheques only . Thus the intention of the appellant was never to make the payment in cash but the circumstances arising out of unavoidable business scenario made situation like that the appellant company was left with no option but to make the cash payment. Regarding the balance cash payment of ₹ 53,00,982 /- to other remaining sellers, it was submitted that the cash payments to them were also made out of circumstances arising out of unavoidable business scenario. (v) It was submitted that the terms of section 40A(3) are not absolute. Consideration of business expediency and other relevant factors are not excluded. Genuine and bona fide transactions are not taken out of the sweep of the section. It is open to the appellant to furnish to the satisfaction of the AO the circumstances under which the payment in the manner prescribed in section 40A(3) was not practicable or would have caused genuine difficulty to the payee. (vi) It was further submitted that the Rule 6DD of the Income Tax Rules, 1962, provides that an assessee can be exempt from payment by a crossed cheques ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch a payment or aggregate of payments made to a person in a day, otherwise than by an account payee cheque drawn on a bank or account payee bank draft, exceeds twenty thousand rupees, no deduction shall be allowed in respect of such expenditure. (3A) Where exceeds twenty thousand rupees: Provided that no disallowance shall be made and no payment shall be deemed to be the profits and gains of business or profession under subsection (3) and this sub-section where a payment or aggregate of payments made to a person in a day, otherwise than by an account payee cheque drawn on a bank or account payee bank draft, exceeds twenty thousand rupees, in such cases and under such circumstances as may be prescribed, having regard to the nature and extent of banking facilities available, considerations of business expediency and other relevant factors : (xa) The relevant extract of Rule 6DD is reproduced as under: 6DD. No disallowance under sub-section (3) of section 40A shall be made and no payment shall be deemed to be the profits and gains of business or profession under sub-section (3A) of section 40A where a payment or aggregate of payments made to a person in a day, oth ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at date. We are not impressed by the contention that the assessee should have made the payment before that date. When a particular agreement provides for a payment on or before a particular date, it is not necessary that just to meet the technical requirement of income- tax provisions, payment should be made earlier. Payment has been mode on March 28, 2010 which foils on a Sunday and is squarely covered by the exception provided under rule 6DD(j) which has been extracted by the Assessing Officer above. Further, the sale deed was also executed on March 30, 2010. Therefore, in our opinion, the cash payment would covered by the exception under rule 6DD(j) and accordingly we set aside the order of the learned Commissioner of Income-tax (Appeals) and delete this addition. (xii) In view of the above discussion, it is held that the payments to Shri Ashok Agarwal are covered by the provisions of Rule 6DD(j) of the IT Rules as the appellant was required to make payment in cash on Sunday and thus the AO was not justified in making disallowance of ₹ 1,82,40,000/- u/s 40A(3) of the Act, hence, the same is deleted. (xiii) The balance cash payments of ₹ 53,00,982/- wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (All), in which it was held that the terms of section 40A(3) are not absolute, consideration of business expediency and other relevant factors are not excluded. Genuine and bona fide transactions are not taken out of the sweep of the section. It is open to the appellant to furnish to the satisfaction of the assessing officer the circumstances under which the payment in the manner prescribed in section 40A(3) was not practicable or would have caused genuine difficulty to the payee. It is pertinent to mention here that the appellant has not stated anything in respect of cash payment of ₹ 4.50 Lac to Shiv pal Singh for purchase of land, which was disallowed by the AO u/s 40A(3) of the Act. (xv) It is noted from the registered sale deed executed by the appellant in favour of M/s Ocean Seven Buildtech P Ltd on that the said sale deed was presented before the Sub Registrar at 6.20 PM on 15.09.2011. It is further noted that the total consideration for the said sale was ₹ 2.44 Crore and not ₹ 2.09 Crore as stated by the appellant and the said sale deed does not reflect that the payment of ₹ 2.09 Crore was paid in cash on 15.09.2011 itself. In the sale deed, i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e are in appeals before the ITAT. The ld. Sr. DR has relied on the order of the Assessing Officer. On the other hand, the ld AR of the assessee has submitted the brief facts and submissions as under: Brief facts pertaining to these grounds of appeal are that during the year under consideration, assessee company made certain payments in cash towards the purchase of land being stock in trade, amounting to ₹ 2,35,40,982/- to following parties :- Name of the Seller Amount paid in cash Shri Heera Lal Khetan 13,62,658 Smt. Shanta Devi Mittal 11,75,000 Shri Ramesh Chandra Agarwal 23,13,324 Shri Shiv Pal Singh 450,0000 Shri Ashok Agarwal 1,82,40,000 TOTAL 2,35,40,982 During the course of assessment proceedings, it was submitted that, the said payments were made either under business exigencies, or on holidays or due to pressure and threats by the concerned parties ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arties to get their sale deed registered on the same day for which they all had agreed. However, on 15.09.2011 the director of M/s Ocean Buildtech (P) Ltd., could reach Jaipur from Gurgaon only after banking hours. The deed could be registered at late evening (APB 23-28). Since the payment against such sale deed was received in cash due to closure of banking hours, cash payment was made to the above four parties, and the deeds were registered on the same date as they had refused to come again for this purpose and seriously warned the assessee to forfeit the advance. These facts are duly verifiable from the purchase deeds filed with the Ld. AO (APB 60-88). Hence, payment to these four sellers were also made in cash under business exigencies. It is also a matter of fact that the said pieces of land that got registered on 15.09.2011 is not disputed by Ld. AO, who did not accept the explanation of the assessee for the only reason that the registry of land sold to M/s Ocean Buildtech (P) Ltd. was done after the execution of the above said purchase deeds. In this regard it is humbly submitted that, both sale and purchase deeds were registered on the same day (15.09.2011) is not disp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... enacting section 40A(3) was to ensure that payments exceeding the sum specified are made by a crossed cheque drawn on a bank or by a crossed bank draft so that it will be easier to ascertain, when deduction is claimed, whether the payment was genuine and whether it was made out of income from disclosed sources. Further that, Rule 6DD of the Income Tax Rules, 1962 provides that an assessee can be exempt from payment through crossed cheques or bank draft in the circumstances specified therein. These circumstances given, though not exhaustive, give the underlying idea that if the identity of the payee is known, it would be possible for the AO to crosscheck the authenticity of the transaction. It is pertinent to note here that in the instant case, Ld. AO never doubted the authenticity of the transaction nor alleged that there was malafide intention of the assessee in paying amount in cash nor it has been brought on record that the transactions were with the intention to evade tax. Thus it is clear that under Rule 6DD, it is open to the assessee to explain to the assessing authority, the circumstances which compelled payment in cash of an amount exceeding the stipulated limi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... /- to Shri Ashok Agarwal, power of attorney holder of his daughter, the amount was paid on Sunday and also the seller has given the notice to release the payment by 25/3/2012, which was Sunday. Sunday was a bank holiday. Under these compelling situations, the assessee had to make payment in cash. The revenue has failed to controvert these facts, therefore, we find no merit in this ground of revenue s appeal. The same is dismissed. As far as the assessee s appeal is concerned, we have noticed that the evidences have been filed which establishes that the documents for registration submitted after the banking hours in respect of land purchased from Hira Lal Khetan for ₹ 13,62,658/- and from Smt. Shanta Devi Mittal for ₹ 11,75,000/-. No such evidence is available on record in respect of other purchases. The assessee has also sold his property on 15/09/2011 for which a deed was also executed in favour of M/s Ocean Seven Buildtech (P) Ltd., Gurgaon on the same day after banking hours. It was submitted that Director of M/s Ocean Seven Buildtech (P) Ltd. reached to Jaipur on 15/9/2011 after the banking hours, therefore, the payments against the sale deed were received in cash d ..... X X X X Extracts X X X X X X X X Extracts X X X X
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