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TMI Blog2018 (10) TMI 1340X X X X Extracts X X X X X X X X Extracts X X X X ..... er and directed the AO to disallow the expenditure being a cash payment made to the land owners is in violation of the provisions of section 40A(3) as the said payment do not fall under the exception provided under Rule 6DD of the IT Rules - Decided against assessee. - ITA No. 284/VIZ/2017 - - - Dated:- 10-8-2018 - Shri V. Durga Rao, Hon ble Judicial Member And Shri D.S. Sunder Singh, Hon ble Accountant Member For the Assessee : Shri G.V.N. Hari, Advocate. For the Department : Shri Deba Kumar Sonawal, CIT DR ORDER PER V. DURGA RAO, JUDICIAL MEMBER This appeal by the assessee is directed against the order of Principal Commissioner of Income Tax-1, Visakhapatnam, dated 27/03/2017 for Assessment Year 2012-13. 2. Facts of the case, in brief, are that assessee had filed his return of income by declaring total income of ₹ 12,89,020/-. Subsequently, case of the assessee was selected for scrutiny and assessment was completed under section 143(3) of the Income Tax Act, 1961 (hereinafter referred to as 'Act') on 16/02/2015 assessing total income at ₹ 14,92,992/-. Subsequently, ld.Commissioner while exercising the powers conferred on him ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntention of the assessee is to acquire the land as a stock-in-trade. It is also noticed by the ld. Commissioner that in the return of income filed for computation of short term capital gain on alleged conversion of capital asset into stock-in-trade during the year, even if it is nil, is not reported in the relevant schedule of ITR (Schedule-CG of ITR). Therefore, the claim of the assessee that the property was initially acquired as a capital asset is only an afterthought to escape the rigors of section 40A(3) and no credence can be given to such self-serving statement. The cost of acquisition was claimed as deduction in the profit loss account in the return of income filed by the assessee for Assessment Year 2012-13 relevant to the Financial Year of purchase i.e. 2011-12 which also clearly establishes that the property was purchased as a business asset only and was used as stock-in-trade during the year of purchase itself and hence the provisions of section 40A(3) are squarely applicable to the expenditure claimed in profit loss account against the purchase of the said property. Further, the assessee has not explained the extenuating circumstances for payment of part of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 42,10,000/- to acquire the capital asset and does not under the purview of section 40A(3) and submitted that the ld. Commissioner wrongly exercised the jurisdiction under section 263 of the Act and the same has to be quashed. 7. On the other hand, ld. Departmental Representative strongly supported the order passed by the ld. Commissioner. He further submitted that the assessee has purchased the property on 21/12/2011 in the name of M/s. Sritanuja Builders Developers, therefore the intention of the assessee is very clear that the property is purchased only with an intention to carry the business and construction and sale of apartments. Therefore, the cash payment made by the assessee is connected to the business and not for acquiring capital asset, hence, section 40A(3) squarely applies to the assessee s case and ld. Commissioner rightly directed the Assessing Officer to disallow the amount paid in cash of ₹ 42,10,000/- and add the same to the total income of the assessee. 8. We have heard both the sides, perused the material available on record and orders of the authorities below. 9. In this case, a site is purchased to the extent of 269 sq.yds. by the assessee in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... you are hereby requested to show cause as to why the order u/s 143(3) of the I.T. Act dated 16.02.2015 for the Asst. Year 2012-13 shall not be revised and the income recomputed and determined as per discussions made above. In this regard, your case is posted for hearing on 03.05.2016 at 11.00A.M. in the chamber of the undersigned at 4th floor, Aayakar Bhavan, Dabagardens, Visakhapatnam, on which date you may appear before the undersigned, either personally or through an authorized representative, failing which it will be deemed that you have no objection for the proposed revision u/s 263 of the Act. 10. In response to the above notice, the assessee vide his letter dated 04/05/2016 submitted that he purchased the property vide document No. 6757/2011, dated 21/12/2011, initially as a fixed asset. Thereafter, another site adjacent to the above mentioned site was offered for sale. With an intention to construct an apartment, he converted the fixed asset originally purchased by him on 21/12/2011 as stock-in-trade. The ld. Commissioner after considering the above explanation given by the assessee observed that the property initially purchased in the name of M/s. Sritanuja Builders ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct and the same do not fall under the exceptions provided in Rule 6DD of the IT Rules. 11. Before us, ld. counsel for the assessee has submitted that the property initially purchased on 21/12/2011 with an intention to keep it as an investment. Subsequently, adjacent property was ready for sale and therefore, same is purchased and constructed an apartment. So far as, the argument of the ld. counsel for the assessee is concerned, the property which is in dispute before us is purchased on 21/12/2011 wherein cash payment of ₹ 42,10,000/- has been made and subsequently on 05/01/2012 i.e. within 20 days, another property is purchased. Therefore, when the assessee is in the business of builder and developer and purchased the property in the name of M/s. Sritanuja Builders Developers and another property is purchased within a short span of 20 days, it cannot be said that assessee is an investor. So far as another argument is concerned, the Assessing Officer has examined all the details and passed the order under section 143(3) of the Act, therefore, it cannot be said that the order passed by the Assessing Officer is erroneous. No doubt the Assessing Officer called the sale deeds ..... X X X X Extracts X X X X X X X X Extracts X X X X
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