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TMI Blog2019 (11) TMI 1236X X X X Extracts X X X X X X X X Extracts X X X X ..... ri G.V.K.Chowdary has acted as an agent and the firm has given the cash to Shri G.V.K.Chowdary who in turn made the disbursements to the land owners. Merely because of endorsement made on agreement it does not conclusively prove that the assessee made cash payment directly to the land owners. Though Shri G.V.K.Chowdary has given the affidavit, the AO has simply brushed aside the agreement without making any enquiry. AO without examining either Shri G.V.K.Chowdary or the land owners has come to a conclusion that the documents were created to strengthen the assessee s case which is based on surmises without having any evidence. Any conclusion has to be drawn only after verification of the facts. AO ought to have examined Shri G.V.K.C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Assessment Year (A.Y.) 2005-06. 2. All the grounds of appeal are related to the addition made by the Assessing Officer (AO) u/s 40A(3) of the Income Tax Act, 1961 (in short Act ). In this case, assessment was completed originally u/s 143(3) by an order dated 25.09.2007. Subsequently, the assessment was taken up for revision u/s 263 by Commissioner of Income Tax, Rajahmundry and found that the assessee has debited the amount of ₹ 53.62 lakhs towards site purchases in the P L account for purchase of 6.39 acres of land from several parties vide two agreements dated 28.05.2004 and 03.06.2004 as per the details given below : (i) Agreement dated 28.05.2004 Date ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s provided u/s 40A(3) of the Act. Since the AO has failed to examine the issue, the Ld.CIT viewed that the assessment passed by the AO u/s 143(3)was erroneous and prejudicial to the interest of the revenue, hence, set aside the order of the AO with a direction to redo the assessment as per the directions given u/s 263. Before the Ld.CIT, the assessee explained that it has made payments to the agents and the agents in turn have made the cash payments to the land owners who insisted for cash payments and furthermore, submitted that the land owners were agriculturists / farmers and they do not have bank account and some payments were also made on holidays. The Ld.CIT set aside the orders of the AO with a direction to redo the assessment with t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e to prospective buyers. Copy of the affidavit given by our agent Sri G.VK.Chowdary which was fi led before the Hon'ble Commissioner of Income Tax enclosed herewith for your kind perusal. We have also enclosed herewith the copies of the receipts issued by the agent for the amounts received by him towards the amounts payable to the land owners, which show that all the payments were made through our agent to the land owners. 3. The Payments were made to the small farmers who are residing in villages and are not having any Bank accounts. 4. Copies of the Ryot pass books of the both the land owners evidencing the holding of land by them are enclosed herewith. 5. During the year under consideration, on one occasion the paym ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was furnished before the AO and the Ld.CIT(A). The assessee further submitted that all the land owners were small farmers residing in villages and having no bank accounts. He furnished the copies of the ryotwari passbooks of the land owners evidencing the holding of the land and establishing the identity. The Ld.AR also submitted that the payment of ₹ 1.00 lakh was made on 04.07.2004 which was a holiday to the bank. Since the payments were made to the small farmers who are not having bank accounts through agents, the Ld.AR argued that the payment is covered by the exceptions in Rule 6DD, hence requested to set aside the order of the Ld.CIT(A) and allow the appeal of the assessee. The assessee also taken support of the order of this Tr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not believe the contention of the assessee and brushed aside the submissions merely because of the endorsements on the reverse side of the agreement acknowledging the receipt of cash payment. In the instant case, there is no dispute that the land owners have given endorsement to the effect that they had received the cash on various dates. However, as per the affidavit, land owners have insisted for cash payments and Shri G.V.K.Chowdary has acted as an agent and the firm has given the cash to Shri G.V.K.Chowdary who in turn made the disbursements to the land owners. Merely because of endorsement made on agreement it does not conclusively prove that the assessee made cash payment directly to the land owners. Though Shri G.V.K.Chowdary has giv ..... X X X X Extracts X X X X X X X X Extracts X X X X
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