9911796707
TMI Blog2011 (8) TMI 1329X X X X Extracts X X X X X X X X Extracts X X X X ..... loans or credits. The assessee did not furnish the full particulars of the parties from whom the amounts were received during the year. The PAN and source of funds advanced to the assessee were not explained. The AO accordingly at pages 4 to 7 of the assessment order has given the names of 118 parties from whom the assessee has received the advance during the year. The total money received during the year is ₹ 7,16,02,224/-. The AO treated the sums so credited as unexplained and added to the income of the assessee u/s 68 of the Act. 2.4 Before the ld. CIT(A), the assessee filed the evidence. The assessee gave the following reasons for accepting the additional evidence. ''1.Submission regarding acceptability of additional Evidence The assessee has filed confirmation letters, proof of identity, affidavits, bank statements and other documents as additional evidence in previous hearings. The assessee has made detailed submission in his application for admission of additional evidence. Further to it, we submit that:- a) The main director of company Shri Shankar Khandelwal who was looking day to day affairs of company was suffering from Cancer and due to this incurable ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Income Tax Act, 1961 and to produce books of accounts. The assessee filed the reply of query and produced books of account before the AO which includes the cash books and bank book, which satisfies the query of the AO. Therefore, all the queries raised by the AO have been replied/complied by the assessee. The Ld. AO never asked the assessee to file confirmation letter of the cash creditors and advances in any notice either issued u/s 142(1) and 143(2) of Income Tax Act. c) In view of the above submission, we submit that the ld AO assessed the income of the assessee without providing the reasonable opportunity. The Assessing Officer is not absolved of the obligation to comply with the fundamental rules of justice, which have come to be known in administrative law as the principles of jurisprudence. Compliance with the audi alteram partem rule of natural justice is an indispensable requirement of a valid assessment order. kindly see, Jagadambika Pratap Narain Singh (Raja) v. CBDT (1975) 100 ITR 698 (SC), Government of India v. Maxim A Lobo (1990) 83 CTR (Mad) 103; CIT v. Vimladen Bhagwandas Patel (Smt.) (1979) 118 ITR 134 (Guj); Gangadharan Pillai (P) v. ACED (1980) 126 ITR 35 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lant is concerned and in view of the decisions of the Courts, the additional evidence is allowed to be admitted. '' 2.6 From pages 5 to 49 of the appellate order, the ld. CIT(A) has mentioned the additional evidence filed before him and have also mentioned the comments of the AO in respect of additional evidence. Before the ld. CIT(A), the assessee relied upon the following case laws:- 1. CIT Vs. Smt. P.K. Noorjahan, 237 ITR 570 (SC) 2. CIT Vs. Bharat Engg. & Construction Co.83 ITR 187 (SC) 3. CIT Vs. Orissa Corporation (P) Ltd., 159 ITR 79 (SC) 4. Aravali Trading Co. Vs. ITO, 8 DTR 199 (Raj.) 2.7 The ld. CIT(A) after considering the submissions of the assessee reduced the addition to ₹ 79,52,500/- and balance addition of ₹ 4,95,82,259/- was deleted. It will be useful to reproduce the order of the ld. CIT(A) in reducing the addition to ₹ 79,52,500/-/ ''3.3.1 Coming to the merits of the addition, the first argument of the appellant is regarding A.O. taking some of the amounts twice and further in some cases amount being taken incorrectly by the A.O., totaling to ₹ 1,40,67,465/-. It is seen that the A.O. has rectified the mistake wherever ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e appellant has claimed to have received ₹ 19 lakhs in cash from Sh. Ram Pal Yadav and ₹ 35 lakhs in cash from one Sh. Surja Ram. Regarding source, it was claimed that same was out of sale proceeds of their agricultural land. However, no any documentary evidence in this regard was furnished. No any specific details as to which land was sold and how much amount was stated to be received from contended sale of the land and the reasons and explanation as to how such heavy amount was advanced to the appellant in cash, was not furnished. Accordingly, I agree with the finding of A.O. that amount of ₹ 54 lakhs is unexplained and held to be income of the appellant from undisclosed sources. 3.3.5 Similarly regarding entry at sr. no. 81 namely Sh. Rakesh Kuamr Gupta- ₹ 18,50,000/-, the A.O, in the remand report, has not found the evidences satisfactory and has commented that addition may be sustained. I have perused the details. The appellant has only furnished the affidavit without furnishing any supporting evidence and details regarding creditworthiness and genuineness of the transactions. Moreover, it was claimed that cheque of ₹ 8.5 lakhs was issued by de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ned CIT (A) had acknowledged the totaling mistake of ₹ 1,40,67,465/- straight away and deleted the same. He had also admitted the additional evidences and accepted credits in respect of 114 creditors for ₹ 4,95,82,259/- However, in respect of the following four creditors, he was not willing to accept the same on the plea that these deposits remained un-verifiable: S.No. of AO's Ord. Name of the creditor. Amount. 2 Shri Anil Dhandhia ₹ 6,87,500/- 60 Shri M.S. Choudhary ₹ 15,000/- 34 Kissans ₹ 54,00,000/- 81 Shri Rakesh Kumar Gupta. ₹ 18,50,000/- Total ₹ 79,52,500/- While confirming the above additions, your honors would note that the ld. CIT (A) had not given his own findings in respect of such deposits and also did not assign any reason for rejecting the explanation of the appellant. He had simply referred to the remand report of the AO and concluded that the explanation furnished in respect of such deposits was not found satisfactory by the 'ld AO' so these deposits were not verifiable. Thus for confirming such additions, he had heavily relied upon the Remand Report of the AO. As a Judicial Authority, it is h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onsideration had been taken as benamidhar of one of the directors of the Co. Shri Shankarlal Khandelwal and all the investments etc. had owned by him so there was no question at all to make further addition on account of the deposits shown in the name of such benanidhar. From the reading of above remand report of the AO, your honors would appreciate that the remand report as relied upon by the ld. CIT (A) for arriving at such findings was not specific and categorical and did not deal with the points at issue in right perspective. Thus the conclusions so arrived at on the basis of such faulty remand report are bad in law. In the circumstances, the ld. CIT (A) had erroneously confirmed these additions on the basis of such faulty report which deserve to be deleted. ''' 2.10 Before us, the ld. DR has filed the written submissions which are reproduced as under:- ''…..The arguments taken by ld. A.R. against confirmation of these additions are not acceptable because of the following reasons. (i) First of all, ld. AR has claimed that the ld. CIT(A) has given this decision relying on the remand report of the AO and therefore, such decision is bad in law. In this regard, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ess activities during the assessment year 2008-09. The AO required the assessee to give the following details. 1. Paid up capital 2. Details of preliminary expenses 3. bank statement 4. to produce cash book, ledger and other documents The AO vide order sheet entry dated 20-02-09 mentioned that the sum of ₹ 5.00 lacs be not added as undisclosed income because the assessee has not been able to give the source of the amount credited as share capital. The hearings were adjourned on 24-02-09. However, there is no entry on 24-0209. Fresh notice was issued on 27-10-09 and the assessee was required to file the sources of the funds for subscription of share capital which has been subscribed in cash by Shri Tikam Khandelwal, Smt. Guman Khandelwal and Shri Dilip Kumawat. Thereafter the order sheet entry is dated 28-11-09 and on that date certain details in respect of share application money were filed by the assessee. The case was adjourned to 9th Dec. 09. The assessment has been made on 13th Dec. 09. The ld. CIT(A) has observed that AO vide notice u/s 142(1) has not asked the assessee to furnish the confirmation letter of cash creditors and advance. From the sequence of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f transactions, including bank statement of party. During assessment proceedings assessee has failed to furnish source of fund inspite of number of opportunities given. '' ''59. Maya d/o Hanuman Yadav ₹ 70,000/-. Copy of ledgers are placed at P.B. (Page No. 213-216). Copy of Ledger account is placed at P.B. (Page No 215). During the year the assessee not received any amount from this party. The amount credited in a/c of party was on account of land purchased from this party. The purchases deed against purchases of land is at PB Page 466 to 477. Further the corresponding purchases summary is at PB Page 213. A.O's Comments: - I have gone through the submission and supporting documents filed by the assessee during appellate proceedings and the same is acceptable'' ''118. Yogesh Agarwal ₹ 70,000/- Copies of allotment letter, Registration form and PAN Card are placed at P.B. (Page No.401-405). The amount from this party was received as advance against sales of plot and this was adjusted against sales of plot made to this party in next year. The advance for plot booking and sales in next year is verifiable from registration form submitted by the party and copy of all ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ade u/s 68 of the Act without collecting any further evidence. 2.17 A sum of ₹ 54.00 lacs credited in the name of Kissan has been confirmed by the ld. CIT(A). Before the ld. CIT(A), it was submitted by the assessee that it has received ₹ 19.00 lacs in cash from Shri Ram Pal Yadav and ₹ 35.00 lacs in cash from Shri Suirja Ram. The assessee filed the affidavits of Shri Ram Pal Yadav and Shri Surja Ram. Shri Ram Pal Yadav has admitted to have given ₹ 19.00 lacs in cash on 7-12-07. He has explained that source of the funds was from the receipt of sale of land. It is not the case of the revenue that the address given in the affidavit is false. Shri Ram Pal Yadav belongs to village Chakwad. This village is having no bank facility and such evidence has been placed before the lower authorities while considering the addition u/s 40A(3) of the Act. Thus the onus stands discharged and therefore, the ld. CIT(A) was not justified in confirming the addition of ₹ 19.00 lacs. Similar is the fact in respect of Shri Surja Ram pertaining to receipt of ₹ 35.00 lacs. Hence, we hold that the ld. CIT(A) was not justified in confirming the addition of ₹ 54.00 la ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d. AR confirmed the addition to the extent of ₹ 3,24,60,562/- u/s 40A(3) of the Act and the findings of the ld. CIT(A) are available at pages 58 to 69 of the appellate order. We are summarizing below the findings of the ld. CIT(A). 1. The assessee claimed that the payments to the extent of ₹ 38,58,252/- were made towards purchase of stamp and registration charges. The ld. CIT(A) noticed that the payments include the payments made to the Advocate as his fees. The payment for stamp duty and registration charges were to the extent of ₹ 34,18,690/- and the ld. CIT(A) has deleted the addition of ₹ 34,18,690/- as against the claim of the assessee made to the extent of ₹ 38,58,252/-.. 2. The AO has wrongly taken the amount at ₹ 1,52,40,000/- as against ₹ 15,24,000/- made to Kailash, Tarachand etc. Hence, the ld. CIT(A) reduced the addition to the extent of ₹ 1,37,16,000/- 3. The ld. CIT(A) observed that the assessee has made the cash payment to the sellers apart from payments made by cheque. It was therefore, held that the sellers could not be said to have not using the bank facilities. Hence, payments are not covered under Rule 6DD ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he sellers have been given cheques of dated 20-10-07, 19-01-08, 25-03-08 and 10-06-08. The cash has been paid on 31-10-07 in respect of sale deed by Phulchand, Lalaram, Shanti Devi, Prabhu, vimla and Mota. Similarly, the sale deed with Tarachand showed that cash payment on 20-10-07 and the cheque is also of the same date. The cash has been made to Dhapu Devi on 20-1007 and 111-07 and the cheques have been given on 20-10-07. Similarly the cash has been paid on 11-03-07 and 20-10-07 in respect of land from Shri Sitaram, Dhannal Lal, Maya and Vimla. The cheques are dated 20-10-07. (8) From the remand report, the ld. CIT(A) observed that the assessee has issued the cheques to those very sellers to whom cash has been paid. The ld. CIT(A) further observed that the assessee has not produced these sellers for cross examination before the AO. The ld. CIT(A) observed that Rule 6DD is not applicable. (9) The decision of Hon'ble Jurisdictional High Court in the case of Kantilal Purshotam & Co. Vs. CIT (supra) is not applicable because the case of the assessee is not covered under rule 6DD. (10) The decision of Hon'ble Calcutta High Court in the case of Girdhari Lal Goenka vs C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uineness of payment also established- Disallowance u/s 40 A (3) was not called for- The object of section 40A (3) is that no fictitious amount should be allowed as revenue expenditure and not that cash payment can never be made". On the basis of such interpretation only, the honorable ITAT, Jaipur Bench Jaipur have taken the same view in the case of M/s PACL India Ltd vs ACIT Circle-3, Jaipur holding therein that business expenditure-disallowance u/s 40A (3)- applicability of Rule 6DD(h)- clause (h) of Rule 6DD takes out of the purview of section 40A (3) such cash payment which is made in a 'village' or 'town' which is not served by any bank to any person who ordinarily 'resides' or is carrying on any business in such village or town- In the instant case, admittedly the sellers of the land are villagers engaged in farming activities and residing at places which are not served by any bank…." The Authorities Below did not take note of these citations while relying on the Board's Press Note dated 8th May, 1969 to turn down the claim of the appellant. In fact, they have misinterpreted the Board's instructions on the point. In fact, this Press Note talks about the 'place where ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s made or in the year when such property was sold? Despite of specific request on the point as made in the written submission, the Authorities Below did not decide this point. In absence of specific adjudication on the point, the order so passed is bad in law as per judicial discipline and deserves to be quashed. (iv) It is a settled law as opined by the judicial authorities in number of cases that for administering the law judiciously it is always desirable to take a practical and pragmatic view to the problem. Kindly refer to the judgment of Honorable Calcutta High Court in the case of Girdhari Lal Goenka vs CIT reported in 179 ITR 122 that ITO has to take a pragmatic view of the matter. The ITO should take a practical approach to problem and strike a balance between the direction of law and hardship to the assessee. He should not enmesh himself in technicalities. After all, the object is not to deprive the assessee of the deduction which he is otherwise entitled to claim where the amount was paid in cash or received in cash. The Assessing Officer has to find out whether the transaction is genuine or not and if he finds that the transaction is genuine, he should allow the dedu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to be deleted. (v) Lastly, on going through the appeal order, it would be noted that the ld. CIT (A) had himself observed that while purchasing these properties as listed at page no. 8 of assessment order, payments to the tune of ₹ 94,00,000/- were made through cheques only. The ld. CIT (A) had also mentioned cheque payments in the appeal order at page no. 64-65 mentioning therein total payments made by cheque for ₹ 94,00,000/- instead the actual payment made by the appellant company through cheques of ₹ 1,29,00,000/-. These payments did not attract the provisions of section 40A (3) of the Act. Accordingly no disallowance was warranted on account of such cheque payments. However while quantifying the amount of relief granted under this head at page no. 69 of the order, he had through an over-sight, over-looked these figures and did not allow any relief on account of such cheque payments. We have already moved a rectification application before the ld.CIT (A) for rectifying this mistake u/s 154 of the Act, which is pending as on date. Mean-while your honors are requested to kindly consider this point also and decide the same as per provisions of Law. In view ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ur is not applicable because in that case the sellers were not having the bank account. In the instant case, the assessee has made the payment by account payee cheque as well as by cash. (3) The argument of the assessee that it purchased the land as an investment is not based on any evidence. The books of accounts and the financial statement showed that the plots of land sold were as stock in trade of the assessee. Hence, the provisions of Section 40A(3) are not applicable (4) The ld. CIT(A) has mentioned that the expenditure incurred for purchasing of land as stock in trade is covered u/s 40A(3) irrespective of the fact as to whether stock was sold or remained in the closing stock. (5) The ld. DR supported the finding of the ld. CIT(A) that certain decisions are not applicable. The decision of Hon'ble Jurisdictional High Court in the case of Smt. Harshila Chordia Vs. ITO 298 ITR 349 is not applicable because it is based on Rule 6DD(j) 3.9 We have heard both the parties. Before the lower authorities, the assessee has filed the certificate from Sarpanch in which it has been mentioned that village Chakwad, Tehsil Jaipur is not served by any bank including the Nationali ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... escribed having nature and extent of banking facilities available, consideration of business expediency and other relevant factors. Requirement in Rule 6DD(g) is that in case the payment is made at a place where there are no banking facility then disallowance is not be made. Requirement of Rule 6DD(g) are satisfied and hence disallowance cannot be made. 3.11 During the year, the assessee has not done any business. Under similar circumstances, the ITAT Jaipur Bench in the case of M/s. Ace India Abodes Ltd. Vs. ACIT (ITA No.79/JP/2001 dated 12-08-2011) has deleted the disallowance u/s 40A(3) after observing in para 18 to 20 which is reproduced as under:- ''18. Similar issue came up before the Tribunal in case of M/s. Rishabhdev Township & Developers P. Ltd. The Tribunal while deciding the appeal of the department in ITA No. 181/JP/2010 vide its order dated 29.4.2011 has held as under :- " 7. After considering the submissions and perusing the material on record, we find no infirmity in the finding of ld. CIT (A). The department is in appeal and if they want to verify whether there is a branch in village Ballupura or not can be verified at any point of time which they have not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... om the village and such cash has to be carried back by them to the village. It is common knowledge that the seller has to confirm before the SubRegistrar that full payment has been received by him. At the same time, the Sub-Registrar satisfies himself about the identity of the seller to ensure that the payment has been made to the right person. For the sake of convenience, in the receipt the place is mentioned as the town where the document is registered. The AO has not made any effort to examine any of the sellers to verify as to whether the payments were received at the villages or at the town. Considering the entire facts the proposition that the payments were made at villages where banking facilities did not exist is accepted. Even if it is assumed that payments were made at a town where banking facilities were available, the case of the appellant-company would still fall under the exception of r. 6DD. Rule 6DD(h) has to be interpreted liberally so as not to frustrate the object of the legislature. The object of s. 40A(3) is not to disallow genuine payments and the r. 6DD has to be interpreted keeping in view the object of the main provision. The second proviso to s. 40A(3) ref ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee that even on account of genuineness of the payment disallowance should not be made under section 40A(3). The ld. CIT (A) has rejected both the contentions of assessee that payments were made in villages and amount of payment was genuine. Since both these issues have already been decided by the Tribunal in above stated cases, therefore, on account of payment made to villagers in the villages, provisions of section 40A(3) are not applicable as held by the Tribunal above. Since we have allowed the issue toto in favour of the assessee by holding that no expenditure can be disallowed under section 40A(3) as assessee has not claimed any expenditure in its Profit & Loss account, therefore, we hold that even part disallowance cannot be made on account of payment made to the parties residing in Jaipur. Accordingly we delete the entire disallowance sustained by ld. CIT (A).'' The ld. CIT(A) has confirmed the addition u/s 40A(3) to the extent of ₹ 3,42,60,562/-. The difference of ₹ 3,39,562/- is in respect of payment made to the Advocate or Deed Writer. 3.12 Since we have held after following the decision of Jaipur Bench in the case of M/s. Ace India Abodes Ltd. Vs. ACIT ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
