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TMI Blog2021 (9) TMI 773X X X X Extracts X X X X X X X X Extracts X X X X ..... that the payments were duly recorded in the sale deed, that the same has been registered by the Sub-Registrar and that the amount had been taken into consideration for the purpose of calculating stamp duty and registration.Thus, we find, on facts, that there is no question of law, much less substantial question of law arising in the relevant appeals. For the assessment year 2008-09 - we are of the view that it is not a case where the CIT(A) passed a cryptic order nor the order passed by the Assessing Officer is without application of mind. The assessee has to be blamed for the same because of not giving a proper explanation/reply to the query raised by the Assessing Officer. In any event, we do not propose to non suit the assessee on the ground that certain details were not furnished in proper form. The assessee would state that certain of the vendors, who did not have bank accounts, could not come out of the village to open up the bank account and after insistence, they had opened the bank accounts and in certain cases, advance was paid to the vendors so as to enable them to keep up various other commitments, to which, they had been fastened.In the light of the order of remand pas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sment years 2008-09 and 2011-12 to 2013-14 or not? - HELD THAT:- Tribunal examined the correctness of the order passed by the CIT(A), who proceeded entirely on the merits of the matter and therefore, the assessee was granted relief by the CIT(A) solely for the reason that there was no incriminating material. But, the CIT(A), having been satisfied on facts, held that no addition needed be made. So far as the order of the Tribunal for the assessment year 2011-12 Mr.T.R.Senthilkumar, learned Senior Standing Counsel appearing for the appellant/Revenue is right in his submission that the Tribunal granted relief to the assessee for the reason that no incriminating material had been found in the course of search and confirmed the order passed by the CIT(A). CIT(A) examined the merits of the matter and found that there was no justification for various disallowances. Therefore, the Tribunal probably missed out this factual position presumably because a batch of cases were before the Tribunal and in all probabilities, both the assessee and the Revenue might not have placed full break up details in a convenient format. The relief granted to the assessee is on facts and on merits of the disall ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... "1. Whether on the facts and in the circumstances of the case, the Tribunal was right in holding that the disallowance made under Section 40A(3) amounting to ₹ 22.56 lakhs is to be allowed? and 2. Whether the Tribunal was right in upholding the action of the CIT(A), towards land development expenses amounting to ₹ 9.84 crores is to be allowed even though the assessee failed to produce any evidence in support of such claim?" (iii) TCA.Nos. 994 & 995 of 2019 (admitted on 17.12.2019) : "(i) Whether on the facts and in the circumstances of the case, the ITAT was right in law in holding that the assessing officer cannot initiate proceedings under Section 153A of the I.T.Act, where there was no incriminating material found during the course of search operation u/s.132 of the Act? (ii) Whether the ITAT was correct in not taking cognizance of the Kerala High Court's decision in the case of CIT v. St.Francis Clay Decor Tiles (385 ITR 624) and the Karnataka High Court's decision in the case of Canara Housing Development Co. V. DCIT (49 taxmann.com 98)? and (iii) Whether the ITAT was correct in confirming the disallowance of land development expen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... roceedings? and 4. Whether on the facts and the circumstances of the case, the ITAT was justified in deleting the addition in respect of the receipts from Kannagapattu land purchased from Smt.D.Sangupathi and M/s.SSD Homes & Estate Developers P limited later transferred to the assessee as advances which ought to have been accounted for sales but has been classified under advances?" 4. We have heard Mr.T.R.Senthil Kumar, learned Senior Standing Counsel assisted by Mrs.K.G.Usharani, learned Junior Standing Counsel appearing for the appellant-Revenue and Mrs.Pushya Sitaraman, learned Senior Counsel appearing for Mr.R.Murali, learned counsel for the respondent-assessee. Prelude : AY 2007-08 : 5. For the relevant assessment year namely 2007-08, the assessee filed e-return on 15.11.2008 admitting an income of ₹ 11,39,56,780/-. The return was duly processed under Section 143(1) of the Act. Subsequently, the case was taken up for scrutiny and a notice under Section 143(2) of the Act along with a questionnaire was issued on 11.6.2009. The assessee was in the business of property development and the main business was to purchase land, develop it into housing plot and market ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... claimed a total cash payment of ₹ 39,08,78,254/- during the relevant year namely AY 2007-08 and the average expenses per day were shown as ₹ 10,70,900/-. In the absence of proper documents, the Assessing Officer disallowed a sum of ₹ 6,22,75,902/- towards 20% of the claim of expenditure made in cash and added back to the total income and finally arrived at the assessed income to the tune of ₹ 22,09,77,552/-, completed the assessment by order dated 29.12.2009 and raised a demand to the tune of ₹ 5,68,31,528/-. 9. As against the order of assessment, the assessee filed an appeal before the CIT(A), who, by order dated 18.3.2011, partly allowed the appeal by confirming the disallowance made by the Assessing Officer under Section 40A(3) of the Act and allowing the claim of the assessee towards development expenses among other things. Aggrieved by that, both the Department as well as the assessee filed two appeals before the Tribunal, which, by order dated 09.7.2013, deleted the disallowance made under Section 40A(3) of the Act and allowed the claim of the assessee towards land development expenses. Hence, the Revenue is before us by filing TCA.Nos.570 and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... As against the same, the Revenue filed an appeal before the Tribunal, which, by order dated 28.3.2019, dismissed the same. Hence, the Revenue is on appeal before us by filing TCA.No.792 of 2019. AY 2011-12 to 2014-15 : 13. For these assessment years also, the assessments were completed on 31.3.2016 pursuant to the search and seizure operations conducted on 03.9.2013. For the assessment years from 2011-12 to 2013-14, the notices under Section 153A of the Act 29.4.2014 were issued. But, in all the four cases, a notice under Section 142(1) came to be issued. Pursuant to that, the assesssee filed their return of income declaring the income to the tune of ₹ 6,09,19,530/-, ₹ 10,70,23,600/-, ₹ 8,05,82,670/- and ₹ 1,01,46,150/- respectively. 14. The Assessing Officer arrived the total income at ₹ 15,99,81,007/- and ₹ 4,53,69,402/- respectively for the assessment years 2011-12 and 2014-15 in view of disallowance of the amounts claimed towards land development expenses. As against the assessment orders dated 31.3.2016 for the years 2011-12 and 2014- 15, the assessee filed appeals before the CIT(A), who, ultimately, allowed the appeals by a common order ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t expenses. Aggrieved by that, both the Department as well as the assessee filed two appeals before the Tribunal. The two salient features in the order dated 09.7.2013 passed by the Tribunal are (i) upholding the order passed by the CIT(A) in deleting the disallowance made under Section 40A(3) of the Act and (ii) allowing the claim of the assessee towards land development expenses. 20. The Assessing Officer was of the opinion that the expenditure claimed by the assessee towards land development was highly excessive and bogus. The Assessing Officer examined each of the heads of expenses namely JCB work, bulldozer hire charges, tractor hire charges, land leveling charges, expenses towards jelly and sand materials, etc. and disallowed the expenses claimed by the assessee, which was approximately to the tune of ₹ 27 lakhs per acre of land. 21. On appeal before the CIT(A), the assessee had elaborately made submissions and primarily contended that the Assessing Officer did not reject the books of accounts of the assessee, that the accounts were duly certified by a Chartered Accountant and that there was no debit entry, etc. After taking note of the factual position, the CIT(A) he ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d by the concerned Sub-Registrar and the total sale consideration was taken into consideration for the purpose of demanding the stamp duty and registration purposes. Therefore, the CIT(A) held that when the Government official namely Registering Authority certified that the payments were actually made to the sellers and when the genuineness of the sale was not doubted, the disallowance under Section 40A(3) of the Act could not be made. The CIT(A) did not agree with the assessee and confirmed the disallowance. 27. The Tribunal tested the correctness of the decision of the CIT(A). The assessee was a builder and developer and the lands purchased by the assessee were in the nature of stock-in-trade and certain purchases were made in cash and such purchases by cash would be hit by Section 40A(3) of the Act unless otherwise exempted under Rule 6DD of the Rules. The Tribunal noted that the assessee was a business man and the cash payments were done for the purchase of lands and also took note that in majority of land dealings, land owners would insist upon payment of money in cash. Furthermore, the Tribunal also noted that the payments were duly recorded in the sale deed, that the same h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ore the CIT(A). The factual position was explained before the CIT(A), who found that for the payment made in respect of 15 land owners to the tune of ₹ 3,93,00,000/-, the vendors were residents of Kannagapattu Village, that they did not have banking facilities and that the Village Administrative Officer concerned certified that there was no bank in Kannagapattu Village. Hence, the explanation offered by the assessee was accepted and the disallowance to that extent was deleted. With regard to the balance payments namely the payments made to 40 vendors, which were by cash as well as by cheque to the tune of ₹ 10,25,77,251/-, the CIT(A) did not agree with the assessee stating that there was no acceptable reason given by the assessee as to why they could not effect the entire payment by cheque when they were able to pay certain amounts through cheque. Therefore, the disallowance made by the Assessing Officer to that extent was sustained. 33. The assessee carried the matter by way of appeal to the Tribunal. The Revenue was also on appeal. The findings rendered by the Tribunal in its order dated 21.6.2013 in ITA.No.1241/Mds/2011 were in paragraphs 9 and 10. The Tribunal stat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at certain of the vendors, who did not have bank accounts, could not come out of the village to open up the bank account and after insistence, they had opened the bank accounts and in certain cases, advance was paid to the vendors so as to enable them to keep up various other commitments, to which, they had been fastened. 37. Therefore, while vacating the remarks made by the Tribunal as against the CIT(A) and the Assessing Officer, we remand the matter to the Assessing Officer to consider the genuineness of the stand taken by the assessee in so far as the payments made to the tune of ₹ 10,25,77,251/-, afford an opportunity of personal hearing to the authorized representative of the assessee and redo the assessment only to the extent indicated in accordance with law. In the light of the order of remand passed by us for the assessment year 2008-09 with regard to disallowance under Section 40A(3) of the Act, TCA.Nos.228 of 2014 and 792 of 2019 stand allowed. The relevant substantial questions of law are left open. IV. Issue pertaining to the presence of incriminating materials for the assessment years 2008-09 and 2011-12 to 2013-14 : 38. The issue as to whether incriminating ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h, leave has been granted and the matter has been tagged along with Civil Appeal No.14702 of 2015 as reported in (2020) 114 Taxmann.com 552 [PCIT Vs. Devi Dass Garg]. 43. As against the decision of the Bombay High Court in the case of Continental Warehousing Corporation (Nhava Sheva) Ltd., an appeal was filed before the Hon'ble Supreme Court, leave has been granted and the appeal has been directed to be tagged along with Civil Appeal No.8900 of 2012 as reported in (2015) 64 Taxmann.com 34. 44. Further, we note that the same issue was decided against the assessee and the assessee is on appeal before the Hon'ble Supreme Court in the case of Dayawanti Vs. CIT [S.L.P.(C).No. 20559 of 2017], in which, an order of interim stay has been granted by the Hon'ble Supreme Court by order dated 03.10.2017. 45. Thus, the issue as to whether the incriminating materials are required to be present or not is now before the Hon'ble Supreme Court. What is required to be seen in the case on hand is as to whether the relief was granted to the assessee solely for the reason that there was no incriminating material available pursuant to the search. A perusal of the orders impugned before ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nder : "Whether on the facts and the circumstances of the case, the ITAT was justified in deleting the addition in respect of the receipts from Kannagapattu land purchased from Smt.D.Sangupathi and M/s.SSD Homes & Estate Developers P limited later transferred to the assessee as advances which ought to have been accounted for sales but has been classified under advances?" 51. We have carefully considered the submissions made by the learned counsel on either side. On perusal of the order passed by the CIT(A) dated 03.4.2018, it is seen that the CIT(A) considered the factual aspects in a detailed manner and deleted the additions. This finding has been affirmed by the Tribunal after re-appreciating the facts. We find no substantial question of law arising for consideration. Hence, with regard to this issue, TCA.No.792 of 2019 stands dismissed. 52. In fine, (i) with regard to the issue of land development expenses, all the above tax case appeals filed by the Revenue stand dismissed as no substantial question of law arises for consideration; (ii) with regard to the issue of disallowance under Section 40A(3) of the Act for the assessment year 2007-08, TCA.Nos. 570 and 571 of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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