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TMI Blog2023 (1) TMI 1111X X X X Extracts X X X X X X X X Extracts X X X X ..... pellant also furnished copy of purchase deed dated July 20, 2011 for Rs. 60,00,000 in respect of agricultural land purchased by the appellant. This information was furnished in compliance to notice dated June 13, 2019 issued under section 142(1) - From the copy of purchase deed it is apparent that the appellant purchased agricultural land from two ladies, paid consideration in cash which is acknowledged by the sellers of land, that purchased deed was signed on July 18, 2011 and got registered in the office of sub-registrar on July 19, 2011. The appellant paid stamp duty and registration expenses of Rs. 3,58,360 in cash. Therefore, genuineness of payment and identity of recipients got established and which has not been disputed even by the learned Principal Commissioner of Income-tax. Thereafter, the Assessing Officer issued another notice under section 142(1) Thus after carefully, analysing the facts and circumstances and the settled position of law, we hold that the revision order passed by the learned Principal Commissioner of Income-tax is not justified. - I. T. A. No. 193/Jaipur/2022. - - - Dated:- 18-8-2022 - Sandeep Gosain (Judicial Member) And Rathod Kamlesh Jayantb ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the enquiry the assessee has failed to explain the source of investment made for purchase of the immovable property. The learned Principal Commissioner of Income-tax further observed that the assessee has no cash-in-hand as on March 31, 2011 and as on April 1, 2011 hence claim of the assessee showing opening cash in hand at Rs. 17,65,230 as on April 1, 2011 in the cash flow statement submitted during the reopening proceedings is factually incorrect. On perusal of purchase deed, the learned Principal Commissioner of Income-tax observed that entire purchase consideration of Rs. 63,58,360 was paid in cash by the assessee. As per provisions of section 40A(3) of the Act, stock (i. e., land) cannot be purchased in cash over Rs. 20,000. Hence disallowance of Rs. 63,58,360 was required to be made under section 40A(3) of the Act and the same was not made by the Assessing Officer. Therefore, on the above facts, the learned Principal Commissioner of Income-tax held that due to lack of enquiry and also due to incorrect and incomplete appreciation of fact, the assessment order passed by the Assessing Officer under section 143(3) of the Act dated December 17, 2019 for the assessment year 201 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oner of Income-tax under section 263 of the Income-tax Act, 1961 and the operative portion of the same is reproduced hereinbelow : 2. On perusal of the assessment records, the following irregularity/defects are noticed : (i) Your case is no books case as written on the first page of the ITR (Part A-GEN) for the assessment years 2011-12 and 2012-13 and you have written all figures as zero in balance-sheet portion of your ITR : filed for the assessment years 2011-12 and 2012-13. In no books cases prescribed details are mandatory to fill in the relevant column of ITR (i. e., column No. 6 of balance-sheet portion in the ITR-refer page 3 of ITR). Said relevant column No. 6 of balance-sheet portion in the ITR is reproduced as under : 6. In a case where regular books of account of business or profession are not maintained-(Furnish the following information as on 31st day of March, 2012, in respect of business or profession) A Amount of total sundry debtors 6a B Amount of total sundry creditors ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ASYPR 1657 A 11-7-2011 4,50,000 2. Smt. Vijaya Kunwar BTDPK 8523 M 14-7-2011 5,00,000 You had confirmation/PAN of said persons in the reopening assessment proceedings. As the assessee had taken loans in contravention of section 269SS of the Income-tax Act ; hence, penalty under section 271D of the Act is liable to impose for Rs. 9.50 lakhs. It is seen that the Assessing Officer did not refer the matter to the Joint Commissioner of Income-tax for imposing the penalty under section 271D of the Act for contravention of section 269CC of the Act. Thus, it is clear from the above discussion, that the Assessing Officer was completed scrutiny assessment without making proper enquiry on the above issues. Hence, the assessment order passed by the Assessing Officer in your case for the assessment year 2012-13 is found to be erroneous and prejudicial to the interests of the Revenue and the same is proposed to be suitably modify/enhance/cancel by invoking the provisions of section 263 of the Income-tax Act. 3. As the assessment order passed by the Assessin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d by the learned Principal Commissioner of Income-tax. Initial reply furnished by the appellant vide letter dated June 20, 2019 is appearing at page 8 of paper book wherein the appellant disclosed that the appellant deals in real estate business activity and that main source of business income is from real estate business. The appellant also furnished copy of purchase deed dated July 20, 2011 for Rs. 60,00,000 in respect of agricultural land purchased by the appellant. This information was furnished in compliance to notice dated June 13, 2019 issued under section 142(1) of the Act. From the copy of purchase deed appearing at pages 14-23 of paper book it is apparent that the appellant purchased agricultural land from two ladies, paid consideration in cash which is acknowledged by the sellers of land, that purchased deed was signed on July 18, 2011 and got registered in the office of sub-registrar on July 19, 2011. The appellant paid stamp duty and registration expenses of Rs. 3,58,360 in cash. Therefore, genuineness of payment and identity of recipients got established and which has not been disputed even by the learned Principal Commissioner of Income-tax. Thereafter, the Assessing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... during the period. Loan taken from wife Smt. Vijay Kanwar having PAN BTDPK8523M of Rs. 5,00,000 and from younger brother Mr. Syoraj Singh of Rs. 4,50,000. Section 269SS not applies to cash transaction between close family members for giving support, help and immediate business needs. Sri Nikhil Mazumder v. Jt. CIT (Kol). Please do the needful and oblige. Thus, in this way all issues were enquired and examined by the Assessing Officer including applicability of provisions of section 40A(3) read with provision to section 40A(3A) of the Income-tax Act, 1961 as the Assessing Officer inquired about nature of business and purchase of land in cash and there being no dispute about genuineness of payment for purchase of land identity of recipients which gets confirmed from the registered purchase deed, and only thereafter, no disallowance under section 40A(3) was made. Mere non-mention of section 40A(3) in notices or in the assessment order would not make the assessment order to be erroneous or prejudicial to the interests of the Revenue. The Assessing Officer also verified as to whether the appellant had sufficient cash funds to acquire the land even if opening cash stated in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 75,000 75,000 75,000 12-5-2011 Sale of land/plot 75,000 75,000 75,000 75,000 14-5-2011 Sale of land/plot 75,000 75,000 75,000 75,000 17-5-2011 Sale of land/plot 75,000 75,000 75,000 75,000 12-5-2011 Sale of land/plot 75,000 75,000 75,000 75,000 12-5-2011 Sale of land/plot 75,000 75,000 75,000 75,000 18-5-2011 Sale of land/plot 7,50,000 7,50,000 7,50,000 7,50,000 23-5-2011 Sale of land/plot 9,75,000 9,75,000 9,75,000 9,75,000 23-5-2011 C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 29-7-2011 Sale of land/plot 1,50,000 1,50,000 1,50,000 0 10-8-2011 Sale of land/plot 1,50,000 1,50,000 0 0 22-8-2011 Sale of land/plot 1,00,000 1,00,000 0 0 10-9-2011 Sale of land/plot 2,00,000 2,00,000 0 0 28-9-2011 Sale of land/plot 2,00,000 2,00,000 0 0 13-10-2011 ATM withdrawal 5,000 5,000 0 0 13-10-2011 ATM withdrawal 10,000 10,000 0 0 13-10-2011 ATM withdrawal 10,000 10,000 0 0 19-10-2011 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iew of the decision of Kolkata Bench of the Tribunal in the case of Nikhil Banik Mazumder v. Jt. CIT in I. T. A. Nos. 453 and 454/Kol/2016, dated January 10, 2018 for the assessment year 2010-11, the Assessing Officer did not refer the matter to the Joint Commissioner of Income-tax for initiation of penalty proceedings under section 271D of the Act which was one of the permissible view available to him. The hon'ble Rajkot Bench of Tribunal in Master Vijay R. Oswal v. ITO [2003] 87 ITD 98 (Rajkot) and Visakhapatnam Bench of the Tribunal in Ambica Chemical Products (Regd.) v. Asst. CIT [2003] 86 ITD 1 (Vizag) has held that non-initiation of penalty in the assessment order is not a good ground to invoke provisions of section 263. The appellant carried only Rs. 1,08,000 to next financial year which is evident from disclosure made in return of income appearing at page 5 of paper book. Therefore, it is also evident that the appellant did not carried the opening balance stated in the cash flow statement to subsequent assessment year and not availed of any benefit of cash claimed to be opening balance. Profit and loss account appearing at page 9 of paper book is not disputed by the lea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pleted assessment accepting returned income in the reassessment proceedings. 4.3 In our view, the assessment order was revised merely by holding that the Assessing Officer had not narrated his conclusion as to why he had accepted cash flow statement and no disallowance under section 40A(3) as made and further no penalty under section 271D was subjected. However, these conclusions drawn by the learned Principal Commissioner of Income-tax are cryptic and without assigning any reasons as to why the explanations and submissions of the appellant were not maintainable or were contrary to the settled position of law or as to why view taken by the Assessing Officer in accepting the explanations and submissions in the course of the assessment order was not a one of the possible view. The hon'ble Mumbai Bench of the Tribunal in the case of Jewel of India v. Asst. CIT [2003] 87 ITD 527 (Mum) has held that order passed by the Commissioner must be a speaking order. In the case of the appellant it has been demonstrated that the revision order posed by the learned Commissioner of Income-tax is not a speaking order inasmuch as it does not deal with any of the contentions of the appellant an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... jarat High Court in the case of Pr. CIT v. Shreeji Prints (P.) Ltd. [2021] 437 ITR (St.) 10 (Guj) ; [2021] 130 tax mann.com 294 (Guj), has held that revision order passed against the asses see is not sustainable when the Principal Commissioner of Income-tax has not mentioned in the show-cause notice issued under section 263 that he is going to invoke Explanation 2 to section 263 hence, invocation of Explanation in the order without confronting the assessee is not appropriate and sustainable in law. The special leave petition of the Revenue has been dis missed by the hon'ble Supreme Court in [2021] 130 taxmann.com 294 (SC). The hon'ble Supreme Court in CIT v. Amitabh Bachchan [2016] 384 ITR 200 (SC) in paragraph 21 of the judgment has reaffirmed the already settled position that (page 216 in 384 ITR) : 21. There can be no doubt that so long as the view taken by the Assessing Officer is a possible view the same ought not to be interfered with by the Commissioner under section 263 of the Act merely on the ground that there is another possible view of the matter. Permitting exercise of revisional power in a situation where two views are possible would really amount to confe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... held that where revisionary authority opined that further enquiry was required, such enquiry should have been conducted by revisionary authority himself to record finding that the assessment order passed by the Assessing Officer was erroneous and prejudicial to the interests of the Revenue. We find the hon'ble Delhi High Court in the case of Sunbeam Auto Ltd. (supra) has held that if the Assessing Officer, while making an assessment, has made inadequate enquiry that would not by itself give occasion to the Commissioner of Income-tax to pass order under section 263 merely because he has different opinion of the matter. Only in the case of 'lack of enquiry' that such a course of action would be open. It has further been held in the said decision that where the view taken by the Assessing Officer was one of the possible views, therefore, the assessment order passed by the Assessing Officer can not be held to be prejudicial to the interests of the Revenue. The hon'ble Delhi High Court in the case of Anil Kumar Sharma (supra) has held that where it was discernible from record that the Assessing Officer had applied his mind to an issue in question, the Commissioner could ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cessary confirmations were filed. As regards the observation of the Commissioner of Income-tax as contained in paragraph (d), the learned authorised representative took us to pages 125-166 of the paper book to highlight that the same was also replied to the Assessing Officer. Similarly, he took us to copy of form 2 filed with the Registrar of Companies for the allotment of shares was placed. It was submitted that no share application money was raised during the year and it was only the share applicants of earlier year who were allotted shares during the year. As regards point (e), the learned authorised representative took us to pages 175-211 wherein a copy of the letter dated October 5, 2010, submitting details of freight and cartage were placed. Regarding difference in creditors as observed by the learned Commissioner of Income-tax at point (f), the learned authorised representative submitted that the difference was already explained to the Assessing Officer, vide letter dated September 20, 2010, placed at paper book pages 40-41 and in this respect, we were taken to paper book page 41 where the necessary explanation was placed.' 9. The Tribunal further considered the quest ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as been taken in the decisions, as noticed above. We also find that the learned counsel for the Department though sought to re-argue before this court that no inquiry has been made by the Assessing Officer with respect to the queries set up in paragraph 3(a) to (f) of the notice issued under section 263 of the Act but when his attention was drawn to the order passed by the Tribunal recording otherwise findings, he could not place anything to show that the aforesaid findings recorded by the Tribunal are perverse or contrary to record. 14. In view thereof the aforesaid question is answered against the Department-appellant and in favour of the assessee. The hon'ble Bangalore Bench of the Income-tax Appellate Tribunal in the case of IBM India P. Ltd. [TS-16-ITAT-2017(Bang)] in I. T. A. No. 1028/Bang/2013, dated January 6, 2017 quashed revision proceedings under section 263 holding that Merely because the Assessing Officer had failed to give reasons for accepting such claims, it cannot be said that there was no application of mind . The Income-tax Appellate Tribunal relied on Punjab and Haryana High Court ruling in the case of Hari Iron Trading Co. v. CIT [2003] 263 ITR 437 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ome-tax can also show and establish that the facts on record or inferences drawn from facts on record per se justified and mandated further enquiry or investigation but the Assessing Officer had erroneously not under taken the same. However, the said finding must be clear, unambiguous and not debatable. The matter cannot be remitted for a fresh decision to the Assessing Officer to conduct further enquiries without a finding that the order is erroneous. Finding that the order is erroneous is a condition or requirement which must be satisfied for exercise of jurisdiction under section 263 of the Act. In such matters, to remand the matter/issue to the Assessing Officer would imply and mean the Commissioner of Income-tax has not examined and decided whether or not the order is erroneous but has directed the Assessing Officer to decide the aspect/question. 18. This distinction must be kept in mind by the Commissioner of Income-tax while exercising jurisdiction under section 263 of the Act and in the absence of the finding that the order is erroneous and prejudicial to the interests of the Revenue, exercise of jurisdiction under the said section is not sustainable. In most cases of al ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er of the Assessing Officer cannot be treated as prejudicial to the interests of the Revenue. Thus, when the Assessing Officer had adopted one of the courses permissible and available to him, and this has resulted in loss to revenue ; or two views were possible and the Assessing Officer has taken one view with which the Commissioner of Income-tax may not agree ; the said order cannot be treated as an erroneous order prejudicial to the interests of the Revenue unless the view taken by the Assessing Officer is unsustainable in law. In such matters, the Commissioner of Income-tax must be give a finding that the view taken by the Assessing Officer is unsustainable in law and, therefore, the order is erroneous. He must also show that prejudice is caused to the interests of the Revenue. Similar view is taken in CIT v. Greenworld Corporation [2009] 314 ITR 81 (SC) ; [2009] 101 Taxman 111 (SC) the Delhi High Court in the case of CIT v. Vodafone Essar South Ltd. [2013] 1 ITR-OL 526 (Delhi) ; [2012] 28 taxmann.com 273, the Delhi High Court in the case of CIT v. Anil Kumar Sharma [2011] 335 ITR 83 (Delhi) ; [2010] 194 Taxman 504 (Delhi) and CIT v. Max India Ltd. [2007] 295 ITR 282 (SC), the h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion into the firm as partner by the deed of partnership dated October 27, 1973, and the dissolution of the partnership firm on February 23, 1974, leaving the private limited company as a sole proprietor thereof and the valuation of the business at the book value as on that date. After giving the chronological sequence of events, the assessee also contended in his submission before the Income-tax Officer that there was no actual transfer of any asset inasmuch as when a partner is admitted into the firm no transfer takes place. It was also contended that no cash trans fer took place from person to person and the transfer and the dissolution of the firm also did not result in accrual of capital gains. In the face of this material on record, it is difficult to explain that the assessment order was made without making any enquiry into the goodwill account of Rs. 10,75,000. In CIT v. Arvind Jewellers [2003] 259 ITR 502 (Guj) it has been held that it is clear that the provisions of section 263 cannot be invoked to correct each and every type of mistake or error committed by the Assessing Officer, it is only when an order is erroneous, that section will be attracted and incorrect assum ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the Revenue, if, in the opinion of the Principal Commissioner or Commissioner,- (a) the order is passed without making inquiries or verification which, should have been made ; (b) the order is passed allowing any relief without inquiring into the claims ; (c) the order has not been made in accordance with any order, direction or instruction issued by the Board under section 119 ; or the order has not been passed in accordance with any decision, prejudicial to the assessee, rendered by the jurisdictional High Court or Supreme Court in the case of the assessee or any other person. This amendment will take effect from 1st day of June, 2015. It can be observed from aforesaid memorandum that Explanation 2 was inserted to provide clarity on the interpretation of expression erroneous in so far as it is prejudicial to the interests of the Revenue . However, the words which should have been made in clause (a) adds more subjectivity rather than providing clarity, particularly in absence of any guidance on the nature of inquiries which should have been made by the Assessing Officer before completing the assessment. Merely because from a perfectionist point of view, it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ax Appellate Tribunal, Mumbai Bench has further held that the intention of the Legislature could not have been to enable the Commissioner of Income-tax to find fault with each and every assessment order without conducting any inquiry or verification in order to establish that the assessment order is not sustainable in law, since such an interpretation will lead to unending litigation and there would not be any point of finality in the legal proceedings. The Income-tax Appellate Tribunal, Mumbai Bench of the Tribunal went on to hold that the opinion of the Commissioner referred to in section 263 of the Act has to be understood as legal and judicious opinion and not arbitrary opinion. 5.7 We also note that it has been held by the Income-tax Appellate Tribunal, Mumbai Bench in the case of Indus Best Hospitality and Realtors Pvt. Ltd. v. Pr. CIT in I. T. A. No. 3125/Mum/2017 vide order dated January 19, 2018 that Explanation 2 to section 263 of the Act introduced by the Finance Act, 2015 is retrospective in nature. Since the year under consideration is assessment year 2014-15, we are afraid that Explanation 2 to section 263 will not come to the aid of the Department in this case. Si ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on 263 of the Act, which the learned Principal Commissioner of Income-tax has relied upon, for the said purpose, mentions orders passed without making inquiries or verifications which should have been made (italics provided by us) as resulting in erroneous orders. Clearly where orders are found to have been passed without making inquiries which were necessary, only those can be said to be erroneous. Not all and sundry non-inquiries will tantamount to the orders being erroneous. The learned Principal Commissioner of Income-tax has to give a categorical finding of error with regard to necessary inquiries required, not being conducted by the Assessing Officer, after considering the submissions/contentions of the assessee made before him. 17. The reliance placed by the learned counsel for the assessee in this regard on the decision of the hon'ble Gauhati High Court in the case of Smt. Lila Choudhury v. CIT [2007] 289 ITR 226 (Gauhati), is apt wherein it has been held so as under (page 235 of 289 ITR) : '13. This would bring the court to the core issue in the case, i.e., whether the impugned order dated November 1, 1996, setting aside the assessment and directing a fresh a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essary for our purposes is to take note of the fact that there has to be an opinion that the assessment which has been set aside is, indeed, erroneous and prejudicial to the interests of the Revenue. Furthermore, the power under section 263 being quasi-judicial such conclusion must be reached after hearing the assessee which is mandated by the statute itself and after recording the reasons for the conclusions reached, a requirement, imposition or which, would be consistent with the well-settled principles of exercise of quasi-judicial powers. 15. Turning to the facts of the present case what is noticeable from the impugned order dated November 1, 1996, is that the Commissioner of Income-tax has not recorded any opinion that the order of assessment of the petitioner for the assessment year 1992-93 is erroneous and prejudicial to the interests of the Revenue. That was the opinion recorded in the notice dated August 14/19, 1996, but the said opinion being recorded in a notice issued to the petitioner asking to show cause, the same must be understood to be a highly rebuttable view. Such view/opinion was required to be reiterated after hearing the petitioner and after holding the nec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssioner of Income-tax should have conducted inquiries to show that the finding of the Assessing Officer was erroneous. That the provision would apply only if an order has been passed without making inquiries which a prudent officer should have carried out, the relevant findings of the Income-tax Appellate Tribunal are as under : '19. The law interpreted by the High Court's makes it clear that the learned Principal Commissioner of Income-tax, before holding an order to be erroneous, should have conducted necessary enquiries or verification in order to show that the finding given by the Assessing Officer is erroneous, the learned Principal Commissioner of Income-tax should have shown that the view taken by the Assessing Officer is unsustainable in law. In the instant case, the learned Principal Commissioner of Income-tax has failed to do so and has simply expressed the view that the Assessing Officer should have conducted enquiry in a particular manner as desired by him. Such a course of action of the learned Principal Commissioner of Income-tax is not in accordance with the mandate of the provisions of section 263 of the Act. The learned Principal Commissioner of Income-t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rying out enquiries or verification, which a reasonable and prudent officer would have carried out or not. It does not authorise or give unfettered powers to the learned Principal Commissioner of Income-tax to revise each and every order, if in his opinion, the same has been passed without making enquiries or verification which should have been made. In our view, it is the responsibility of the learned Principal Commissioner of Income-tax to show that the enquiries or verification conducted by the Assessing Officer was not in accordance with the enquiries or verification that would have been carried out by a prudent officer. Hence, in our view, the question as to whether the amendment brought in by way of Explanation 2(a) shall have retrospective or prospective application shall not be relevant.' 18. In view of the above, in the absence of finding of any error in the order of the Assessing Officer, the impugned revisionary order passed by the learned Principal Commissioner of Income-tax is held to be not in accordance with law and is therefore set aside. In following cases it has been held that no disallowance under section 40A(3) was warranted where genuineness of trans ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (ii) N. R. Shetty Prashanth v. ITO [2020] 58 CCH 266 (Bang) 5. We heard the rival contentions and perused the material on record. The sole disputed issue is with respect to the disallowance under section 40A(3) of the Act confirmed by the Commissioner of Income-tax (Appeals). The learned authorised representative submit ted that the Commissioner of Income-tax (Appeals) has erred in confirming the disallowance made by the Assessing Officer irrespective of the facts that the payments were made in exigency, where the assessee was directed to make the payment in cash on the request of the seller. These payments were confirmed by the sellers and confirmation letters were filed with the assessing authority. The learned authorised representative relied on the judicial decisions and vehemently objected to the observations of the Assessing Officer that there was no exigency for cash payments by the assessee. The contentions of the learned authorised representative that the identity and genuineness of the transactions is not doubted and there exist business exigency in purchase of goods for cash payments from the supplier, otherwise the assessee shall not get goods on time for smooth r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... In a particular case, where there exists business expediency and other relevant factors, then, the Act provides for immunity from disallowance of expenditure. If the assessee proves to the satisfaction of the Assessing Officer, that there exist a business expediency in making the cash payments, such payments cannot be disallowed under section 40A(3) of the Act. The Assessing Officer has no reason to disallow cash payments by invoking the provisions of section 40A(3) of the Act, when he has not doubted the genuineness of the purchases. When the assessee has proved that there exist business expediency in making cash payments, to satisfaction of the Assessing Officer, then such payments could not be disallowed under section 40A(3). (v) Vikrant Happy Homes (P.) Ltd. v. Dy. CIT [2022] 138 taxmann.com 559 (Pune) [copy placed at pages 1-3 of case law compilation given at the time of hearing] assessment year 2012-13 9. Coming to the facts on hands in the present case the fact remains admitted that the sellers from whom the assessee purchased lands were identified the transaction and also acknowledged the cash payments, thereby, it shows the transaction is genuine, as discussed in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ons appearing at pages 7 and 8 of the assessment order. It is therefore clear that the assessee was having sufficient bank balance and only at the insistence sellers, the assessee has withdrawn cash and made payment to them and wherever, the seller has insisted on cheque payments, the payment has been made by cheque. This makes out a case that the assessee has business expediency under which it has to make payment in cash and in absence of which, the transactions could not be completed. The second proviso to section 40A(3) refers to the nature and extent of banking facility, consideration of business expediency and other relevant factors which means that the object of the Legislature is not to make disallowance of cash payments which have to be compulsory made by the assessee on account of business expediency. Further, the source of cash payments is clearly identifiable in form of the withdrawals from the assessee's bank accounts and the said details were submitted before the lower authorities and have not been disputed by them. It is not the case of the Revenue either that unaccounted or undisclosed income of the assessee has been utilised in making the cash payments. (para 42 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... prescribed in section 40A(3), was not practicable or would have caused genuine difficulty to the payee. It is also open to the assessee to identify the person who has received cash payment. At pages 18-19 of compilation 15. . . . . cash payment was made on insistence of the seller of the land. It is further stated that the amount is duly recorded in the sale deeds and there is no doubt raised about genuineness of the trans action by the authorities below . . . Looking to the totality of the facts and in view of the fact that the assessee had to make payment on the insistence of the sellers respectively and following the judgment of the hon'ble Rajasthan High Court in the case of Smt. Harshila Chordia v. ITO [2008] 298 ITR 349 (Raj) and more particularly in the case of Anupam Tele Services v. ITO in [2014] 366 ITR 122 (Guj) Tax Appeal No. 556 of 2013 of the hon'ble Gujarat High Court, we do not see any reason to interfere in the finding of the learned Commissioner of Income-tax (Appeals) and the same is hereby affirmed. Ground raised by the Revenue is dismissed. (ix) Shree Salasar Overseas (P.) Ltd v. Dy. CIT [2014] 44 taxmann.com 387 (Jaipur) (copy placed at pag ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e purview of exceptional or unavoidable circumstances. (ii) The Gujarat High Court decision in the case of CIT v. P. Pravin and Co. [2005] 274 ITR 534 (Guj) ; [2005] 193 CTR 213 (Guj) held that the requirement under rule 6DD of the Income-tax Rules, 1962, regarding practicability of payment otherwise than in cash and consideration of business expediency has to be judged from the point of view of the business man and not of the Revenue authorities. At page 30 of compilation 14.9 In the present case it is seen that the assessee was forced to make cash payment as agriculturists were not ready to accept the cheques as many other purchasers were available in the market and willing to pay in cash. Being a prudent businessman, the assessee thought it proper to make cash payment so that their agreement of purchase of land may not be cancelled or agriculturists may refuse to sell the land to the assessee the next day . . . At page 31 of compilation 14.10 In the case of ITO v. Rishabhdev Township and Developers (P.) Ltd. decided in I. T. A. No. 181/Jaipur/2010, vide order dated April 29, 2011 for the assessment year 2006-07 similar view has been taken in favour of the asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion 40A(3) of the Income-tax Act. 2.5 Adverting to alternative ground, the learned counsel for the assessee contends that since all the parties from whom the purchases were made were residing in villages and having no banking facilities because of which they had insisted the assessee for making payment in cash towards the sale of their personal ornaments to the assessee and thus it is clear the case of the assessee is clearly covered by rule 6DD(g) of the Income-tax Rules, 1962 inasmuch as the exceptional circumstances specified thereunder existed in the case of the assessee and that being so, no addition under section 40A(3) of the Act could have been made. Reliance is placed by the learned authorised representative of the assessee as under : (i) PACL India Ltd. v. Asst. CIT [2010] 38 DTR (A.T.) 1 (Jaipur). (ii) CIT v. Interseas [2010] 40 DTR 143 (Ker) (iii) Shree Salasar Overseas (P.) Ltd v. Dy. CIT [2012] 107 DTR 225 (Jaipur) 2.6 The learned Departmental representative is heard. 2.7 I have heard the rival contentions and perused the material available on record. Respectfully following the decision of the Income-tax Appellate Tribunal, Ahmedabad Bench in the cas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of sub-section (3) of section 40A must have nexus to the failure of such object. Therefore the genuineness of the transactions and it being free from vice of any device of evasion of tax is relevant consideration for which section 40A(3) has been brought on the statute books and which has been satisfied in the instant case. 21. In the entirety of the facts and circumstances of the case and respectfully following the legal proposition laid down by the various courts and co-ordinate Benches referred supra, no disallowance is called under section 40A(3) of the Act and the same is directed to be deleted. In the result, the ground No. 1 of the assessee's appeal is allowed. (xii) Prime Infra Developers P. Ltd. v. ITO in I. T. A. No. 7144/Delhi/ 2017, order dated June 27, 2018 (copy placed at pages 68-94 of case law compilation given at the time of hearing) assessment year 2013-14 At pages 89 of compilation page 44 When genuineness of the transaction is not doubted by the Assessing Officer, no disallowance under section 40A(3) is called for : 5.7 We note that, in the present case the genuineness or the transactions which were entered by the assessee have not been disp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... view, when there being no dispute as genuineness of transaction and identity of payees/recipients, the Assessing Officer was justified in not making any disallowance under section 40A(3) with reference to cash paid for purchase of land and appellant was also justified in referring the juris dictional High Court judgment in the case of Smt. Harshila Chordia v. ITO [2008] 298 ITR 349 (Raj) which has consistently been followed by the Tribunals including the jurisdictional Tribunal even after deletion of clause (j) of rule 6DD of the Income-tax Rules, 1962. During the course of hearing the learned Commissioner of Income-tax-Departmental representative had placed reliance on the Central Board of Direct Taxes Circular No. 220 [F. No. 206/17/76/IT (A-II), dated May 31, 1977 to demonstrate that conditions specified in para 4 of the said circular cannot be pressed into service by the appellant in view of complete substitution of rule 6DD by the Income-tax (Seventh Amendment) Rules, 2008 with effect from the assessment year 2009-10 and complete deletion of substituted rule 6DD(j) by the Income-tax (Third Amendment) Rules, 2020 with effect from January 29, 2020. In this regard we are of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... deed was executed on July 19, 2011. Therefore, cash was taken under compelling circumstances and to meet business exigencies and to execute the purchase deed on July 18, 2011 and get is registered with the Sub-Registrar on July 19, 2011. Confirmation of accounts was furnished in the course of the assessment proceedings and the same are appearing at pages 53 and 54 of paper book, a fact which has also been admitted by the learned Principal Commissioner of Income-tax in the revision order. We also noted that the Assessing Officer issued show-cause notice in respect of which the appellant submitted that the provisions of section 269SS do not apply to cash transaction between close family members for giving support, help and immediate business needs and for which purpose reliance was placed on the Income-tax Appellate Tribunal, Kolkota in the case of Nikhil Banik Mazumder v. Jt. CIT. This is verifiable from the reply of appellant in the course of the assessment proceedings appearing at page 51 of the paper book. After weighing the explanation offered by the appellant, the Assessing Officer did not refer the matter for initiation of penalty proceedings under section 271D to the Joint Co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... icting proper interpretation of provisions of the Act. The hon'ble Rajkot Bench of the Tribunal in Master Vijay R. Oswal v. ITO [2003] 87 ITD 98 (Rajkot) and Visakhapatnam Bench of the Tribunal in Ambica Chemical Products (Regd.) v. Asst. CIT [2003] 86 ITD 1 (Vizag) has held that non-initiation of penalty in assessment order is not a good ground to invoke provisions of section 263. The jurisdictional High Court of Rajasthan in the case of CIT v. Raj Kumar Sharma [2007] 294 ITR 131 (Raj) has observed that the Tribunal in its order has found that the genuineness of the deposits made by the assessee's brother Pankaj Sharma was not doubted by the Assessing Officer. The Tribunal also noticed the explanation given by the assessee that the depos its were obtained by him to satisfy the immediate business requirement. Further, the Tribunal accepted that the assessee had a bona fide belief that the cash transactions were permissible and the cause shown by the asses see constituted reasonable cause. The hon'ble court accordingly dismissed the appeal holding that the finding of the Tribunal cannot be said to be grossly perverse or unsustainable in law. In our considered view, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... see had no option but to discharge the remaining consideration in cash at the time of registry as insisted by the seller of the property and in absence thereof, the deal might have not fructified. The Tribunal found the explanation so furnished as reasonable and plausible and did not find any mala fide in the explanation so submitted as everything was flowing from the registered sale deed where transactions have been duly documented including the payment through demand draft and cash which is from known sources of funds contributed by the assessee's husband. The Income-tax Appellate Tribunal, Kolkata in Nikhil Banik Mazumder v. Jt. CIT in I. T. A. Nos. 453 and 454/Kol/2016, dated January 10, 2018 (copy placed at pages 98-110 in case law compilation submitted in the course of hearing) where wife and husband, sons and father gave loans and repaid some amounts, it was held to be simply a transfer of money from one family member to another. In strict sense of term, it was not a loan, but financial help or support. The Income-tax Appellate Tribunal, Pune in ITO v. Sunil M. Kasliwal [2005] 94 ITD 281 (Pune) ; 146 Taxman 4 (Pune) (TM) (Mag.) held that loans which were raised from mino ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... takenly shown as loan by the auditor. The Assessing Officer declined that all these pleadings in his penalty order dated June 30, 2014. He held that the assessee's impugned cash loan transactions exceeding Rs. 20,000 indicated a motive to avoid defection without involving any reasonable cause. He thus imposed the impugned penalty of Rs. 2.50 lakhs under section 271D of the Act affirmed in the Commissioner of Income-tax (Appeals)'s order under challenge. 4. The learned counsel vehemently contends during the course of hearing that both the lower authorities have erred in law as well as on facts in imposing the impugned under section 271D penalty respect of two cash loans/gifts sums in case of mother and wife ; respectively. His case accordingly is that the clinching fact of the said two parties turning out as family-members itself forms a reasonable cause for not levying the impugned penalty. The Revenue strongly submits on all the lower authorities action invoking the impugned penalty. We find no reason to sustain the penalty in issue. The fact remains that the two sum(s) in question of Rs. 1 lakh and 1.30 lakh have come from the assessee's mother and wife ; respectiv ..... X X X X Extracts X X X X X X X X Extracts X X X X
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