9911796707
TMI Blog2023 (9) TMI 1076X X X X Extracts X X X X X X X X Extracts X X X X ..... section 40A(3). So far as the statement of the Director is concerned, we find nowhere he has stated that they have paid an amount of Rs. 1.50 crore towards purchase of land. We also agree with the observation of the ld.CIT(A) that in absence of examination of the books of accounts and without finding that such cash payments were made and debited to the profit and loss account, the AO could not have made the disallowance u/s. 40A(3). DR also could not controvert the finding of the ld.CIT(A) that the AO had made the same disallowance of Rs. 1.50 crores u/s. 40A(3) in the subsequent assessment year i.e. AY 2009-10 also. Since, no evidence either oral or documentary has been brought on the record by the AO that in fact the said cash payments were made by the assessee company to Shri B.V. Sampath and family members, therefore, order of the ld.CIT(A) deleting the addition of Rs. 1.50 crores made by the AO u/s. 40A(3) upheld - Decided against revenue. - SHRI RAMA KANTA PANDA, ACCOUNTANT MEMBER AND SHRI K. NARASIMHA CHARY, JUDICIAL MEMBER For the Appellant : Shri K.A.Sai Prasad, CA For the Respondent : Shri T.Sunil Gowtham, Sr.AR ORDER Per Shri Rama Kanta P ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ccounts, the AO completed the assessment u/s. 144 of the I.T. Act determining the income of the assessee at Rs. 2,14,31,217/- wherein he made addition of Rs. 1,50,00,00/- by invoking the provisions of section 40A(3). 4. Before the ld.CIT(A), the assessee made elaborate submissions and filed certain additional evidences which were forwarded to the AO for a remand report. After obtaining the remand report of the AO and the rejoinder of the assessee to such remand report, the ld.CIT(A) deleted the addition by observing as under:- 7. I have carefully considered the issue, the facts on record, the remand report of the AO, the rejoinder and the written submissions of the AR. Brief facts, for proper appreciation of the issue under consideration, can be stated as under:- 7.1 The appellant company entered into a MoU on 22.10.2005 with Sri B.V. Sampath and family members (Landlords) for the purchase of agricultural land measuring Ac 12.26 Gts for a sale consideration of Rs. 44 lakhs per Acre. On the date of execution of MoU, the appellant paid advance of Rs. 25 lakhs to Sri B.V. Sampath and family. Approval from the BMRDA was sought for forming 342 plots of various dimensions to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the impugned addition. The replies given by Sri M. Ramachandra Reddy to Q Nos. 6 7, for appropriate appreciation of facts, are reproduced here under:- Q. 6. Please furnish details of the projects undertaken by your company in Bangalore? both completed as well as ongoing projects? Ans. The Company Anuradha Properties Et: Townships Private Limited, entered into a joint development agreement in the year 2005 with Shri B. V. Sampath and his family members to develop 24 acres 16 guntas of agricultural land by converting it into non nonagricultural land. The land is situated at Bukkasagara Village, JiganiHobli, Anekal Taluk, Bangalore. BMRDA approval was sought for forming 342 sites of various dimentions measuring in all about 5,40,000 sq. ft. As per the JDA initially we have agreed to purchase land at the rate of Rs. 40 lacs per acre on development basis from Shri B. V. Sampath. Subsequently the terms were changed to jointly develop the land and share the sale proceeds after allowing for expenditure incurred in connection with sale of the land. The proceeds were agreed to be shared in the ratios of 70:30. The sale of sites took place during the year 2007-2008. As on date ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... crores in cash to Sri B.V. Sampath and family members. The AO has not brought any material on record to substantiate the impugned disallowance but for relying upon a statement, which also doesn't lead to any such inference, as drawn by the AO. 8.2 It is evident from the aforesaid statement before the DDIT(Inv) that there is no admission whatsoever by the MD of the appellant that it paid Rs. 1.50 crores in cash to Sri B.V. Sampath and family members. The AO did not cause any enquiries into the matter and didn't examine/ cross-examine the statement made by Sri M. Ramachandra Reddy before the DDIT (Inv.) with Sri B.V. Sampath and others. Further, the AO did not bring anything on record any documentary evidence of material seized or impounded in support of the conclusion so drawn by him. 8.3 I am in agreement with the argument of the AR that disallowance u/s 40A(3) could have been made only if the payments in cash were reflected in the books of account and they were debited to the P L account. As per the submissions made by the appellant, evidenced by the Books of Ale produced during the remand proceedings, all the payments made to the landlords were made by cheques ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d on behalf of the assessee. We have also considered the various decisions cited before us. We find the AO in the instant case, made addition of Rs. 1,50,00,000/- by invoking the provisions of section 40A(3), on the ground that the assessee company made huge cash payments in excess of Rs. 20,000/- in connection with development of housing plots at Bangalore which attracts provisions of section 40A(3). We find the ld.CIT(A) deleted the addition, the reasons of which have already been reproduced in the preceding paragraph. 8.1 We do not find any infirmity in the order of the ld.CIT(A) on this issue. It is an admitted fact that the assessee, during the course of assessment proceedings, had not produced the books of accounts for which the assessment was completed u/s. 144 of the I.T. Act. The AO made the addition of Rs. 1.50 crores based on the statement of the M.D of the company before the DDIT (Inv.). The relevant question No. 7 and answer there to which is reproduced by the ld.CIT(A) is being reproduced here again at the cost of repetition. Q.7. Please give the details of the expenditure that have been incurred on the development of the project. Please also give details of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... made to different individuals apparently clients with genuinity of the same reaching the destination of client, it can also be presumed that the part of payments of Rs.1,23,94,796/- might have reached Sri. B.V. Sampath. In the above circumstances the ld.CIT(A) is requested to decide the issue on merits of the case. 10. A perusal of the above observation shows that the AO is trying to invoke the provisions of section 40A(3) for some site expenses and other expenses, but not on account of any payments made to Shri B.V. Sampath and family members by the assessee. Even in the remand report also, the AO had given vague answer according to which he is presuming that part of the payments of Rs. 1,23,94,796/- might have reached Shri B.V. Sampath. This in our opinion cannot be the basis for addition u/s. 40A(3). 11. For attracting the provisions u/s. 40A(3), there must be some cash payments recorded in the books of accounts. However, in the instant case as mentioned earlier no books of accounts were produced during the course of assessment proceedings for which the assessment was completed u/s. 144 of the I.T. Act and therefore, the AO could not have invoked the provisions of sectio ..... X X X X Extracts X X X X X X X X Extracts X X X X
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