TMI Blog2012 (9) TMI 86X X X X Extracts X X X X X X X X Extracts X X X X ..... As one of the promoters of the company had claimed that the entire amount of Rs. 1.95 crores was advanced by him for payment to the vendors with the confirmation letter it was the duty of the AO to make proper enquiry for finding out the genuineness of the confirmation letter and claim of payment but neither the promoter was summoned for examination nor has made any attempt to find out whether sufficient fund was available with promoter for making payment of Rs. 1.95 crores in cash - restore the matter back to the Assessing Officer who shall conduct necessary enquiry with regard to the payment - in favour of assessee for statistical purposes. Disallowance made u/s. 40 (a) (ia) - Held that:- As decided in case of Merilyn Shipping & Tran ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eached by AO that the sale agreement belongs to the company are on mere surmise and suspicion, hence, invoking the provisions of section 69C of the IT Act are against the provisions of law. 1.3 The action of the Assessing Officer by resorting to the provisions of section 40(A)(3) of the I.T. Act cannot withstand the test of law. 1.4 The finding of the learned CIT(A) in approving the action of the AO in disallowing expenditure by invoking the provisions of section 40(a)(ia) of the I.T. act are not correct when these provisions do not apply to the facts of the case. 1.5 For these and other reasons that are to be urged at the time of hearing of the case, the appellant prays that the additions made by the Assessing Officer and sustained b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 17.3.2007. From the cash receipt impounded during the survey operation, it was found that the entire amount of Rs. 1.95 crores was paid in cash by the assessee-company and Shri M. Sudhakar Reddy. During the scrutiny assessment proceedings when asked to explain the assessee-company submitted that the land in question was purchased by Mr. V. Mahindra, a promoter of the assessee company and others. During the relevant previous year since there was some dispute with the ownership of the land to clear the dispute and to have a clear legal title on the said property, the promoters decided to enter into an agreement for purchase of land from the vendor and accordingly entered into an agreement for purchase of the property for a sum of Rs. 1.95 c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the assessee. In the Agreement of Sale also there is no mention about Mr. V. Mahindra. Since the Agreement of Sale clearly indicates that Shri N.R. Srinivas and others are the absolute owners and possessors of the land admeasuring 12 acres 38 guntas, therefore, it is clear that the assessee-company had made cash payment of Rs. 1.95 crores to the said vendors i.e., Mr. N.R. Srinivas and others from unexplained sources which clearly attracts addition u/s. 69C of the Act. The assessee being aggrieved with the addition made, challenged the same before the CIT(A). 8. The CIT(A) after considering the contentions raised on behalf of the assessee came to a conclusion that the Agreement of Sale is very much clear to indicate that the assessee-c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... paid by him. Therefore, it was not open for the Assessing Officer to reject the explanation of the assessee regarding the source of payment without making any enquiry in this regard. The learned AR further submitted that even assuming the payment was made by the assessee-company but the Agreement of Sale as well as the cash receipt clearly reveal the fact that the amount was paid by the assessee-company and Shri M. Sudhakar Reddy. Therefore, the entire amount of Rs. 1.95 crores could not have been added in the hands of the assessee alone. 10. The learned AR submitted that since the issue of payment of the amount by Mr. V. Mahindra has not been properly examined the matter requires to be re-examined by the Assessing Officer. 11. The le ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unt of Rs. 1.95 crores was advanced by him for payment to the vendors. When such confirmation letter was filed during the assessment proceedings, it was the duty of the Assessing Officer to make proper enquiry for finding out the genuineness of the confirmation letter and claim of payment of Rs. 1.95 crores by Mr. V. Mahindra. The Assessing Officer has neither summoned Mr. V. Mahindra for examination nor has made any attempt to find out whether sufficient fund was available with Mr. V. Mahindra for making payment of Rs. 1.95 crores in cash. These facts needed to be established on record before making the addition u/s. 69 of the Act. We, therefore, think it proper to restore the matter back to the Assessing Officer who shall conduct necess ..... X X X X Extracts X X X X X X X X Extracts X X X X
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