TMI Blog2021 (4) TMI 1352X X X X Extracts X X X X X X X X Extracts X X X X ..... 40A(3) is liable to be set aside. Consequently, the addition stands deleted. Assessee has not insisted on the confirmation of addition qua cash payment made towards purchase of vacant site, hence the affirmation of the said disallowance by the Ld. CIT(A) does not warrant any interference. - Decided partly in favour of assessee. - I.T.A. No. 148/VIZ/2020 - - - Dated:- 7-4-2021 - SHRI N.K. CHOUDHRY, HON BLE JUDICIAL MEMBER AND SHRI D.S. SUNDER SINGH, HON'BLE ACCOUNTANT MEMBER For the Assessee : Shri C.Subrahmanyam, FCA For the Department : Smt.Suman Malik, DR ORDER PER N.K. CHOUDHRY, JUDICIAL MEMBER This appeal has been preferred by the Assessee against the order dated 24/12/2019 impugned herein passed by the ld. Commissioner of Income Tax (Appeals) [for short, ld. Commissioner ], Vijayawada u/sec. 250(6) of the Income Tax Act, 1961 (hereinafter referred to as Act ) for the A.Y. 2012-13. 2. In this case, the only issue in controversy relates to the affirmation of partly disallowance of Rs. 28,61,410/- u/s section 40A(3) of the Act, by the Ld. Commissioner. 3. Facts of the case in brief are that Assessee being an individual claimed to have b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t of the FT, it is dear that there is business expediency in the said cash payments and that the sellers are agriculturists and the sellers have insisted on cash payment. The sellers have specifically stated that cheques are not reliable and that the reason why they have insisted upon cash payments. In the light of these facts, the assessee could not have carried the business but or the cash payments for purchase of lands which were initially acquired as an investment and then after obtaining necessary land conversion, these lands were introduced as stock in trade and then put to sale. In this view of the matter, it is submitted that the cash purchases are inevitable and thus prove the business expediency in this case. The appeal may be decided accordingly. 4.1 The ld. Commissioner, while relying upon the remand report wherein the business expediency was accepted by the AO, deleted the disallowance to the tune of Rs. 1,08,09,000/- qua 05 agriculturists/sellers, out of total cash payment of Rs.1,35,87,225/- by observing in para no. 31 of its order as under:- The sellers as mentioned, are ordinarily residing at Edupugallu Village as is evident from the recitals in the releva ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt point of time when the payments were made to them and that the said payments are covered by the scope of the exception laid down rule 6DD(g). The assessee furnished additional evidence by way of copies of paper clippings and letter of the Sr.Branch Manager of Andhra Bank, Tadigadapa in order to show that the branch of Andhra Bank at Edupugallu was established in the year 2015 only and there is no other bank in the said village. 30. In this regard, it is seen that rule 6DD(g) lays down the exception to the applicability of the provisions of sec. 40A(3) to a payment which is made in a village or town to any person who ordinarily resides in such village or town, which is not served by any bank on the date of such payment. In the case of the assessee, cash payments were made to the following sellers of agricultural lands, who are ordinarily residing at Edupugallu Village: SI. No. Date of Purchase Document No. Nature of land Party Name Consideration Amount (Rs.) 1 30.09.2011 4882/11 Agricultural T.Srir ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... itional ground of appeal is therefore partly allowed. 7.1 It appears from the impugned order that the ld. Commissioner deleted the addition of Rs. 1,08,09,000/-qua 05 agriculturists who are residing in the village wherein there was no bank facility available during the period of transactions, however, sustained the addition of Rs. 24,70,000/- and Rs.3,91,410/- made cash payments towards purchase of agricultural lands and vacant site respectively, on the ground that the said payments are not covered by any exception laid down in rule 6DD and therefore the said cash payments aggregating to Rs.28,61,410/- are liable for disallowance u/sec. 40A(3) of the Act. 7.2. Let us to peruse the provisions of Rule 6DD of the Income Tax Rules, 1962 which are as follows:- Rule 6DD No disallowance under sub-section (3) of section 40A shall be made and no payment shall be deemed to be the profits and gains of business or profession under sub-section (3A) of section 40A where a payment or aggregate of payments made to a person in a day, otherwise than by an account payee cheque drawn on a bank or account payee bank draft, exceeds twenty thousand rupees in the cases and circumstances spe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... siness expediency and insistence of the sellers on cash payments. 7.5 The Co-ordinate bench of the Tribunal in the case of ITO Vs. Smt. Jalumuri Rama Lakshmi in ITA No. 242/VIZ/2015 dated 28/07/2017 also dealt with an identical issue and upheld the deletion of addition made u/sec. 40A(3) of the Act by holding as under:- 7. We have heard both the parties, perused the materials available on record and gone through the orders of the authorities below. The assessee has made the payments for purchase of the land in cash for ₹ 26,50,000/- to the seller and a sum of ₹ 51.00 lakhs was made to the developer. The fact that the land was purchased and got developed by the assessee was not disputed by the A.O. The Ld. CIT(A) deleted the addition placing reliance on the decision in the case of PSL Limited Vs. ACIT and CIT Vs. Vijay Kumar Goel, wherein the principle followed in both the cases was the disallowance is not warranted when the transaction is genuine and the identity of the payer is not doubted apart from the applicability of rule 6DD(h) 6DD(a)(iv). The CIT(A) has given a finding that a sum of ₹ 26,50,000/- was paid in cash and recorded in the registered sal ..... X X X X Extracts X X X X X X X X Extracts X X X X
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