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2016 (5) TMI 1515 - AT - Income TaxAddition u/s 40A(3) - assessee had made payments in cash - HELD THAT:- AO has presumed that only sold quantity of land was purchased during the year under consideration. There is nothing on record with the Authorities Below to arrive at this conclusion. In view of the above facts and circumstances we do not find that action of learned CIT(A) in confirming the disallowance made by AO u/s 40A(3) of the Act, can be upheld as there is no evidence of purchase of land by assessee and also there is no evidence that assessee had made payments to the owners of land as has already been established by the fact that owners had received payments form actual buyers only and therefore, there can not be any question of disallowance u/s 40A(3). Therefore, we hold that on merits and facts of the case no disallowance was warranted u/s 40A(3). Even otherwise, if it is assumed that assessee must have first purchased the land and had made payments in cash even then the disallowance u/s 40A(3) cannot be made in view of the judgment in the case of Sh. Gurdas Garg [2015 (8) TMI 569 - PUNJAB & HARYANA HIGH COURT] Where the identity of the persons who has received payment in cash is established and genuineness of transactions is established, no disallowance can be made under the provisions of section 40A(3). In the present case even if it is assumed that assessee had first purchased the land and had made the payments to sellers of land the identity of sellers of land is established as is evident from the copy of agreement to sell impounded during survey and also the identity of assessee is established who is deemed to have purchased the land and therefore, also the facts and circumstances of the present case read with judgment of Hon’ble Punjab & Haryana High Court in the case of Sh. Gurdas Garg suggest that no disallowance could have been made in the present case. In view of the above we allow ground Nos.3 to 6 of the appeal of the assessee.
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