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The DCIT, Circle-2, Jaipur Versus M/s Shree Salasar Overseas Pvt. Ltd.

2016 (6) TMI 733 - ITAT JAIPUR

Provision made for Development of Land - whether is ascertained liability? - Held that:- Undisputedly, there is no change in the facts and circumstances of the case. The issue in question is covered in favour of the assessee by the earlier decisions of the Coordinate Benches in assessee’s own case - Decided in favour of assessee - Addition u/s 40A(3) - payment made in cash - Held that:- Undisputedly the genuineness of the transactions and identity of the parties have been clearly spelt out b .....

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mers and the need for cash payment given the lack of banking facility, cheques given earlier not being deposited thus requiring cash payments in respect of these 21 transactions. Further, it is noted that these cash payments of ₹ 74.51 lacs constitute only a small percentage of total payments towards purchase of land totalling to ₹ 236.90 crores during the year under consideration and thus constitute an exception rather than a norm. In our view, the need for cash payments on Sundays/ .....

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dated 28.03.2014 has deleted the disallowance in A.Y. 2006-07, 2007-08 and 2008-09. Thus we find no infirmity in the order of the ld. CIT(A) who has rightly deleted the disallowance - Decided in favour of assessee - ITA No. 416 /JP/15 - Dated:- 15-6-2016 - Shri Kul Bharat, JM And Shri Vikram Singh Yadav, AM For the Assessee : Shri Vijay Goyal, (C.A.) For the Revenue : Smt. Roli Agarwal (CIT) ORDER Per Shri Vikram Singh Yadav, AM This is an appeal filed by the Revenue against the order of CIT(A)- .....

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r u/s 40A(3) of the IT Act, 1961. 2. The brief facts of the case are that the assessee company is a colonizer and its business is of buying agricultural land, getting it converted into residential/commercial land after obtaining necessary permission from Jaipur Development Authority, dividing the land into plots and selling these plots directly as well as through brokers. The company is also selling plots on commission basis owned by someone else after developing the land. During the year under .....

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of land. It can also be seen that for the A.Y. 2005-06 there was closing balance of provisions of ₹ 2,58,81,034/- for two schemes whereas the amount of closing balance of the provisions for A.Y. 2012-13 is ₹ 43,72,23,601/- and the number of schemes are nine. This is indicative of the fact that the funds of provisions made for the development of land are being used for expansion of the business rather than the development of land. With these observations, the amount of ₹ 5,18,1 .....

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s own case by Hon ble ITAT, Jaipur - M/s Shree Salasar Overseas (Pvt) Ltd. vs. CIT-I Jaipur ITA No. 433/JP/2011 with reference to order u/s 263 passed by CIT. (b) Assessee s own case by Hon ble ITAT, Jaipur - M/s Shree Salasar Overseas (Pvt) Ltd. vs. ACIT, Circle-2, Jaipur in ITA No.910/JP/2013 (AY 2005-06), 911/JP/2013 (AY 2007-08) and 912/JP/2013 (AY 2008-09) with reference to order by AO u/s 148 on same issue. The ld. AR submitted that the ld. AO rejected the assessee s claim on the same grou .....

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tances in the year under consideration, therefore the decision of Hon ble ITAT of earlier years is applicable for this year also. 2.2 The ld. AR further submitted that it is prevailing accounting policy of assessee and other assesses of similar trade to make provision of development expenses to be incurred on area sold in order to arrive at the true and correct profit and the assessee is consistently following this accounting practice. It was further submitted that the assessments for A.Y.2004-0 .....

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ified in making addition of ₹ 1,07,47,296/-, ₹ 11,21,74,877/- and of ₹ 16,35,62,072/- in A.Y. 2005- 06, 2007-08 & A.Y. 2008-09 respectively by disallowing provision development expenses claimed by the assessee as future liability of development expenses against the sale of plots booked by it in these years. Thus the order of ld. CIT(A) for A.Y. 2005-06, 2007-08 and 2008-09 are upheld in this regard. 2.4 The ld DR is heard who has relied on the order of the AO. 2.5 We have h .....

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the assessee. Thus, the ground raised by the Revenue is dismissed. 3. In Ground No.2, the Revenue has challenged the deletion of ₹ 74,51,000/- made by the AO u/s 40A(3) of the Act. 3.1 Briefly, the facts of the case are that the assessee has made payments exceeding ₹ 20,000/- against purchase of land during the period under consideration, otherwise than by an account payee cheque. During the course of assessment proceedings, the assessee was asked to explain as to why the above ment .....

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payment to the above parties had already been made by the assessee through cheques on different dates up to 2005 as observed from the details of payment submitted by the AR. After a gap of 3 to 4 years payments were made in cash not to a particular party but to various parties clears that there was no such requirement before the assessee to make payments in cash to all such parties and the AR also failed to give any details regarding requirement of making such payments in cash. Accordingly it wa .....

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es of the business are same. The circumstances of the payment made to the farmers are also same. Therefore the disallowance made by AO deserves to be deleted. 3.3 It was further submitted that genuineness of transactions and identity of parties are not in doubt. The payments were made to the farmers for purchase of agricultural land and the payments are supported by other documentary evidence like agreement to sale, sale deed and revenue records of the land, 90B orders of JDA etc. 3.4 It was fur .....

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negotiations/meetings are possible only at the residence of the owners and under these circumstances the final deal of the land is possible at the place of the owners of the land and payments are required to be made in villages which are not served by the banking facilities or after the close of banking hours. In some case the assessee gave post dates cheques to farmers but they did not lodge the cheque in the bank account of the assessee and they were not given possession of land to the assesse .....

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2009 which was also on Sunday. On Sunday, the banks remains closed and therefore covered under exceptions mentioned in clause 6DD. The remaining 2 payments of ₹ 5,00,000/- and ₹ 51,000/- were made on 15.10.2009 and 27.07.2009 after banking hours. 3.6 It was further submitted that the ld. AO failed to appreciate the relaxation provided under Second proviso to section 40A(3) of Income Tax Act. The second Proviso to section 40A(3) is as under: Provided further that no disallowance under .....

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business expediency and other relevant factors were added to under such circumstances as may be prescribed have some specific meanings. If the legislature intended to restrict the exemption only to the circumstances prescribed under rule 6DD then there was no need to add these words. The intention of the law is to give proper weightage to availability of banking facilities, business expediency and other relevant factors. The AO should have consider the applicability of rule 6DD after considering .....

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d who has argued the matter at length and relied upon the order of the AO. 3.9 We have heard the rival contentions and perused the material available on record. It is noted that during the year under consideration, the assessee has made cash payments of ₹ 74.51 lacs in respect of 21 separate transactions towards purchase of agriculture land. Out of 21 transactions, 19 payments were made to various farmers on Sunday and the remaining two payments totalling to ₹ 5,51,000/- was made aft .....

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