TMI Blog2017 (3) TMI 183X X X X Extracts X X X X X X X X Extracts X X X X ..... nce of such evidence, we are inclined to accept the contention of the assessee that these payments were made in the place of vocation i.e., the payments were made in villages where the agricultural lands are situated. Thus we set aside the orders of CIT(A) and allow the appeals of the assessee in both the years under consideration. With regard to land development expenditure, these expenses were incurred in the villages to develop the land, where there is no banking facilities. Hence, we are inclined to accept the contention of the assessee that these payments were made directly to the employees of the company to carry out the development work. Accordingly, these expenses are also not hit by the provisions of section 40A(3). With regard to payment of commission, we have noticed that the AO has disallowed the payment to agents due to the fact that genuineness of the payments were not proved due to non-compliance to the notices of AO and mismatch of the signatures on the confirmation letters submitted by the assessee. The ld. AO had accepted the payments which are properly documented. Hence, we accept the findings of the AO and accordingly grounds raised by the assessee in t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nfirmed the additions made u/s 40A(3) by the AO by observing as under: 1. There is no doubt about the fact that a large number of payments have been made violating the provisions of section 40A(3) of the Act. 2. The explanation that payments were made to poor land owners, who did not have bank accounts is completely unsubstantiated. The onus lies squarely on the assessee to not only provide details of its payments through entries in the books of account, but also to substantiate the arguments made by it. The assessee has not even provided full details of each and every transaction. Moreover, the lands were situated close to Shamshabad, which houses one of best Airports in the country along with many other facilities. The Assessing Officer has rightly stated that he cannot accept the aforementioned arguments of the assessee pertaining to no banking facilities. Further, the argument that the land owners insisted on cash payments is also not valid. Not only it is violative of the legal Provisions, but it is also unsubstantiated. Further, the assessee has not provided a single shred of evidence to show that payments in small amounts were made to its workers directly. This arg ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... were paid or any agreement of commission. He observed that moreover, the AO had rightly pointed out that the commission payments debited to the level of 20% is excessively high and does not confirm to either the market rates or human probability and moreover, the assessee did not make any specific request during the assessment proceedings for examination of its own commission agents. In view of the above observations, the CIT(A) confirmed the additions made by the AO towards commission payments. 9. Aggrieved by the order of the CIT(A), the assessee is in appeal before us raising the following grounds of appeal: 1. The order of the learned Commissioner of Income-Tax (Appeals) is erroneous, unjust and contrary to the facts of the case. 2. The learned Commissioner of Income-Tax (Appeals) erred in holding that the provisions of Sec. 40A(3) would apply in respect of the payments made for acquisition of land in Silicon County and further erred in confirming the addition made by the Assessing Officer of ₹ 7,71,298/-. 3. The learned Commissioner of Income-Tax (Appeals) erred in holding that the provisions of Sec.40A(3) would apply in respect of the payments made fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .. Rs.16,02,401 d) Silicon County-III .. Rs.66,13,927 e) Royal Residency .. Rs.29,37,438 f) Crystal Park .. ₹ 1,51,164 3. The learned Commissioner of Income-Tax (Appeals) erred in confirming the addition of ₹ 88,93,980/- being the disallowance of proportionate commission paid during the previous year under consideration. 4. The learned Commissioner of Income- Tax (Appeals) erred in confirming levy of interest u/s 234B of ₹ 30,64,681/- and u/s 234C of ₹ 26,427/-. 10. Ld. AR submitted that the assessee is in business of development of real estate. In that process, it has bought agricultural lands in and around Shamshabad area. All these lands were directly purchased from villagers wherein there is no banking facility available at the relevant point of time when the assessee purchased the lands. However, he objected to the observation of CIT(A) that Shamshabad area is well d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... peaks about only ordinary residence of the parties. It is relevant to notice that chart submitted before the Hon ble Tribunal by the AR in which the addresses were given, which highlights that ordinary residence of the parties, who sold land to the assessee are ordinary residents in and around Hyderabad where there is no shortage of banking facilities. It is only to infer that these payments were made in the place of residence and not in the place of sale, hence, she vehemently argued that these payments were not as per rule of exclusion under rule 6DD(g) of the Rules. 11.1 For the other types of payments for land development and commission, she relied on the orders of revenue authorities. 12. In the rejoinder, ld. AR read out Rule 6DD(g), in which not only the rule speaks about ordinary residence, but, it also speaks about or carrying of any business, profession or vocation, in any such village or town . He reiterated that the payments were made to the land owners after the registration in the villages itself and the payment in the place of villages also falls within the rule 6DD(g). He submitted that rules should be applied in toto and not interpreting part of the rule. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Hon ble High Court observed and held at page 693 of the Reports (239 ITR 687) as follows: In view of the aforesaid principles as laid down and the object as sought to be achieved u/s 40A(3) of the Act, any changes made in the subordinate legislation would not in any way affect the substantive provision. Moreover, by deleting the circumstances as contemplated earlier, viz., sub clauses (1) and (2) of rule 6DD(j) the objects of curbing the circulation of black money and regulating the business transactions become more strengthened and it avoids any undue advantage being taken by unscrupulous assessees or litigation being multiplied. As the position stands now 20% of the cash transactions exceeding ₹ 20,000 are disallowed in computing the business expenditure but not the entire ₹ 20,000/- While the amended provision confers advantage to the assessee to this extent, the circumstances permitted to be taken into account by the Assessing authority are no longer available by reason of deletion of old rule 6DD(j). But that by itself does not make section 40A(3) arbitrary and unconstitutional. One cannot plead ignorance of law and make cash payments contrary to law. It is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1 In the case under consideration, the facts are similar to the facts in the above decision of the coordinate bench. As per the said decision, the payments are made in the place of registration wherein there is no banking facilities, are not covered by the provisions of section 40A(3). In the given case, ld. DR submitted that as per 6DD(g), the ordinary residence of the land owners are relevant, as the payment would have made in the place of residence not in the place of registration. We are not in a position to appreciate this view because the rule 6DD(g) excludes the payment, which is made in a village or town, which on the date of such payment is not served by any bank, to any person who ordinarily resides, or is carrying on any business, profession or vocation, in any such village or town. In the above rule, with regard to the person who receives the payment, it prescribes two situations wherein first situation, rule allows the payer to pay in the place of residence and in the second situation, the payment made in the place of the dealing or place of registration in which the person carries the business, profession or vocation. In the given case, the assessee claims that the pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ort from the Assessing Officer, before accepting the additional evidence produced before him. v. The CIT(A) erred in ignoring the provisions that the Company will not get any immunity from the application of provisions of section 40A(3), as the assessee failed to produce evidence in support of its claim that the circumstances stipulated under Rule 6DD(g) were prevailing on the dates of payments in cash. vi. The CIT(A) erred in ignoring the fact that the assessee had filed separate Trading and P L Account for separate ventures and shown payments to same agents who are commonly employed. Thus the CIT(A) erred in deleting the disallowance of ₹ 49,900/- made u/s 40A(3) towards payments agents. 16. Briefly the facts of the case are that for the AY 2007-08, the assessee filed its return of income on 30/10/2007 admitting an income of ₹ 1,33,57,380/-. The AO issued notices u/s 143(2) and 142(1) of the IT Act. The assessee filed all the details. The AO completed the assessment u/s 143(3) on 31/12/2009 determining the total income at ₹ 3,71,41,126/-. The AO, thereafter, issued notice u/s 148 on 29/03/2012 requiring the assessee to file the return of income. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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