TMI Blog2016 (3) TMI 1233X X X X Extracts X X X X X X X X Extracts X X X X ..... ded invoking the provisions of section 40A(3) of the Act can be dispensed with if the assessee is able to prove the business expediency out of which it had to make the cash payments and the genuineness of the transaction has also to be proved. We observe that none of the lower authorities have questioned the genuineness of the transaction. The only reason for disallowance is the provisions of section 40A(3) of the Act. The assessee had all along stated the reason of business exigency out of which he had to make cash payments, which were also not doubted by any of the lower authorities. Further, we see that the facts of the case are exactly same as that of Gurdas Garg (2015 (8) TMI 569 - PUNJAB & HARYANA HIGH COURT ). Therefore, we are inclined to hold that the said cash payments cannot be disallowed to the assessee. The addition is hereby deleted.- Decided in favour of assessee - ITA No. 749/Chd/2014, ITA No. 750/Chd/2014, ITA No. 464/Chd/2014, ITA No. 751/Chd/2014 - - - Dated:- 30-3-2016 - Bhavnesh Saini (Judicial Member) And Rano Jain (Accountant Member) For the Appellant : Sudhir Sehgal For the Respondent : Manjit Singh, DR ORDER Rano Jain (Accountant Memb ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee to substantiate its claim of there being exceptional circumstances to make cash payment for purchase of land. Further, he stated that since out of a total amount of ₹ 1,43,13,750/-, purchases to the extent of only ₹ 60,50,000/- have been made in cash, which shows that a substantial chunk of payment has been made by cheque also. In view of this, he dismissed the appeal of the assessee. 6. Aggrieved by this, the assessee has come in appeal, raising the following grounds of appeal : 1. That the Worthy Commissioner of Income Tax (Appeals), Ludhiana has erred in confirming the addition of ₹ 12,10,000/- u/s 40A(3) of the Income Tax Act, 1961 on account of purchase of land by making cash payment of ₹ 60,50,000/- to the Sellers. 2. That Ld. CIT(A) erred on facts and law in confirming the addition made by the AO by invoking the provisions of section 40A(3) as the assessee made cash payments exceeding ₹ 20000/- for purchase of land held as stock in trade. The explanation furnished by the assessee, based on facts and case laws, during the course of appellate proceedings has not been rebutted by the Ld. CIT(A). 3. That the appellant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e that the assessee has made cash payment of ₹ 60,50,000/- to some agriculturists for purchase of land. The assessee is a real estate developer during the year and is in the process of accumulating land from various sources. It has not done any business during the year. From the perusal of accounts filed before us, we see that no claim of any expenditure or even purchases have been made during the year. The lands purchased have been transferred to project in progress account. In view of all this, we observe that the provisions of section 40A(3) of the Act cannot be invoked. Section 40A(3) of the Act reads as under : 40A(3) Where the assessee incurs any expenditure in respect of which a payment or aggregate of payments made to a person in a day, otherwise than by an account payee cheque drawn on bank or account payee bank draft, exceeds twenty thousand rupees, no deduction shall be allowed in respect of such expenditure. 11. The language of the section is very clear that in cases of expenditure incurred by the assessee in cash, no deduction on account of that expenditure is allowed under this provision. We are aware of the proposition that even if the expenditure i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Hon'ble Jurisdictional High Court. In this case, the assessee was engaged in the business of trading in properties. Admittedly, certain payments were made in cash in excess of ₹ 20,000/- per day. Invoking the provisions of section 40A(3) of the Act, the Assessing Officer made the disallowance. The learned CIT (Appeals) in his order gave finding that the identity of the payees i.e. the vender in respect of the land purchased by the assessee was established. The sale deeds were produced, the genuineness thereof was accepted. The amount paid in respect of each of these agreements was certified by the Stamp Registration Authority. In this way, the learned CIT (Appeals) held that the bar against the grant of deductions under section 40A(3) of the Act was not attracted. The Tribunal did not upset these findings given by the learned CIT (Appeals) including as to the genuineness and the correctness of the transactions. In fact, the Tribunal noted the contention on behalf of the assessee that there was a boom in the real estate market, that it was necessary, therefore, to conclude the transactions at the earliest and not to postpone them, that the assessee did not know the vendor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... resent case, detailed submissions with corroborative evidences were filed at every stage including that of the Assessing Officer as well as the learned CIT (Appeals). Even before us, the voluminous Paper Book has been filed . The elaborate submissions were made to prove that the expenses incurred in cash were genuine which were paid to distilleries through Excise Department for purchase of liquor and there were practical expediency because of which the payments have to be made in cash. This is an undisputed fact that the assessee firm has twelve partners, who are operating business through vends located at distinct places. Each person has licence in his own name to make the sales and purchases as per the terms of these licence agreements. Further, it is quite a known fact that in the business of the liquor, transactions are to be done in cash. All these facts have not been controverted by the Assessing Officer or even by the learned CIT (Appeals). This makes out a case that the assessee has business expediency under which it have to make payments in cash. Further, not a single transaction has been questioned at any stage. The learned CIT (Appeals) while adjudicating the contention ..... X X X X Extracts X X X X X X X X Extracts X X X X
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