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TMI Blog2016 (3) TMI 1247X X X X Extracts X X X X X X X X Extracts X X X X ..... roceedings, the Assessing Officer observed that assessee had purchased certain properties which were registered with Registrar of Revenue Department. The Assessing Officer further observed that the payment for purchase of such properties was made in cash. The Assessing Officer observed that since the properties in the case of assessee were stock in trade therefore, payment of cash attracted the provisions of section 40A(3) of the Act and such payments were liable to be disallowed. The Assessing Officer, therefore, relying upon the case law of Attar Singh Gurmukh Singh Vs. ITO (SAC), 191 ITR 667 (SC), held that since there was no cogent reasons to make payments otherwise than a crossed cheque or bank draft as the place where the deeds were registered was well served by banking facilities. Therefore, he show caused the assessee as to why the disallowance be not made. The assessee in his reply submitted as below. "That as regarding the invocation of the provisions of section 40A(3) of the Income Tax Act, 1961 on the cash payment for the purchases of land made by assessee at Rs. 9,22,000/- and Rs. 8,99,500/- it is submitted as under:- (a) The land purchased in the question was an a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot related to purchase of LAND from anybody, agriculturist or not. To that extent the grounds of the applicant assessee is plainly not entertainable." 2.3 The rebuttal of the AO in the remand report that the case of the appellant does not fall in the exception provided in rule 6DD(e) is also covered by the order of Jodhpur Bench of the ITAT in the case of Vaishali Builders & Colonizers (2012) 138 ITD 227. The relevant part of the order in para 11.3 is reproduced as under:- "The Id. counsel for the assessee argued that for purchase of agricultural and payment made to the villagers, the provisions of section 40A(3) may not be applied as provided in exception to Rule 6DD. We have gone through the Rule 6DD applicable now and prior to amendment also, in which gone of the exception has been provided for making payment in cash for purchase of land. It is, however, provided that above rule can be a.r.ded if payment is made for purchase of agricultural produce which is not the case of the assessee at all." 2.4 The judgment of Hon'ble Supreme Court in the case of Attar Singh Gurmukh Singh vs. ITO (1991) 191 ITR 667 and Mudiam Oil Company vs. ITO (1973) 92 ITR 519 also supports the acti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n'ble Punjab & Haryana High Court has exhaustively dealt with the issue and has framed Question No.1 as below. "Re: Question No.1 3. The appellant is engaged inter alia in trading in properties in his individual name. As noted in the assessment order, during the course of assessment proceedings, the details of the closing stock as on 31.03.2009 alongwith details of sales/purchases were placed on record. The consideration, which in respect of each of the transactions was admittedly in excess of Rs. 20,000/-, was paid in cash. Payment by demand draft was made only in respect of one of the transactions. These payments in cash were disallowed by the Assessing Officer and the order in this regard was upheld by the Tribunal. The CIT (Appeals) had allowed the deductions." The Hon'ble Punjab & Haryana High Court in the above case has considered the Supreme Court decision in the case of Attar Singh Gurmukh Singh V/s. ITO (supra) as relied upon by authorities below. The findings of the Court are contained in para 7 to 10. The relevant findings of the Hon'ble High Court are reproduced below. "7. The respondent/assessee's case is supported by several judgments. The Rajasthan High Court ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... poses of proper identification to enable the Income-tax Officer to satisfy himself about the genuineness of the transaction. The Income-tax Officer will, however, record his satisfaction before allowing the benefit of Rule 6DD(j). 18. It appears that fulfillment of the conditions of paragraph 5 of the circular has clearly escaped the attention of the Tribunal. The circular clearly indicates that ordinarily where the Income-tax Officer is satisfied about the genuineness of the transaction and payment and identification of the cash payment is established, the Income-tax Officer shall record his satisfaction about the fulfilment of the conditions for allowing the benefit of Rule 6DD(j). Apparently, Section 40A(3)was intended to penalize the tax evader and not the honest transactions and that is why after framing of Rule 6DD (j), the Board stepped in by issuing the aforesaid circular. 19. This clarification, in our opinion, is in conformity with the principle enunciated by the Supreme Court in CTO v. Swastik Roadways as noticed above. 20. In this case, there is no dispute about the genuineness of the transactions and the payment and identity of the receiver are established. There ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vious of the proliferation of black money which is under circulation in our country. Any restraint intended to curb the chances and opportunities to use or create black money should not be regarded as curtailing the freedom of trade or business." 9. At the cost of repetition, the Tribunal has not disbelieved the transactions or the genuineness thereof. Nor has it disbelieved the fact of payments having been made. More important, the reasons furnished by the appellant for having made the cash payments, which we have already adverted to, have not been disbelieved. In our view, assuming these reasons to be correct, they clearly make out a case of business expediency. 10. In the circumstances, the order of the Tribunal in this regard is set aside. The payments cannot be disallowed under Section 40A(3) of the Act." In the present case, the genuineness of payment has not been doubted as Assessing Officer himself has held that sale deeds of properties were registered with the Revenue Department of Govt. Therefore, the case of the assessee is fully covered by the above decision of Hon'ble Punjab and Haryana High Court. Therefore, respectfully following the same we allow the ground of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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