TMI Blog2015 (7) TMI 1283X X X X Extracts X X X X X X X X Extracts X X X X ..... squarely applicable on the facts of the case. - decided in favour of assessee. - I.T. A. No. 173/BLPR/2011 - - - Dated:- 17-7-2015 - SHRI MUKUL K. SHRAWAT, JUDICIAL MEMBER AND SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER. Appellant by : Shri D.K. Jain. Respondent by : Shri Praveen Jain and Shri R.B. Doshi. O R D E R Per Shri Shamin Yahya, A.M. This appeal by the Revenue is directed against the order of learned CIT(Appeals), Raipur dated 29-04-2011 and pertains to assessment year 2008-09. The ground raised by the Revenue reads as under : Whether in law and on facts circumstances of the case, the CIT(A) was justified in deleting the addition of ₹ 61,06,000/- made by the AO applying the provisions of Section 40A(3) of the I.T. Act. 2. In this case the Assessing Officer made the impugned disallowance by observing as under : The assessee is engaged in the business of real estate dealings and construction of multistoried buildings. Survey u/s 133A of the Income-tax Act was conducted during the relevant assessment year and the assessee has offered an amount of ₹ 1.66 crores towards discrepancies found during survey, which was found off ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 989) 80 CTR (CAL) 140 : (1989) 179 ITR 122 (CAL). The Janambhumi v/s. CIT (1997) 141 CTR (Gau) 518 : 1997) 225 ITR 517 (Gau) : (1998) 99 TAXMAN 451 Hasanand Pinjomal v/s. CIT (1997) CTR (GUJ) 486 : (1978) 112 ITR 134 (GUJ). D.B. Late v/s. ITO (1983) 16 TTJ (Pune) 136. Janta Rice Mill v/s. ITO (2007) 110 TTJ (Lucknow) 357. Raj Narain Bhajan Lal v/s. ITO (1977) 4 TTJ (Del) 1157. ITI v/s. Janki Dass Chatur Bhu (1977) 04 TTJ (Del) 1145. Ashok Kumar Bros. v/s. ITO (1988) 31 TTJ (Del) 353. 4. Considering the above, learned CIT(Appeals) deleted the addition holding as under : 3.3 I have carefully gone through the assessment order and submissions of the appellant. It is not in disp0ute that the payment was made in cash for purchase of land. I find that the purchases made by the appellant are supported by duly registered purchase deeds in all the cases. I find force in the submissions of the appellant that identity of the persons to whom payment was made for purchase of land has been established beyond doubt and genuineness of the payment is also not in dispute as the same has been witnessed and authenticated by the registered sale deeds. At this juncture, it i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... designed to check tax evasion by claims of cash expenditure which are difficult of proper investigation by the revenue. 3.7 For the reasons mentioned above and ratio decided in the judgments referred above, I am of the considered opinion that the AO has applied the provisions of Section 40A(3) in a mechanical manner without appreciating and getting in to objects behind the insertion of Section 40A(3) in the Income Tax Act, 1961. The AO failed to appreciate that the proviso to Section 40A(3) which has been substituted b y the Finance Act, 2007 w.e.f. 1st April 2008 provides that no disallowance shall be made and no payment shall be deemed to be profits and gains business or profession where any payment exceeding ₹ 20,000/- is made in such cases and such circumstances as may be prescribed having record to the nature and extent of banking facilities, available, consideration of business expediency and other relevant factors. In my considered view, the AO has erred in invoking the provisions of Section 40A(3) as the transaction of purchases are genuine and have not been proved as false or a mere colorable device to evade tax. Hence, the disallowance made by the AO is deleted. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts as its business interest would have suffer due to non availability of the said land. iv) In present case It is not in dispute that the payment was made in cash for purchase of land. Purchase made are duly supported by duly registered purchase deed in all the cases. The sellers have appeared before the Sub registrar at the time of registration. As per general paralance Sub-Registrar satisfies himself about the identity of the seller to ensure that the payment has been made to the right person. Sub registrar also asks the sellers whether full sum has been received by them, then only he registers the sale deed. v) Moreover, the photos of the sellers duly signed by them at the time of the registry, forms part of the sale deed which was registered before the Sub- Registrar. Thus the identity and genuineness of the sellers is beyond any doubt not questioned by the department. vi) Not only the sale deed specified the cash payment, but even each and every date of cash payments have also been mentioned in the sale deed for registration before the sub registrar which was available on record at the time of the scrutiny. vii) It can be referred in the 1st Purchase from Shri Ro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ions of different High Courts referred to above, it clearly emerges that the purpose of Section 40A(3) of the Act is not to penalize the assessee for making cash payment as an amount of ₹ 2,500 or above. The purpose is only preventive and to check evasion of tax and flow of unaccounted money or to check transactions which are not genuine and may be put as camouflage to evade tax by showing fictitious or false transactions. 4. Amongst others, the assessee places reliance on following: a. Saraswati Housing Developers v/s. Additional Commissioner of Income Tax (2013) 142 ITD 0198, Delhi Bench G . b. CIT v/s. Sitaram Anilkumar IT Ref no. 102 of 1999, Order dt. 23.08.2011. c. PACL India nLtd. V/s. Assistant Commissioner of Income-tax (2010) 38 DTR 0001 ITAT, Jaipur A Bench. d. Giirdharilal Goenka v/s. Commissioner of Income-tax (1989) 80 CTR 0140- High Court of Calcutta. e. Walford Transport (Eastern India) v/s. CIT 1999 240 ITR 902 Gauhati. f. Circular no. 220 Dated 31st May, 1977. 7. Upon careful consideration, we find that it is undisputed that the assessee has purchased the land from sellers who were illiterate villagers. It is also not d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e time, the government authority i.e. sub-registrar satisfied himself upon the identity of the seller to ensure that the payment has been made to the right person. For the sake of convenience in the receipt, the place is mentioned as the town where the document is registered. From the assessment order we observe that the Assessing Officer has not made any effort to examine the very fact whether the payments were made and received by the sellers at their villages or at the town where the sale deed was registered. 11. Considering the entire facts and proposition that the payments were made at villages where banking facilities did not exist is accepted. After careful consideration of practical situation, we also observe that even it is assumed that payments were made at a town where banking facilities were available, the case of the appellant company would still fall under the exception of Rule 6DD(h). We further observe that Rule 6DD(h) of the Rules has to be interpreted liberally so as not to frustrate the object of the legislature. The object of s. 40A(3) is not to disallow genuine payments and r. 6DD has to be interpreted keeping in view the object of the main provision. The se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er are hereby deleted. 8. We find that the above case law is applicable on the facts of the case. Payees in this case also are illiterate villagers who wanted some of the payments to be done in cash. There is no dispute regarding identity of the payees and genuineness of the transaction. Moreover the above observations of the Tribunal are squarely applicable on the facts of the case. On the facts and circumstances of the case, we have no reason to differ from the view taken by the Tribunal as above which are directly applicable on the facts of the present case. The Hon ble Apex Court in the case of Honda Ciel Power Products, Civil Appeal no. 5412 of 2007 has held that lack of consideration of a coordinate bench decision can render the order of the Tribunal liable for rectification of a mistake under section 254 of the I.T. Act. In this view of the matter, in the background of aforesaid discussion and precedent, we do not find any infirmity in the order of learned CIT(Appeals). Accordingly, we uphold the same. 9. In the result, this appeal filed by the Revenue stands dismissed. Order pronounced in the open Court on this 17th day of July, 2015. - - TaxTMI - TMITax - In ..... X X X X Extracts X X X X X X X X Extracts X X X X
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