TMI Blog2018 (8) TMI 194X X X X Extracts X X X X X X X X Extracts X X X X ..... 1.50 crores is not part of value of land. Hence, it cannot be a part of future business expenditure. Therefore, the contention of the revenue authorities is not correct to say that assessee has converted the land in the subsequent year amounts to claim of expenditure in the subsequent AY, as the value of ₹ 1.50 crore is not part of land in first place. Hence, the disallowance u/s 40A(3) is accordingly deleted. - ITA No. 2113/Hyd/2017 - - - Dated:- 31-7-2018 - SMT P. MADHAVI DEVI, JUDICIAL MEMBER AND SHRI S. RIFAUR RAHMAN, ACCOUNTANT MEMBER Assessee by : Shri S. Rama Rao Revenue by : Smt. N. Swapna ORDER Per S. Rifaur Rahman, A. M. This appeal filed by the assessee is directed against the order dated 05/10/2016 of CIT(A) 4, Hyderabad for AY 2009-10. 2. The assessee is a partnership firm engaged in the real estate business. The assessee filed its return of income for the AY 2013-14 on 30.09.2013 admitting a total income at ₹ 10,85,100/-. A Survey u/s.133A was conducted on 21.01.2015. During the survey proceedings, it was noticed that the assessee purchased Plot no.25 26 admeasuring 360 sq. yds. at Haripuri Colony, Nagole vide Doc NO.555/201 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a builder when the purchase of land was expenditure, there was no reason to not to make such claim in the P L account. It would also show that the assessee has manipulated book entries in the P L account and books of accounts just for their own benefits and to defeat the provision of law. c) The second proviso of Section 40A(3) reads as under: - If an assessee incurs any expenditure in respect of which payment in excess of ₹ 20,OOOj- is made otherwise than by an account payee cheque or an account payee bank draft, expenditure will not be allowable as deduction subject to the exceptions as provided under Rule 6DD. d) The assessee firm is dealing in Real estate and land purchased is stock in trade. Therefore, the payment made for purchase of land was expenditure in the business of the assessee which attracts the provisions of Section 40A(3) of IT Act. e) The land purchased is stock-in-trade of the business of the assessee and was not merely an asset. In the statement recorded during the survey proceedings, the assessee has stated that the parties insisted for cash payments hence they made the cash payments and confirmed the cash payments. The cash payments ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t, ₹ 58,00,000/- was paid through bank and the balance of ₹ 1,50,00,000/- was paid through Cash. The Assessing Officer disallowed cash payments of ₹ 1,50,00,000/- since it violates the Section 40A(3). The Assessing Officer made disallowance with regard to cash payments on the purchase of plot at Nagole. Before me, the appellant explains about the land at Saroor Nagar. The appellant has not submitted any explanation as to why such huge payments were made in cash and what were the other relevant factors for which the cash payment has been made. It is pertinent to note that the appellant is engaged in the business of real estate and any payments for a business transactions is subjected to attraction of Section 40A(3). It is pertinent to note that the issue is not that whether this transaction expenditure has been claimed in the books of accounts or not. The issue is whether the cash payments in business transaction should be allowed or not. The appellant has not submitted purchase document or bank statements before me. The appellant has not submitted any explanation the urgent need to make cash payments in Saroor Nagar, which is part of urban centre. It is also ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... submitted that the provisions of Sec. 4OA(3) mention that where an assessee incurs any expenditure in respect of which payments were made to a person otherwise than by way of crossed cheque or account payee cheque, no deduction shall be allowed in respect of such expenditure. It is humbly submitted that when the assessee himself has not claimed any expenditure and when the assessee treated the amount as capital expenditure, there is no requirement for making any such disallowance. The provision of sec. 4OA(3) has application only to the revenue expenditure debited to the Profit and Loss account where such expenditure is claimed. In the case of the assessee, no such claim was made in the P L A/c and also the assessee has not capitalized the full value as per agreement of sale, but, capitalized only the amount as per registered sale deed, therefore, there is no question of making any disallowance. Therefore, the ld. AR pleaded that the addition made may be deleted in view of the above submissions. 7. Ld. DR relied on the orders of revenue authorities and submitted a letter of AO dated 19/04/2018 addressed to Ld. DR, on the proceedings before AO, the contents of which are reproduc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed its return of income U/s. 44AD. In Assessment Year 2014-15, the Net Profit was taken at ₹ 1,23,640. The assessee is not maintaining any books of accounts which shows that the assessee has opted for 44 AD. Thus the turnover is shown at ₹ 15,45,500 for the A. Y. 2014-15. Similarly for the A. Y. 15-16 also the turnover is taken at ₹ 60,33,000 and offered net income of ₹ 4,82,640 U/s. 44AD. Thus the subsequent events of A Y. 2014-15 and 2015-16 wherein the turnover is shown at ₹ 15,45,500 and 60,33,000 clearly shows that the assessee had taken the cost of land at ₹ 58,00,000 only as against the actual consideration paid of ₹ 2,08,00,000. In view of the above, the consideration paid amounting to ₹ 1,50,00,000 over and above the consideration of ₹ 58,00,000 shown as per agreement of sale is nothing but investment made by the assessee outside the books of accounts. According it is humbly prayed that the addition made by the Assessing Officer may please b e upheld. The copy of the ROl s for the A. Y. 2014-15 and 2015-16 are enclosed herewith for verifying the incomes offered u/s. 44AD for kind perusal of Hon'ble bench. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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