TMI Blog2019 (2) TMI 1053X X X X Extracts X X X X X X X X Extracts X X X X ..... nacting section 40A(3) of the Act was two-fold – firstly, putting a check on trading transactions with a mind to evade the liability of tax on income earned out of such transaction, and secondly, to inculcate the banking habits amongst the business community. In our understanding, this provision was directly related to curb evasion of tax and inculcating banking habits. Therefore, once the genuineness of the transaction is accepted and the payees are identified, then the intention of inserting the provisions of section 40A(3) is fulfilled. Considering, we do not find any merit in the additions made by the Assessing Officer. We, accordingly, direct the AO to delete the addition. - Decided in favour of assessee. - ITA No. 5294/DEL/2013 And ITA No. 2403/DEL/2014 - - - Dated:- 17-12-2018 - SHRI N.K. BILLAIYA, ACCOUNTANT MEMBER, AND SHRI KULDIP SINGH, JUDICIAL MEMBER For The Assessee : Dr. Rakesh Gupta, Adv. Shri Somil Aggarwal, Adv For The Revenue : Shri J. K. Mishra, CIT(A)-DR ORDER PER N.K. BILLAIYA, AM:- The above captioned two appeals by the assessee are preferred against the two separate orders of the Commissioner of Income Tax [Appeals] XXXI ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... duly recorded in the regular books of account. There is no dispute in relation to the sources of payments made for purchases of land. As mentioned elsewhere, the assessment was framed u/s 143(3) of the Act vide order dated 13.05.2008. During the course of original scrutiny assessment proceedings, the assessee has furnished the following reply: May 12, 2008 The Deputy Commissioner of Income Tax, Circle 4(1), C R Building, New Delhi Sir, Sub: Notice tinder Section 143 (2)/ 115WE(2) of I.T. Act, 1961 in the matter of M/s Lord Krishna Dwellers Private Limited for Assessment year 2006-2007 Ref: Your Notice dated 01.02.2008 This has reference to our discussion on 25.04.2008 on captioned matter, wherein you had asked us for submitting certain documents and requiring us to appear in person before your .good self on 12.05,2008. (1) A list of comparison between purchased cost of property acquired and circle rate of property acquired as per prevailing circle rate along with circle rate list is enclosed herewith as Annexure A. 2) Details of vendors from whom land was purchased during the financial year 2005- 2006 is enclosed herewith as An ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e same which were considered by the Assessing Officer while framing assessment u/s 143(3) of the Act. 11. It would be pertinent to refer to the findings of the Hon'ble Delhi High Court in the case of Kabul Chawla [supra] which reads as under: The decision in CIT Vs. Anil Kumar Bhatia does not deal with a situation where, as in the present case, no incriminating material was found during the search conducted u/s 132 Nevertheless, it was interesting to note that in CIT Vs. Chetan Das Lachman Das the court underscored the need for department to have unearthed material during the search to justifying the assessment sought to be made. It was held that an assessment u/s 153A has to be made under this section only on the basis of seized material. On a conspectus of Section 153A(1) of the Act, read with the provisos thereto, and in the light of the law explained in the aforementioned decisions, the legal position that emerges is as under: (i) Once a search takes place under Section 132 of the Act, notice under Section 153 A (1) will have to be mandatorily issued to the person searched requiring him to file returns for six AYs immediately preceding the previous ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case in totality in the light of the judicial decisions discussed hereinabove, we have no hesitation to hold that the assessment framed u/s 153A of the Act is bad in law and deserves to be quashed. 14. Since we have set aside the assessment itself, we do not find it necessary to dwell into the merits of the case. 15. Before closing, we have to point out that the ld. DR has placed reliance on the decision of the Supreme Court in the case of Mukundray K. Shah 290 ITR 433. We find that the facts of this case are clearly distinguishable from the facts of the case in hand in as much as in that case, the Revenue came to know about the transaction, triggering the provisions of section 222e of the Act from the diary found during the search proceedings. Whereas in the case in hand, the sale deeds found at the time of search were same sale deeds which were considered by the Assessing Officer at the time of assessment proceedings u/s 143(3) of the Act. ITA No. 2403/DEL/2014 [A.Y. 2007-08] 16. The sum and substance of the grievance of the assessee is that the ld. CIT(A) erred in confirming the disallowance of ₹ 6.80 lakhs made u/s 40A(3) of the Act. 17. Briefly state ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... artment as to the identity of the payee and reasonableness of the payment. 23. In this regard, it is pertinent to get into the following decisions on the impugned subject: Attar Sinsh Gurmukh Singh vs ITO reported in (1991) 191 ITR 667 (S.C) Section 40A(3) of the Income-tax Act, 1961, which provides that expenditure in excess of ₹ 2,500 (Rs.10,000 after the 1987 amendment) would be allowed to be deducted only if made by a crossed cheque or crossed bank draft (except in specified cases) is not arbitrary and does not amount to a restriction on the fundamental right to carry on business. If read together with Rule 6DD of the Income-tax Rules, 1962, it will be clear that the provisions are not intended to restrict business activities. There is no restriction on the assessee in his trading activities. Section 40A(3) only empowers the Assessing Officer to disallow the deduction claimed as expenditure in respect of which payment is not made by crossed cheque or crossed bank draft. The payment by crossed cheque or crossed bank draft is insisted upon to enable the assessing authority to ascertain whether the payment was genuine or whether it was out of income from undi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e hampered the supply of goods within the stipulated time. Therefore, the genuineness of the purchase has been accepted by the Id. CIT(Appeal) which has also not been disputed by the department as it appears from the order so passed by the learned Tribunal. It further appears from the assessment order that neither the Assessing Officer nor the CIT(Appeal) has disbelieved the genuineness of the transaction. There was no dispute that the purchases were genuine. Anupam Tele Services vs ITO in (2014) 43 taxmann.com 199 (Gui) Section 40A(3) of the Income-tax Act, 1961, read with rule 6DD of the Income-tax Rules, 1962 - Business disallowance - Cash payment exceeding prescribed limits (Rule 6DD(j)-Assessment year 2006-07 - Assessee was working as an agent of Tata Tele Services Limited for distributing mobile cards and recharge vouchers - Principal company Tata insisted that cheque payment from assessee s co-operative bank would not do, since realization took longer time and such payments should be made only in cash in their bank account - If assessee would not make cash payment and make cheque payments alone, it would have received recharge vouchers delayed by 4/5 days ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
