TMI Blog2019 (7) TMI 22X X X X Extracts X X X X X X X X Extracts X X X X ..... ion by Assessing Officer. Consequently, we remit this issue back to the file of Assessing Officer to carry out necessary verification Disallowance u/s 40A(3) - payments made for purchase of land before sub-registrar i.e. Govt. Authority on the ground that the said payments were not covered under the exceptions specified u/r 6DD of the I.T. Rules - HELD THAT:- Admittedly, purchase price of various plots of land was paid before the Registering Authorities on different dates and none of the same fall within accounting period except the one on which the assessee had incurred loss. In such circumstances, where the amount of cash has been paid for purchasing plots of land in earlier years, then no disallowance can be made u/s 40A(3) during the year, as no such purchases were made during the year. In any case, purchase price has been paid before the Sub-Registrar and the transaction being genuine, there is no merit in making any disallowance u/s 40A(3). Accordingly, we reverse the order of CIT(A) in this regard and delete the addition made u/s 40A(3). Grounds of appeal raised by assessee are thus, allowed. - ITA No.2944/PUN/2016 Assessment Year : 2013-14 - - - Dated:- 27-6-2019 - ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... adjudicating the ground nos.3 4 pertaining to the quantum of business income to be assessed in respect of sale of agricultural lands by holding that the said grounds did not emanate from the asst. order and thereby dismissing the same. 5.1] The learned CIT(A) failed to appreciate that the said claim was raised by the assessee even in the course of the asst. proceedings by filing letters dated 28.08.2015 and 29.01.2016 and hence, merely because the said claim was not considered by the A.O., there was no reason to reject the same even in the appellate proceedings. 5.2] The learned CIT(A) erred in not appreciating that in view of the ratio laid down by Hon'ble Bombay H.C. in the case of Pruthvi Stock Brokers [349 ITR 336], the appellate authorities are empowered to consider fresh claims which are not raised in the return of income and hence, the said claim should have been adjudicated on merits of the case. 5.3] The learned CIT(A) ought to have appreciated that the business income on sale of agricultural lands should have been assessed at ₹ 9,14,984/- as against the business income of ₹ 78,04,184/- wrongly declared by the assessee in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er section 40A(3) of the Act. 5. The CIT(A) referred to the background of introduction of section 40A(3) of the Act and exceptions provided in Rule 6DD of Income Tax Rules, 1962 (in short the Rules ) and held that where the assessee had failed to show that the payments made by it were covered by any of the exceptions provided under Rule 6DD of the Rules, then the cash payments made by assessee were disallowable under section 40A(3) of the Act. 6. The assessee is in appeal against the order of CIT(A). 7. The learned Authorized Representative for the assessee pointed out that the issue raised vide grounds of appeal No.1 to 4 was against disallowance made under section 40A(3) of the Act. Further issue raised vide grounds of appeal No.5 to 5.4 was against non-adjudication of grounds of appeal No.3 and 4 raised before the CIT(A) pertaining to assessability of quantum of business income in respect of sale of agricultural land and further determination of income from long term capital gains. The said claim was not made in the return of income. However, in the course of assessment proceedings, the assessee had furnished letters asking the Assessing Offi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee stressed that the said lands were purchased as investment and that also in earlier years and hence, there was no merit in the aforesaid disallowance under section 40A(3) of the Act. In any case, where the cash payments were made / confirmed before the Sub-Registrar i.e. Government Authority and since the payment was actually made and was genuine, there was no justification for making the aforesaid disallowance under section 40A(3) of the Act. 8. The learned Departmental Representative for the Revenue on the other hand, placed reliance on the orders of authorities below. 9. We have heard the rival contentions and perused the record. The assessee before us has raised grounds of appeal No.1 to 4 against disallowance made under section 40A(3) of the Act. Further, grounds of appeal No.5 to 5.4 are interlinked to the first issue raised of disallowance under section 40A(3) of the Act. Vide ground of appeal No.5, the assessee has raised working of quantum of business income to be assessed in the hands of assessee in respect of agricultural land sold which was converted into stock-intrade by the assessee but by an inadvertent error, the said bifurcation was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ,68,750 4,47,966 2,19,466 20,784 Gat 437, Balwant Nagar 16.02.2010 1,00,100 20.10.2012 1,75,000 1,59,437 59,337 15,563 Gat 165/B, Balwant Nagar 30.12.2010 11,76,000 30.05.2012 52,00,000 47,33,000 35,57,000 4,67,000 Gat 170, Nandgaon 09.05.2011 1,40,920 11.03.2013 1,50,000 1,45,338 4,418 4,662 Gat 164, Balwant Nagar 20.04.2011 11,57,400 30.05.2012 51,02,500 45,19,480 33,62,080 5,83,020 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... books of account do not reflect any entry of conversion of investment into stock in trade as on 01.04.2012 on the basis of fair market value, but on the other hand assessed income as business income. However, the assessee pleads otherwise. In fairness, we are of the view that this aspect needs confirmation in the hands of assessee. The first point which is to be kept in mind is that the investment in different plots of land have not been shown as stock in trade by assessee in earlier years and if that be so, then the gain arising therefrom cannot be assessed as business income. But the assessee has declared profits on sale of land as its business income. So the exercise of working fair market value as on the date of conversion into stock in trade and consequent capital gains to be assessed on the date of conversion and the business income to be assessed on the date of sale of stock in trade need to be computed and assessed in the hands of assessee. The assessee also claims that since it is the agricultural land which is converted into stock in trade, then capital gains is assessable under section 45(2) of the Act. This aspect also needs verification by Assessing Officer. C ..... X X X X Extracts X X X X X X X X Extracts X X X X
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