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TMI Blog2023 (1) TMI 1111X X X X Extracts X X X X X X X X Extracts X X X X ..... e-tax erred on facts and in law in holding the subject land to be stock-in-trade merely because the appellant is a property dealer. 4. The learned Principal Commissioner of Income-tax erred on facts and in law in setting aside the order of the Assessing Officer without justifiable reasons. All the grounds are inter-connected and relates to challenging the order of the learned Principal Commissioner of Income-tax ("Pr. CIT") in invoking and passing order under section 263 of the Income-tax Act, 1961. Therefore, we thought it fit to decide all the issues by passing the present combined order. 2. The brief facts of the case are that the assessee filed the return of income for the assessment year 2012-13 on March 18, 2013 declaring total income of Rs. 10,75,940 which has been processed under section 143(1) of the Act. As per ITS statement, the assessee has purchased an immovable property for a consideration of Rs. 60,00,000 on July 20, 2011 and registration/stamp charges have been paid for Rs. 3,58,360. The Assessing Officer reopened the case by issuing notice under section 148 on March 22, 2019 with the prior approval of the competent authority and completed the scrutiny assessme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... see, the assessee had purchased immovable property for Rs. 60,00,000 on July 20, 2011 and paid registration charges of Rs. 3,58,360. Therefore, the case of the assessee is reopened with prior approval of the Principal Commissioner of Income-tax, Kota vide approval Sl. No. 4310, dated March 19, 2019 by issuing notice under section 148 on March 22, 2019 which was served on the assessee online, through registered post as well as through notice server. In compliance thereof, the assessee furnished written reply, copy of Income-tax return with computation of income, profit and loss account, cash flow statement, confirmation of accounts, receipts for sale consideration, agreement for sale, sale deed dated July 20, 2011. Thereafter, in the case of the assessee notice(s) under section 142(1) and questionnaire were issued time to time. In response thereto, written explanations information sought for, copy of Income-tax return with computation of income, copies of bank statements, documents, etc., were furnished online which have been kept on record and were test checked. 2. The assessee is engaged in real estate business. After verifying and examining reply and documents furnished by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the year, at Rs. 94,51,228 (which includes land purchased at village Kustala at Rs. 63,58,360 (cost Rs. 60,00,000 + stamp Rs. 3,58,360)). On perusal of purchased deed of this property dated July 20, 2011, it is noticed that entire purchase consideration of Rs. 63,58,360 was paid in cash by you. As per provisions of section 40A(3) of the Income-tax Act, stock, (i. e., land) cannot be purchased in cash over Rs. 20,000. Otherwise, whole expenditure is required to disallow, as per said section. Hence, disallowance of Rs. 63,58,360 is required to be made under section 40A(3) of the Income-tax Act and the same was not made by the Assessing Officer. (iii) On perusal of cash flow statement of the assessment year 2012-13 submitted to the Assessing Officer during the assessment proceedings, it is found that you had taken loans from following persons in cash over Rs. 20,000 during the year under consideration : Sl. No. Name of loan provider PAN Date of loan Amount of loan (in Rs.) 1. Shri Shyoray Singh ASYPR 1657 A 11-7-2011 4,50,000 2. Smt. Vijaya Kunwar BTDPK 8523 M 14-7-2011 5,00,000 You had confirmation/PAN of said persons in the reopening assessment proceedings. As ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... heard the rival contentions and perused the material placed on record and the orders passed by the Revenue authorities and the case law cited by the parties. From the record, we noticed that the assessee had furnished return of income for the year under consideration under presumptive taxation under section 44AD and disclosed required particulars. The Assessing Officer while passing the order has categorically mentioned that he had verified and examined the reply and documents furnished by the assessee. The Assessing Officer has further mentioned that the assessee had furnished written reply, copy of Income-tax return with computation of income, profit and loss account, cash flow statement, confirmation of accounts, receipts for sale consideration, agreement for sale, sale deed dated July 20, 2011 bank statements, etc. This finding and recording of these facts is not disputed by the learned Principal Commissioner of Income-tax. Initial reply furnished by the appellant vide letter dated June 20, 2019 is appearing at page 8 of paper book wherein the appellant disclosed that the appellant deals in real estate business activity and that main source of business income is from real estat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the Assessing Officer made necessary inquiries with regard to purchase of land in cash in the course of real estate business, acceptance of cash loans from the family members and applicability of provisions of section 269SS of the Act : "In above reference we confirm that the said land has been purchased on dated July 19, 2011 for Rs. 60,00,000 and registry charges Rs. 3,58,360 has been paid in cash. The assessee deals in real estate business and income shown as business income. We are already submitted the cash flow statement, i. e., source of cash paid to the seller. Main source of cash generated is sale of plots and cash loan taken from wife and younger brother and cash withdrawal from banks which can be seen attached cash flow statement. The assessee sold the 90B converted plots in cash. We are submitting herewith the copies of sale agreements of plots sold during the period. Loan taken from wife Smt. Vijay Kanwar having PAN BTDPK8523M of Rs. 5,00,000 and from younger brother Mr. Syoraj Singh of Rs. 4,50,000. Section 269SS not applies to cash transaction between close family members for giving support, help and immediate business needs. Sri Nikhil Mazumder v. Jt. CIT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Sale of land/plot 75,000 75,000 75,000 75,000 18-5-2011 Sale of land/plot 7,50,000 7,50,000 7,50,000 7,50,000 23-5-2011 Sale of land/plot 9,75,000 9,75,000 9,75,000 9,75,000 23-5-2011 Cash withdrawn (Corp. Bank) 20,000 20,000 20,000 20,000 23-5-2011 ATM withdrawal 10,000 10,000 10,000 0 23-5-2011 ATM withdrawal 10,000 10,000 10,000 0 23-5-2011 ATM withdrawal 10,000 10,000 10,000 0 23-5-2011 ATM withdrawal 10,000 10,000 10,000 0 29-5-2011 Advance against land received 1,20,000 1,20,000 1,20,000 0 11-6-2011 Advance against land received 1,70,000 1,70,000 1,70,000 1,70,000 23-6-2011 Sale of land/plot 1,50,000 1,50,000 1,50,000 1,50,000 28-6-2011 Cash withdrawn (Corp. Bank) 3,00,000 3,00,000 3,00,000 3,00,000 29-6-2011 Sale of land/plot 1,50,000 1,50,000 1,50,000 1,50,000 5-7-2011 Sale of land/plot 3,50,000 3,50,000 3,50,000 3,50,000 6-7-2011 Cash withdrawn (Corp. Bank) 1,00,000 1,00,000 1,00,000 1,00,000 11-7-2011 Unsecured loan from Shyoraj Singh 4,50,000 4,50,000 4,50,000 4,50,000 14-7-2011 Unsecured loan from Vijaya Kanwar 5,00,000 5,00,000 5,00,000 5,00,000 16-7-2011 Cash withdraw ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he hon'ble Rajkot Bench of Tribunal in Master Vijay R. Oswal v. ITO [2003] 87 ITD 98 (Rajkot) and Visakhapatnam Bench of the Tribunal in Ambica Chemical Products (Regd.) v. Asst. CIT [2003] 86 ITD 1 (Vizag) has held that non-initiation of penalty in the assessment order is not a good ground to invoke provisions of section 263. The appellant carried only Rs. 1,08,000 to next financial year which is evident from disclosure made in return of income appearing at page 5 of paper book. Therefore, it is also evident that the appellant did not carried the opening balance stated in the cash flow statement to subsequent assessment year and not availed of any benefit of cash claimed to be opening balance. Profit and loss account appearing at page 9 of paper book is not disputed by the learned Principal Commissioner of Income-tax. Land purchased in cash remained unsold during the year as appellant received sale consideration with respect of 90B converted plots which is evident from the reply of appellant appearing at page 51 of paper book. 4.2 Even otherwise in our view disallowance under section 40A(3) is not mandatory. If the assessee is able to demonstrate that its case falls within t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al Commissioner of Income-tax are cryptic and without assigning any reasons as to why the explanations and submissions of the appellant were not maintainable or were contrary to the settled position of law or as to why view taken by the Assessing Officer in accepting the explanations and submissions in the course of the assessment order was not a one of the possible view. The hon'ble Mumbai Bench of the Tribunal in the case of Jewel of India v. Asst. CIT [2003] 87 ITD 527 (Mum) has held that order passed by the Commissioner must be a speaking order. In the case of the appellant it has been demonstrated that the revision order posed by the learned Commissioner of Income-tax is not a speaking order inasmuch as it does not deal with any of the contentions of the appellant and also as to why judicial pronouncements relied on by the appellant were distinguishable on the facts and circumstances of the appellant's case. Mere reproduction of explanation of the appellant in the revision order does not tantamount to taking into consideration the said explanation while adjudicating the matter. In CIT v. Philips India Ltd. [2016] 237 Taxman 538 (Cal) ; [2015] 64 taxmann.com 402 (Cal) i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the order without confronting the assessee is not appropriate and sustainable in law. The special leave petition of the Revenue has been dis missed by the hon'ble Supreme Court in [2021] 130 taxmann.com 294 (SC). The hon'ble Supreme Court in CIT v. Amitabh Bachchan [2016] 384 ITR 200 (SC) in paragraph 21 of the judgment has reaffirmed the already settled position that (page 216 in 384 ITR) : "21. There can be no doubt that so long as the view taken by the Assessing Officer is a possible view the same ought not to be interfered with by the Commissioner under section 263 of the Act merely on the ground that there is another possible view of the matter. Permitting exercise of revisional power in a situation where two views are possible would really amount to conferring some kind of an appellate power in the revisional authority. This is a course of action that must be desisted from . . . ." In our view the error envisaged by section 263 is not one that depends on possibility or guess work, but it should actually be an error either of fact or of law as held in Technip Italy Spa v. Asst. CIT [2006] 150 Taxman 13 (Delhi-Trib) (Mag.) and Pratap Footwear v. Asst. CIT [2003] ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le making an assessment, has made inadequate enquiry that would not by itself give occasion to the Commissioner of Income-tax to pass order under section 263 merely because he has different opinion of the matter. Only in the case of 'lack of enquiry' that such a course of action would be open. It has further been held in the said decision that where the view taken by the Assessing Officer was one of the possible views, therefore, the assessment order passed by the Assessing Officer can not be held to be prejudicial to the interests of the Revenue. The hon'ble Delhi High Court in the case of Anil Kumar Sharma (supra) has held that where it was discernible from record that the Assessing Officer had applied his mind to an issue in question, the Commissioner could not invoke section 263 merely because he has different opinion." The hon'ble Allahabad High Court in CIT v. Krishna Capbox (P.) Ltd. [2015] 372 ITR 310 (All) in I. T. A. No. 1 of 2015 had occasion to decide following substantial question of law arising from the revision order passed under section 263 in a case where the Assessing Officer had not mentioned the nature of inquiries conducted by him while making ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re application money was raised during the year and it was only the share applicants of earlier year who were allotted shares during the year. As regards point (e), the learned authorised representative took us to pages 175-211 wherein a copy of the letter dated October 5, 2010, submitting details of freight and cartage were placed. Regarding difference in creditors as observed by the learned Commissioner of Income-tax at point (f), the learned authorised representative submitted that the difference was already explained to the Assessing Officer, vide letter dated September 20, 2010, placed at paper book pages 40-41 and in this respect, we were taken to paper book page 41 where the necessary explanation was placed.' 9. The Tribunal further considered the question whether discussion of queries and reply received from the assessee, in the assessment order, is necessary or not. Relying on the two judgments of the Delhi High Court in CIT v. Vikas Polymers [2012] 341 ITR 537 (Delhi) ; [2010] 194 Taxman 157 and CIT v. Vodafone Essar South Ltd. [2013] 1 ITR-OL 526 (Delhi) ; 28 taxmann.com 273, it held that once inquiry was made, a mere non-discussion or non-mention thereof in the as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce anything to show that the aforesaid findings recorded by the Tribunal are perverse or contrary to record. 14. In view thereof the aforesaid question is answered against the Department-appellant and in favour of the assessee." The hon'ble Bangalore Bench of the Income-tax Appellate Tribunal in the case of IBM India P. Ltd. [TS-16-ITAT-2017(Bang)] in I. T. A. No. 1028/Bang/2013, dated January 6, 2017 quashed revision proceedings under section 263 holding that "Merely because the Assessing Officer had failed to give reasons for accepting such claims, it cannot be said that there was no application of mind". The Income-tax Appellate Tribunal relied on Punjab and Haryana High Court ruling in the case of Hari Iron Trading Co. v. CIT [2003] 263 ITR 437 (P&H) ; [TS-13-HC-2003(P&H)] and the Bombay High Court ruling in the case of CIT v. Gabriel India Ltd. [1993] 203 ITR 108 (Bom). Moreover, the Income-tax Appellate Tribunal held that "issues which are sought to be revised are not only covered by the juris dictional High Court but came to be accepted by the Assessing Officer after due application of mind". In this case during revision proceeding, the assessee contended that all th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e order is erroneous. Finding that the order is erroneous is a condition or requirement which must be satisfied for exercise of jurisdiction under section 263 of the Act. In such matters, to remand the matter/issue to the Assessing Officer would imply and mean the Commissioner of Income-tax has not examined and decided whether or not the order is erroneous but has directed the Assessing Officer to decide the aspect/question. 18. This distinction must be kept in mind by the Commissioner of Income-tax while exercising jurisdiction under section 263 of the Act and in the absence of the finding that the order is erroneous and prejudicial to the interests of the Revenue, exercise of jurisdiction under the said section is not sustainable. In most cases of alleged 'inade quate investigation', it will be difficult to hold that the order of the Assessing Officer, who had conducted enquiries and had acted as an investigator, is erroneous, without the Commissioner of Income-tax conducting verification/inquiry. The order of the Assessing Officer may be or may not be wrong. The Commissioner of Income-tax cannot direct reconsideration on this ground but only when the order is erroneous ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e interests of the Revenue unless the view taken by the Assessing Officer is unsustainable in law. In such matters, the Commissioner of Income-tax must be give a finding that the view taken by the Assessing Officer is unsustainable in law and, therefore, the order is erroneous. He must also show that prejudice is caused to the interests of the Revenue. Similar view is taken in CIT v. Greenworld Corporation [2009] 314 ITR 81 (SC) ; [2009] 101 Taxman 111 (SC) the Delhi High Court in the case of CIT v. Vodafone Essar South Ltd. [2013] 1 ITR-OL 526 (Delhi) ; [2012] 28 taxmann.com 273, the Delhi High Court in the case of CIT v. Anil Kumar Sharma [2011] 335 ITR 83 (Delhi) ; [2010] 194 Taxman 504 (Delhi) and CIT v. Max India Ltd. [2007] 295 ITR 282 (SC), the hon'ble Jodhpur Bench of the Tribunal in the case of Deepchand Surana v. CIT [2015] 152 ITD 566 (Jodhpur) held that if the Assessing Officer allowed the assessee's claim after making enquiries during course of the assessment proceedings on relevant issues, his decision cannot be held to be erroneous simply because in his order he did not make an elaborate discussion in that regard. In CIT v. Nirma Chemicals Works P. Ltd. [2009 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of any asset inasmuch as when a partner is admitted into the firm no transfer takes place. It was also contended that no cash trans fer took place from person to person and the transfer and the dissolution of the firm also did not result in accrual of capital gains. In the face of this material on record, it is difficult to explain that the assessment order was made without making any enquiry into the goodwill account of Rs. 10,75,000." In CIT v. Arvind Jewellers [2003] 259 ITR 502 (Guj) it has been held that it is clear that the provisions of section 263 cannot be invoked to correct each and every type of mistake or error committed by the Assessing Officer, it is only when an order is erroneous, that section will be attracted and incorrect assumption of facts or an incorrect application of law will satisfy the requirement of the order being erroneous. In the instant case, it was the finding of fact given by the Tribunal that the assessee had produced relevant material and offered explanation in pursuance of the notices issued under section 142(1) as well as section 143(2) and after considering those materials and explanation, the Income-tax Officer had come to a definite conclu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y decision, prejudicial to the assessee, rendered by the jurisdictional High Court or Supreme Court in the case of the assessee or any other person. This amendment will take effect from 1st day of June, 2015." It can be observed from aforesaid memorandum that Explanation 2 was inserted to provide clarity on the interpretation of expression "erroneous in so far as it is prejudicial to the interests of the Revenue". However, the words "which should have been made" in clause (a) adds more subjectivity rather than providing clarity, particularly in absence of any guidance on the nature of inquiries which should have been made by the Assessing Officer before completing the assessment. Merely because from a perfectionist point of view, it is felt that some more enquiries and verifications could have been made by the Assessing Officer, assessment order cannot be declared to be erroneous and prejudicial to the interests of the Revenue as held by the hon'ble Delhi Tribunal (Special Bench) in the case of Salora International Ltd. v. Addl. CIT [2005] 2 SOT 705 (Delhi-Trib). Further, as it is clearly mentioned that this amendment will take effect from June 1, 2015, therefore it will ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s. The Income-tax Appellate Tribunal, Mumbai Bench of the Tribunal went on to hold that the opinion of the Commissioner referred to in section 263 of the Act has to be understood as legal and judicious opinion and not arbitrary opinion. 5.7 We also note that it has been held by the Income-tax Appellate Tribunal, Mumbai Bench in the case of Indus Best Hospitality and Realtors Pvt. Ltd. v. Pr. CIT in I. T. A. No. 3125/Mum/2017 vide order dated January 19, 2018 that Explanation 2 to section 263 of the Act introduced by the Finance Act, 2015 is retrospective in nature. Since the year under consideration is assessment year 2014-15, we are afraid that Explanation 2 to section 263 will not come to the aid of the Department in this case. Similar view has been taken by the various co-ordinate Benches of the Income-tax Appellate Tribunal in the following cases : (a) A. V. Industries v. Asst. CIT (I. T. A. No. 3469/Mum/2010, dated November 6, 2015). (b) Metacaps Engineering and Mahendra Constructions Co. (J. V.) v. CIT (I. T. A. No. 2895/Mum/2014, dated September 11, 2017). (c) Reliance Money Infrastructure Ltd. v. Pr. CIT (I. T. A. No. 3259/Mum/2017, dated October 6, 2017). (d) Sha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s being erroneous. The learned Principal Commissioner of Income-tax has to give a categorical finding of error with regard to necessary inquiries required, not being conducted by the Assessing Officer, after considering the submissions/contentions of the assessee made before him. 17. The reliance placed by the learned counsel for the assessee in this regard on the decision of the hon'ble Gauhati High Court in the case of Smt. Lila Choudhury v. CIT [2007] 289 ITR 226 (Gauhati), is apt wherein it has been held so as under (page 235 of 289 ITR) : '13. This would bring the court to the core issue in the case, i.e., whether the impugned order dated November 1, 1996, setting aside the assessment and directing a fresh assessment has been made without recording any firm conclusion that the assessment order is erroneous and prejudicial to the interests of the Revenue. There can be no manner of doubt that the power conferred by section 263 of the Act to interfere with an assessment made can be exercised only if the Commissioner is of the opinion that such assessment order is erroneous and prejudicial to the interests of the Revenue. 14. Though much argument has been advanced as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... consistent with the well-settled principles of exercise of quasi-judicial powers. 15. Turning to the facts of the present case what is noticeable from the impugned order dated November 1, 1996, is that the Commissioner of Income-tax has not recorded any opinion that the order of assessment of the petitioner for the assessment year 1992-93 is erroneous and prejudicial to the interests of the Revenue. That was the opinion recorded in the notice dated August 14/19, 1996, but the said opinion being recorded in a notice issued to the petitioner asking to show cause, the same must be understood to be a highly rebuttable view. Such view/opinion was required to be reiterated after hearing the petitioner and after holding the necessary enquiry. On receipt of the show-cause notice dated August 14/19, 1996 the petitioner submitted an elaborate reply laying materials before the Commissioner to show that sufficient proof of income of the assessee was laid before the Assessing Officer to enable the said authority to come to the conclusion that the investments in the house property were made from the known sources of income of the assessee. The said materials were in the form of balance-sheets ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g an order to be erroneous, should have conducted necessary enquiries or verification in order to show that the finding given by the Assessing Officer is erroneous, the learned Principal Commissioner of Income-tax should have shown that the view taken by the Assessing Officer is unsustainable in law. In the instant case, the learned Principal Commissioner of Income-tax has failed to do so and has simply expressed the view that the Assessing Officer should have conducted enquiry in a particular manner as desired by him. Such a course of action of the learned Principal Commissioner of Income-tax is not in accordance with the mandate of the provisions of section 263 of the Act. The learned Principal Commissioner of Income-tax has taken support of the newly inserted Explanation 2(a) to section 263 of the Act. Even though there is a doubt as to whether the said Explanation, which was inserted by the Finance Act, 2015 with effect from April 1, 2015, would be applicable to the year under consideration, yet we are of the view that the said Explanation cannot be said to have over ridden the law interpreted by the hon'ble Delhi High Court, referred above. If that be the case, then the le ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r verification conducted by the Assessing Officer was not in accordance with the enquiries or verification that would have been carried out by a prudent officer. Hence, in our view, the question as to whether the amendment brought in by way of Explanation 2(a) shall have retrospective or prospective application shall not be relevant.' 18. In view of the above, in the absence of finding of any error in the order of the Assessing Officer, the impugned revisionary order passed by the learned Principal Commissioner of Income-tax is held to be not in accordance with law and is therefore set aside." In following cases it has been held that no disallowance under section 40A(3) was warranted where genuineness of transaction, identity of the recipient as well as compelling circumstances to make payment in cash existed and when recipients insisted for the payment in cash : (i) Smt. Sangeeta Verma v. CIT [2021] 133 taxmann.com 97 (All) "8. Having heard the learned counsel for the parties and having perused the record, though it cannot be denied that section 40A(3) of the Act is a compliance provision inasmuch as, in absence of statutory compliance being made, certain percentage of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... payments were made in exigency, where the assessee was directed to make the payment in cash on the request of the seller. These payments were confirmed by the sellers and confirmation letters were filed with the assessing authority. The learned authorised representative relied on the judicial decisions and vehemently objected to the observations of the Assessing Officer that there was no exigency for cash payments by the assessee. The contentions of the learned authorised representative that the identity and genuineness of the transactions is not doubted and there exist business exigency in purchase of goods for cash payments from the supplier, otherwise the assessee shall not get goods on time for smooth running of the business and adjust to the demand and supply trend. Further the assessee filed the details and evidence, which are not doubted by the assessing authorities. The Assessing Officer has accepted the genuineness of the transactions but since the payments are made in cash, the Assessing Officer applied the provisions under section 40A(3) of the Act. The recipients are the suppliers identified as per the confirmations filed. The learned authorised representative relied o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n he has not doubted the genuineness of the purchases. When the assessee has proved that there exist business expediency in making cash payments, to satisfaction of the Assessing Officer, then such payments could not be disallowed under section 40A(3)." (v) Vikrant Happy Homes (P.) Ltd. v. Dy. CIT [2022] 138 taxmann.com 559 (Pune) [copy placed at pages 1-3 of case law compilation given at the time of hearing] assessment year 2012-13 "9. Coming to the facts on hands in the present case the fact remains admitted that the sellers from whom the assessee purchased lands were identified the transaction and also acknowledged the cash payments, thereby, it shows the transaction is genuine, as discussed in the foregoing paragraphs that the assessee treated the said lands as stock-in-trade and no deduction claimed. The ratio laid down of the hon'ble High Court of Bombay in the case of Madhav Govind Dhulshete v. ITO [2018] 99 taxmann.com 56 (Bom) as to whether the disallowances is maintainable even the transaction is genuine, in our opinion is not applicable to the facts on hand. However, we find merit in the alternative contention of the assessee that the expenditure incurred in cash ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... second proviso to section 40A(3) refers to the nature and extent of banking facility, consideration of business expediency and other relevant factors which means that the object of the Legislature is not to make disallowance of cash payments which have to be compulsory made by the assessee on account of business expediency. Further, the source of cash payments is clearly identifiable in form of the withdrawals from the assessee's bank accounts and the said details were submitted before the lower authorities and have not been disputed by them. It is not the case of the Revenue either that unaccounted or undisclosed income of the assessee has been utilised in making the cash payments. (para 42) In the entirety of facts and circumstances of the case and respect fully following the legal proposition laid down by the various courts and the co-ordinate Benches referred supra, we are of the view that the identity of the persons from whom the various plots of land have been purchased and source of cash payments as withdrawals from the assessee's bank account has been established. The genuineness of the transaction has been established as evidenced by the registered sale deeds an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e facts and in view of the fact that the assessee had to make payment on the insistence of the sellers respectively and following the judgment of the hon'ble Rajasthan High Court in the case of Smt. Harshila Chordia v. ITO [2008] 298 ITR 349 (Raj) and more particularly in the case of Anupam Tele Services v. ITO in [2014] 366 ITR 122 (Guj) Tax Appeal No. 556 of 2013 of the hon'ble Gujarat High Court, we do not see any reason to interfere in the finding of the learned Commissioner of Income-tax (Appeals) and the same is hereby affirmed. Ground raised by the Revenue is dismissed." (ix) Shree Salasar Overseas (P.) Ltd v. Dy. CIT [2014] 44 taxmann.com 387 (Jaipur) (copy placed at pages 21-31 of case law compilation given at the time of hearing) At page 27 of compilation 11. The Legislature intended not to make the provision of section 40A(3) very strict and absolutely mandatory : The jurisdictional High Court in the case of Kanti Lal Purshottam and Co. v. CIT [1985] 155 ITR 519 (Raj) ; [1986] 53 CTR 19 (Raj) held that Income-tax is a tax on the real income and the purpose of introducing section 40A(3) was to block the loopholes of making cash payment and claim as deducti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e it is seen that the assessee was forced to make cash payment as agriculturists were not ready to accept the cheques as many other purchasers were available in the market and willing to pay in cash. Being a prudent businessman, the assessee thought it proper to make cash payment so that their agreement of purchase of land may not be cancelled or agriculturists may refuse to sell the land to the assessee the next day . . ." At page 31 of compilation "14.10 In the case of ITO v. Rishabhdev Township and Developers (P.) Ltd. decided in I. T. A. No. 181/Jaipur/2010, vide order dated April 29, 2011 for the assessment year 2006-07 similar view has been taken in favour of the assessee. In this case also a payment of Rs. 84,25,000 was made in cash and in view of provisions of section 40A(3) the addition of Rs. 16,85,000 was made. However, the learned Commissioner of Income-tax (Appeals) deleted the addition by observing that the payments were made to the villagers. The Department preferred appeal before the Tribunal. The Tribunal held that the learned Commissioner of Income-tax (Appeals) was right in deleting the disallowance. (x) ITO v. Rajesh Kumar Gupta in I. T. A. No. 1138/Jaipur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ances specified thereunder existed in the case of the assessee and that being so, no addition under section 40A(3) of the Act could have been made. Reliance is placed by the learned authorised representative of the assessee as under : (i) PACL India Ltd. v. Asst. CIT [2010] 38 DTR (A.T.) 1 (Jaipur). (ii) CIT v. Interseas [2010] 40 DTR 143 (Ker) (iii) Shree Salasar Overseas (P.) Ltd v. Dy. CIT [2012] 107 DTR 225 (Jaipur) 2.6 The learned Departmental representative is heard. 2.7 I have heard the rival contentions and perused the material available on record. Respectfully following the decision of the Income-tax Appellate Tribunal, Ahmedabad Bench in the case of Gopalsingh R. Rajpurohit v. Asst. CIT (supra), I hold that once the assessee has filed his return under section 44AF, no further disallowance can be made under section 40A(3) of the Act. It is noteworthy that in this case no trading irregularity was found and addition has been sustained only on technical issue of section 40A(3) of the Act. The presumptive system of tax under section 44AF starts with non obstante clause and overrides other provisions. In view thereof, there is no justification in making the addition w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... called under section 40A(3) of the Act and the same is directed to be deleted. In the result, the ground No. 1 of the assessee's appeal is allowed." (xii) Prime Infra Developers P. Ltd. v. ITO in I. T. A. No. 7144/Delhi/ 2017, order dated June 27, 2018 (copy placed at pages 68-94 of case law compilation given at the time of hearing) assessment year 2013-14 At pages 89 of compilation page 44 "When genuineness of the transaction is not doubted by the Assessing Officer, no disallowance under section 40A(3) is called for : 5.7 We note that, in the present case the genuineness or the transactions which were entered by the assessee have not been disputed by the authorities below. This fact in evident from the plain reading of the orders of the authorities below. We further note that the authorities below have not raised any doubt about the genuine ness of the transaction therefore there is no dispute regarding the identity of the payee or the veracity of the transaction. The only objection raised was the violation of provisions of section 40A(3). Thus once the transaction are considered genuine are bona fide, then the same are taken out of the purview of the section 40A(3). ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me-tax Rules, 1962. During the course of hearing the learned Commissioner of Income-tax-Departmental representative had placed reliance on the Central Board of Direct Taxes Circular No. 220 [F. No. 206/17/76/IT (A-II), dated May 31, 1977 to demonstrate that conditions specified in para 4 of the said circular cannot be pressed into service by the appellant in view of complete substitution of rule 6DD by the Income-tax (Seventh Amendment) Rules, 2008 with effect from the assessment year 2009-10 and complete deletion of substituted rule 6DD(j) by the Income-tax (Third Amendment) Rules, 2020 with effect from January 29, 2020. In this regard we are of the view that position of law as to applicability of provisions of section 40A(3) explained by the hon'ble Supreme Court in the case of Attar Singh Gurmukh Singh v. ITO [1991] 191 ITR 667 (SC) has not been altered by amending provisions of section 40A(3) inasmuch as no corresponding amendment has been made in proviso to section 40A(3A) has been made wherein exclusion has been granted for payments made in cash beyond specified limit on account of "considerations of business expediency and other relevant factors" and reliance placed on o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... how-cause notice in respect of which the appellant submitted that the provisions of section 269SS do not apply to cash transaction between close family members for giving support, help and immediate business needs and for which purpose reliance was placed on the Income-tax Appellate Tribunal, Kolkota in the case of Nikhil Banik Mazumder v. Jt. CIT. This is verifiable from the reply of appellant in the course of the assessment proceedings appearing at page 51 of the paper book. After weighing the explanation offered by the appellant, the Assessing Officer did not refer the matter for initiation of penalty proceedings under section 271D to the Joint Commissioner of Income-tax which cannot, in our view, be termed as erroneous or prejudicial to the interests of the Revenue as the Assessing Officer after raising a query took a one of the possible view which is permissible under the law as explained by the hon'ble courts and the Tribunal. However, non-reference of aforesaid transactions to the Joint Commissioner of Income-tax for initiation of penalty proceedings is viewed by the learned Principal Commissioner of Income-tax to be erroneous and prejudicial to the interests of the Reve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s found that the genuineness of the deposits made by the assessee's brother Pankaj Sharma was not doubted by the Assessing Officer. The Tribunal also noticed the explanation given by the assessee that the depos its were obtained by him to satisfy the immediate business requirement. Further, the Tribunal accepted that the assessee had a bona fide belief that the cash transactions were permissible and the cause shown by the asses see constituted reasonable cause. The hon'ble court accordingly dismissed the appeal holding that "the finding of the Tribunal cannot be said to be grossly perverse or unsustainable in law. In our considered view, the appeal does not give rise to any substantial question of law". The hon'ble Punjab and Haryana High Court in the case of CIT v. Sunil Kumar Goel [2009] 315 ITR 163 (P&H) ; 183 Taxman 53 (P&H) has held as under : "A family transaction, between two independent assessees, based on an act of casualness, especially in a case where the disclosure thereof was contained in the compilation of accounts, and which had no tax effect, established 'reasonable cause' under section 273B of the Act." The Income-tax Appellate Tribunal, Jai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee's husband. The Income-tax Appellate Tribunal, Kolkata in Nikhil Banik Mazumder v. Jt. CIT in I. T. A. Nos. 453 and 454/Kol/2016, dated January 10, 2018 (copy placed at pages 98-110 in case law compilation submitted in the course of hearing) where wife and husband, sons and father gave loans and repaid some amounts, it was held to be simply a transfer of money from one family member to another. In strict sense of term, it was not a loan, but financial help or support. The Income-tax Appellate Tribunal, Pune in ITO v. Sunil M. Kasliwal [2005] 94 ITD 281 (Pune) ; 146 Taxman 4 (Pune) (TM) (Mag.) held that loans which were raised from minor son and daughter, amounting to more than 2 lakhs, were held to be outside the mischief of section 269SS of the Act. The hon'ble Madras High Court in CIT v. Smt. M. Yesodha [2013] 351 ITR 265 (Mad) ; [2013] 31 taxmann.com 153 (Mad), held that transaction of loan between father-in-law and daughter-in-law in cash cannot be subject matter of levy of penalty under section 271D of the Act. The hon'ble Kolkata Tribunal in Promod Kumar Singh v. Jt. CIT (I. T. A. No. 210/Kol/2015, dated August 30, 2017) held that section 269SS would not hav ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h the lower authorities have erred in law as well as on facts in imposing the impugned under section 271D penalty respect of two cash loans/gifts sums in case of mother and wife ; respectively. His case accordingly is that the clinching fact of the said two parties turning out as family-members itself forms a reasonable cause for not levying the impugned penalty. The Revenue strongly submits on all the lower authorities action invoking the impugned penalty. We find no reason to sustain the penalty in issue. The fact remains that the two sum(s) in question of Rs. 1 lakh and 1.30 lakh have come from the assessee's mother and wife ; respectively. Case law CIT v. Natvarlal Purshottamdas Parekh [2008] 303 ITR 5 (Guj) holds that such kind of amount(s) ; which are mere book entry transactions on behalf of family-members does not violate the provisions of section 269SS and 269T. The hon'ble Madras High Court in CIT v. Idhayam Publications Ltd. [2006] 285 ITR 221 (Mad) also holds that such transactions between sister concerns having common directors in running account also does not attract the impugned penal provision. We take into account all these facts to conclude that the learne ..... X X X X Extracts X X X X X X X X Extracts X X X X
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