SHYAM APPARELS P.LTD., Jaipur v. ITO, Jaipur

ITA 549/JPR/2016 | 2012-2013
Pronouncement Date: 07-11-2017 | Result: Partly Allowed

Appeal Details

RSA Number 54923114 RSA 2016
Assessee PAN AACCS1818B
Bench Jaipur
Appeal Number ITA 549/JPR/2016
Duration Of Justice 1 year(s) 5 month(s) 14 day(s)
Appellant SHYAM APPARELS P.LTD., Jaipur
Respondent ITO, Jaipur
Appeal Type Income Tax Appeal
Pronouncement Date 07-11-2017
Appeal Filed By Assessee
Tags No record found
Order Result Partly Allowed
Bench Allotted Not Allotted
Tribunal Order Date 07-11-2017
Date Of Final Hearing 03-04-2017
Next Hearing Date 03-04-2017
First Hearing Date 03-04-2017
Assessment Year 2012-2013
Appeal Filed On 24-05-2016
Judgment Text
VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL JAIPUR BENCHES JAIPUR JH HKKXPAN] YS[KK LNL; OA JH DQY HKKJR ] U;KF;D LNL; DS LE{K BEFORE: SHRI BHAGCHAND AM & SHRI KUL BHARAT JM VK;DJ VIHY LA-@ ITA NO. 497/JP/2016 FU/KZKJ.K O'K Z@ ASSESSMENT YEAR : 2012-13 INCOME TAX OFFICER WARD 3(2) JAIPUR. CUKE VS. M/S SHYAM APPARELS PVT. LTD. E-11 BIHARI MARG BANIPARK JAIPUR. LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO.: AACCS 1818 B VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT VK;DJ VIHY LA-@ ITA NO. 549/JP/2016 FU/KZKJ.K O'K Z@ ASSESSMENT YEAR : 2010-11 M/S SHYAM APPARELS PVT. LTD. E-11 BIHARI MARG BANIPARK JAIPUR. CUKE VS. INCOME TAX OFFICER WARD 3(2) JAIPUR. LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO.: AACCS 1818 B VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT JKTLO DH VKSJ LS@ REVENUE BY : SHRI R.A. VERMA (ADDL.CIT). FU/KZKFJRH DH VKSJ LS@ ASSESSEE BY : SHRI MANISH AGARWAL (CA) LQUOKBZ DH RKJH[K@ DATE OF HEARING : 10/10/2017 MN?KKS'K.KK DH RKJH[K @ DATE OF PRONOUNCEMENT : 07/11/2017 VKNS'K@ ORDER PER: BHAGCHAND A.M. THESE ARE THE CROSS APPEALS ONE BY THE REVENUE AND ANOTHER BY THE ASSESSEE EMANATES FROM THE ORDER OF THE LD. CIT (A)-I JAIPUR DATED ITA 497 & 549/JP/2016_ ITO VS. SHYAM APPARELS 2 25/02/2016 FOR THE A.Y. 2010-11 WHEREIN THE REVENUE AND THE ASSESSEE HAS TAKEN FOLLOWING GROUNDS OF APPEAL:- GROUND OF REVENUES APPEAL IN ITA NO. 497/JP/2016 (I) WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. CIT(A) HAS ERRED IN DELETING THE DIS ALLOWANCE OF RS. 1 82 40 000/- MADE BY THE A.O. U/S 40A(3) OF TH E I.T. ACT IGNORING THE FACT THAT ASSESSEE MADE PAYMENTS OF RS . 1 82 40 000/- IN CASH ON SUNDAY WITHOUT ANY COMPULS ION OR BUSINESS EXIGENCY AND WAS HAVING AMPLE OPPORTUNITY AND TIME TO MAKE PAYMENTS THROUGH DD/BANKERS CHEQUE. GROUNDS OF ASSESSEES APPEAL IN ITA NO. 742/JP/2014 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE THE LD. CIT(A) HAS GROSSLY ERRED IN UPHOLDING THE DISALLOWA NCE OF RS. 28 84 313/- MADE BY LD. AO U/S 40(A)(IA) BY HOLDING THAT THE APPELLANT DID NOT DEDUCT INCOME TAX AT SOURCE (TDS) ON THE INTEREST PAID TO NBFC(S) WITHOUT APPRECIATING THAT THE ENTIRE AMOUNT STOOD PAID DURING THE YEAR ITSELF AND NO A MOUNT REMAINED OUTSTANDING AS ON 31.03.2012. THUS THE PR OVISIONS OF SECTION 40(A)(IA) ARE NOT ATTRACTED IN THE FACTS & CIRCUMSTANCES OF THE CASE AND HENCE THE ADDITION O F RS. 28 84 313/- DESERVES TO BE DELETED. 1.1 THAT THE LD. CIT(A) HAS FURTHER ERRED IN IGNOR ING THE BINDING ORDER OF HONBLE JURISDICTIONAL BENCH OF ITAT JAIP UR IN THE CASE OF ACIT VS. GIRDHARILAL BARGOTI ITA NO. 757/JP/2012 WHICH WAS BINDING UPON THE LD. AO AS WELL AS LD. CIT(A) PART ICULARLY WHEN THE ITAT HAS AFTER TAKING INTO CONSIDERATION A LL THE RELEVANT AND CONTRADICTORY JUDGMENTS RENDERED BY VA RIOUS HIGH COURTS HAS DECIDED TO FOLLOW THE JUDGMENT OF HONBLE ALLAHABAD HIGH COURT IN THE CASE OF CIT VS. VECTOR SHIPPING SERVICES (P) LTD. [357 ITR 642] (AFFIRMED BY SUPREM E COURT) BY FOLLOWING THE HONBLE SUPREME COURTS DIRECTION REN DERED IN CIT VS. VEGETABLE PRODUCTS LTD. REPORTED IN 88 ITR 192 TO THE EFFECT THAT WHEN TWO VIEWS ARE POSSIBLE ON AN ISSUE THEN THE ONE FAVOURING ASSESSEE HAS TO BE PREFERRED. THUS T HE ACTION OF ITA 497 & 549/JP/2016_ ITO VS. SHYAM APPARELS 3 LD. CIT(A) DESERVES TO BE HOLD BAD IN LAW AND THE A DDITION SO SUSTAINED DESERVES TO BE DELETED. 1.2 THAT THE LD. CIT(A) HAS FURTHER ERRED IN IGNOR ING THE FACT THAT THE ASSESSEE HAS NOT BEEN TREATED AS ASSESSEE IN DE FAULT U/S 201 OF THE I.T. ACT 1961 AND THEREFORE AS PER SEC OND PROVISO TO SECTION 40(A)(IA) NO DISALLOWANCE THERE UNDER C OULD BE MADE PARTICULARLY WHEN THE RECIPIENTS BANKING COMP ANIES HAD INCLUDED THESE PAYMENTS IN THEIR RESPECTIVE INCOMES THEREFORE THE DISALLOWANCE SO MADE DESERVES TO BE DELETED. 1.3 THAT THE LD. AO HAS FURTHER ERRED IN NOT APPRE CIATING THE FACT THAT THE SECOND PROVISO TO SECTION 40(A)(IA) IS MER ELY CLARIFICATORY / DECLARATORY IN NATURE AND THEREFORE IT IS TO BE APPLIED RETROSPECTIVELY SPECIALLY IN REFERENCE TO T HE JUDGMENTS OF / HONBLE SUPREME COURT IN THE CASE OF CIT VS. V ATIKA TOWNSHIP LTD. REPORTED IN 267 ITR 466. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E THE LD. CIT(A) IN SUSTAINING THE DISALLOWANCE OF RS. 53 00 982/- MADE U/S 40A(3) OF INCOME TAX ACT 1961 WITHOUT APPRECIA TING THE FACT THAT THE CASH PAYMENTS WERE MADE IN UNAVOIDABL E CIRCUMSTANCES AND UNDER EXTREME BUSINESS EXIGENCIES IN ORDER TO SAFEGUARD ITS BUSINESS INTERESTS THUS THE CASE OF ASSESSEE BEING FULLY COVERED BY THE EXCEPTIONS PROVIDED UNDE R RULE 6DD(G) OF INCOME TAX RULES 1962 THEREFORE THE SA ID ADDITION DESERVES TO BE DELETED. 2.1 THAT THE LD. CIT(A) FURTHER ERRED IN NOT PROPE RLY APPRECIATING THE PROVISION OF SECTION 40A(3) OF THE ACT WHICH BY ITS VERY NATURE IS NOT ABSOLUTE; AND GENUINE / BONA FIDE TRA NSACTIONS DO NOT CALL FOR DISALLOWANCE UNDER THE SAID PROVISION PARTICULARLY WHEN IT HAS NEITHER BEEN DOUBTED BY THE LD. AO NOR THE LD. CIT(A). THUS THE ADDITION SUSTAINED BY THE LD. CIT( A) DESERVES TO BE DELETED. 2. BOTH THE APPEALS ARE CROSS APPEALS HEARD TOGETHE R AND BEING DISPOSED OFF BY THIS COMMON ORDER. THERE WAS A DELAY OF 17 DAYS IN FILING ITA 497 & 549/JP/2016_ ITO VS. SHYAM APPARELS 4 THE ASSESSEES APPEAL FOR WHICH THE ASSESSEE HAS FI LED AN APPLICATION SEEKING CONDONATION OF DELAY. AFTER HEARING BOTH THE SIDES ON THE ISSUE OF CONDO NATION OF DELAY WE CONDONE THE DELAY AND HEARD THE APPEAL ON MERITS. 3. THE BRIEF FACTS OF THE CASE ARE THAT THE RETURN O F INCOME DECLARING TOTAL INCOME AT RS. NIL WAS FILED BY THE ASSESSEE ON 29/09/2012 (AFTER CLAIMING SET OFF OF BROUGHT FORWARDED LOSSES OF RS. 18 41 151/-). THE ASSESSEE IS A PRIVATE LIMITED COMPANY ENGAGED IN T HE BUSINESS OF REAL ESTATE SELLING PLOTS OF LAND FOR RESIDENTIAL AS WEL L AS FARM HOUSE PURPOSES AND ALSO PROVIDING COMMON FACILITIES LIKE CLUB HOUS E SWIMMING POOL ROAD ETC. THE ASSESSMENT WAS COMPLETED U/S 143(3) OF THE I NCOME TAX ACT 1961 (IN SHORT THE ACT) AT A TOTAL INCOME OF RS. 2 65 62 990/- BY MAKING CERTAIN ADDITIONS / DISALLOWANCES. THE LD. CIT(A) PART LY ALLOWED THE APPEAL OF THE ASSESSEE. NOW THE REVENUE AND THE ASSESSEE AR E IN APPEALS BEFORE THE ITAT 4. GROUND NO.1.1 OF THE ASSESSEES APPEAL IS NOT PR ESSED THEREFORE THE SAME STANDS DISMISSED AS NOT PRESSED. 5. THE GROUND NO. 1 1.2 AND 1.3 OF THE ASSESSEES A PPEAL ARE AGAINST UPHOLDING THE DISALLOWANCE OF RS. 28 84 313/- MADE B Y THE ASSESSING ITA 497 & 549/JP/2016_ ITO VS. SHYAM APPARELS 5 OFFICER U/S 40(A)(IA) OF THE ACT. THE LD. CIT(A) HAS SUSTAINED THE ADDITION BY HOLDING AS UNDER: (I) I HAVE DULY CONSIDERED THE SUBMISSIONS OF THE A PPELLANT ASSESSMENT ORDER AND THE MATERIAL PLACED ON RECORD. DURING THE YEAR UNDER CONSIDERATION THE APPELLANT PAID INTEREST OF RS. 2 8 84 313/- TO THE NBFCS WITHOUT DEDUCTION OF TAX AT SOURCE AS PER FOL LOWING DETAILS: NAME OF THE PARTY AMOUNT TDS DEDUCTED KOTAK MAHINDRA PRIME LTD. 1 98 282/- NIL TATA CAPITAL LIMITED 4 33 221/- NIL RELIGARES FINVEST LTD. 22 52 810/- NIL TOTAL 28 84 313/- THE AO INVOKED THE PROVISIONS OF SECTION 40A (IA) O F THE ACT AND MADE ADDITION OF RS. 28 84 313/- TO THE INCOME OF THE AP PELLANT COMPANY. (II) DURING APPELLATE PROCEEDINGS IT WAS THE CONTE NTION OF THE APPELLANT THAT THE ENTIRE INTEREST WAS PAID DURING THE YEAR A ND NO INTEREST WAS PAYABLE AT THE YEAR END AND THUS PROVISIONS OF SECT ION 40A(IA) ARE NOT APPLICABLE AND IT PLACED RELIANCE ON THE CASE OF VE CTOR SHIPPING SERVICES P LTD (2013) 357 ITR 642 (ALL) MERILYN SHIPPING & TRANSPORT VS ACIT 136 ITD 23. (III) THE AR ALSO RELIED ON THE DECISION OF HONBLE ITAT JAIPUR IN THE CASE OF GIRDHARI LAI BARGOTI DATED 10.04.2015. I HAVE GONE THROUGH THE ABOVE DECISION OF HONBLE ITAT AND OBSERVED THAT THE HON BLE ITAT HAS NOT DECIDED THE ISSUE ON MERITS AND OBSERVED THAT DIFFE RENT COURTS HAVE DIFFERENT VIEWS ON THE ISSUE THEREFORE IN VIEW OF DECISION OF HONBLE SUPREME COURT IN THE CASE OF CIT VS. VEGETABLE PROD UCTS LTD. THE CASE WAS DECIDED IN FAVOUR OF THE APPELLANT. IT IS TO BE NOTED THAT IN A RECENT DECISION DATED 29.04.2015 WHICH IS SUBSEQUENT TO TH E ORDER OF HONBLE ITAT JAIPUR IN THE CASE OF GIRDHARI LAI BARGOTI T HE HONBLE P & H HIGH COURT IN THE CASE OF P.M.S. DIESELS VS CIT (2015) 9 3 CCH 110 PHHC / (2015) 277 CTR 0491 (P&H) AFTER CONSIDERING THE CAS ES OF CIT VS. M/S ITA 497 & 549/JP/2016_ ITO VS. SHYAM APPARELS 6 VECTOR SHIPPING SERVICES (P) LTD. (2013) 262 CTR ( ALL) 545 V.M. SALGAOCAR & BROS. (P) LTD. ETC. VS. CIT ETC. (200 0) 243 ITR 383 (SC) ACIT VS. MERILYN SHIPPING & TRANSPORTERS 136 ITD 23 (SB) (VISHAKHAPATNAM) TUBE INVESTMENTS OF INDIA LTD. AND ANOTHER VS. ACIT (TDS) AND OTHERS (2010) 325 ITR 610 (MAD)HELD THAT: THE PROVISIONS OF SECTION 40(A) (IA) OF THE INCOM E TAX ACT 1961 ARE APPLICABLE NOT ONLY TO THE AMOUNT WHICH I S SHOWN AS PAYABLE ON THE DATE OF BALANCE SHEET BUT IT IS APPL ICABLE TO SUCH EXPENDITURE WHICH BECOME PAYABLE AT ANY TIME DURING THE RELEVANT PREVIOUS YEAR AND WAS ACTUALLY PAID WITHIN THE PREVIOUS YEAR. IN THE RESULT THE QUESTION IS DECIDE D IN FAVOUR OF REVENUE AND AGAINST THE ASSESSEE. (IV) THE SAME VIEW WAS TAKEN BY THE HONBLE CALCUTT A HIGH COURT IN THE CASE OF CIT VS. CRESCENT EXPORT SYNDICATE (2013) 216 TA XMAN 258 (CALCUTTA) WHEREIN IT WAS HELD THAT: IT IS NOTICEABLE THAT SECTION 40(A) IS APPLICABLE IRRESPECTIVE OF THE METHOD OF ACCOUNTING FOLLOWED BY AN ASSESSEE. T HEREFORE BY USING THE TERM 'PAYABLE' LEGISLATURE INCLUDED TH E ENTIRE ACCRUED LIABILITY. IF ASSESSEE WAS FOLLOWING MERCAN TILE SYSTEM OF ACCOUNTING THEN THE MOMENT AMOUNT WAS CREDITED TO THE ACCOUNT OF PAYEE ON ACCRUAL OF LIABILITY TDS WAS R EQUIRED TO BE MADE BUT IF ASSESSEE WAS FOLLOWING CASH SYSTEM O F ACCOUNTING THEN ON MAKING PAYMENT TDS WAS TO BE MA DE AS THE LIABILITY WAS DISCHARGED BY MAKING PAYMENT. THE TDS PROVISIONS ARE APPLICABLE BOTH IN THE SITUATION OF ACTUAL PAYMENT AS WELL OF THE CREDIT OF THE AMOUNT. IT BEC OMES VERY CLEAR FROM THE FACT THAT THE PHRASE 'ON WHICH TAX IS DEDUCTIBLE AT SOURCE UNDER CHAPTER XVIIB' WAS NOT THERE IN TH E BILL BUT INCORPORATED IN THE ACT. THIS WAS NOT WITHOUT ANY P URPOSE. (V) THE HON'BLE HIGH COURT OF HIMACHAL PRADESH IN T HE CASE OF PALAM GAS SERVICE VS CIT (2014) 89 CCH 0123 HPHC / (2015) 37 0 ITR 0740 (HP) HELD THAT: ITA 497 & 549/JP/2016_ ITO VS. SHYAM APPARELS 7 LASTLY INSOFAR AS THE PLEA TAKEN BY THE APPELLAN T THAT NO DISALLOWANCE CAN BE MADE UNDER SECTION 40 (A) (IA) AS THE FREIGHT CHARGES HAD BEEN PAID AND WERE NOT PAYABLE. SUFFICE IT TO STATE THAT THE PROVISIONS OF SECTION 40 (A) (IA) OF THE ACT WERE APPLICABLE NOT ONLY TO THE AMOUNT WHICH WERE S HOWN AS OUTSTANDING ON THE CLOSING OF THE RELEVANT PREVIOUS YEAR BUT TO THE ENTIRE EXPENDITURE WHICH BECAME LIABLE FOR P AYMENT AT ANY POINT OF TIME DURING THE YEAR UNDER CONSIDERATI ON AND WHICH WAS ALSO PAID BEFORE THE CLOSING OF THE YEAR AS RIGHTLY HELD BY THE AUTHORITIES BELOW.' (VI) THE HONBLE ITAT LUCKNOW BENCH IN THE CASE OF DCIT VS AMA MEDICAL & DIAGNOSTIC CENTRE (2014) 40 CCH 0581 LUCKNOW TRIB / (2014) 63 SOT 0136 (LUCKNOW) ((URO)) HELD THAT: ITAT ARE OF THE VIEW THAT THE HON'BLE JURISDICTION AL HIGH COURT HAS NOT EXAMINED THE IMPUGNED ISSUE I.E. WHET HER DISALLOWANCE U/S 40(A) (IA) OF THE ACT COULD BE MAD E ONLY IN RESPECT OF SUCH AMOUNT WHICH ARE PAYABLE AS ON 31 ST MARCH OF EVERY YEAR UNDER CONSIDERATION WHEREAS THE HON'BLE GUJARAT HIGH COURT AND HON'BLE CALCUTTA HIGH COURT HAVE DEA LT WITH THE ISSUE IN DETAIL IN THE LIGHT OF VARIOUS JUDICIA L PRONOUNCEMENT AND HAVE CATEGORICALLY HELD THAT SECT ION 40(A) (IA) WOULD COVER NOT ONLY TO THE AMOUNT WHICH ARE P AYABLE AS ON 31ST MARCH OF A PARTICULAR YEAR BUT ALSO WHICH A RE PAYABLE AT ANY TIME DURING THE YEAR. (PARA7.5) ITAT CONSIDERED OPINION THAT THE VIEW EXPRESSED OR THE RATIO LAID DOWN BY THE SPECIAL BENCH OF THE TRIBUNAL IN T HE CASE OF MERILYN SHIPPING & TRANSPORTS HAS BEEN OVERRULED. T HEREFORE IT CANNOT BE SAID THAT SINCE THE HON'BLE JURISDICTI ONAL HIGH COURT HAS APPROVED THE VIEW TAKEN BY THE SPECIAL BE NCH OF THE TRIBUNAL IN THE CASE OF MERILYN SHIPPING & TRANSPOR TS THE SAME HAS TO BE FOLLOWED BY THE TRIBUNAL SITUATED WI THIN THE JURISDICTION OF HON'BLE ALLAHABAD HIGH COURT. THE H ON'BLE JURISDICTIONAL HIGH COURT HAS NOT EXAMINED THE IMPU GNED ISSUE AT ALL AND SIMPLE PASSING REFERENCE WAS MADE WITH REGARD TO THE ORDER OF THE SPECIAL BENCH OF THE TRI BUNAL IN THE CASE OF MERILYN SHIPPING & TRANSPORTS AND THE RELIE F WAS ITA 497 & 549/JP/2016_ ITO VS. SHYAM APPARELS 8 GRANTED TO THE ASSESSEE ON MERIT. THEREFORE THE RA TIO LAID DOWN IN THE CASE OF MERILYN SHIPPING &TRANSPORTS W HICH HAS BEEN SUSPENDED BY HON'BLE ANDHRA PRADESH HIGH COURT HAS NOT BEEN APPROVED BY THE HON'BLE ALLAHABAD HIGH COU RT. THEREFORE SUBORDINATE JUDICIAL FORUM ARE NOT REQUI RED TO FOLLOW THE RATIO ORDER LAID DOWN IN THE CASE OF MER ILYN SHIPPING & TRANSPORTS (SUPRA) AS IT WAS OVERRULED BY THE OTHE R HIGH COURT. (PARA8)' (VII) IT WAS ANOTHER CONTENTION OF THE APPELLANT TH AT 2 ND PROVISO TO SECTION 40(A) (IA) THOUGH INSERTED ON THE STATUTE W.E.F. 01 .04.2013 THE SAME BEING CURATIVE IS TO BE TREATED AS APPLICABLE FROM 01.04.2005. THE ABOVE CONTENTION DESERVES TO BE REJECTED BECAUSE IF THE I NTENTION OF THE LEGISLATURE WAS TO MAKE THE SAID PROVISO APPLICABLE FROM 01.04.2005 IT COULD SAID SO WHILE INSERTING THE SECOND PROVISO. F URTHER EVEN IF IT IS PRESUMED FOR THE TIME BEING THAT IT WAS RETROSPECTI VE IN NATURE STILL NO BENEFIT CAN BE GIVEN TO THE APPELLANT AS IT FAILED TO PRODUCE THE REQUIRED CERTIFICATE FROM THE CHARTERED ACCOUNTANT AS STIPUL ATED IN 1 ST PROVISO TO SECTION 201 OF THE ACT. HERE IT MAY BE MENTIONED TH AT AS PER THE PROVISO TO SECTION 201 INSERTED W.E.F. 01.07.2012 THE APPE LLANT WOULD NOT BE TREATED AS ASSESSEE IN DEFAULT IF THE CONCERNED NBF C (I) HAS FURNISHED ITS RETURN OF INCOME U/S 139; (II) HAS TAKEN INTO ACCOUNT SUCH SUMS FOR COMPUTIN G INCOME IN SUCH RETURN OF INCOME; AND (III) HAS PAID THE TAX DUE ON THE INCOME DECLARED BY IT IN SUCH RETURN OF INCOME AND THE PERSON FURNISHES A CERTIFICATE T O THIS EFFECT FROM AN ACCOUNTANT IN SUCH FORM AS MAY BE PRESCRI BED (FORM N. 26A) (VIII) IT IS PERTINENT TO MENTION THAT THE APPELLA NT HAS NOT FILED ANY CERTIFICATE FROM THE CONCERNED NBFCS IN FORM NO. 26A DULY ISSUE D BY A CHARTERED ITA 497 & 549/JP/2016_ ITO VS. SHYAM APPARELS 9 ACCOUNTANT AND THUS NO BENEFIT COULD BE ALLOWED TO THE APPELLANT ON THE BASIS OF THE ABOVE SECTION. IT MAY BE MENTIONED THAT VIDE CIRCULAR NO. 10 OF 2013 DATED 16.12.2013 IT HAS BEEN STATED BY THE CBDT THAT: 4. AFTER CAREFUL EXAMINATION OF THE ISSUE THE BO ARD IS OF THE CONSIDERED VIEW THAT THE PROVISION OF SECTION 40(A) (IA) OF THE ACT WOULD COVER NOT ONLY THE AMOUNTS WHICH ARE PAYABLE AS ON 31ST MARCH OF A PREVIOUS YEAR BUT ALSO AMOUNTS WHICH ARE PAYABLE AT ANY TIME DURING THE YEAR. THE STATUTORY PROVISIONS ARE AMPLY CLEAR AND IN THE CONTEXT OF SECTION 40(A)(IA) OF TH E ACT THE TERM 'PAYABLE' WOULD INCLUDE 'AMOUNTS WHICH ARE PAID DUR ING THE PREVIOUS YEAR. (IX) IN VIEW OF THE ABOVE DISCUSSION AND THE JUDICIAL PR ONOUNCEMENTS IT IS HELD THAT: (I) THE PROVISIONS OF SECTION 40(A) (IA) ARE APPLI CABLE WHETHER THE PAYMENTS WERE PAID DURING THE YEAR OR PAYABLE AT T HE YEAR END AND (II) THE AO WAS JUSTIFIED IN MAKING ADDITION OF RS . 28 84 313/- U/S 40A(IA) OF THE ACT AND THUS THE SAME IS SUSTAINED. 6. NOW THE ASSESSEE IS IN APPEAL BEFORE THE ITAT. THE LD AR OF THE ASSESSEE HAS SUBMITTED AS UNDER: IT IS SUBMITTED THAT DURING THE YEAR UNDER CONSIDER ATION ASSESSEE HAS DEBITED A SUM OF RS. 28 84 313/- UNDER THE HEAD INT EREST PAID TO VARIOUS NBFCS AND TDS WAS NOT MADE ON SUCH PAYMENTS UNDER T HE BONAFIDE BELIEF THAT PAYMENTS MADE TO NBFCS WAS NOT LIABLE FOR ANY TDS BEING PART OF THE BANKING COMPANIES. FURTHER TOTAL AMOUNT PAID TO REL IGARE FINVEST LTD. AT RS. 22 52 810/- INCLUDES A SUM OF RS. 2 10 765/- AS PRE EMI AMOUNT THUS THE SAME COULD NOT BE DISALLOWED BEING PAID TOWARDS THE PRINCIPAL AND A DEDUCTION OF THE SAME SHOULD HAVE BEEN MADE OUT OF TOTAL DISALLOWANCE ITA 497 & 549/JP/2016_ ITO VS. SHYAM APPARELS 10 MADE. THIS IS ALSO VERIFIABLE FROM THE COPY OF LETT ER FROM RELIGARE FINVEST LTD. (APB 22). WITH REGARD TO THE BALANCE DISALLOWANCE IT IS SUBM ITTED THAT IN FIRST PROVISO TO SUBSECTION 1 OF SECTION 201 ASSESSEE HAS NEVER BEEN TREATED AS ASSESSEE IN DEFAULT AND THEREFORE IN VIEW OF THE SECOND PROVISO TO SECTION 40(A)(IA) INSERTED W.E.F. 01.04.2013 NO DIS ALLOWANCE COULD BE MADE IN THE HANDS OF ASSESSEE. THOUGH THE AMENDMENT IN SECTION 40(A)(IA) INSERTING THE SECOND PROVISO HAS TAKEN PL ACE W.E.F. 01.04.2013 I.E. FROM AY 2013-14 HOWEVER IT IS A BENEFICIAL PR OVISION AND INSERTION OF THE SAME IN THE STATUTE CLEARLY SHOWS THE INTENTION OF THE LEGISLATURE TO GIVE RELIEF IN THE CASE WHERE THE PAYEE HAS PAID DU E TAXES FURTHER DISALLOWANCE IN THE HANDS OF THE PAYER CAUSED TO TH E SERIOUS HARDSHIP. THE INTENTION BEHIND THE INSERTION OF PROVISION OF SECT ION 40(A)(IA) WAS TO BROUGHT THOSE PERSONS IN THE TAX NET IN WHOSE CASE NO TDS IS DEDUCTED THOUGH THEY ARE ENJOYING THE TAXABLE INCOME THUS W HERE THE PAYEE HAS ALREADY PAID THE DUE TAXES ON THE PAYMENTS ON WHICH NO TDS IS DEDUCTED BY PAYER THERE REMAINED NO REASON TO MAKE DISALLOW ANCE IN THE HANDS OF THE PAYER. THE HONBLE APEX COURT IN THE CASE OF CI T (CENTRAL-1) DELHI VS. VATIKA TOWNSHIP PVT. LTD. REPORTED IN 367 ITR 466 ( RELEVANT PARA 30-37) (APB 161-192) HAS HELD THAT THE BENEFICIAL AMENDMENT WHICH EFFECT THE PUBLIC GENERALLY AND WHERE TO CONFER SUCH BENEFIT A PPEARS TO HAVE BEEN THE LEGISLATORS OBJECT THEN THE PRESUMPTION WOULD BE THAT SUCH A LEGISLATION GIVING IT A PURPOSIVE CONSTRUCTION WO ULD WARRANT IT TO BE GIVEN RETROSPECTIVE EFFECT. RECENTLY THE HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. ANSAL LAND MARK TOWNSHIP (P) LTD. REPORTED IN 377 ITR 635 (APB 193-197) HAS HELD THAT THE SECOND PROVISO TO SECTION 40(A)(IA) IS DEC LARATORY AND CURATIVE AND IT HAS RETROSPECTIVE EFFECT FROM 01.04.2005. ITA 497 & 549/JP/2016_ ITO VS. SHYAM APPARELS 11 FURTHER THE HONBLE AGRA BENCH OF ITAT IN THE CASE OF RAJEEV KUMAR AGARWAL VS. ADDL. CIT REPORTED IN 149 ITD 363 HELD AS UNDER [APB 198- 205]: SECOND PROVISO ASSESSMENT YEAR 2006-07 WHETHER INSERTION OF SECOND PROVISO TO SECTION 40(A)(IA) WITH EFFECT FROM 01.04 .2013 IS DECLARATORY AND CURATIVE IN NATURE AND IT HAS RETROSPECTIVE EFFECT FROM 01.04.2005 BEING DATE FROM WHICH SUB-CLAUSE (IA) OF SECTION 40(A) WA S INSERTED BY FINANCE (NO. 2) ACT 2004 HELD YES. SINCE THE SECOND PROVISO INSERTED IN SECTION 40(A) (IA) W.E.F. 01.04.2013 IS CURATIVE AND REMEDIAL IN NATURE AND FURTHER THAT IT GOES WITH THE SPIRIT OF THE LAW THAT NO DOUBLE TAX SHOULD BE CHARGED ON SAM E INCOME AND HENCE THE SAME IS APPLICABLE RETROSPECTIVELY I.E. W.E.F. ASSTT. YEAR 2005-06 WHEN THE SUB SECTION (IA) WAS INSERTED IN SECTION 40(A) OF THE INCOME TAX ACT 1961. SUCH VIEW HAS BEEN UPHELD BY THE HON`BLE SUPR EME COURT IN THE CASES OF GOODYEAR INDIA LTD. V/S STATE OF HARYANA A ND ANR. (188 ITR 402) ALLIED MOTORS PVT. LTD. V/S CIT (224 ITR 677) AND R .B. JODHAMLA KUTHIALA V/S CIT (82 ITR 570). RECENTLY HONBLE ITAT JAIPUR BE NCH (SMC) IN THE CASE OF BHUPENDRA PAL SINGH [ITA NO. 757/JP/16] ALSO CONCUR RED WITH THIS VIEW (APB 206-209). THE LD. CIT(A) DISREGARDED THIS PLEA OF THE ASSESSE E ON THE GROUND THAT NO CERTIFICATE AS PRESCRIBED UNDER PROVISO TO SECTI ON 201(1) R.W. RULE 31ACB CERTIFYING THAT THE TAXES IN RESPECT OF INTE REST INCOME WERE DULY PAID BY THE NBFCS WAS FILED BY THE ASSESSEE. IN SUP PORT OF CLAIM ASSESSEE IS NOW FURNISHING CERTIFICATES FROM CA (APB 15-22) IN ACCORDANCE WITH PROVISO TO SECTION 201(1) R.W. RULE 31ACB CERTIFYI NG THAT THE TAXES IN RESPECT OF INTEREST INCOME WERE DULY PAID BY THE RE SPECTIVE NBFCS (WITH SEPARATE APPLICATION PRAYING FOR ADMITTING THE SAM E AS ADDITIONAL EVIDENCE). ITA 497 & 549/JP/2016_ ITO VS. SHYAM APPARELS 12 SINCE THE ASSESSEE HAS FURNISHED PROOF THAT THE REC IPIENTS HAVE PAID TAX ON THE INTEREST PAID BY THE ASSESSEE AS ADDITIONAL EVI DENCE IT IS HUMBLY PRAYED THAT THE DISALLOWANCE TO SUCH EXTENT DESERVE S TO BE DELETED. 07. ON THE OTHER HAND THE LD SR. DR HAS RELIED ON THE ORDERS OF THE AUTHORITIES BELOW. 08. WE HAVE HEARD BOTH THE SIDES ON THIS ISSUE. THE LD. CIT(A)S OBSERVATION THAT NO CERTIFICATE AS PRESCRIBED UNDER PROVISO TO SECTION 201(1) R.W. RULE 31ACB OF THE RULES CERTIFYING THAT THE TAXES IN RESPECT OF INTEREST INCOME WERE DULY PAID BY NBFCS WAS FILED. THE RECORD SHOWS THAT THE ASSESSEE HAS SUBMITTED CERTIFICATE FROM A CHART ERED ACCOUNTANT NAMELY M/S DUA MANRAL & ASSOCIATES PLACED AT PAGE N O. 20 TO 21 OF THE PAPER BOOK AS PER THE PROVISO TO SECTION 201(1) R. W. RULE 31ACB OF THE RULES CERTIFYING THAT THE TAXES IN RESPECT OF INTER EST INCOME OF RS. 20 42 045 WERE DULY PAID BY NBFCS RELIGARE FINVEST L TD. THE HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. ANSAL LAND M ARK TOWNSHIP (P) LTD. HAS HELD AS UNDER: SECTION 40(A)(IA) OF THE INCOME-TAX ACT 1961 IS A IMED AT ENSURING THAT AN EXPENDITURE SHOULD NOT BE ALLOWED AS DEDUCTION I N THE HANDS OF AN ASSESSEE IN A SITUATION IN WHICH INCOME EMBEDDED IN SUCH EXPENDITURE HAS REMAINED UNTAXED DUE TO TAX WITHHOLDING LAPSES BY T HE ASSESSEE. IT IS NOT A PENALTY FOR TAX WITHHOLDING LAPSE BUT IT IS A SOR T OF COMPENSATORY DEDUCTION RESTRICTION FOR AN INCOME GOING UNTAXED D UE TO TAX WITHHOLDING LAPSE. THE INSERTION OF THE SECOND PROVISO TO SECTI ON 40(A)(IA) IS DECLARATORY AND CURATIVE IN NATURE AND IT HAS RETRO SPECTIVE EFFECT FROM APRIL 1 2005 BEING THE DATE FROM WHICH SUB-CLAUSE (IA) OF SECTION 40(A) ITA 497 & 549/JP/2016_ ITO VS. SHYAM APPARELS 13 WAS INSERTED BY THE FINANCE (NO. 2) ACT 2004. THE FIRST PROVISO TO SECTION 201(1) OF THE ACT HAS BEEN INSERTED TO BENEFIT THE ASSESSEE. IT ALSO STATES THAT WHERE A PERSON FAILS TO DEDUCT TAX AT SOURCE O N THE SUM PAID TO A RESIDENT OR ON THE SUM CREDITED TO THE ACCOUNT OF A RESIDENT SUCH PERSON SHALL NOT BE DEEMED TO BE AN ASSESSEE IN DEFAULT IN RESPECT OF SUCH TAX IF SUCH RESIDENT HAS FURNISHED HIS RETURN OF INCOME UN DER SECTION 139. WHAT IS COMMON TO BOTH PROVISOS TO SECTIONS 40(A)(IA) AN D 201(1) OF THE ACT IS THAT AS LONG AS THE PAYEE OR RESIDENT HAS FILED ITS RETURN OF INCOME DISCLOSING THE PAYMENT RECEIVED BY AND IN WHICH THE INCOME EARNED BY IT IS EMBEDDED AND HAS ALSO PAID TAX ON SUCH INCOME T HE ASSESSEE WOULD NOT BE TREATED AS A PERSON IN DEFAULT. THEREFORE CONSIDERING THESE FACTS WE ARE OF THE VIE W THAT THE LD. CIT(A) WAS NOT JUSTIFIED IN SUSTAINING THE ADDITION IN RESP ECT OF INTEREST AMOUNT PAID TO RELIGARE FINVEST LTD.. FURTHER THE PAYMENT OF RS. 22 52 810/- DISALLOWED BY THE ASSESSING OFFICER PAID TO RELIGARE FINVEST LTD. ALSO INCLUDES A SUM OF RS. 2 10 765/- WHICH WAS TOWARDS PR E EMI PAYMENT WHICH IS THE PAYMENT TOWARDS PRINCIPAL AMOUNT THEREF ORE NO TAX DEDUCTION WAS REQUIRED. AS FAR AS THE OTHER PAYMENT S OF INTEREST WITHOUT MAKING ANY TDS ARE CONCERNED WE HOLD THAT THE ASSES SEE HAD NOT SUBMITTED CERTIFICATE AS REQUIRED BY LAW THEREFORE WE SUSTAIN THE ADDITION TO THAT EXTENT. ACCORDINGLY GROUNDS NO. 1 OF THE AS SESSEES APPEAL IS PARTLY ALLOWED. 9. GROUND NO. 1 OF THE REVENUES APPEAL AND GROUND NO. 2 AND 2.1 OF THE ASSESSEES APPEAL ARE AGAINST DELETING THE DISA LLOWANCE OF RS. 1 82 40 000/- AND SUSTAINING THE ADDITION OF RS. 5 3 00 982/- RESPECTIVELY ITA 497 & 549/JP/2016_ ITO VS. SHYAM APPARELS 14 OUT OF ADDITION MADE BY THE A.O. U/S 40A(3) OF THE ACT. THE LD. CIT(A) HAS GIVEN PART RELIEF TO THE ASSESSEE BY HOLDING AS UNDER: (I) I HAVE DULY CONSIDERED THE SUBMISSIONS OF THE A PPELLANT ASSESSMENT ORDER AND THE MATERIAL PLACED ON RECORD. THE FACTS OF THE CASE ARE THAT THE APPELLANT COMPANY IS ENGAGED IN THE BUSINESS OF REAL ESTATE MAINLY DEALING IN PURCHASE OF LAND AND SELLING THE PLOTS A ND FARM HOUSES OF SMALL SIZES AFTER DEVELOPING THE LAND VIZ COMMON F ACILITIES AND ROADS ETC. DURING THE ASSESSMENT PROCEEDINGS IT WAS OBSERVED BY THE AO THAT THE APPELLANT MADE CASH PAYMENTS EXCEEDING RS. 20 000/- IN VIOLATION OF PROVISIONS OF SECTION 40A(3) OF THE ACT AS PER THE FOLLOWING DETAILS: NAME OF PARTY TOTAL AMOUNT PAID REGISTRY/ AGREEMENT DATE OF PAYMENT AS PER REGISTRY DATE OF PAYMENT AS PER CASH BOOK RAMESH CHAND AGRAWAL 23 13 324/- 15.09.2011 (THURSDAY) NO MENTION OF SPECIFIC DATE 15.09.2011 (THURSDAY) HIRA LAL KHETAN 9 62 658/- -DO- -DO- -DO- HIRA LAL KHETAN 4 00 000/- -DO- -DO- -DO- SMT. SHANTA DEVI 11 75 000/- -DO- -DO- -DO- SHIV PAL SINGH 4 50 000/- 20.07.2011 (WEDNESDAY) 20.07.2009 (WEDNESDAY) (THROUGH THE DATE MENTIONED IS 20.07.2011 BUT THAT APPEARS TO BE TYPOGRAPHICAL ERROR) 20.07.2011 (WEDNESDAY) TOTAL 53 00 982/- ASHOK AGARWAL (POA HOLDER OF ANSHITA) 43 60 000/- 29.03.2012 (THURSDAY) 25.03.212 (SUNDAY) 25.03.212 (SUNDAY) -DO- 48 40 000/- -DO- -DO- -DO- -DO- 44 50 000/- -DO- -DO- -DO- -DO- 45 90 000/- -DO- -DO- -DO- TOTAL 1 82 40 000/- (II) IT WAS FURTHER NOTED BY THE AO THAT SOME OF TH E PAYMENTS TO THE CONCERNED PARTIES WERE ALSO PAID THROUGH CHEQUES AN D THUS THERE WAS NO BUSINESS EXIGENCIES OR COMPULSIONS FOR MAKING THE P AYMENT OF RS. 2 35 40 982/- IN CASH AND THE AO DISALLOWED A SUM O F RS. 2 35 40 982/- ITA 497 & 549/JP/2016_ ITO VS. SHYAM APPARELS 15 U/S 40A(3) OF THE ACT. DURING APPELLATE PROCEEDINGS IT WAS SUBMITTED BY THE APPELLANT THAT OUT OF CASH PAYMENTS OF RS. 2 35 40 982/- A SUM OF RS. 1 82 40 000/- WAS PAID TO SHRI ASHOK AGARWAL P OWER OF ATTORNEY(POA) HOLDER OF HIS DAUGHTER MS ANKITA AGAR WAL AND THE REMAINING AMOUNT WAS PAID TO TOUR PARTIES. THE DETA ILS OF CASH PAYMENTS OF RS. 2 35 40 982/- IS AS UNDER: N AME OF THE PARTY ADDRESS AMOUNT PAID SHRI ASHOK AGARWAL POA HOLDER OF MS. ANSHITA AGARWAL 25 DAYAL NAGAR GOPAL; PURA BY - PASS JAIPUR. RS. 1 82 40 000/ - SMT. SHANTA DEVI 2/189 VIDHYADHAR NAGAR JAIPUR. RS. 11 75 000/ - SHRI RAMESH CHANDRA AGARWAL B - 22 - A MANDIR MARGH SUBHASH NAGAR JAIPUR RS. 23 13 324/ - SHRI HEERA LAI KHETAN C - 69 AMBABARI JAIPUR. RS 13 62 658/ - SHRI SHIV PAL SINGH RS. 4 50 000/- TOTAL RS. 2 35 40 982/ - (III) DURING APPELLATE PROCEEDINGS IT WAS THE CO NTENTION OF THE APPELLANT THAT ALL THE CASH PAYMENTS MADE BY IT WERE DULY REFLECTE D IN ITS BOOKS OF ACCOUNTS AND WERE OUT OF THE CASH BALANCE AVAILABLE IN THE CASH BOOK. ALL THE CASH PAYMENTS WERE MADE IN URGENCY AND OUT OF A BNORMAL UNAVOIDABLE CIRCUMSTANCES. THE SELLERS TO WHOM THE CASH PAYMENTS WERE MADE ARE ALL GENUINE INDIVIDUALS AND THEIR IDENTITY IS ESTABLISHED. EVEN AT THE TIME OF REGISTRY OF THE SALE AGREEMENTS THE PH OTO ID AND ADDRESS PROOF OF THE BUYER AS WELL AS OF THE SELLER IS SUBM ITTED WITH THE REGISTRAR HENCE THE IDENTITY OF THE SELLER CANNOT BE CHALLENG ED. IT WAS THE CONTENTION OF THE APPELLANT THAT THE OBJECT OF THE PROVISIONS OF SECTION 40A(3) IS TO CHECK EVASION OF TAXES SO THAT THE PAY MENT IS MADE FROM DISCLOSED SOURCES ONLY OR IN OTHER WORDS THE OBJEC T OF ENACTING SECTION 40A(3) IS TO ENSURE THAT PAYMENTS IN RESPECT OF WHI CH DEDUCTIONS ARE CLAIMED BY THE TAXPAYERS ARE GENUINELY MADE AND ACC OMMODATION PAYMENTS ARE NOT ALLOWED AS DEDUCTION. IN THE ASSES SMENT ORDER THE AO HAS NEVER QUESTIONED ABOUT THE GENUINENESS OF THE S OURCE OF CASH ITA 497 & 549/JP/2016_ ITO VS. SHYAM APPARELS 16 PAYMENT NOR THE AUTHENTICITY OF THE TRANSACTION. TH E PURPOSE OF THE 40A(3) IS NOT TO PENALIZE THE APPELLANT FOR MAKING CASH PAYMENTS OF AN AMOUNT EXCEEDING THE STIPULATED LIMIT. THE PURPOSE IS ONLY PREVENTIVE AND TO CHECK EVASION OF TAX AND FLOW OF UNACCOUNTED MONEY OR TO CHECK THE TRANSACTIONS WHICH ARE NOT GENUINE AND MAY BE P UT AS CAMOUFLAGE TO EVADE TAX BY SHOWING FICTITIOUS OR FALSE TRANSACTIO N. (IV) IT WAS THE CONTENTION OF THE APPELLANT THAT IN THE CASE OF SHRI ASHOK AGARWAL POA HOLDER OF HIS DAUGHTER MS. ANSHITA AGA RWAL THE TRANSACTION FOR PURCHASE OF LAND WAS ENTERED DURING THE FINANCIAL YEAR 2009-10 AGAINST WHICH THE ADVANCE PAYMENT WAS MADE DURING THAT YEAR ITSELF AND THE BALANCE PAYMENT WAS TO BE MADE WITHI N A YEAR'S TIME BUT IN THE MEAN TIME CERTAIN ISSUES REGARDING THE PAPER S / TITLE OF THE LAND CAME IN TO KNOWLEDGE OF THE APPELLANT COMPANY WHICH WERE REQUIRED TO BE SORTED OUT BY THE OWNER TO THE SATISFACTION OF THE BUYER I.E. THE APPELLANT COMPANY THEREFORE PAYMENT COULD BE MADE AGAINST THE SAID DEAL IN NEXT TWO AND HALF YEAR. IN SPITE OF THE REP ETITIVE REMINDERS FROM THE SELLER THE APPELLANT COMPANY DOES NOT MADE THE BALANCE PAYMENT BECAUSE THE OWNER HAD NOT PRODUCED THE DESIRED DOCU MENTS. SHRI ASHOK AGARWAL SEND A NOTICE ON 01/03/2012 MENTIONING THER EIN THAT IN CASE THE BALANCE PAYMENT IS NOT MADE BY THE APPELLANT CO MPANY ON OR BEFORE 25/03/2012 THEY WILL CANCEL THE DEAL AND FORFEIT T HE ADVANCE AMOUNT PAID TO THEM. ON RECEIVING THE SAID NOTICE THE APP ELLANT COMPANY APPROACHED THE OWNER OF THE LAND TO RESOLVE THE MAT TER RELATING THE CLEAR TITLE / PAPERS OF THE SAID LAND AND AFTER HAV ING 3-4 MEETINGS THE MUTUAL UNDERSTANDING WAS MADE BETWEEN THE OWNER AND THE APPELLANT COMPANY WITH THE CONDITION THAT AS SOON THE OWNER S ATISFY THE APPELLANT COMPANY REGARDING THE CLEAR PAPERS AND TITLE THE P AYMENT WILL BE RELEASED IMMEDIATELY BY THE BUYER. FINALLY ON 22 ND MARCH 2012 THE OWNER OF THE LAND PRODUCED THE EVIDENCE OF CLEAR PO SSESSION OF LAND ITA 497 & 549/JP/2016_ ITO VS. SHYAM APPARELS 17 WHICH WERE GOT VERIFIED BY THE APPELLANT COMPANY TH ROUGH HIS LAWYER TO COMPLY WITH THE CONDITION OF MAKING PAYMENT IMMEDIA TELY ON GETTING SATISFIED THE PAYMENT OF RS. 1 82 40 000/- WAS REL EASED ON 25 TH MARCH 2012 BY THE APPELLANT AND BEING SUNDAY THAT DAY WA S BANK HOLIDAY AND THE APPELLANT WAS LEFT WITH NO OPTION BUT TO MAKE C ASH PAYMENT. IT WAS FURTHER SUBMITTED THAT THE PAYMENT PATTERN TO SHRI ASHOK AGARWAL POA HOLDER OF HIS DAUGHTER MS. ANSHITA AGARWAL REVEAL T HAT INITIAL PAYMENT OF ADVANCE MONEY HAS BEEN PAID THROUGH ACCOUNT PAYEE C HEQUES ONLY AND ALSO THE FULL AND FINAL PAYMENT ON THE DATE OF REGI STRY WAS ALSO PAID BY ACCOUNT PAYEE CHEQUES ONLY . THUS THE INTENTION OF THE APPELLANT WAS NEVER TO MAKE THE PAYMENT IN CASH BUT THE CIRCUMSTA NCES ARISING OUT OF UNAVOIDABLE BUSINESS SCENARIO MADE SITUATION LIKE T HAT THE APPELLANT COMPANY WAS LEFT WITH NO OPTION BUT TO MAKE THE CAS H PAYMENT. REGARDING THE BALANCE CASH PAYMENT OF RS. 53 00 98 2 /- TO OTHER REMAINING SELLERS IT WAS SUBMITTED THAT THE CASH P AYMENTS TO THEM WERE ALSO MADE OUT OF CIRCUMSTANCES ARISING OUT OF UNAVO IDABLE BUSINESS SCENARIO. (V) IT WAS SUBMITTED THAT THE TERMS OF SECTION 40A( 3) ARE NOT ABSOLUTE. CONSIDERATION OF BUSINESS EXPEDIENCY AND OTHER RELE VANT FACTORS ARE NOT EXCLUDED. GENUINE AND BONA FIDE TRANSACTIONS ARE NO T TAKEN OUT OF THE SWEEP OF THE SECTION. IT IS OPEN TO THE APPELLANT T O FURNISH TO THE SATISFACTION OF THE AO THE CIRCUMSTANCES UNDER WHIC H THE PAYMENT IN THE MANNER PRESCRIBED IN SECTION 40A(3) WAS NOT PRACTIC ABLE OR WOULD HAVE CAUSED GENUINE DIFFICULTY TO THE PAYEE. (VI) IT WAS FURTHER SUBMITTED THAT THE RULE 6DD OF THE INCOME TAX RULES 1962 PROVIDES THAT AN ASSESSEE CAN BE EXEMPT FROM PAYMENT BY A CROSSED CHEQUES OR BANK DRAFT IN THE CIRCUMSTANCES SPECIFIED IN THE RULE. THE CBDT HAS ISSUED CERTAIN GUIDELINES GIVING CERTA IN CIRCUMSTANCES AND ITA 497 & 549/JP/2016_ ITO VS. SHYAM APPARELS 18 THOSE CIRCUMSTANCES ARE ILLUSTRATIVE AND NOT EXHAUS TIVE AND THE UNDERLYING IDEA OF THE CIRCULAR IS THAT IF THE IDEN TITY OF THE PAYEE IS KNOWN IT WOULD BE POSSIBLE FOR THE ITO TO CROSS CH ECK WHETHER THE TRANSACTION HAD IN FACT TAKEN PLACE. IN THE PRESENT CASE OF THE APPELLANT COMPANY THE AO NEVER TRY TO CROSS EXAMINE THE TRAN SACTION DONE BY THE COMPANY OTHERWISE THE THINGS WOULD HAVE GOT CLEAR UP TO HIS SATISFACTION THAT THE TRANSACTION HAD IN FACT TAKEN PLACE. THE MITIGATING CIRCUMSTANCES REFERRED TO IN THE SECOND PROVISO TO SECTION 40A (3) ARE DETAILED IN RULE 6DD OF THE INCOME-TAX RULES 1962. THE OBJECT OF THAT RULE 6DD IS TO RELAX THE RIGOURS OF SECTION 40A(3) IN GENUINE AND BONAFIDE CASES TO AVOID HARDSHIP AND HARASSMENT. (VII) IT WAS FURTHER SUBMITTED THAT IT IS CLEAR THA T UNDER RULE 6DD IT IS OPEN TO THE APPELLANT TO EXPLAIN TO THE ASSESSING AUTHORITY THE CIRCUMSTANCES WHICH COMPELLED PAYMENT IN CASH OF AN AMOUNT EXCEED ING THE STIPULATED LIMIT. THE GENUINENESS OF THE TRANSACTION CAN ALSO BE EXPLAINED. SUCH EXPENDITURE SHALL NOT BE DISALLOWED UNDER SECTION 4 0A(3). IN THE MATTER OF THE APPELLANT THE SOURCE OF PAYMENT IN CASH AS WELL AS THE IDENTITY OF THE PAYEE IS CLEARLY PROVED AND IN THE ENTIRE ASSES SMENT ORDER THE ASSESSING OFFICER NEVER QUESTIONED ABOUT THE GENUIN ENESS OF TRANSACTION AND IDENTITY OF THE PAYEE THUS THE DISALLOWANCE OF RS. 2 35 40 982 /- MADE U/S 40A(3) OF THE I.T. ACT 1961 IS NOT LAWFUL AND DESERVES TO BE DELETED . (VIII) IN SUPPORT OF ITS CLAIM THE APPELLANT RELIE D UPON A NUMBER OF JUDICIAL PRONOUNCEMENTS INCLUDING THE RECENT DECISIONS OF GU RDAS GARG VS. CIT (A) ITA NO. 413 OF 2014 PUNJAB AND HARYANA HIGH COU RT AND HONEY ENTERPRISES VS. CIT(A) ITA 377/2004 DELHI HIGH CO URT. (IX) IN A NUTSHELL IT WAS THE CONTENTION OF THE AP PELLANT THAT THE GENUINE CASH PAYMENTS EXCEEDING THE PRESCRIBED LIMIT CANNOT BE DISALLOWED AND ITA 497 & 549/JP/2016_ ITO VS. SHYAM APPARELS 19 IN THE INSTANT CASE UNDER CONSIDERATION THE GENUIN ENESS OF THE TRANSACTIONS UNDER CONSIDERATION WERE NEVER DISPUTE D BY THE AO AND THUS DISALLOWANCE U/S 40A(3) MADE BY THE AO DESERVE S TO BE DELETED. (X) IT WOULD BE RELEVANT TO REPRODUCE THE PROVISION S OF SECTION 40A(3) OF THE ACT AS UNDER: (3) WHERE THE ASSESSEE INCURS ANY EXPENDITURE IN R ESPECT OF WHICH A PAYMENT OR AGGREGATE OF PAYMENTS MADE TO A PERSON IN A DAY OTHERWISE THAN BY AN ACCOUNT PAYEE CHEQUE DRAWN ON A BANK OR ACCOUNT PAYEE BANK DRAFT EXCEEDS TWENTY THOUSAND R UPEES NO DEDUCTION SHALL BE ALLOWED IN RESPECT OF SUCH EXPEN DITURE. (3A) WHERE EXCEEDS TWENTY THOUSAND RUPEES: PROVIDED THAT NO DISALLOWANCE SHALL BE MADE AND NO PAYMENT SHALL BE DEEMED TO BE THE PROFITS AND GAINS OF BUSI NESS OR PROFESSION UNDER SUBSECTION (3) AND THIS SUB-SECTIO N WHERE A PAYMENT OR AGGREGATE OF PAYMENTS MADE TO A PERSON I N A DAY OTHERWISE THAN BY AN ACCOUNT PAYEE CHEQUE DRAWN ON A BANK OR ACCOUNT PAYEE BANK DRAFT EXCEEDS TWENTY THOUSAND R UPEES IN SUCH CASES AND UNDER SUCH CIRCUMSTANCES AS MAY BE P RESCRIBED HAVING REGARD TO THE NATURE AND EXTENT OF BANKING F ACILITIES AVAILABLE CONSIDERATIONS OF BUSINESS EXPEDIENCY AN D OTHER RELEVANT FACTORS : (XA) THE RELEVANT EXTRACT OF RULE 6DD IS REPRODUCE D AS UNDER: 6DD. NO DISALLOWANCE UNDER SUB-SECTION (3) OF SECT ION 40A SHALL BE MADE AND NO PAYMENT SHALL BE DEEMED TO BE THE PROFI TS AND GAINS OF BUSINESS OR PROFESSION UNDER SUB-SECTION (3A) OF SECTION 40A WHERE A PAYMENT OR AGGREGATE OF PAYMENTS MADE TO A PERSON IN A DAY OTHERWISE THAN BY AN ACCOUNT PAYEE CHEQUE DRAW N ON A BANK OR ACCOUNT PAYEE BANK DRAFT EXCEEDS TWENTY THOUSAN D RUPEES IN THE CASES AND CIRCUMSTANCES SPECIFIED HEREUNDER NA MELY: (XI) IT IS EVIDENT FROM THE ABOVE THAT THE RULE 6DD HAS SPECIFIED THE CIRCUMSTANCES IN WHICH PAYMENTS EXCEEDING THE PRESC RIBED LIMITS CAN BE MADE IN CASH. IN IS NOTED FROM THE LETTER OF SHRI A SHOK AGARWAL DATED ITA 497 & 549/JP/2016_ ITO VS. SHYAM APPARELS 20 01.03.2012 PLACED ON RECORD THAT IN THE SAID LETTER SHRI ASHOK AGARWAL STATED THAT IF THE BALANCE PAYMENTS WERE NOT MADE O N OR BEFORE 25.03.2012 THE DEAL WOULD BE CANCELLED AND THE ADV ANCE AMOUNT WOULD BE FORFEITED. IT WAS SUBMITTED BY THE APPELLANT THA T THE SELLER COULD SATISFY THE APPELLANT ABOUT THE CLEAR POSSESSION OF THE PROPERTY UNDER CONSIDERATION ONLY ON 22.03.2012 AND FINALLY THE PA YMENTS WERE MADE IN CASH ON 25.03.2012 I.E. ON SUNDAY AS THE BANK WAS C LOSED ON SUNDAYS. IT WAS FURTHER SUBMITTED THAT THE GENUINENESS OF THE T RANSACTION WAS NOT DENIED BY THE AO AND THE CASH PAYMENTS ARE DULY REC ORDED IN ITS BOOKS OF ACCOUNTS. IT IS NOTED FROM THE ABOVE DISCUSSION THAT THE CASH PAYMENTS OF RS. 1 82 40 000/- MADE TO SHRI ASHOK AG ARWAL IS COVERED UNDER CLAUSE (J) OF RULE 6DD ACCORDING TO WHICH WHE RE THE PAYMENT WAS REQUIRED TO BE MADE ON A DAY ON WHICH THE BANKS WER E CLOSED EITHER ON ACCOUNT OF HOLIDAY OR STRIKE NO DISALLOWANCE IS TO BE MADE U/S 40A(3) OF THE ACT. FURTHER THE GENUINENESS OF THE CASH PAYME NTS WERE NOT DOUBTED BY THE AO AND EVEN THE SALES DEEDS WERE EXE CUTED BEFORE THE SUB REGISTRAR IN WHICH THE DATE OF PAYMENTS WERE AL SO MENTIONED IT MAY BE MENTIONED THAT THE STAMP PAPERS FOR EXECUTION OF SALE DEEDS WERE PURCHASED ON 22.03.2012 AND THE SALE DEEDS WERE EXE CUTED BEFORE THE SUB-REGISTRAR ON 30.03.2012. (XIA) IT MAY BE MENTIONED THAT IN THE CASE OF HI T ECH LAND DEVELOPERS & BUILDERS VS ADDL. CIT [2015] 59 TAXMANN.COM 67 (CHA NDIGARH TRIBUNAL) IT WAS HELD THAT: '9. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS CAREF ULLY AND FIND FORCE IN THE SUBMISSIONS OF LEARNED COUNSEL FOR THE ASSESSEE. IT IS NOT DOUBTED THAT IN THE AGREEMENT TO SELL IT WAS AG REED THAT SALE DEED WOULD BE EXECUTED I.E. REGISTERED ON OR BEFORE MARCH 28 2010 AND THE ASSESSEE WAS REQUIRED TO MAK E FULL PAYMENT BEFORE THAT DATE. LATER ON IT WAS FOUND TH AT MARCH 28 2010 FELL ON SUNDAY NATURALLY NOBODY WOULD LIK E TO LEAVE THE LAND DEAL THEREFORE THE ASSESSEE PAID CASH ON THAT DATE. ITA 497 & 549/JP/2016_ ITO VS. SHYAM APPARELS 21 WE ARE NOT IMPRESSED BY THE CONTENTION THAT THE ASS ESSEE SHOULD HAVE MADE THE PAYMENT BEFORE THAT DATE. WHEN A PARTICULAR AGREEMENT PROVIDES FOR A PAYMENT ON OR B EFORE A PARTICULAR DATE IT IS NOT NECESSARY THAT JUST TO M EET THE TECHNICAL REQUIREMENT OF INCOME- TAX PROVISIONS PA YMENT SHOULD BE MADE EARLIER. PAYMENT HAS BEEN MODE ON MA RCH 28 2010 WHICH FOILS ON A SUNDAY AND IS SQUARELY COVERE D BY THE EXCEPTION PROVIDED UNDER RULE 6DD(J) WHICH HAS BEEN EXTRACTED BY THE ASSESSING OFFICER ABOVE. FURTHER THE SALE D EED WAS ALSO EXECUTED ON MARCH 30 2010. THEREFORE IN OUR OPINI ON THE CASH PAYMENT WOULD COVERED BY THE EXCEPTION UNDER RULE 6 DD(J) AND ACCORDINGLY WE SET ASIDE THE ORDER OF THE LEARNED C OMMISSIONER OF INCOME-TAX (APPEALS) AND DELETE THIS ADDITION. (XII) IN VIEW OF THE ABOVE DISCUSSION IT IS HELD T HAT THE PAYMENTS TO SHRI ASHOK AGARWAL ARE COVERED BY THE PROVISIONS OF RULE 6DD(J ) OF THE IT RULES AS THE APPELLANT WAS REQUIRED TO MAKE PAYMENT IN CASH ON SUNDAY AND THUS THE AO WAS NOT JUSTIFIED IN MAKING DISALLOWANCE OF RS. 1 82 40 000/- U/S 40A(3) OF THE ACT HENCE THE SAME IS DELETED. (XIII) THE BALANCE CASH PAYMENTS OF RS. 53 00 982/- WAS MADE ON (THURSDAY) IN VIOLATION OF PROVISIONS OF SECTION 40A(3) TO THE REMAINING FOUR SELLERS AS PER FOLLOWING DETAILS: NAME OF THE SELLER AMOUNT IN RS. WHETHER AGREEMENT TO SELL REGISTERED DATE AND TIME OF SALE DEED PRESENTATION BEFORE SUB REGISTRAR SHRI HEERA LAI KHETAN 4 00 000/- YES 15.09.2011 AT 5.30PM SMT. SHANTA DEVI MITTAL 11 75 000/- YES 15.09.2011 AT 5.23 PM SHRI RAMESH CHANDRA AGARWAL 23 13 324/- NO SHRI HEERA LAI KHETAN 9 62 658/- NO SHIV PAL SINGH 4 50 000/- 20.07.2001 (WEDNESDAY COPY OF SALE DEED NOT FURNISHED TOTAL 53 00 982/- ITA 497 & 549/JP/2016_ ITO VS. SHYAM APPARELS 22 (XIV) IT WAS THE CONTENTION OF THE APPELLANT THAT T HESE PAYMENTS WERE MADE IN CASH OUT OF CIRCUMSTANCES ARISING OUT OF UNAVOIDABL E BUSINESS SCENARIO. THE APPELLANT COMPANY HAD MADE THE ARRANGEMENT WITH THESE SELLERS TO PURCHASE THE LAND AFTER NEGOTIATING THE PRICE AT TH E LOWEST POSSIBLE RATE AND ENSURED TO MAKE THE PAYMENT AT THE EARLIEST POS SIBLE DATE BUT DUE TO NON AVAILABILITY OF FUNDS IN THE BANK IT KEPT O N PROLONGING THE PAYMENT AND WAS UNDER CONSTANT PRESSURE OF SELLERS TO MAKE THE PAYMENT IMMEDIATELY OTHERWISE THEY WILL CANCEL THE DEAL OR REVISE THE SELLING PRICE. ON 15/09/2011 THE APPELLANT COMPANY RECEIVED THE CASH PAYMENT OF RS. 2.09 CRORE ON ACCOUNT OF SALE OF LAN D TO M/S OCEAN SEVEN BUILDTECH PVT. LTD. AND ON THE VERY SAME DAY IT MA DE THE PAYMENT OF RS. 48 50 982/- TO THE ABOVE MENTIONED SELLERS AND GOT THE SALE DEEDS REGISTERED IN THE CASE OF SHRI HEERA LAI KHETAN AND SMT. SHANTA DEVI MITTAL FOR RS. 4 00 000/- AND RS. 11 75 000/- RESPE CTIVELY. IT WAS THE CONTENTION OF THE APPELLANT THAT THE PAYMENTS WERE MADE IN CASH OUT OF BUSINESS EXPEDIENCIES TO SAFE GUARD ITS INTEREST. I N SUPPORT OF ITS CONTENTIONS THE APPELLANT RELIED ON A NUMBER OF JU DICIAL PRONOUNCEMENTS I.E. ATTAR SINGH GURMUKH SINGH VS. I TO 1991 191ITR 667 673 (SC) FOLLOWED IN CIT VS. RAJA PAL AUTOMO BILES (202) 320 ITR 185 (ALL) IN WHICH IT WAS HELD THAT THE TERMS OF S ECTION 40A(3) ARE NOT ABSOLUTE CONSIDERATION OF BUSINESS EXPEDIENCY AND OTHER RELEVANT FACTORS ARE NOT EXCLUDED. GENUINE AND BONA FIDE TRA NSACTIONS ARE NOT TAKEN OUT OF THE SWEEP OF THE SECTION. IT IS OPEN T O THE APPELLANT TO FURNISH TO THE SATISFACTION OF THE ASSESSING OFFICE R THE CIRCUMSTANCES UNDER WHICH THE PAYMENT IN THE MANNER PRESCRIBED IN SECTION 40A(3) WAS NOT PRACTICABLE OR WOULD HAVE CAUSED GENUINE DIFFIC ULTY TO THE PAYEE. IT IS PERTINENT TO MENTION HERE THAT THE APPELLANT HAS NO T STATED ANYTHING IN RESPECT OF CASH PAYMENT OF RS. 4.50 LAC TO SHIV PAL SINGH FOR PURCHASE OF LAND WHICH WAS DISALLOWED BY THE AO U/S 40A(3) OF THE ACT. ITA 497 & 549/JP/2016_ ITO VS. SHYAM APPARELS 23 (XV) IT IS NOTED FROM THE REGISTERED SALE DEED EXEC UTED BY THE APPELLANT IN FAVOUR OF M/S OCEAN SEVEN BUILDTECH P LTD ON THAT T HE SAID SALE DEED WAS PRESENTED BEFORE THE SUB REGISTRAR AT 6.20 PM O N 15.09.2011. IT IS FURTHER NOTED THAT THE TOTAL CONSIDERATION FOR THE SAID SALE WAS RS. 2.44 CRORE AND NOT RS. 2.09 CRORE AS STATED BY THE APPEL LANT AND THE SAID SALE DEED DOES NOT REFLECT THAT THE PAYMENT OF RS. 2.09 CRORE WAS PAID IN CASH ON 15.09.2011 ITSELF. IN THE SALE DEED IT IS STATE D THAT THE APPELLANT HAS RECEIVED FULL CONSIDERATION OF RS. 2.44 CRORE AND N OTHING IS LEFT TO BE PAID BY THE BUYER. THUS IT IS HELD THAT THE APPELLANT W AS NOT ABLE TO ESTABLISH THAT IT RECEIVED A SUM OF RS. 2.09 CRORE IN CASH FR OM M/S OCEAN SEVEN BUILDTECH P LTD ON 15.09.2011 ITSELF. HENCE THE CO NTENTION OF THE APPELLANT THAT IT MADE PAYMENT IN CASH AMOUNTING TO RS. 48 50 982/- FOR PURCHASE OF LAND ON 15.09.2011 OUT OF THE SALE PROC EEDS OF LAND RECEIVED IN CASH FROM M/S OCEAN SEVEN BUILDTECH P LTD ON 15. 09.2011 CANNOT BE BELIEVED AND REJECTED IN THE ABSENCE OF ANY DOCUMEN TARY EVIDENCE TO SUPPORT ITS CONTENTION AND IN VIEW OF THE ABOVE DIS CUSSION. THE APPELLANT HAS NOT STATED ANYTHING ABOUT THE CASH PAYMENT OF R S. 4.50 LAC MADE TO SHRI SHIV PAL SINGH ON 20.07.2001 (WEDNESDAY) FOR PURCHASE OF LAND. IT IS THEREFORE HELD THAT THE APPELLANT HAS NO REASO N TO EXPLAIN WHY CASH PAYMENT OF RS. 4.5 LAC WAS PAID FOR PURCHASE OF LAN D IN VIOLATION OF PROVISION OF SECTION 40A(3) OF THE ACT AND THUS THE SAID PAYMENT IS NOT COVERED BY RULE 6DD. (XVI) THE APPELLANT HAS DRAWN MY ATTENTION TO THE L ANGUAGE OF SECTION 40A (3) WHICH READS AS PROVIDED NO DISALLOWANCES SHALL BE MADE AND NO PAYMENT SHALL BE DEEMED TO BE THE PROFIT AND GAIN O F BUSINESS OR PROFESSION UNDER SECTION (3) AND THIS SUB SECTION W HERE A PAYMENT OR AGGREGATE OF PAYMENT MADE TO A PERSON IN A DAY OTH ERWISE THAN BY A ACCOUNT PAYEE CHEQUE DRAWN ON A BANK OR ACCOUNT PAY EE BANK DRAFT EXCEEDS RS. 20 000/- IN SUCH CASE AND UNDER SUCH C IRCUMSTANCES AS MAY ITA 497 & 549/JP/2016_ ITO VS. SHYAM APPARELS 24 BE PRESCRIBED HAVING REGARD TO THE NATURE AND EXT ENT OF BANKING FACILITIES AVAILABLE CONSIDERATIONS OF BUSINESS EX PEDIENCIES AND OTHER RELEVANT FACTORS. (XVII) IT MAY BE MENTIONED HERE THAT RULE 6DD PROV IDES RELIEF TO THE ASSESSEE FROM THE RIGOUR OF SECTION 40A(3) IN THE CIRCUMSTAN CES PRESCRIBED THEREIN AND THUS RULE 6DD HAS TAKEN INTO ACCOUNT THE CIRCU MSTANCES HAVING REGARD TO THE NATURE AND EXTENT OF BANKING FACILITI ES AVAILABLE CONSIDERATIONS OF BUSINESS EXPEDIENCY AND OTHER REL EVANT FACTORS. (XVII) HENCE IN VIEW OF THE ABOVE DISCUSSION OUT OF CASH PAYMENTS OF RS. 2 35 40 982/- DISALLOWED BY THE AO U/S 40A(3) A SU M OF RS. 53 00 982/- (48 50 982 + 4 50 000) IS HEREBY SUSTAINED AND THE APPELLANT COMPANY GETS A RELIEF OF RS. 1 82 40 000/- THEREOF. 10. THE REVENUE AS WELL AS THE ASSESSEE ARE IN APPEA LS BEFORE THE ITAT. THE LD. SR. DR HAS RELIED ON THE ORDER OF THE ASSESSING OFFICER. ON THE OTHER HAND THE LD AR OF THE ASSESSEE HAS SUBMI TTED THE BRIEF FACTS AND SUBMISSIONS AS UNDER: BRIEF FACTS PERTAINING TO THESE GROUNDS OF APPEAL A RE THAT DURING THE YEAR UNDER CONSIDERATION ASSESSEE COMPANY MADE CERTAIN PAYMENTS IN CASH TOWARDS THE PURCHASE OF LAND BEING STOCK IN TRADE AMOUNTING TO RS. 2 35 40 982/- TO FOLLOWING PARTIES :- NAME OF THE SELLER AMOUNT PAID IN CASH SHRI HEERA LAL KHETAN 13 62 658 SMT. SHANTA DEVI MITTAL 11 75 000 SHRI RAMESH CHANDRA AGARWAL 23 13 324 SHRI SHIV PAL SINGH 450 0000 SHRI ASHOK AGARWAL 1 82 40 000 TOTAL 2 35 40 982 ITA 497 & 549/JP/2016_ ITO VS. SHYAM APPARELS 25 DURING THE COURSE OF ASSESSMENT PROCEEDINGS IT WAS SUBMITTED THAT THE SAID PAYMENTS WERE MADE EITHER UNDER BUSINESS EXIGENCIES OR ON HOLIDAYS OR DUE TO PRESSURE AND THREATS BY THE CONCERNED PARTIES TO CANCEL THE DEAL AND FORFEITURE OF ADVANCES PAID. THE ASSESSEE HAD ALSO SUBMITTED BEFORE THE LD. AO COPY OF A LETTER/ NOTICE RECEIVED FROM ONE SUCH SELLER (APB 29-30). WITH REGARDS TO THE ABOVE PAYMENTS ALLEGED TO HAVE MADE IN CONTRAVENTION TO PROVISIONS OF SECTION 40A(3) IT WAS EXPLAINED T HAT PAYMENT TO SHRI ASHOK AGARWAL WHO WAS POA HOLDER OF HIS DAUGHTER THE TR ANSACTION WAS ENTERED INTO DURING THE FINANCIAL YEAR 2009-10 AGAINST WHI CH THE ADVANCE PAYMENT WAS MADE IN THAT YEAR ITSELF AND THE BALANCE PAYMEN T WAS TO BE MADE WITHIN A YEAR. BUT DUE TO TITLE PROBLEMS REGARDING THE CON CERNED LAND IN THE HANDS OF SELLER THE ASSESSEE DID NOT MAKE THE BALANCE PA YMENT FOR THE NEXT TWO YEARS IN SPITE OF REPETITIVE REMINDERS RECEIVED FR OM THE SELLER. FINALLY AFTER RECEIVING THE FINAL NOTICE FROM THE SELLER TO EITHE R PAY THE BALANCE AMOUNT OR THE DEAL WOULD BE CANCELLED AND THE ADVANCE MONEY W OULD BE FORFEITED THE ASSESSEE MET WITH THE SELLER TO RESOLVE THE ISSUE A ND DURING SUCH MEETING THE SELLER HANDED OVER THE COPIES OF TITLE DOCUMENT OF THE SUBJECT PROPERTY. ASSESSEE AFTER TAKING LEGAL OPINION AND VERIFICATIO N DECIDED TO MAKE THE PAYMENT WITHIN THE TIME FRAME ALLOWED BY SELLER WHI CH WAS GOING TO EXPIRE ON 25.03.2012. LATER IT WAS REALIZED THAT 25 TH MARCH WAS A SUNDAY AND THEREFORE THE ASSESSEE WAS LEFT WITH NO OTHER OPTIO N BUT TO MAKE PAYMENT IN CASH ON 25 TH MARCH OR ELSE THE SELLER WOULD HAVE CANCELLED THE DEAL AND FORFEITED THE ADVANCE AMOUNT. THUS UNDER SUCH EXCE PTIONAL CIRCUMSTANCES THE PAYMENT OF RS. 1 82 40 000/- WAS MADE TO SHRI A SHOK AGARWAL AND HENCE WAS SQUARELY COVERED UNDER THE CLAUSE (J) OF RULE 6DD. REGARDING PAYMENT OF RS. 53 00 982/- MADE TO THE R EMAINING FOUR PERSONS IT IS SUBMITTED THAT THE ASSESSEE HAD NEGOTIATED T HE PRICE FOR PURCHASE OF LAND WITH THE ABOVE SELLERS AT THE LOWEST RATE POSS IBLE AND PROMISED TO PAY THE SALE CONSIDERATION AT THE EARLIEST. BUT DUE TO UNAVAILABILITY OF REQUIRED ITA 497 & 549/JP/2016_ ITO VS. SHYAM APPARELS 26 BANK BALANCE THE ASSESSEE WAS NOT ABLE TO PAY THEM AND WAS UNDER CONSTANT PRESSURE OF LOSING ON THE DEALS AS THE SE LLERS WERE CONSTANTLY WARNING TO CANCEL THE SAME. UNDER SUCH CIRCUMSTANCE S WHEN THE ASSESSEE STRUCK A DEAL WITH M/S OCEAN SEVEN BUILDTECH (P) LT D AND WAS TO RECEIVE THE SALE CONSIDERATION IN CASH AT THE TIME OF REGISTRAT ION OF SALE DEED TO BE EXECUTED ON 15.09.2011 THE ASSESSEE ASKED ALL THE ABOVE FOUR PARTIES TO GET THEIR SALE DEED REGISTERED ON THE SAME DAY FOR WHIC H THEY ALL HAD AGREED. HOWEVER ON 15.09.2011 THE DIRECTOR OF M/S OCEAN BU ILDTECH (P) LTD. COULD REACH JAIPUR FROM GURGAON ONLY AFTER BANKING HOURS. THE DEED COULD BE REGISTERED AT LATE EVENING (APB 23-28). SINCE THE P AYMENT AGAINST SUCH SALE DEED WAS RECEIVED IN CASH DUE TO CLOSURE OF BANKING HOURS CASH PAYMENT WAS MADE TO THE ABOVE FOUR PARTIES AND THE DEEDS W ERE REGISTERED ON THE SAME DATE AS THEY HAD REFUSED TO COME AGAIN FOR THI S PURPOSE AND SERIOUSLY WARNED THE ASSESSEE TO FORFEIT THE ADVANCE. THESE F ACTS ARE DULY VERIFIABLE FROM THE PURCHASE DEEDS FILED WITH THE LD. AO (APB 60-88). HENCE PAYMENT TO THESE FOUR SELLERS WERE ALSO MADE IN CASH UNDER BUSINESS EXIGENCIES. IT IS ALSO A MATTER OF FACT THAT THE SAID PIECES OF LAND THAT GOT REGISTERED ON 15.09.2011 IS NOT DISPUTED BY LD. AO WHO DID NOT A CCEPT THE EXPLANATION OF THE ASSESSEE FOR THE ONLY REASON THAT THE REGISTRY OF LAND SOLD TO M/S OCEAN BUILDTECH (P) LTD. WAS DONE AFTER THE EXECUTION OF THE ABOVE SAID PURCHASE DEEDS. IN THIS REGARD IT IS HUMBLY SUBMITTED THAT BOTH SA LE AND PURCHASE DEEDS WERE REGISTERED ON THE SAME DAY (15.09.2011) IS NOT DISP UTED NOR THE FACT THAT THESE WERE REGISTERED AFTER BANKING HOURS WAS DOUBT ED BY LD. AO OR LD. CIT(A). BOTH THE SALE AND PURCHASE DEEDS WERE PUT F ORTH BEFORE THE REGISTRAR AND WERE REGISTERED ON THE SAME DAY IN FACT THIS F URTHER STRENGTHENS THE CONTENTION OF THE ASSESSEE THAT THE CASH RECEIVED FROM ONE PARTY WAS INDEED UTILIZED TO PAY THE OTHER FOUR PARTIES WHO IN TURN GOT THE LAND REGISTERED IMMEDIATELY IN THE NAME OF ASSESSEE AND THIS PROVES BEYOND ITA 497 & 549/JP/2016_ ITO VS. SHYAM APPARELS 27 DOUBTS THE BUSINESS EXIGENCY THAT COMPELLED THE AS SESSEE TO MAKE CASH PAYMENT FOR THE PURCHASE OF LAND PARCELS FROM THEM. FURTHER THE FACT THAT ASSESSEE HAD RECEIVED CASH FROM SALE OF ITS LAND TO M/S OCEAN SEVEN BUILDTECH (P) LTD IS VERIFIABLE FROM THE CASH BOOK [APB 89-110] PLACED ON RECORDS OF THE LD. AO WHEREIN CASH DEPOSIT OF RS. 2 .09 CR. AND RS. 13.50 LACS [THIS WAS FOR ANOTHER SALE OF A SMALL PIECE OF LAND MADE TO M/S OCEAN BUILDTECH (P) LTD. ON THE SAME DATE] IS DULY APPEAR ING ON 15.09.2011 [APB 89] AND NEITHER LD. AO NOR LD. CIT(A) HAS DISBELIEVED S UCH ENTRIES. IT IS ALSO A FACT ON RECORD THAT THE BOOKS OF ACCOUNTS MAINTAINED WER E NOT DOUBTED NOR REJECTED. THE LD. CIT(A) DISREGARDED THE EXPLANATIO N GIVEN BY THE ASSESSEE IN A VERY SUMMARY MANNER BY ALLEGING THAT THE CASH B OOK SHOWS ONLY A RECEIPT OF RS. 2.09 CR. ON 15.09.2011 WHEREAS THE SALE CON SIDERATION WAS RS. 2.44 CR. AS PER THE SALE DEED AND NOTHING WAS MENTIONED AS P ENDING IN THE DEED. IN THIS REGARD IT IS SUBMITTED THAT THE BALANCE RS. 35 LACS WAS RECEIVED IN CASH ON 17.09.2011 [APB 28] AND THIS BEING A VERY SMALL PO RTION OF THE ENTIRE SALE CONSIDERATION THE ASSESSEE READILY AGREED TO TAKE THE BALANCE AMOUNT A DAY AFTER THE REGISTRY AS IT WAS IN IMMEDIATE NEED OF FUNDS IN ORDER TO MAKE THE PAYMENTS AGAINST THE PURCHASES OF ABOVE LANDS. THUS ALL THE PAYMENTS AS ABOVE ARE DULY MADE UNDER BUSINESS EXIGENCIES AND HENCE COVERED UNDER THE SUB-RULE (J) TO RULE 6DD OF IT RULES 1962. IT IS HUMBLY SUBMITTED THAT UNDOUBTEDLY PROVISIONS OF SECTION 40A(3) CALLS FOR A DISALLOWANCE WHENEVER THERE IS ANY CASH PAYM ENT EXCEEDING RS. 20 000/- IN RESPECT OF ANY EXPENSE OTHERWISE ALLOWA BLE WHILE COMPUTING BUSINESS INCOME. HOWEVER EACH AND EVERY PROVISION IS INSERTED IN THE ACT WITH SOME PURPOSE WHICH IS DESCRIBED IN THE LEGISL ATIVE INTENTION EXPLAINED WHILE INTRODUCING THE SAME. THE INTENTION OF THE LE GISLATURE WHILE ENACTING SECTION 40A(3) WAS TO ENSURE THAT PAYMENTS EXCEEDING THE SUM SPECIFIED ARE MADE BY A CROSSED CHEQUE DRAWN ON A B ANK OR BY A CROSSED BANK DRAFT SO THAT IT WILL BE EASIER TO ASCERTAIN WHEN DEDUCTION IS CLAIMED ITA 497 & 549/JP/2016_ ITO VS. SHYAM APPARELS 28 WHETHER THE PAYMENT WAS GENUINE AND WHETHER IT WAS MADE OUT OF INCOME FROM DISCLOSED SOURCES. FURTHER THAT RULE 6DD OF THE INCOME TAX RULES 196 2 PROVIDES THAT AN ASSESSEE CAN BE EXEMPT FROM PAYMENT THROUGH CROSSED CHEQUES OR BANK DRAFT IN THE CIRCUMSTANCES SPECIFIED THEREIN. THESE CIRCUMSTANCES GIVEN THOUGH NOT EXHAUSTIVE GIVE THE UNDERLYING IDEA THA T IF THE IDENTITY OF THE PAYEE IS KNOWN IT WOULD BE POSSIBLE FOR THE AO TO CROSSCHECK THE AUTHENTICITY OF THE TRANSACTION. IT IS PERTINENT TO NOTE HERE THAT IN THE INSTANT CASE LD. AO NEVER DOUBTED THE AUTHENTICITY OF THE TRANSACTION NOR ALLEGED THAT THERE WAS MALAFIDE INTENTION OF THE ASSESSEE I N PAYING AMOUNT IN CASH NOR IT HAS BEEN BROUGHT ON RECORD THAT THE TRANSACT IONS WERE WITH THE INTENTION TO EVADE TAX. THUS IT IS CLEAR THAT UNDER RULE 6DD IT IS OPEN TO THE ASSESSEE TO EXPLAIN TO THE ASSESSING AUTHORITY THE CIRCUMSTANCES WHICH CO MPELLED PAYMENT IN CASH OF AN AMOUNT EXCEEDING THE STIPULATED LIMIT AND AL SO EXPLAIN THE GENUINENESS OF TRANSACTION. THE CONTENTION OF THE ASSESSEE GETS SUPPORT FROM TH E FOLLOWING PRONOUNCEMENTS: WALFORD TRANSPORT (EASTERN INDIA) LTD VS. CIT [1999 (240 ITR 905) GAU] [APB 210-215] WHERE THE TRANSACTION IS FOUND TO BE GENUINE AND TH E IDENTITY OF THE PAYEE IS ESTABLISHED A LIBERAL VIEW OF COMPELLING AND MITIGA TING CIRCUMSTANCES SHOULD BE TAKEN. CIT VS. K.K.S.K PROCESSOR (P) LTD [2007] 292 ITR 66 9] [APB 216-220] THE OBJECT OF THE RULE 6DD IS TO RELAX THE RIGOURS OF SEC 40A(3) IN GENUINE AND BONAFIDE CASES TO AVOID HARDSHIPS AND HARASSMENT RELIANCE IS ALSO PLACED ON THE DECISION OF THE APEX COURT IN THE CASE OF ATTAR SINGH GURMUKH SINGH VS. ITO [191 ITR 667 (SC)] [APB 221-223] WHICH WAS ITA 497 & 549/JP/2016_ ITO VS. SHYAM APPARELS 29 FOLLOWED BY THE ALLAHABAD HIGH COURT IN THE CASE OF CIT VS. RAJA PAL AUTOMOBILES [320 ITR 185] [APB 224-227] WHEREIN IT HAS BEEN HELD THAT THE TERMS OF SEC 40A(3) ARE NOT ABSOLUTE. CONSIDERATION OF BUSINESS EXIGENCIES AND OTHER RELEVANT FACTORS ARE NOT EXCLUDED. GENUIN E AND BONA FIDE TRANSACTIONS ARE NOT TAKEN OUT OF THE SWEEP OF THE SECTION. IT IS OPEN TO THE ASSESSEE TO FURNISH TO THE SATISFACTION OF THE AO T HE CIRCUMSTANCES UNDER WHICH THE PAYMENT IN THE MANNER PRESCRIBED IN SEC 4 0A(3) WAS NOT PRACTICABLE OR WOULD HAVE CAUSED GENUINE HARDSHIPS TO THE PAYEE. BASED ON ABOVE SUBMISSIONS IT IS EVIDENT THAT PART IES TO THE TRANSACTIONS ARE NOT DISPUTED PAYMENT MADE IS EVIDENT SOURCE OF PA YMENT IS CLEARLY IDENTIFIED AND THE GENUINENESS OF PAYMENT MADE IS A MPLY SUBSTANTIATED COUPLED WITH THE UNAVOIDABLE CIRCUMSTANCES ATTACHED WITH SUCH PAYMENTS WHICH COMPELLED THE ASSESSEE TO MAKE PAYMENT IN CAS H THUS ALL THE ABOVE PAYMENTS MADE IN CONTRAVENTION OF PROVISIONS OF SE C 40A(3) ARE SQUARELY COVERED IN THE EXEMPTION PROVIDED FOR U/R 6DD OF TH E INCOME TAX RULES 1962 AND HENCE THE ENTIRE DISALLOWANCE OF RS. 2 35 40982/- MADE U/S 40A(3) DESERVES TO BE DELETED AND THE ASSESSEE PRAYS ACCOR DINGLY. RELIANCE IS FURTHER PLACED ON THE FOLLOWING JUDICIA L PRONOUNCEMENTS: 1. DCIT VS. M/S SHREE SALASAR OVERSEAS (P) LTD [ITAT J PR BENCH IN ITA NO. 416/JP/15 DATED 15.06.2016] (APB 228-232) 2. AJMEER FOOD PRODUCTS (P)LTD V/S JT. CIT 145 DTR (JP) TRIBUNAL 57 [APB 233- 238] 11. WE HAVE HEARD BOTH THE SIDES ON THIS ISSUE. AS FAR AS REVENUES APPEAL IS CONCERNED WE FIND THAT THE PAYMENT OF RS. 1 82 40 000/- TO SHRI ASHOK AGARWAL POWER OF ATTORNEY HOLDER OF HIS D AUGHTER THE AMOUNT WAS PAID ON SUNDAY AND ALSO THE SELLER HAS GIVEN THE NOTICE TO RELEASE THE PAYMENT BY 25/3/2012 WHICH WAS SUNDAY. SUNDAY WAS A B ANK HOLIDAY. ITA 497 & 549/JP/2016_ ITO VS. SHYAM APPARELS 30 UNDER THESE COMPELLING SITUATIONS THE ASSESSEE HAD TO MAKE PAYMENT IN CASH. THE REVENUE HAS FAILED TO CONTROVERT THESE FA CTS THEREFORE WE FIND NO MERIT IN THIS GROUND OF REVENUES APPEAL. THE SAM E IS DISMISSED. AS FAR AS THE ASSESSEES APPEAL IS CONCERNED WE HAVE NOTIC ED THAT THE EVIDENCES HAVE BEEN FILED WHICH ESTABLISHES THAT THE DOCUMENT S FOR REGISTRATION SUBMITTED AFTER THE BANKING HOURS IN RESPECT OF LAN D PURCHASED FROM HIRA LAL KHETAN FOR RS. 13 62 658/- AND FROM SMT. SHANTA DEVI MITTAL FOR RS. 11 75 000/-. NO SUCH EVIDENCE IS AVAILABLE ON RECO RD IN RESPECT OF OTHER PURCHASES. THE ASSESSEE HAS ALSO SOLD HIS PROPERTY O N 15/09/2011 FOR WHICH A DEED WAS ALSO EXECUTED IN FAVOUR OF M/S OCEAN SEVEN BUILDTECH (P) LTD. GURGAON ON THE SAME DAY AFTER BANKING HOU RS. IT WAS SUBMITTED THAT DIRECTOR OF M/S OCEAN SEVEN BUILDTECH (P) LTD. REACHED TO JAIPUR ON 15/9/2011 AFTER THE BANKING HOURS THEREFORE THE P AYMENTS AGAINST THE SALE DEED WERE RECEIVED IN CASH DUE TO CLOSURE OF TH E BANKING HOURS AND THE SAME CASH RECEIVED FROM THIS PARTY WAS FURTHER P AID TO THESE TWO PARTIES FROM WHOM THE LAND WAS PURCHASED BY THE ASSES SEE. THESE FACTS ARE VERIFIABLE FROM THESE TWO PURCHASE DEEDS WHICH W ERE DULY FILED BEFORE THE ASSESSING OFFICER. THEREFORE IT IS ESTAB LISHED THAT THE ASSESSEE HAS TO MAKE PAYMENT TO THESE TWO SELLERS OF THE LAND IN CASH UNDER THE BUSINESS EXIGENCY TO SAFEGUARD THE INTEREST AND ALS O FOR GENUINE AND BONAFIDE NEEDS OF ASSESSEES BUSINESS. IT IS ALSO A FACT THAT THESE ITA 497 & 549/JP/2016_ ITO VS. SHYAM APPARELS 31 PURCHASES AND SALE DEEDS WERE PUT FORTH BEFORE THE R EGISTRAR ON THE SAME DAY AFTER BANKING HOURS WHICH STRENGTHEN THE CO NTENTION OF THE ASSESSEE. THE CASH RECEIVED ON THE SALE OF THE LAND WAS UTILIZED FOR MAKING PAYMENT TO TWO PARTIES. THESE DEEDS WERE REGIST ERED AFTER 4.00 P.M. WHICH IS USUALLY THE BANKING HOURS. THEREFORE CONSIDERING ALL THESE FACTS AND CIRCUMSTANCES WE PARTLY ALLOW THIS GROUND OF ASSESSEES APPEAL. 12. IN THE RESULT THE APPEAL OF THE REVENUE IS DIS MISSED AND APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 07/11/2017. SD/- SD/- DQY HKKJR HKKXPAN (KUL BHARAT) (BHAGCHAND) U;KF;D LNL;@ U;KF;D LNL;@ U;KF;D LNL;@ U;KF;D LNL;@ JUDICIAL MEMBER YS[KK LNL;@ YS[KK LNL;@ YS[KK LNL;@ YS[KK LNL;@ ACCOUNTANT MEMBER TK;IQJ@ JAIPUR FNUKAD@ DATED:- 07 TH NOVEMBER 2017 *RANJAN VKNS'K DH IZFRFYFI VXZSFKR @ COPY OF THE ORDER FORWARDED TO: 1. VIHYKFKHZ @ THE APPELLANT- THE ITO WARD 3(2) JAIPUR. 2. IZR;FKHZ @ THE RESPONDENT- M/S SHYAM APPARELS PVT. LTD. JAIPUR . 3. VK;DJ VK;QDR @ CIT 4. VK;DJ VK;QDRVIHY @ THE CIT(A) 5. FOHKKXH; IZFRFUF/K] VK;DJ VIHYH; VF/KDJ.K] T;IQJ @ DR ITAT JAIPUR 6. XKMZ QKBZY @ GUARD FILE (ITA NO. 497 & 549/JP/2016) VKNS'KKUQLKJ @ BY ORDER LGK;D IATHDKJ @ ASST. REGISTRAR