Income Tax Appellate Tribunal - Hyderabad
M/S. J.B, Construction & Projects, ... vs Assessee on 5 May, 2014
IN THE INCOME TAX APPELLATE TRIBUNAL
HYDERABAD BENCH "B", HYDERABAD
BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER
AND SMT. ASHA VIJAYARAGHAVAN, JUDICIAL MEMBER
ITA No. 1162/Hyd/2011
Assessment Year 2008-09
The Income Tax Officer vs. M/s. J.B. Constructions &
Ward-2 Projects, Nizamabad
Nizamabad PAN: AAFFJ9964M
Appellant Respondent
ITA No. 1005/Hyd/2011
Assessment Year 2008-09
M/s. J.B. Constructions & vs. The Income Tax Officer
Projects, Nizamabad Ward-2
PAN: AAFFJ9964M Nizamabad
Appellant Respondent
Revenue by: Sri Solgy Jose T. Kottaram
Revenue by: Sri S. Rama Rao
Date of hearing: 05.05.2014
Date of pronouncement: 30.05.2014
ORDER
PER CHANDRA POOJARI, A.M.:
These are cross appeals directed against the order of the CIT(A)-VI, Hyderabad dated 23.03.2011 for assessment year 2008-09.
2. The assessee in appeal before us with regard to enhancement of disallowance u/s. 40A(3) of Income-tax Act, 1961 from Rs. 52.88 lakhs to Rs. 386.77 lakhs.
2 ITA No. 1162/Hyd/2011 & Anr.M/s. J.B. Constructions & Projects.
==========================
3. The Revenue raised the following grounds:
2. The CIT(A) erred in deleting the addition made towards disallowance on account of 40A(3) payments. The CIT(A) erred in deleting the said addition ignoring the fact that it was an agreed addition and the AR of the assessee has duly signed on the order sheet of the file accepting such addition.
3. The CIT(A) erred in contending that the AO has not rejected the books of account. The CIT(A) on one hand accepted the book results, and enhanced the payments made u/s. 40A(3), however, on the other hand for the other addition made by the AO, the CIT(A) states that the AO has not rejected the books of account. The CIT(A) ignored the fact that had the books of account been rejected by the AO, the question of 40A(3) payments does not arise at all.
Thus the grievance of the Revenue in its appeal is that the CIT(A) erred in deleting the estimated addition of Rs. 22,83,144.
4. Brief facts of the case are that the assessee firm filed its return of income for the A.Y. 2008-09 on 24.09.2008 admitting a total income of Rs. 15,60,000. A survey operation u/s. 133A was conducted on 28.04.2008 in the case of the firm and accordingly, the case was selected for scrutiny. A notice u/s. 143(2) of Income-tax Act, 1961 was issued and served upon the assessee. After examining all the relevant material and information, assessment was completed by making the following additions vide order dated 30.12.2009:
(a) Difference in estimated income Rs. 22,83,144
(b) Disallowance u/s. 40A(3) Rs. 52,88,000
--------------
Total Rs. 91,31,144
--------------3 ITA No. 1162/Hyd/2011 & Anr.
M/s. J.B. Constructions & Projects. ==========================
5. On appeal, the CIT(A) deleted the addition of Rs.
22,83,144 on the reason that the AO has not found the books of account incomplete nor any discrepancies and he also not identified correct number of vouchers where the expenditure is not verifiable. He did not confront the assessee or given him an opportunity to contradict the material relied upon to estimate the income. Further, the CIT(A) observed that there is payment in excess of Rs. 20,000 otherwise by crossed cheque or DD, not only to the extent of Rs. 52.88 lakhs. On the other hand, it was Rs. 386.77 lakhs in respect of the following parties:
Sl. Name & Address of the Nature of
Date Amount (Rs.)
No. party payment
1. 06.06.2007 P. Srinivas & SLN Real 2nd instalment 5,288,000.00
Estate, Nizamabad as per MOU
2. 13.10.2007 -do- -do- 10,709,000.00
3. 16.11.2007 -do- -do- 22,680,000.00
6. Against the deletion of addition, the Revenue is in appeal before us and against enhancement of disallowance, the assessee is in appeal before us.
7. The learned AR submitted that the assessee is in real estate business. The payments for purchase of land are to be made before registration and the assessee having entered into agreement with the land owners, the assessee is forced to make payments on Sunday also. The assessee has no choice to select the date and place of payment. It is entirely the discretion of the vendor. If the assessee postponed the payment for working day, the vendor may change his decision and he may go back. The assessee has to purchase the entire 4 ITA No. 1162/Hyd/2011 & Anr. M/s. J.B. Constructions & Projects.
========================== piece of land in a wholesome manner and not in piecemeal. If the assessee failed to got entire property in a single boundary it is very difficult to the assessee to undertake plotting of the property so as to get best price for the property. Further, he submitted that there is a cutthroat competition in the real estate business. The assessee has to see the availability of cash and requirement of the seller for money and the assessee has to arrange the amount at the insistence of the seller to make payment. He submitted that the assessee's case falls under the purview of Rule 6DD(J) of Income-tax Rules, 1962 as such provisions of section 40A(3) cannot be applied. Further, he drew our attention to the Profit and Loss A/c. of the assessee placed on record at Paper Book page No. 4 to suggest that the assessee has not charged this amount to Profit and Loss A/c as an expenditure. He also drew our attention to the payment details to P. Srinivas and SLN Real Estate (Landlord) Account placed at page No. 24 of the Paper Book. Further, he submitted that when the income of the assessee is estimated there cannot be any addition u/s. 40A(3) of the Act. For this purpose he relied on the judgement of jurisdictional High Court in the case of Indwell Constructions vs. CIT (232 ITR 766).
8. On the other hand, the learned DR submitted that the assessee paid a cash payment to the AOP, M/s Srinivas and others (AOP) [Audit report mentioned it as M/s Srinivas & M/s SLN Real Estate] in cash on the following dates:
5 ITA No. 1162/Hyd/2011 & Anr.M/s. J.B. Constructions & Projects.
==========================
06-06-2007 - Rs. 52,88,000/-
13-10-2007 - Rs. 1,07,09,000/-
16-12-2007 - Rs. 2,26,80,000/-
9. The audit report submitted with the return mentioned that an amount of Rs. 1.8 Crores was paid on 13-10-2007.
However, it is seen that 13-10-2007 is a Saturday. The same was confronted by the CIT(A) with the AO and he stated that this error was pointed out by him during the assessment proceedings and at the instance of the assessee on perusal of the seized books of the accounts, the cash payments were stated to be made on 14-10-2007 which was a Sunday.
Therefore, the CIT(A) made no interference with regard to the date and the Assessing Officer's contention is accepted as it is supported by the evidence in seized that the above amounts located in Madhav Nagar, which is not facilitated by any banking service. In the confirmation letter, Mr. P. Srinivas Rao, on behalf of the AOP stated that the payments were received in cash from the assessee to make payments to the land owners. But he did not submit even a single certificate or receipt from the villagers who are the land owners to whom he paid the amounts or a statement from them that they did not possess bank accounts. The AOP also did not furnish any evidence to whom the payments were made like
a) Names of land owners giving their survey No. and extent of land sold.
b) Details of the advance paid to such land owners on agreement and amount paid out of cash receipt from the assessee.
6 ITA No. 1162/Hyd/2011 & Anr.M/s. J.B. Constructions & Projects.
==========================
c) an acknowledgement of the receipt by the villagers giving the survey no. and extent of the land that represent full and final settlement towards the land sold by them.
d) the street no. in the village where the payments were made to the villagers, as the lands are situated at Shivar Village but not Madhavnagar in Borgoan Pangra, Nizamabad Mandal & Dist.
e) date of registration and conveyance deed of the above said lands to whom full and final payment was made. The AO did not verify whether there was a gap between the final payment and the date of registration or whether the registration is executed the next day Le. Monday, i.e. 15-10-2007 or 18-12- 2007 to evidence an unavoidable reason for such a payment.
10. However, on the contrary it is seen that most of the villagers hold bank accounts which they stated during the assessment proceedings before the Assessing Officer u/s 131 and a few examples are cited below:
(a) Sri Vemulapalli Venkat Rao, s/o. Gopalakrishnaiah, R/o 3-18, Madhav Nagar, Nizamabad sold 1/5th of his share out of 38 guntas of land in Borgoan (P). He received an amount of 1/5th of his share in Rs.
30,00,000/- paid in cash. He is maintaining a bank account in Deccan Bank Nizamabad since 2006.
(b) Sri Vemulapalli Venkateswara Rao, S/o Late Narayan Rao, Dharmaram (P), Dichpalli Mandal, Nizamabad sold l/Sth of his share out of 38 guntas of land at Borgoan (P) and received the amount in cash. He stated that he was maintaining a bank account in Dena Bank, Dharmaram (B) since 1989.
(c) Sri Vemulapalli Prakash Rao, S/o Gopalakrishnaiah, R/o 3- 17, Madhav Nagar, Nizamabad sold 1/5th of 7 ITA No. 1162/Hyd/2011 & Anr. M/s. J.B. Constructions & Projects.
========================== his share out of 38 guntas of land in Borgoan (P). He received an amount of Rs. 30,00,000/-in cash. He is maintaining a bank account in Indian Overseas Bank, Nizamabad.
(d) Sri Sandagiri Bhoomreddi, 5/0 Late Sri Saya Reddy, R/o Plot No. 23, Kanuganti Gardens, Pragathi Nagar, Nizamabad. He sold 1.10 guntas of land to the assessee and received Rs. 2,00,000 by a cheque towards the sale consideration. He is maintaining an bank account in Andhra Bank, Hyderabad Road, Nizamabad.
(e) Sri Mandava Subramanyeswara Rao, 5/0 Late Sri Raghavayya, R/o 3-7, Madhav Nagar, Nizamabad sold the land to the extent of 0.24 cents at Borgoan Pangra for an amount of Rs. 10 lakhs. The said amount was paid in cash and he is holding an account in Indian Bank, Nizamabad and also in Dena Bank in Bardipur, Dichpally Mandal.
11. These are few examples out of many those have been cited here only to prove that the land is located in the Municipal limits of Nizamabad and constitutes one village out of three villages in Pangra, Borgoan. It is also to show that though the land owners are villagers yet due to the proximity towards a town or a city of Nizamabad, they are holding the bank accounts in different banks. It is also seen from the copy of the debit voucher through which the payment was recorded to have been made to Sri P. Srinivas and Others, the address of the assessee is clearly printed. The address is printed as M/s.
J.B. Constructions and Projects, Madhav Nagar, Hyderabad Road, Nizamabad-503003, A.P. From the perusal of the above example mentioned at SI. NoA, it is evident that the banking services are available at Andhra Bank, Hyderabad Road, 8 ITA No. 1162/Hyd/2011 & Anr. M/s. J.B. Constructions & Projects.
========================== Nizamabad. On perusal of the audit report, it is seen that the assessee paid an aggregate of an amount of Rs.3,86,77,OOO/-
to M/s. Srinivas and M/s. SLN Real Estates on three different occasions. The Assessing Officer in the order mentioned that one of the members of AOP, Sri K. Narender Reddy is also a partner in M/s. SLN Real Estate and also Cl partner in the assessee's firm. Similarly, Mr. Srinivas representing the AOP is a partner in M/s. 8alaji Enterprises. There are 17 members constituting the AOP and all of them are into one business or the other and filing their income-tax returns in Nizamabad itself. The assessee also is maintaining its account at Bank of Maharashtra, Account No. 161025 having its branch code as 539, addressed at Range Bhavan, Nizamabad. The AOP stated that they are maintaining an office at Survey No. 125, Madhavnagar and during the assessment proceedings, they did not submit any evidence pertaining to the existence of the office like a photograph or a building sanction plant approved by the Grama Panchayat. An office is a building, where a "person" conducts its business, establishes an administrative set up to organize its activity for smooth functioning and for corresponding with other agencies may be a government or private for regulating its lawful activities. Therefore, it is difficult to say that there is a proper office existing for conducting the business of the AOP. Since Sri P. Srinivas and Sri K. Narender Reddy are having their respective business operations, there would be definitely an account maintained in one bank or the other in an around the place from where they are operating. Though the address of the AOP is mentioned 9 ITA No. 1162/Hyd/2011 & Anr. M/s. J.B. Constructions & Projects.
========================== on the PAN application form as having its office at Madhav Nagar, yet it is a fact to appreciate that the ADP is filing its returns from the address of one of its members, i.e. P. Srinivas, Flat No. 202, Mahaan Apartments, Vinayak Nagar, Hyderabad Road, Nizamabad. The AOP also filed its first return only after a survey was conducted on M/s Priya Builders on 28-2-2008 where the agreement between the AOP and the assessee was found. Consequently, after two months, a survey u/s 133A was also conducted on the assessee on 28-04-2008. From this it is clearly evident that the address on the PAN application form which the assessee submitted during the assessment proceedings is not correct where any official correspondence can be received. However, the address of the PAN Card does not authenticate an address and it is only a Permanent Account No. which is an identification number for the tax payer. Therefore, it is clearly seen that the assessee is maintaining a bank account and the office is located at a place where there is a banking service in the close vicinity. The network of the banking facility is spread to the remote villages also these days either by a rural cooperative bank or a rural bank or a public sector undertaking bank, etc. Therefore, the onus to prove that the payment was made in a village not having the banking facility was on the assessee which has not been discharged by any evidence. For example, if there are many streets in a locality provided by a banking service and if there is no banking service on a particular street, it does not mean that there is no banking facility available. The population of Madhavnagar Village may be less to provide a service there, 10 ITA No. 1162/Hyd/2011 & Anr. M/s. J.B. Constructions & Projects.
========================== but a facility is available in the close vicinity catering to the needs of few villages around it. Even on perusal of the debit voucher, it is seen that there is no serial number, names of the persons along with the designations who prepared the debit voucher, no office seal has been marked on the debit voucher. It is also seen that there are no witnesses for such a huge transaction and no acknowledgement slip was given by the recipient, i.e., Sri P. Srinivas and M/s SLN Real Estate to the assessee.
12. In the statement filed before the Assessing Officer, the assessee stated the following as the source of cash generation:
Capital as on 31-12-2006 Rs. 72,75,000
Payment made to AOP on
25-10-2006 } Rs. 50,00,000
20-11-2006 }
28-12-2006 }
31-12-2006 }
Funds available up to 15-12-2007
(Sale proceeds) Rs. 3,58,78,949
Withdrawals out of loan amount from
Bank of Maharashtra up to 25-1-2007 Rs. 1,50,00,000
After examining the above source also the Assessing Officer did not ask the assessee the details like
a) number of plots in each survey no.
b) names and addresses of the person to whom the plots are sold
c) rate at which each plot has been sold 11 ITA No. 1162/Hyd/2011 & Anr. M/s. J.B. Constructions & Projects.
==========================
d) mode of receipt of payment e)amount pending to be paid to the land owners in each survey number carved into plots against which cash payment was made to the AOP, etc.
13. The assessee did not submit a cash flow statement to show the availability of cash on a day prior to the payment made to the AOP. In the absence of all these factors pertaining to the cash payment transaction by the assessee, it is difficult to say that it is a genuine transaction that would qualify for exemption u/s 40A(3) r.w.r. 6DD. Rule 6DD gives the assessee an exemption if the payment is made in a village or a town where no banking facility is available to a person who resides or carry on any business in such village or town. In the present case, it is seen that the assessee's principal office is located in Ranga Reddy District that is mentioned in the partnership deed and has its branch office at Nizamabad which is surrounded by one bank or the other in the close vicinity. Therefore, the assessee should prove any exceptional or unavoidable circumstances as prescribed in Rule 6DD(j) to make payments on a holiday. Sec. 4OA(3) r.w.r. 6DD has to be seen in light of the CBDT Circular which has liberalized the residuary clause (j) of Rule 6DD so as to avoid disallowance of payments in genuine cases. The assessee has chose to make payments on a holiday i.e., Sunday and to substantiate any business expediency, he has not submitted justified reasons. The only reason given by the assessee is that the MD of the assessee firm, Sri K. Narayana Rao is based in Hyderabad and visits Nizamabad only on Sundays. This reason is not an 12 ITA No. 1162/Hyd/2011 & Anr. M/s. J.B. Constructions & Projects.
========================== exceptional and an unavoidable circumstance but it is a habitual visit on a holiday and he should have made appropriate arrangements to disburse the payment to the AOP as per law using the banking channels as both of them i.e. the assessee as well as the AOP are maintaining accounts in their respective banks. Most of the banks are providing online facilities and the assessee should have used the banking channels to transfer the amount to the account held by the AOP. It is also a point to note that the assessee also received cash against the sale of plots. If he id not maintain an account in the bank and deposited them, which is the place that stored this cash in physical units? A perusal of the statement of Bank of Maharashtra show several cash deposits. These days most of the banks are following staggered holidays depending on their locations and business transactions. The assessee could have used the online facility either on a Saturday or on Monday and transferred the amount to the AOP via an online transaction. It is also beyond my imagination as to how the M.D of the assessee would have carried the huge amount from Hyderabad to Nizamabad or from a place where it is kept in safe custody. It is also a point to mention that the assessee's manager, Sri Nydam Ravinder is also a member of AOP and has a bank account in Bank of Maharashtra at Namdevwada Branch, Nizamabad. Therefore, the assessee has not brought out on record any evidence as to what is that business expediency that compelled him to make the payment on a Sunday. It is seen that the Assessing Officer has not taken a view on the circumstances that set out in Rule 6DD taking into 13 ITA No. 1162/Hyd/2011 & Anr. M/s. J.B. Constructions & Projects.
========================== account the surrounding circumstances and business expediencies while exercising his discretion favouring the assessee on two occasions that is pertaining to the payments made on 14.10.2007 and 16-12-2007. The assessee also could not prove that the payment was made to the AOP in Madhav Nagar Village only. Therefore, the burden of proof is more on the assessee to establish the exceptional and unavoidable circumstances. I also rely on the judicial pronouncements in the case of Nangilal Vs. CIT( 1987), 66 CTR Rajasthan 109 where the Hon'ble High Court held that it is not sufficient to the assessee merely to establish that the purposes were genuine and the payees are identifiable. The assessee is further required to prove that due to exceptional and unavoidable circumstances, payment by cheque was not practicable and hence, cash payments were made. I also rely in the case of CIT Vs. Jyothi Challaram (1988), 173 ITR 358 (AP) where it was held that the assessee and the recipient both had bank accounts and the explanation of the assessee that the parties insisted on cash payments and they did express unwillingness to render the services which was otherwise not corroborated by sufficient evidence. Therefore, the assessee could not prove,
(a) That payees' office or business operations were conducted from a village where there is no banking facility.
(b) Unavoidable and exceptional circumstances that compelled him to pay cash to AOP on a Sunday, when both of the persons are into their respective business and holding accounts in banks, where amount could be transferred on a day earlier i.e. 14 ITA No. 1162/Hyd/2011 & Anr. M/s. J.B. Constructions & Projects.
========================== Saturday or a day later i.e. Monday. No evidence to the urgency on a Sunday for its payment was furnished by the assessee.
(c) The assessee, the AOP and the villagers(landlords) are all holding bank accounts in some bank or the other and the assessee did not establish the unavoidable and exceptional circumstances for such a cash payment to the AOP.
14. The DR submitted that the assessee could not discharge the onus cast on it to prove that there were some exceptional and unavoidable circumstance that compelled it to pay cash to the AOP amounting to Rs. 3,86,77,000/-. It is also evident from the above discussion that there is a banking service available in the vicinity where the assessee's office is located and the AOP could not prove that it had its Office in the village Madhav Nagar. Since the assessee and the AOP, both are into business and filing their respective returns, it is evident that they are holding account in some bank or the other and to enter into such transactions on a holiday or due to certain unavoidable circumstances has not been proved by them.
Therefore, the CIT(A) enhanced the addition made by the Assessing Officer amounting to Rs. 52,88,000/- to Rs.
3,86,77,000/- and directed the Assessing Officer to pass an order accordingly.
15. We have heard both the parties and perused material on record. We have carefully gone through the Profit and Loss A/c. The assessee has debited/charged an amount of Rs. 2,51,17,649 towards purchases account-land to the Profit and 15 ITA No. 1162/Hyd/2011 & Anr. M/s. J.B. Constructions & Projects.
========================== Loss A/c. This amount is transferred from land opening balance account which is as follows:
Sl. Name & Address of the Nature of
Date Amount (Rs.)
No. party payment
1. 06.06.2007 P. Srinivas & SLN Real 2nd instalment 5,288,000.00
Estate, Nizamabad as per MOU
2. 13.10.2007 do do 10,709,000.00
3. 16.12.2007 do do 22,680,000.00
16. However, the CIT(A) considered the following payments appearing in P. Srinivas & SLN Real Estate (Landlord account) to make addition u/s. 40A(3) of the Act:
Vch Vch
Date Particulars Debit Credit
Type Type
By Opening
1.4.2007 Balance 7,89,16,999.00
1.4.2007 To amount retained Journal 60 1,07,09,000.00
of P. Srinivas A./c.
6.6.2007 To cash Payment 590 52,88,000,00
1,59,97,000.00 7,89,16,999.00
To Closing Balance 6,29,19,999.00
7,89,16,999.00 7,89,16,999.00
1.12.2007 By opening Balance 6,29,19,999.00
15.12.2007 To cash payment 501 2,26,80,000.00
2,26,80,000.00 6,29,19,999.00
To Closing Balance 4,02,39,999.00
6,29,19,999.00 6,29,19,999.00
17. The above account is not an expenditure account. The closing balance of this account has been taken to the current liabilities as sundry creditors in the Balance Sheet as on 31.3.2008. The provisions of section 40A(3) read as follows:
40A.
(1) ....
(2) ....
(3) Where the assessee incurs any expenditure in respect 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 rupees, no deduction shall be allowed in respect of such expenditure.16 ITA No. 1162/Hyd/2011 & Anr.
M/s. J.B. Constructions & Projects.
==========================
18. Under section 40A(3), where the assessee incurs an expenditure in respect of which payment is made in a sum exceeding Rs. 20,000 otherwise than by an account payee cheque drawn on a bank or an account payee bank draft, such expenditure shall not be allowed as deduction. Therefore, for pressing the provisions of section 40A(3) into action, the amount must be claimed as expenditure. The word "expenditure" has not been defined in Income-tax Act. As held in Indian Molasses Co. Ltd. vs. CIT (37 ITR 66) (SC) "expenditure is what is paid out or away" and is something which is gone irretrievably. In the case before us as seen from the table produced above, the assessee has not claimed the payment of Rs. 386,77,000 as expenditure in the Profit and Loss A/c. It is an item of payment to sundry creditors viz., P. Srinivas & SLN Real Estate (Landlord) Account and not debited to the Profit and Loss A/c. as an expenditure. It is an entry in sundry creditors account and shown as a current liability in the Balance Sheet as on 31.3.2008. Thus, the amount paid by the assessee cannot be construed as an expenditure charged to Profit and Loss A/c. When the amount paid by the assessee had not been claimed as deductible expenditure while computing the business income provisions of section 40A(3) cannot be applied. Mere entry in the books of account, as observed earlier, will not change the character of the transaction. Even otherwise there is no dispute that the payments are made on Sunday where there is banking holiday on that day. The Department has not disputed the fact that Sunday was a holiday. The plea of the lower authorities is that 17 ITA No. 1162/Hyd/2011 & Anr. M/s. J.B. Constructions & Projects.
========================== the assessee has not provide the exception as provided in Rule 6DD(J) of the IT Rules, 1962. The assessee stated before that there is no banking facility available in the village where the payment was made.
19. The exceptions to the application of sec 40A(3) is laid down in Rule 6DD(j). Rule 6DD(j) is as follows:
6DD. No disallowance under sub-section (3) of section 40A shall be made and no payment shall be deemed to be the profits 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 drawn on a bank or account payee bank draft, exceeds twenty thousand rupees in the cases and circumstances specified hereunder, namely :--
....
(j) where the payment was required to be made on a day on which the banks were closed either on account of holiday or strike;
20. Therefore the only exception that the Assessee can claim is when payments are required to be made on days when the Banks were closed on account of holidays or strike. Transactions after the banking hours in the course of regular business will not fall within this exception. In those transactions, the payment is not required to be made when the banks are closed i.e. after banking hours. Further the purpose of the disallowance u/s 40A (3) is to dissuade transactions by cash.
21. Sec 40A(3) itself provides that the exceptions will have to be prescribed having regard to the nature and extent of banking facilities available, considerations of business expediency and other relevant factors. Taking all these factors, 18 ITA No. 1162/Hyd/2011 & Anr. M/s. J.B. Constructions & Projects.
========================== considering the nature of activity of the Assessee and the necessity for them to pay cash to the land owners we are of the opinion that the condition under Rule 6DD for exemption viz., transactions should have taken place on Bank Holidays should be read down in the case of the Assessee.
22. In the case under consideration, no banking facility is available where the properties were purchased by the assessee or payments were made on holidays i.e., Sundays, therefore, there was no choice for the assessee except to make the payments in cash due to exceptional or unavoidable circumstances as provided under Rule 6DD. In view of the above discussion, we set aside the order of CIT(A) and delete the addition of Rs. 3,86,77,000 made u/s 40A(3) of the Act.
23. Considering the above facts and circumstances, we are of the opinion that the disallowance u/s. 40A(3) of the Act made by the lower authorities is not warranted. Accordingly, assessee's appeal is allowed.
24. Coming to the Revenue appeal. The CIT(A) deleted the addition on the basis that books of account are not rejected to estimate income of the assessee. In our opinion, as pointed out by the AO in his assessment order, certain expenditure towards labour and other miscellaneous expenditure are self-
vouched and not verifiable. The AO estimated the income at 10% of the sales and thereafter given deduction towards interest to partners. Being so, in our opinion, the estimation by the AO is reasonable and was accepted by the AR of the 19 ITA No. 1162/Hyd/2011 & Anr. M/s. J.B. Constructions & Projects.
========================== assessee during the course of assessment by signing the order-sheet. Such deduction cannot be deleted and the same is to be confirmed. Accordingly, this ground of the Revenue is allowed.
25. In the result, both revenue and assessee's appeals are allowed.
Order pronounced in Open Court on 30th May, 2014 Sd/- Sd/-
(ASHA VIJAYARAGHAVAN) (CHANDRA POOJARI)
JUDICIAL MEMBER ACCOUNTANT MEMBER
Hyderabad, dated the 30th May, 2014
tprao
Copy to:
1. The Income Tax Officer, Ward-2, Nizamabad.
2. M/s. J.B. Constructions & Projects, Sy. No. 128, Madhav Nagar, Pangra, Borgaon (V), Nizamabad.
3. The CIT(A)-VI, Hyderabad, 6A, Income Tax Towers, A.C. Guards, Hyderabad-500 004.
4. The CIT-V, Hyderabad.
5. The DR, B Bench, ITAT, Hyderabad.