Income Tax Appellate Tribunal - Chandigarh
Hill View Infrastructure Pvt. Ltd., ... vs Dcit, Chandigarh on 14 November, 2017
IN THE INCOME TAX APPELLATE TRIBUNAL
CHANDIGARH BENCHES 'B' CHANDIGARH
BEFORE SMT. DIVA SINGH, JUDICIAL MEMBER AND
DR. B.R.R. KUMAR, ACCOUNTANT MEMBER
ITA No.644/Chd/2016
Assessment Year:2008-09
Hill View I nfrastructure Pvt. Ltd. Vs. The DCI T
SCO No. 2474, Sector 22-C Central Circle-1
Chandigarh Chandigarh
PAN No. AABCH6185R
(Appellant) (Respondent)
Assessee By : Shri. Sudhir Sehgal
Department By : Sm t. Chandrakanta
Date of hearing : 31/08/2017
Date of Pronouncement : 14/11/2017
ORDER
PER DR. B.R.R. KUMAR, A.M:
The present appeal has been filed by the Assessee against the order of the Ld. CIT (A)-3, Gurgaon dt. 31/03/2016.
2. The Assessee has raised the following effective grounds of appeal:
1. That the Ld. CIT(A) has erred in confirming the action of the Assessing Officer in making addition of Rs. 8,00,000/- to the taxable income under section 40A(3) of the Income Tax Act, 1961.
2. That the Ld. CIT(A) has erred in confirming the action of the Assessing Officer in not allowing deduction under section 80-IB on disallowance of donation of Rs. 20,47,300/- and FBT amounting to Rs. 67,855/-.
3. That the submissions filed during the course of hearing has not been considered properly.
3. Ground No. 1 deals with addition of Rs. 8,00,000/- under section 40A(3) . The Assessing Officer has disallowed Rs. 8,00,000/- on account of cash payment made to one Shri. Amarnath for purchase of land on 06/07/2007, as the seller doesn't fall under any of the clauses mentioned under Rule 6DD. 2
4. Ld. CIT (A) has confirmed the disallowance as the assessee has not furnished any specific reason for having made the cash payment so as to make a case of business expediency.
5. Before us the Ld. AR argued that since the sources have been proved, the party to whom the payments were made is identifiable and the expenses incurred in cash were genuine and due to business expediency hence, no disallowance is called for.
6. The Ld. DR argued that the assessee could not prove the business expediency as it is a transaction of land and there was no urgent need to make cash payment at this age of existence of wider banking operations all over.
7. We have heard Ld. Representatives of both the parties and perused the material available on record. The issue to be decided is whether the provisions of section 40A (3) are applicable to the assessee or not. For the sake of convenience Section 40A (3) reads as under:
Section 40A(3) [(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.
Provided that no disallowance shall be made and no payment shall be deemed to be the profits and gains of business or profession under sub-section(3) and this sub-section 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 such cases and under such circumstances as may be prescribed, having regard to the nature and extent of banking facilities available, considerations of business expediency and other relevant factors.
From the above reading it clearly says that the invoking of Section 40A(3) disallowance does not arise if considerations of business expediency and other relevant factors are existing while making cash payments.3
8. From the records it is found that the commercial expediency has not been submitted even before the Ld. CIT(A). It was submitted that the payment made is genuine and to an identifiable person and the payment made by cash was under some compelling circumstances. The assessee relied on the order of the jurisdictional High Court in the case of Gurudas Garg in ITA No. 413 of 2014, and judgment of the Hon'ble Apex Court in the case of Attar Singh Gurmukh Singh Vs. ITO (1991) 4SCC 385, whereby it was held that the provisions of section 40A(3) of the Act and Rule 6DD of the Income Tax Rules were intended to prevent the use of unaccounted money for business transactions. 8.1 We have perused the material placed on record. During the assessment proceeding the assessee explains that the amount was paid for purchase of land for the capital project of developing a park and that land did not form part of their stock in trade. Further before the CIT(A) the assessee has explained that the cash payment was made under some compelling circumstances. Ld. CIT(A) held that the assessee could not file any evidence to substantiate his claim to make out a case of business expediency. Thus it could be seen that the business expediency could not be proved before the lower authorities. Hence the issue is being remanded back to the file of Assessing Officer to allow the cash payment as per Rule 8DD, only if business expediency has been conclusively proved by the assessee. As a result, this ground of appeal is allowed for statistical purposes.
9. The second ground relates to deduction under section 80IB on disallowance of donation paid and FBT.
10. The Assessing Officer held that the assessee has debited FBT and donation amounting to Rs. 67,855/- and Rs. 20,47,300/- respectively. The assessee itself admitted that these were inadvertently omitted to be added in the taxable 4 income of the assessee. Further the assessee has offered the same for taxable. Therefore, an amount of Rs. 21,15,155/- is added to taxable income of the assessee.
11. The Ld. CIT(A)has confirmed the addition on the grounds that the assessee has not added these expenses as claimed to the income of the assessee in computation of gross total income. These expenses have only been added while computing the deemed total income under section 115JB.
12. Before us the Ld. AR filed the copy of the return of income. It is observed that the donation was shown in the column no. 33 for Rs. 20,47,300/-. Profit before taxes, profit after tax at column no. 43 and 47 have been shown to be Rs. 1,95,37,673/- in the column of the computation of total income Part B-T1 the total income shown was Rs.1,95,37,673/-. Similar amount was shown in the gross total income. The assessee has added the donation and FBT for computation of total income under section 115JB. After deduction of donation FBT the deemed total income under section 115JB remains at Rs. 2,16,52,828/-. The donation was already claimed in P&L Account. Hence the deduction claimed by the assessee under section 80IB is acceptable. This ground may be treated as allowed.
13. In the result, appeal of the assessee is allowed.
Order pronounced in the open Court on 14/11/2017
Sd/- Sd/-
(DIVA SINGH) (DR. B.R.R. KUMAR)
JUDICIAL MEMBER ACCOUNTANT MEMBER
Dated : 14/11/2017
AG
Copy to: The Appellant, The Respondent, The CIT, The CIT(A), The DR