Income Tax Appellate Tribunal - Chandigarh
Mrs.Amrinder Kaur , Chandigarh vs Assessee on 13 September, 2013
IN THE INCOME TAX APPELLATE TRIBUNAL
CHANDIG ARH BENCH 'B', CHANDIG ARH
BEFORE SHRI T.R. SOOD, ACCOUNTANT MEMBER AND
Ms. SUSHMA CHOWLA, JUDICI AL MEMBER
ITA No. 1104/Chd/2013
Assessment Year : 2009-10
Mrs. Amrinder Kaur Vs. D.C.I.T. Circle 6(1)
117, Phase 2 Mohali
Mohali Chandigarh
Chandigarh
ABBPK 3365 N
(Appellant) (Respondent)
Appellant by S/Shri Deepak Aggawal & Brij Bhushan Sharma
Respondent by: Shri Amarveer Singh
Date of hearing 16.1.2014
Date of Pronouncement 27.1.2014
O R D E R
PER T.R.SOOD, A.M
This appeal is directed against the order dated 13.9.2013 of the Ld CIT(A), Chandigarh.
2. In this appeal the assessee has raised the following grounds:
" 1. Th at th e L d. CI T( A) is n ot j us t i fi e d i n c o n fi r m in g th e ac t i o n o f th e As s es s i n g o ff ic er i n d is al l ow i n g a n ex pe n d it ur e of Rs . 1 ,0 0 ,0 0 0/- un d er s ec t i on 40 A( 3) o n ac c ou n t of c as h p ay m e nt m a de in ex c es s o f Rs . 20 0 00 /- t o t h e c o ntr ac tor , w her e as as pe r th e As s es s ee th e s ai d p ay m e nt was m ad e to t h e la b o ur e r s a t s it e o n b e ha l f of t he C on tr ac t or th at to o o n S un d ay .
2. a) Th at t h e L d . CI T( A) is no t jus t if i ed i n c o nf ir m i ng an a dd i t io n o f Rs . 24 , 32 ,3 1 8/- a ga i ns t an a dd i ti o n o f Rs . 27 ,3 2 ,0 2 9/- m ad e by t he As s es s i n g O f f ic er to w ar ds c l os in g s t oc k on th e b as is t ha t t h e a v er a g e pur c h as e pr ic e o f t h e l an d is a m ou nt i n g t o Rs . 1 56 p er S q . Mtr . A nd t he c l os i n g s toc k is me as ur in g 3 7 21 9 S q . Mtr s . Ther ef or e t he c los i n g s toc k c om es to Rs . 5 8, 8 0, 6 0 2/- w hic h is Rs . 2 7, 32 , 02 9 /- s h or t as s h ow n by t h e as s es s e e, w h er e as as per t he as s es s e e a l a r ge c hu nk o f l a nd p ur c has e d by th e as s es s e e is p ar t o f K HU D a nd f a l ls u nd er t h e r iv er b e d w h ic h i s no t l iv e ab l e, mor e ov er t her e is no los s to t he r ev e n ue as in t h e i mm e d ia te ly s uc c ee d i ng y e ar i. e. 2 01 0- 1 1 t he w ho l e o f t h e la n d ex c e p t th e la n d c o m pr is i n g o f KH UD was s o l d o ut b y th e as s es s ee a nd pr of i t o n th e s a me hav e a d mi tt e d ly be e n d ec l ar e d.
b) . Th at th e L d. CI T( A) is n ot j us t i fi e d i n c o n fi r m in g th e ac t i o n o f th e As s es s i n g o ff ic er i n m ak in g a t r a d in g a d d it i o n i n c l os i ng s t oc k of t h e l a nd 2 r e ma i n in g at th e en d o f t he y e ar , w it h ou t r e j e c ti n g t h e b o ok r es u lts of th e as s es s e e.
c). Th at a l ter n at iv e ly an d wi t ho ut pr e j u dic e t o th e a bov e th e as s es s ee a ls o d is p ut es th e q u an tu m o f th e a dd i t io n c o nf ir m ed by t h e L d. C IT ( A) .
3. a) . Th at th e L d. CI T( A) is n ot j us t i fi e d i n c o n fi r m in g th e ac t i o n o f th e As s es s i n g of fic er i n mak i n g a n a d- h oc d i s a ll o wa nc e o f Rs . 2 5 ,0 0 00 /- to war ds v ar io us ex pe n d it ur es i nc l ud i ng bo ar d in g , e nt er ta i nm e nt , m is c e l l an e ous , d i wa l i an d tr av el i n g ex pe ns e s for m is s in g v o uc he r s /b i l ls by ter m i ng t h e a dd i t io n as a gr ee d w her e as as p er th e As s es s e e t he s ai d ad d it i o n w as no t ex a m in e d t ow ar ds its c o m mer c i a l ex p ed i e nc y an d / or ge n u in e nes s .
b) . Th at a l ter n at iv e ly an d wi t ho ut pr e j u dic e t o th e a bov e th e as s es s ee a ls o d is p ut es th e q u an tu m o f th e a dd i t io n c o nf ir m ed by t h e L d. C IT ( A) . "
3 Ground No. 1 - After hearing both the parties we find that during assessment proceedings the Assessing Office noticed that the assessee has paid a sum of Rs. 1 Lakh on 19.10.2008 in cash to Credence Engineers (P) Ltd. The payment was made towards land development expenses. According to the Assessing officer as per Sec 40A(3) of Income -tax Act, 1961 if the payment is made in cash then deduction of the same is not allowable and accordingly disallowed a sum of Rs. 1 lakh.
4 On appeal action of the Assessing officer was confirmed by the LD. CIT(A).
5 Before us. the Ld. Counsel for the assessee submitted that payment was made on Sunday which was a Bank holiday and same is exempt under Rule 6DD (j). He also relied on the decision of Hon'ble Madras High Court in case of CIT Vs. K.K.S.K. Leather Processor P. Ltd.. 292 ITR 669.
6 On the other hand, the Ld. D.R. for the Revenue supported the order of the Ld. CIT(A).
7 After considering the rival submissions we find that rule 6DD(j) of Income -tax Rules, 1962 provides as under:
"6DD - No disallowance under sub-section (3) of Sec 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 Sec 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 3 bank or account payee bank draft, exceeds twenty thousand rupees in the case and circumstances specified hereunder.
(a) to (i)....................not relevant
(j) - where the payment was required to be made on the day on which the banks were closed either on account of holiday or on strike."
The above clearly makes it very clear that if the payment is made on a day which is holiday then no disallowance is called for u/s 40A(3). Since the payment has been made on Sunday which is a Bank holiday and therefore in our opinion, the disallowance is not called for. Accordingly we set aside the order of the Ld. CIT(A) and delete the addition. 8 Ground No. 2 - After hearing both the parties we find that during assessment proceedings the Assessing Office noticed that the assessee has shown value of closing stock at Rs. 31,48,572/- as per following chart:
Total Total cost Avg. Unsol Value of Value of Difference area (Rs.) cost d ara unsold unsold purchas per (Sqmt area (Rs) land ed Sqmt ) reasonabl (sqmt) (Rs) e shown in the balance sheet in Rs.
105307 16645500 158 37219 5880602 41,48,573 27,32,029 According to the Assessing officer since the assessee has purchased the land at an average cost of Rs. 158 per sqmt therefore the closing stock should have also been valued at Rs. 158 per sqmt. Accordingly to which the value of closing stock would be Rs. 58,80,602/- and accordingly a sum of Rs. 27,32,029/- was added to the income of the assessee. 9 On appeal before the Ld. CIT(A) following submissions were made:
4
" The f ac ts p er t a in i n g to th e pr es e nt c as e a r e t h at th er e w as a c h unk o f l an d in t he a for es a id 37 2 19 S q . Mtr . w h ic h for ms p ar t of K HU D wh ic h c om es u n de r th e r iv er be d a n d c a n n ot us e d for l iv e l i ho o d, t h e n ec es s ar y c on f ir ma t io n fr o m R ev en u e O f fic i a ls o f G ov e r n me nt of Hi m ac ha l Pr ad es h c on f ir mi n g t h e b a l anc e l an d to b e G ai r Mu mk i n / K h ud w as a ls o pr ov id e d to th e Ld . A.O ., a pp e ar in g at P ag e 7 - 8. Du r i n g t h e as s e s s me n t pr oc e e di n gs t he as s es s ee pr od uc ed a c h ar t be f or e t h e L d. A .O . s h ow i ng a ll t he d et a ils o f l a n d a n d t h e m et h od a do p te d by t he as s es s ee f or v a lu at i o n o f c los i n g s toc k , a p pe ar i ng a t P a ge 9 , w h ic h w as d u ly r ec o g n i ze d by t he L d. A.O . ex c e pt th e v al u at i on of K h ud . H ow ev er , it is a ls o per t in e nt to m en ti o n h er e t ha t t h e w ho l e o f t he l an d ex c e pt KH UD has be e n s o l d o ut in t he i mm e d ia te ly s uc c e ed i n g y e ar i .e . A. Y. 2 01 0- 1 1 an d t he nec es s ar y v a l ua t io n t ak en f or t he s a i d K hu d i n t h e b al a nc e s he et for t h e y ea r en d i ng o n 3 1. 0 3. 2 01 0 is a p pe ar i ng at P a ge 10 . "
10 The Ld. CIT(A) called for certain details and noticed that there was a difference in valuation given by the assessee which before him, was worked out at Rs. 55,80,891/-. He observed that the Assessing officer has applied average rate in respect of the lands purchased through various projects differs where some of the lands have been sold and the value to be worked out as per the sale projects deals for which a chart was given before him which is as under:
KH A S R A TO T AL AR E A B A LA NC E RA T E/ SQ . B A LA NC E NO . AR E A SO LD AR E A MT R CL . STO CK A MO U NT 33 7 2 15 2 9 15 2 9 0 23 8 .1 1 0 33 7 4 18 8 36 15 6 66 31 7 0 23 8 .1 1 75 4 80 8 .7 33 7 5 42 7 22 34 5 60 81 6 2 15 8 .7 5 12 9 57 1 7. 5 33 7 7 14 8 76 97 1 5 51 6 1 16 4 .7 5 85 0 27 4 .7 5 3 25 6 0 45 0 21 1 0 84 . 9 17 9 13 9 4 22 4 6 22 4 6 0 13 9 .6 2 0 6 16 9 2 16 9 2 0 13 9 .6 2 0 7/ 1 16 3 6 16 3 6 13 9 .6 2 22 8 41 8 .3 2 7/ 2 22 3 7 22 3 7 15 2 .1 4 34 0 33 7 .1 8 8 28 1 1 28 0 25 3 1 84 . 9 21 4 88 1 .9 10 / 2 16 1 2 54 0 10 7 2 27 1 .8 2 29 1 39 1 .0 4 11 / 2 17 0 1 94 0 76 1 27 1 .8 2 20 6 85 5 .0 2 13 / 2 18 0 5 37 0 14 3 5 27 1 .8 2 39 0 06 1 .7 16 27 6 8 10 0 26 6 8 84 . 9 22 6 51 3 .2 14 13 9 6 13 9 6 84 . 9 11 8 52 0 .4 15 38 4 4 38 4 4 84 . 9 32 6 35 5 .6 17 10 3 6 10 3 6 15 2 .1 4 15 7 61 7 .0 4 TO T AL 10 5 30 7 68 0 88 37 2 19 55 8 08 9 1. 3 5 Accordingly he reduced the addition to Rs. 55,80,890/-.
11 Before us. the Ld. Counsel for the assessee submitted that the assessee was engaged in the business of purchase 5 and sale of land and the income has been retuned under the head "income from business". It was pointed out that the assessee had purchased big chunks of land which were divided in smaller plots and were sold accordingly. Out of this big chunks of land some portions were useless because same were located in khud which would fetch much lower value. Some lands have also been sold and closing stock has been valued on the method of cost or market value which is lower. Therefore whatever 'khud land' was remaining that has been valued at a lower rate. In this regard he referred to the chart given at page 7 of the paper book. He further contended that khud land (measuring 16493 sqmt) has been valued bythe assessee @ Rs. 13 per sqmt.
12 On the other hand, the Ld. D.R. for the Revenue strongly supported the order of the Ld. CIT(A).
13 After considering the rival submissions we find some force in the submissions of the Ld. Counsel for the assessee. If a businessman purchases huge chunk of land out of which prime portion of the land is sold then balance amount could not be valued on the average rate basis. For example if the assessee purchases 1000 sqmt of land on the main road and if out of that land adjacent to main road measuring 500 sqmt is sold then the land on the back side would fetch lower rate and closing stock is required to be valued at a corresponding lower rate. Similarly in case of 'khud land' same has to be valued at a lower rate. However, at the same time Rs. 13 per sqmt also seems to be very low value. Therefore in our opinion, a reasonable estimate is required to be made. In some khasra numbers the land has been valued at the rate of Rs. 78 to 254 6 per sqmt. Considering this fact we are of the opinion that if 'khud land' is valued at Rs. 75 per sqmt the same would meet the ends of justice. Accordingly we set aside the order of the Ld. CIT(A) and direct the Assessing officer to value 16493 sqmt of 'khud land' at Rs. 75 per sqmt and allow relief accordingly.
14 Ground No. 3 - After hearing both the parties we find that during assessment proceedings the Assessing Office noticed that the assessee has claimed expenses on account of boarding, entertainment, miscellaneous expenses, Diwali expenses and traveling expenses totaling to Rs. 245,342/-. These expenses were not properly vouched therefore he made a disallowance of Rs. 250,000 out of total expenses. 15 On appeal the Ld. CIT(A) observed that total expenses on account of boarding, entertainment, miscellaneous expenses, Diwali expenses and traveling expenses were Rs. 1174250/- out of which vouchers amounting to Rs. 245,342/- were not available. Therefore disallowance was justified. 16 Before us. the Ld. Counsel for the assessee submitted that the addition has been made on adhoc basis without pin pointing for which items the bills were not available. He further submitted that only reasonable disallowance may be made.
17 On the other hand, the Ld. D.R. for the Revenue supported the order of the Ld. CIT(A).
18 After considering the rival submissions we find some force in the contentions of the Ld. Counsel for the assessee. The Assessing officer has not pointed out which vouchers were not available. Addition has been made on adhoc basis which is not 7 permissible under the law. There are various expenses for which no vouchers may be available. For exemption for local conveyance generally no vouchers are available from Three wheelers or Taxi or even Riksha puller. However, at the same time it was admitted that these vouchers were not properly available. Therefore considering over all facts, we are of the opinion that if an addition of Rs. 1 lakhs is made that would meet the ends of justice and accordingly we set aside the order of the Ld. CIT(A) and reduce the addition of Rs. 2,50,00 out of unvouched expenses to Rs. 1 lakh.
19 In the result, appeal of the assessee is partly allowed.
Order pronounced in the open court on 27.1.2014 Sd/- Sd/-
(SUSHMA CHOWLA) (T.R. SOOD)
JUDICI AL MEMBER ACCOUNTANT MEMBER
Dated : 27 .1.2014
SURESH
Copy to: The Appellant/The Respondent/The CIT/The CIT(A)/The DR