Asstt. Commissioner Of Income Tax- Circle- 1(2), Raipur, District Raipur(C.g v. M/S R.p. Real Estate Pvt. Ltd., B

HIGH COURT OF CHHATTISGARH, BILASPUR NAFR TAX CASE (INCOME TAX APPEAL) NO. 13 OF 2016 Asstt. Commissioner of Income Tax- Circle- 1(2), Raipur, District Raipur(C.G.) … Appellant Versus M/s R.P. Real Estate Pvt. Ltd., B-62, Khamardih, Shankar Nagar, VIPEstate, near VIP Club, Raipur, Raipur (C.G.) ... Respondent For Appellant :Ms. Naushina Afrin Ali, Advocate. Hon'ble Shri Navin Sinha, Chief JusticeHon'ble Shri Justice P. Sam Koshy Judgment on Board Per NAVIN SINHA, C.J. 01/03/2016 1.The present appeal has been filed against order dated 17.7.2015allowing I.T.A. No. 173/BLPR/2011, passed by the Income TaxAppellate Tribunal, Raipur Bench, Raipur in regard to the assessmentyear 2008-09. 2.Learned Counsel for the Appellant submits that the AssessingOfficer imposed liability to tax on ₹61,06,000/- applying Section 40A(3)of the Income Tax Act (hereinafter referred to as 'the Act') whichprovides that any expenditure in respect of which a payment oraggregate of payments made to a person in a day, otherwise than by anaccount payee cheque drawn on a bank or account payee bank draft,exceeds twenty thousand rupees, no deduction shall be allowed inrespect of such expenditure. It was an admitted position on behalf of theassessee that payments to the extent of ₹61,06,000/- had been made incash to four different persons towards payment of purchase price for lands as the assessee is engaged in the business of real estatedealings and construction of multistoried buildings. The AssessingOfficer has recorded his satisfaction that no plausible explanation wasgiven why payments were made in cash contrary to law. The assesseewas duly noticed under Section 143(2) of the Act and was heard in thematter. 3.The Commissioner Income Tax (Appeals) after hearing theassessee and the departmental representative concluded thatpayments were made in cash to actual identified recipient land ownersfrom whom purchase was made by duly registered purchase deed withthe identity of each seller established beyond doubt and thegenuineness of the payments also confirmed by the registered deeds.The Appellate Authority dwelt into the introduction of Section 40A(3) ofthe Act by circular dated 6.7.1968 in the Finance Act, 1968 with effectfrom 1.4.1969 holding that the purpose of inserting the provision in theAct was not to penalise a bonafide assessee for making cash paymentabove the prescribed limit. The purpose was preventive to checkevasion of tax and flow of unaccounted money or to check transactionswhich were not genuine and which may be a camouflage to evade taxby showing fictitious and false transactions. In support of hisconclusions the Appellate Authority relied upon in 1999 240 ITR 902Gauhati [Walford Transport (Eastern India) v. CIT]. The payment couldbe allowed towards expenditure if circumstances so warranted keepingin mind considerations of business expediency and other relevantfactors as may be permissible under the rules. The Appellate Authoritytherefore arrived at the conclusion that in the facts of the case theAssessing Officer had acted mechanically without due and properapplication of mind to statutory provisions. 4.In appeal before the Tribunal, the departmental representative ina rhetorical manner simply relied upon the order of the AssessingOfficer without any ground to assail the order of the Commissioner ofIncome Tax (Appeals). The Tribunal again noticed that full payment hadbeen made to the seller under the registered deeds was not disputed bythe Assessing Officer and neither was the identity or genuineness of thesellers in dispute or the contention of the assessee that the sellersbeing villagers had no bank accounts and therefore insisted on cashpayment. The Tribunal held that payment in cash was out of businesscompulsion and not optional. The Tribunal held that the facts of thecase were in pari materia with Saraswati Housing & Developers v.Additional Commissioner of Income Tax, (2013) 142 ITD 0198, DelhiBench (G). Reference may also be made to Rule 6DD(g) & (j)permitting cash payments for reasons specified and which reads asfollows:- “6DD. No disallowance under sub-section (3) of section 40A shallbe made and no payment shall be deemed to be the profits andgains of business or profession under sub-section (3A) of section40A where a payment or aggregate of payments made to aperson in a day, otherwise than by an account payee chequedrawn on a bank or account payee bank draft, exceeds twentythousand rupees in the cases and circumstances specifiedhereunder, namely :- (g)Where the payment is made in a village or town, which onthe date of such payment is not served by any bank, to anyperson who ordinarily resides, or is carrying on any business,profession or vocation, in any such village or town; (j)Where the payment was required to be made on a day onwhich the banks were closed either on account of holiday orstrike.” 5.The Tribunal has interpreted the aforesaid to hold that cashpayments above twenty thousand rupees could be accepted if theconditions prescribed in the rules were fulfilled to the satisfaction of theauthority concerned. The reasoning of the Tribunal and theinterpretation by it of Section 40A(3) and Rule 6DD(g) supported byjudicial precedents have not been assailed in this appeal and nosubmission has been made before us with regard to the same. We aresatisfied that the appeal ought not to have filed and raises nosubstantial question of law for determination under Section 260A of theAct. 6.Before parting we consider it appropriate to quote the following extract from the CBDT circular dated 10.12.2015 :- “It is clarified that an appeal should not be filed merely becausethe tax effect in a case exceeds the monetary limits prescribedabove. Filing of appeal in such cases is to be decided on meritsof the case.” 7.There is no merit in the appeal. The appeal is dismissed. Sd/- Sd/- (Navin Sinha) (P. Sam Koshy)Chief Justice Judge /sharad/ Chief Justice