The Principal Commissioner Of Income Tax, Central 2,Chennai-34 v. M/S.jubilee Plot & Housing Pvt. Ltd

IN THE HIGH COURT OF JUDICATURE AT MADRASDATED: 02.3.2021CORAM : The Honourable Mr.Justice T.S.SIVAGNANAMandThe Honourable Ms.Justice R.N.MANJULATax Case Appeal Nos.228 of 2014, 570 & 571 of 2015 and792, 991, 994, 995 & 997 of 2019 The Commissioner of Income Tax, Chennai. ...Appellant in TCA.Nos.228/2014 & 570 &571/2015 The Principal Commissioner of Income Tax, Central 2,Chennai-34. Vs ...Appellant in TCA.Nos.792, 991, 994, 995 & 997/2019 M/s.Jubilee Plot & Housing Pvt. Ltd.,No.1379, 6[th] Street, I Block,Golden Villa, Vallallar Kudiyeruppu,18[th] Main Road, Anna Nagar,Chennai - 600 040. ...Respondent in all cases PRAYERS : TCA.No.228 of 2014: Appeal under Section 260A of the IncomeTax Act, 1961 against the order dated 21.6.2013 made in ITA.No.1315/Mds/2011 for the assessment year 2008-09 on the file of theIncome Tax Appellate Tribunal, Madras 'C' Bench, Chennai 1)against the order of the Commissioner of Income Tax(Appeals)-III,121,M.G.Road, Chennai-34 made in ITA No.800/10-11/a-III, order dated 15/4/2011, Assessment year 2008-2009 2)against the order of the D.C.I.T.Co.Circle-II(3),Chennai-34made in PAN No. Assessment year 2008-2009 dated oforder 28.12.2010 TCA.Nos.570 & 571 of 2015: Appeals under Section 260A of theIncome Tax Act, 1961 against the common order dated 21.6.2013made in ITA.Nos.915 and 1097/Mds/2011 for the assessment year2007-08 on the file of the Income Tax Appellate Tribunal, Madras'C' Bench, Chennai. https://hcservices.ecourts.gov.in/hcservices/ 1)against the order of the Commissioner of Income Tax(Appeals)-III,121,M.G.Road, Chennai-34 made in ITA No.488/09-10/A-III, dated 18.03.2011,Assessment year 2007-2008. 2)against the order of the A.C.I.TCo.Circle II(3), Chennai-34made in PAN No. , Assessment year 2007-08, order dated29.12.2009 TCA.No.792 of 2019: Appeal under Section 260A of the IncomeTax Act, 1961 against the order dated 28.3.2019 made in ITA.No.2258/Chny/2018 for the assessment year 2008-09 on the file ofthe Income Tax Appellate Tribunal, Madras 'A' Bench. 1)against the order of the Commissioner of Income Tax(Appeals)-18, 46,M.G.Road, Chennai-34 made in ITA Nos.210/16-17,dated 03.04.2018, assessment year 2008-2009. 2)against the order of the Assistant Commissioner of IncomeTaxCentralCircle-2(2)RoomNo.109,IstFloor,N.No.46,M.G.road, Chennai-34 made in PAN No. date oforder 31.3.2016, assessment year 2008-2009. TCA.Nos.991, 994, 995 & 997 of 2019: Appeals under Section260A of the Income Tax Act, 1961 against the common order dated24.12.2018 made in ITA.Nos.1450, 1451, 1448 and 1449/Chny/2018,respectively for the assessment years 2013-14, 2014-15, 2011-12and 2012-13 on the file of the Income Tax Appellate Tribunal,Madras 'A' Bench. 1)against the order of the Assistant Commissioner Income TaxCentral Circle-2(2) Room No.109, Ist Floor, N.No.46,M.G.Road,Chennai-34 made in PAN No. , order dated 31/03/2016,Assessment year 2011-2012. 2)against the order of the Asssistant Commissioner of IncomeTax central Circle -2(2) Room No.109, Ist Floor, N.No.46,M.g.Road, Chennai-34 made in PAN No. , order dated31/03/2016,Assessment year 2012-2013. 3)against the order of the Assistant Commissioner of IncomeTax Central Circle-2(2) Room No.109, Ist Floor, N.No.46,M.g.Road, Chennai-34 made in PAN No. , order dated31/03/2016, assessment year 2013-14. 4)against the order of the Assistant Commissioner of IncomeTax Central Circle -2(2) Room No.109 Ist Floor,N.No.46,M.G.Road, Chennai-34 made in PAN No. , orderdated 31/03/2016,Assessment year 2014-15. For Appellants :Mr.T.R.Senthil Kumar, SSCassisted by Mrs.K.G.Usharani, JSCFor Respondent: Ms.Pushya Sitaraman, SC for Mr.R.Murali 2)against the order of the Asssistant Commissioner of IncomeTax central Circle -2(2) Room No.109, Ist Floor, N.No.46,M.g.Road, Chennai-34 made in PAN No. , order dated31/03/2016,Assessment year 2012-2013. 3)against the order of the Assistant Commissioner of IncomeTax Central Circle-2(2) Room No.109, Ist Floor, N.No.46,M.g.Road, Chennai-34 made in PAN No. , order dated31/03/2016, assessment year 2013-14. 4)against the order of the Assistant Commissioner of IncomeTax Central Circle -2(2) Room No.109 Ist Floor,N.No.46,M.G.Road, Chennai-34 made in PAN No. , orderdated 31/03/2016,Assessment year 2014-15. For Appellants :Mr.T.R.Senthil Kumar, SSCassisted by Mrs.K.G.Usharani, JSCFor Respondent: Ms.Pushya Sitaraman, SC for Mr.R.Murali These appeals, filed by the Revenue under Section 260A ofthe Income Tax Act, 1961 (for short, the Act), are directedagainst the various orders passed by the respective Benches ofthe Income Tax Appellate Tribunal, Chennai (for brevity, theTribunal) in the respective cases. 2. Except TCA.No.792 of 2019, all the other tax caseappeals were admitted on the following substantial questions oflaw: (i) TCA.No.228 of 2014 (admitted on 17.4.2014) : "1. Whether on the facts and in thecircumstances of the case, the Tribunal wasright in holding that the disallowance madeunder Section 40(A)(3) amounting to Rs.3.93crores is to be allowed? and2. Whether the Tribunal was right inupholding the action of the CIT(A), towardsland development expenses amounting toRs.12.13 crores is to be allowed even thoughthe assessee failed to produce any evidencein support of such claim?" (ii) TCA.Nos.570 & 571 of 2015 (admitted on 01.9.2015 ):"1. Whether on the facts and in thecircumstances of the case, the Tribunal wasright in holding that the disallowance madeunder Section 40A(3) amounting to Rs.22.56lakhs is to be allowed? and 2. Whether the Tribunal was right inupholding the action of the CIT(A), towardsland development expenses amounting toRs.9.84 crores is to be allowed even thoughthe assessee failed to produce any evidencein support of such claim?" (iii) TCA.Nos. 994 & 995 of 2019 (admitted on 17.12.2019) : "(i) Whether on the facts and in thecircumstances of the case, the ITAT wasright in law in holding that the assessingofficer cannot initiate proceedings underSection 153A of the I.T.Act, where there wasno incriminating material found during thecourse of search operation u/s.132 of theAct? (ii) Whether the ITAT was correct in nottaking cognizance of the Kerala High Court'sdecision in the case of CIT v. St.FrancisClay Decor Tiles (385 ITR 624) and theKarnataka High Court's decision in the case of Canara Housing Development Co. V. DCIT(49 taxmann.com 98)? and (iii) Whether the ITAT was correct inconfirming the disallowance of landdevelopment expenses @ 24.35% of the saidexpenditure is not warranted, relying uponits earlier order in the assessee's own casefor the assessment years 2007-08 and 2008- 09, against which appeal has been preferredby the department?" and (iv) TCA.Nos.991 and 997 of 2019 (admitted on 17.12.2019): "(i) Whether on the facts and in thecircumstances of the case, the ITAT wasright in law in holding that the assessingofficer cannot initiate proceedings underSection 153A of the I.T.Act, where there wasno incriminating material found during thecourse of search operation u/s.132 of theAct? (ii) Whether the ITAT was correct in nottaking cognizance of the Kerala High Court'sdecision in the case of CIT v. St.FrancisClay Decor Tiles (385 ITR 624) and theKarnataka High Court's decision in the caseof Canara Housing Development Co. V. DCIT(49 taxmann.com 98)? and (iii) Whether on the facts and in thecircumstances of the case, the ITAT wasjustified in deleting the addition made byestimating the net profit at 31.55% and "(i) Whether on the facts and in thecircumstances of the case, the ITAT wasright in law in holding that the assessingofficer cannot initiate proceedings underSection 153A of the I.T.Act, where there wasno incriminating material found during thecourse of search operation u/s.132 of theAct? (ii) Whether the ITAT was correct in nottaking cognizance of the Kerala High Court'sdecision in the case of CIT v. St.FrancisClay Decor Tiles (385 ITR 624) and theKarnataka High Court's decision in the caseof Canara Housing Development Co. V. DCIT(49 taxmann.com 98)? and (iii) Whether on the facts and in thecircumstances of the case, the ITAT wasjustified in deleting the addition made byestimating the net profit at 31.55% and 24.39% of the turnover, for the assessment years, 2012-13 and 2013-14 respectively,when the assessee has not maintained booksof accounts for the said assessment years?" 3. The Revenue filed TCA.No.792 of 2019 by raising thefollowing substantial questions of law :"1. Whether on the facts and thecircumstances of the case, the ITAT iscorrect in law in deleting the addition madeby the Assessing Officer by invoking theprovisions of Section 40A(3) even though theassessee has not brought out any specificevidence that its case falls within any ofthe exceptions provided in Rule 6DD, whichhas been framed to give relief from therigours of Section 40A(3) and to coverextraordinary circumstances? 2. Whether on the facts and the circumstances of the case, the ITAT'sconclusion that the CIT(A) has rightlydeleted the addition made u/s.40A(3) of theAct was correct, in spite of the fact thatmany payments have been made by cheque alsoand both the assessee and the sellers hadbank accounts and the assessee has beenresorting to cash payments as per hisconvenience? 3. Whether on the facts and the circumstances of the case, the ITAT wascorrect in law, in deciding that theadditions are not based on incriminatingmaterials without appreciating that theseadditions are based on solid evidences foundduring search proceedings? and 4. Whether on the facts and thecircumstances of the case, the ITAT wasjustified in deleting the addition inrespect of the receipts from Kannagapattuland purchased from Smt.D.Sangupathi andM/s.SSD Homes & Estate Developers P limitedlater transferred to the assessee asadvances which ought to have been accountedfor sales but has been classified underadvances?" 4. We have heard Mr.T.R.Senthil Kumar, learned SeniorStanding Counsel assisted by Mrs.K.G.Usharani, learned JuniorStanding Counsel appearing for the appellant-Revenue andMrs.Pushya Sitaraman, learned Senior Counsel appearing forMr.R.Murali, learned counsel for the respondent-assessee. AY 2007-08 : 5. For the relevant assessment year namely 2007-08, theassessee filed e-return on 15.11.2008 admitting an income ofRs.11,39,56,780/-. The return was duly processed under Section143(1) of the Act. Subsequently, the case was taken up forscrutiny and a notice under Section 143(2) of the Act along witha questionnaire was issued on 11.6.2009. The assessee was in thebusiness of property development and the main business was topurchase land, develop it into housing plot and market the same.During the relevant period, the assessee had shown a net profitof Rs.11,36,39,027/- on a total receipt of Rs.70,98,43,848/-from the sale of lands. After verification of the details calledfor, it was found that out of total purchase, a huge part of theamount was paid by cash and a part by cheque. The assessee wasasked to explain as to why the purchase of land made in cashshould not be disallowed and added to the total income and the assessee filed a reply dated 15.12.2010. assessee filed a reply dated 15.12.2010. 6. After examining Rule 6DD of the Income Tax Rules,1962 (for short, the Rules) and on perusal of the said reply,the Assessing Officer was of the view that exemption from thetransaction was provided through account pay cheque drawn onbank on purchase of agriculture or forest produce or likeprovided that the payment was made to cultivator, grower orproducer of such article produced or products. In the assessee'scase, for the relevant year, the payment was neither made forsuch product nor to the producer of such products. Ultimately,the total disallowance under Section 40A(3) of the Act was madeamounting to Rs.22,56,596/- and added back to the total income. 7. The other disallowance was with regard to the claimof exemption under the development cost of the land. Theassessee claimed substantial expenses towards development cost.The Assessing Officer found that more than 90% of the paymentshad been made by cash. The Assessing Officer sought supportingmaterials for the break up of the development cost towardscutting of trees, removing water and other cleaning, supply ofsand, jelly, rubbish, gravel stone and quarry dust. However, theassessee failed to discharge the onus nor furnished necessarydocuments such as bills, register, etc. 8. In the absence of any supporting materials, the Assessing Officer estimated the expenses towards landdevelopment cost. In addition, on verification of the documents,it came to light that a part of the expenses was made throughself made vouchers incurred in cash and that the assessee didnot deduct tax at source in respect of that portion of thepayments. In furtherance of it, cash expenses to the tune ofRs.39,08,78,254/- was accounted to self made debit vouchers,which only contained the amount paid and the signature of therecipient and it did not contain the address of the party. Theassessee also claimed a total cash payment of Rs.39,08,78,254/-during the relevant year namely AY 2007-08 and the averageexpenses per day were shown as Rs.10,70,900/-. In the absence ofproper documents, the Assessing Officer disallowed a sum ofRs.6,22,75,902/- towards 20% of the claim of expenditure made incash and added back to the total income and finally arrived atthe assessed income to the tune of Rs.22,09,77,552/-, completedthe assessment by order dated 29.12.2009 and raised a demand tothe tune of Rs.5,68,31,528/-. 9. As against the order of assessment, the assesseefiled an appeal before the CIT(A), who, by order dated18.3.2011, partly allowed the appeal by confirming thedisallowance made by the Assessing Officer under Section 40A(3)of the Act and allowing the claim of the assessee towardsdevelopment expenses among other things. Aggrieved by that, both the Department as well as the assessee filed two appeals beforethe Tribunal, which, by order dated 09.7.2013, deleted thedisallowance made under Section 40A(3) of the Act and allowedthe claim of the assessee towards land development expenses.Hence, the Revenue is before us by filing TCA.Nos.570 and 571 of2015. AY 2008-09 : 9. As against the order of assessment, the assesseefiled an appeal before the CIT(A), who, by order dated18.3.2011, partly allowed the appeal by confirming thedisallowance made by the Assessing Officer under Section 40A(3)of the Act and allowing the claim of the assessee towardsdevelopment expenses among other things. Aggrieved by that, both the Department as well as the assessee filed two appeals beforethe Tribunal, which, by order dated 09.7.2013, deleted thedisallowance made under Section 40A(3) of the Act and allowedthe claim of the assessee towards land development expenses.Hence, the Revenue is before us by filing TCA.Nos.570 and 571 of2015. AY 2008-09 : 10. The assessee filed their return of income on30.9.2008disclosingtheincometothetuneofRs.70,05,56,400/-. The assessment was completed under Section143(3) of the Act on 28.12.2010 by making two disallowances, thefirst of which was for a sum of Rs.14,18,77,251/- under Section40A(3) of the Act the and the second was to the tune ofRs.12,13,61,729/- towards land development cost claimed.Aggrieved by that, the assessee filed an appeal before theconcerned Commissioner of Income Tax (Appeals) [for short, theCIT(A)], who, by order dated 15.4.2011, partly allowed theappeal by deleting the disallowance to the tune ofRs.12,13,61,729/- towards land development cost and by deletingthe addition to the tune of Rs.3,93,00,000/- out of the totaldisallowance to the tune of Rs.14,18,77,251/- made under Section40A(3) of the Act. Aggrieved by that, both the assessee as wellas the Revenue filed appeals before the Tribunal. Ultimately, byorder dated 21.6.2013, the Tribunal confirmed the adjudicationmade by the CIT(A) with regard to deletion of disallowancetowards land development cost and a part deletion of thedisallowance under Section 40A(3) of the Act. But, in respect ofthe balance disallowance to the tune of Rs.10,25,77,251/-sustained by the CIT(A) out of the total disallowance ofRs.14,18,77,251/- made by the Assessing Officer under Section40A(3) of the Act, the Tribunal remitted the issue back to theAssessing Officer. As against the order dated 21.6.2013, theRevenue is on appeal by filing TCA.No.228 of 2014. 11. In the meanwhile, there was a search and seizureconducted in the premises of the assessee on 03.9.2013 and anotice under Section 153A of the Act was issued. Thereafter, theassessee filed revised return by disclosing the same incomereturned originally. Pursuant to that, the assessment wascompleted on 31.3.2016 under Section 143(3) read with Section153A of the Act, by which, the Assessing Officer confirmed thedisallowance of Rs.10,25,77,251/- sustained by the CIT(A) in theearlier round of litigation on the ground that the assesseeeffected cash and cheque payments for purchasing the land inKannagapattu village. 12. Aggrieved by the order of assessment dated31.3.2016, the assessee filed an appeal before the CIT(A), whoallowed it by order dated 03.4.2018. As against the same, the https://hcservices.ecourts.gov.in/hcservices/ Revenue filed an appeal before the Tribunal, which, by orderdated 28.3.2019, dismissed the same. Hence, the Revenue is onappeal before us by filing TCA.No.792 of 2019. AY 2011-12 to 2014-15 : 13. For these assessment years also, the assessmentswere completed on 31.3.2016 pursuant to the search and seizureoperations conducted on 03.9.2013. For the assessment years from2011-12 to 2013-14, the notices under Section 153A of the Act29.4.2014 were issued. But, in all the four cases, a noticeunder Section 142(1) came to be issued. Pursuant to that, theassesssee filed their return of income declaring the income tothetuneofRs.6,09,19,530/-,Rs.10,70,23,600/-,Rs.8,05,82,670/- and Rs.1,01,46,150/- respectively. https://hcservices.ecourts.gov.in/hcservices/ Revenue filed an appeal before the Tribunal, which, by orderdated 28.3.2019, dismissed the same. Hence, the Revenue is onappeal before us by filing TCA.No.792 of 2019. AY 2011-12 to 2014-15 : 13. For these assessment years also, the assessmentswere completed on 31.3.2016 pursuant to the search and seizureoperations conducted on 03.9.2013. For the assessment years from2011-12 to 2013-14, the notices under Section 153A of the Act29.4.2014 were issued. But, in all the four cases, a noticeunder Section 142(1) came to be issued. Pursuant to that, theassesssee filed their return of income declaring the income tothetuneofRs.6,09,19,530/-,Rs.10,70,23,600/-,Rs.8,05,82,670/- and Rs.1,01,46,150/- respectively. 14. The Assessing Officer arrived the total income atRs.15,99,81,007/- and Rs.4,53,69,402/- respectively for theassessment years 2011-12 and 2014-15 in view of disallowance ofthe amounts claimed towards land development expenses. Asagainst the assessment orders dated 31.3.2016 for the years2011-12 and 2014-15, the assessee filed appeals before the CIT(A), who, ultimately, allowed the appeals by a common orderdated 12.1.2018 and deleted the additions towards landdevelopment cost. 15. For the assessment years 2012-13 and 2013-14, theincomeweredeterminedatRs.20,65,16,835/-andRs.18,21,41,348/- including long term capital gains. As againstthe orders of assessment for the years 2012-13 and 2013-14, theassessee preferred appeals before the CIT(A), who, by anothercommon order dated 12.1.2018, also allowed the appeals anddeleted the additions on the ground that the books of accountsof the assessee had not been rejected by the Assessing Officer. 16. As against the two common orders dated 12.1.2018respectively for the assessment years 2011-12 and 2014-15 aswell as 2012-13 and 2013-14, the Revenue preferred appealsbefore the Tribunal, which, by the common order dated24.12.2018, dismissed the appeals. Therefore, the Revenue isbefore us by way of TCA.Nos. 991, 994, 995 and 997 of 2019. 17. The following table would be a ready reckoner withregard to the issues involved in the above tax case appeals : https://hcservices.ecourts.gov.in/hcservices/ S.NoTCA.No.AssessmentIssues.Year1.228 of 20142008-091.LandDevelopmentExpenses2. Disallowance U/S 40A(3)2.570 and 5712007-08 for1.LandDevelopmentof 2015both casesExpenses2. Disallowance U/S 40A(3)3.792 of 20192008-091.LandDevelopmentExpenses2. Disallowance U/S 40A(3)3.Incriminatingmaterials4.991 of 20192011-121.LandDevelopment994 of 20192012-13Expenses&2013-14 &995 of 20192.Incriminatingmaterials5.997 of 20192014-151.LandDevelopmentExpenses6.792 of 20192008-091.Addition on account ofescapement of sales I. Issue pertaining to land development expenses : 18. One of the issues involved in the batch of cases,which is common to the all the assessment years namely 2007-08,2008-09, 2011-12, 2012-13, 2013-14 and 2014-15, is with regardto land development expenses incurred by the respondent/assessee. 19. Since the issue is common for all the aforementionedassessment years, we have examined the order of assessmentpassed under Section 143(3) of the Act for the assessment year2007-08 dated 29.12.2009. On appeal by the assessee, the CIT(A),by order dated 18.3.2011, partly allowed the appeal byconfirming the disallowance made by the Assessing Officer underSection 40A(3) of the Act and by allowing the claim of theassessee towards development expenses. Aggrieved by that, boththe Department as well as the assessee filed two appeals beforethe Tribunal. The two salient features in the order dated09.7.2013 passed by the Tribunal are (i) upholding the orderpassed by the CIT(A) in deleting the disallowance made underSection 40A(3) of the Act and (ii) allowing the claim of theassessee towards land development expenses. 20. The Assessing Officer was of the opinion that theexpenditure claimed by the assessee towards land development washighly excessive and bogus. The Assessing Officer examined eachof the heads of expenses namely JCB work, bulldozer hirecharges, tractor hire charges, land leveling charges, expensestowards jelly and sand materials, etc. and disallowed theexpenses claimed by the assessee, which was approximately to thetune of Rs.27 lakhs per acre of land. 21. On appeal before the CIT(A), the assessee hadelaborately made submissions and primarily contended that theAssessing Officer did not reject the books of accounts of theassessee, that the accounts were duly certified by a CharteredAccountant and that there was no debit entry, etc. After takingnote of the factual position, the CIT(A) held that thedisallowance was not justified. The CIT(A) noted that theassessee produced vouchers, which contained the details of thenames, amounts and signatures and merely because the addresseswere not given, the vouchers could not be treated as bogusvouchers. Further, the CIT(A) agreed with the assessee that thedebit vouchers were not created for claiming any expenditure,but they actually vouched the expenses incurred by the assessee.Furthermore, the CIT(A) noted that the Assessing Officer hadchecked only the vouchers for the period from 25.3.2007 to31.3.2007 on a test check basis and not for the whole year. Inaddition, the CIT(A) observed that the Assessing Officer had notbrought out any material on record to establish that thevouchers were bogus. 22. One more important fact, which the CIT(A) noted wasthat in spite of the so called high expenditure incurred for land development, the assessee was able to show the net profitrate of 16.01%, which, by any standard, was very reasonable.Thus, the Tribunal set aside the disallowance made by theAssessing Officer. 23. The finding rendered by the CIT(A) was tested forits correctness by the Tribunal, which re-appreciated the factsand concurred with the CIT(A). Therefore, we find no good groundto interfere with the said factual finding. We also find thatthere are no questions of law, much less substantial questionsof law arising in these appeals. 24. Accordingly, with regard to the issue of landdevelopment expenses, all the above tax case appeals filed bythe Revenue stand dismissed. II. Issue pertaining to disallowance under Section 40A(3) forthe assessment year 2007-08 : 25. The second issue is with regard to disallowanceunder Section 40A(3) of the Act for the assessment year 2007-08. 26. The Assessing Officer did not agree with theassessee that cash payments were made to the vendors and went bythe letter and spirit of Section 40A(3) of the Act that cashpayments have been effected beyond the threshold limit andtherefore disallowed the same. The assessee preferred an appealbefore the CIT(A), who examined the genuineness of thetransaction as to whether the assessee would be entitled toclaim the benefit of the proviso to Section 40A(3) of the Act.The CIT(A) rejected the finding on the fact that the cashpayments were duly recorded in the registered sale deed and theywere endorsed by the concerned Sub-Registrar and the total saleconsideration was taken into consideration for the purpose ofdemanding the stamp duty and registration purposes. Therefore,the CIT(A) held that when the Government official namelyRegistering Authority certified that the payments were actuallymade to the sellers and when the genuineness of the sale was notdoubted, the disallowance under Section 40A(3) of the Act couldnot be made. The CIT(A) did not agree with the assessee andconfirmed the disallowance. 27. The Tribunal tested the correctness of the decisionof the CIT(A). The assessee was a builder and developer and thelands purchased by the assessee were in the nature of stock-in-trade and certain purchases were made in cash and such purchasesby cash would be hit by Section 40A(3) of the Act unlessotherwise exempted under Rule 6DD of the Rules. The Tribunalnoted that the assessee was a business man and the cash paymentswere done for the purchase of lands and also took note that inmajority of land dealings, land owners would insist upon paymentof money in cash. Furthermore, the Tribunal also noted that the payments were duly recorded in the sale deed, that the same hasbeen registered by the Sub-Registrar and that the amount hadbeen taken into consideration for the purpose of calculatingstamp duty and registration. 28. Thus, we find, on facts, that there is no questionof law, much less substantial question of law arising in therelevant appeals. Accordingly, with regard to the issue ofdisallowance under Section 40A(3) of the Act for the assessmentyear 2007-08, TCA.Nos.570 and 571 of 2015 stand dismissed. Nocosts. III. Issue pertaining to disallowance under Section 40A(3) ofthe Act for the assessment year 2008-09 : 29. The issue relating to disallowance under Section 40A(3) of the Act also arises for the assessment year 2008-09,which is a question of law to be decided in TCA.Nos.228 of 2014and 792 of 2019. 30. The assessee purchased the land from 67 vendors,out of which, in respect of 12 vendors, the assessee paid theamounts by cheques. For 40 vendors, the payments were effectedboth by cheques and by cash and for the remaining 15 vendors,payments were made only by cash. The assessee was called upon toexplain as to why payments were effected especially to theextent of such a huge amount of money. They stated that the landowners, from whom, the agricultural lands were purchased, wereresiding in Kannagapet and Chettipunniyam villages where therewas no banking facility, that as per the details given by thevendors, they did not have any bank account, that the paymentswere made at their respective houses in the villages, that insome cases, the initial advance was paid through agents only andthat subsequently, on account of compulsion, some of the vendorsopened the bank account in the nearby town and the assessee paidthe amounts by cheque. They further stated that the vendors wereuneducated, that they were not able to come out of their villageto open the bank account, that in such a situation, the assesseewas compelled to pay the amount by cash and that in some cases,the assessee paid the amount by cash on holidays as the vendorshad to honour their commitments. 31. The Assessing Officer was not convinced with theexplanation offered by the assessee and accordingly disallowedthat portion of the payments, which were made by the assessee bycash to the vendors excluding the amounts paid for stamp dutyand registration charges. 32. Aggrieved by such an order, the assessee preferredan appeal before the CIT(A). The factual position was explainedbefore the CIT(A), who found that for the payment made inrespect of 15 land owners to the tune of Rs.3,93,00,000/-, the https://hcservices.ecourts.gov.in/hcservices/ 31. The Assessing Officer was not convinced with theexplanation offered by the assessee and accordingly disallowedthat portion of the payments, which were made by the assessee bycash to the vendors excluding the amounts paid for stamp dutyand registration charges. 32. Aggrieved by such an order, the assessee preferredan appeal before the CIT(A). The factual position was explainedbefore the CIT(A), who found that for the payment made inrespect of 15 land owners to the tune of Rs.3,93,00,000/-, the https://hcservices.ecourts.gov.in/hcservices/ vendors were residents of Kannagapattu Village, that they didnot have banking facilities and that the Village AdministrativeOfficer concerned certified that there was no bank inKannagapattu Village. Hence, the explanation offered by theassessee was accepted and the disallowance to that extent wasdeleted. With regard to the balance payments namely the paymentsmade to 40 vendors, which were by cash as well as by cheque tothe tune of Rs.10,25,77,251/-, the CIT(A) did not agree with theassessee stating that there was no acceptable reason given bythe assessee as to why they could not effect the entire paymentby cheque when they were able to pay certain amounts throughcheque. Therefore, the disallowance made by the AssessingOfficer to that extent was sustained. 33. The assessee carried the matter by way of appeal tothe Tribunal. The Revenue was also on appeal. The findingsrendered by the Tribunal in its order dated 21.6.2013 inITA.No.1241/Mds/2011 were in paragraphs 9 and 10. The Tribunalstated that the order passed by the CIT(A) was a cryptic orderand that he had not examined as to whether any part of theextent would be covered by Rule 6DD of the Rules. Further, theTribunal commented upon the Assessing Officer for having madeobservations, which, in the opinion of the Tribunal, werewithout application of mind. Accordingly, the orders passed byboth the CIT(A) and the Assessing Officer were set aside and thematter was remitted back to the Assessing Officer for a freshexamination. 34. In our considered view, the order passed by the CIT(A) cannot be taken to be a cryptic order as could be seen fromparagraph 7 of the order dated 15.4.2011. The CIT(A) tested thecorrectness of the order passed by the Assessing Officer andgranted partial relief to the assessee. In respect of theremaining amount where the disallowance was sustained, the CIT(A) assigned reasons as to why he did not agree with theassessee. The decisions, which were relied upon by the assessee,were taken note of by the CIT(A) and reasons were given as towhy they would not apply to the case of the assessee. Hence, wedo not agree with the finding of the Tribunal that the orderpassed by the CIT(A) is a cryptic order. 35. So far as the order passed by the Assessing Officeris concerned, the Tribunal stated that it was withoutapplication of mind. This observation also seems to be factuallyincorrect because sustainability of the reply given by theassessee was examined by the Assessing Officer. In paragraph 3.2of the assessment order dated 28.12.2010, the Assessing Officerextracted the explanation offered by the assessee in theirwritten submission dated 15.12.2010. To say the least, the saidwritten submission is absolutely vague without furnishing anydetails. Consequently, the Assessing Officer cannot be faultedfor having completed the assessment and assigning reasons as to why the disallowance has to be made. 35. So far as the order passed by the Assessing Officeris concerned, the Tribunal stated that it was withoutapplication of mind. This observation also seems to be factuallyincorrect because sustainability of the reply given by theassessee was examined by the Assessing Officer. In paragraph 3.2of the assessment order dated 28.12.2010, the Assessing Officerextracted the explanation offered by the assessee in theirwritten submission dated 15.12.2010. To say the least, the saidwritten submission is absolutely vague without furnishing anydetails. Consequently, the Assessing Officer cannot be faultedfor having completed the assessment and assigning reasons as to why the disallowance has to be made. 36. Therefore, we are of the view that it is not a casewhere the CIT(A) passed a cryptic order nor the order passed bythe Assessing Officer is without application of mind. Theassessee has to be blamed for the same because of not giving aproper explanation/reply to the query raised by the AssessingOfficer. In any event, we do not propose to non suit theassessee on the ground that certain details were not furnishedin proper form. The assessee would state that certain of thevendors, who did not have bank accounts, could not come out ofthe village to open up the bank account and after insistence,they had opened the bank accounts and in certain cases, advancewas paid to the vendors so as to enable them to keep up variousother commitments, to which, they had been fastened. 37. Therefore, while vacating the remarks made by theTribunal as against the CIT(A) and the Assessing Officer, weremand the matter to the Assessing Officer to consider thegenuineness of the stand taken by the assessee in so far as thepayments made to the tune of Rs.10,25,77,251/-, afford anopportunity of personal hearing to the authorized representativeof the assessee and redo the assessment only to the extentindicated in accordance with law. In the light of the order ofremand passed by us for the assessment year 2008-09 with regardto disallowance under Section 40A(3) of the Act, TCA.Nos.228 of2014 and 792 of 2019 stand allowed. The relevant substantialquestions of law are left open. IV. Issue pertaining to the presence of incriminating materialsfor the assessment years 2008-09 and 2011-12 to 2013-14 : 38. The issue as to whether incriminating materialsshould be available for initiation of proceedings under Section153A of the Act is a question of law (i) raised forconsideration in TCA.No.792 of 2019 for the assessment year2008-09 and (ii) framed for consideration for the for theassessment years from 2011-12 to 2013-14. 39. The Revenue rests their arguments by placingreliance on the following decisions : (i) of the Kerala High Court in thecase of CIT Vs. St.Francis Clay Decor Tiles[reported in (2016) 70 Taxmann.com 234]; (ii) of the Allahabad High Court in thecase of CIT Vs. Raj Kumar Arora [reported in(2014) 52 Taxmann.com 172]; (iii) of the Kerala High Court in thecase of E.N.Gopakumar Vs. CIT [reported in(2016) 75 Taxmann.com 215]; (iv) of the Delhi High Court in thecase of Filatex India Ltd. Vs. CIT [reported in (2014) 49 Taxmann.com 465]; (v) of the Kerala High Court in thecase of Dr.A.V.Sreekumar Vs. CIT [reportedin (2018) 90 Taxmann.com 355]; and(vi) of the Kerala High Court in thecase of Sunny Jacob Jewellers and WeddingCentre Vs. DCIT [reported in (2014) 48Taxmann.com 347]. 40. These decisions are pressed into service by theRevenue for the proposition that there has been no requirementunder the provisions of the Act for the Department to collectinformation and evidence for six previous years preceding theassessment year in order to initiate proceedings under Section153A of the Act. Further, during the assessment under Section153A of the Act, additions need not be restricted or allowed toincriminating materials found during the course of search. in (2014) 49 Taxmann.com 465]; (v) of the Kerala High Court in thecase of Dr.A.V.Sreekumar Vs. CIT [reportedin (2018) 90 Taxmann.com 355]; and(vi) of the Kerala High Court in thecase of Sunny Jacob Jewellers and WeddingCentre Vs. DCIT [reported in (2014) 48Taxmann.com 347]. 40. These decisions are pressed into service by theRevenue for the proposition that there has been no requirementunder the provisions of the Act for the Department to collectinformation and evidence for six previous years preceding theassessment year in order to initiate proceedings under Section153A of the Act. Further, during the assessment under Section153A of the Act, additions need not be restricted or allowed toincriminating materials found during the course of search. 41. So far as the assessee is concerned, they wouldplace heavy reliance on the following decisions 42. It is pointed out by the learned Senior StandingCounsel that as against the decision of the Delhi High Court inthe case of Smt. Amita Garg, the Revenue filed a special leavepetition before the Hon'ble Supreme Court, in which, leave hasbeen granted and the matter has been tagged along with CivilAppeal No.14702 of 2015 as reported in (2020) 114 Taxmann.com552 [PCIT Vs. Devi Dass Garg]. 43. As against the decision of the Bombay High Court inthe case of Continental Warehousing Corporation (Nhava Sheva)Ltd., an appeal was filed before the Hon'ble Supreme Court,leave has been granted and the appeal has been directed to betagged along with Civil Appeal No.8900 of 2012 as reported in(2015) 64 Taxmann.com 34. 44. Further, we note that the same issue was decided https://hcservices.ecourts.gov.in/hcservices/ against the assessee and the assessee is on appeal before theHon'ble Supreme Court in the case of Dayawanti Vs. CIT [S.L.P.(C).No. 20559 of 2017], in which, an order of interim stay hasbeen granted by the Hon'ble Supreme Court by order dated03.10.2017. 45. Thus, the issue as to whether the incriminatingmaterials are required to be present or not is now before theHon'ble Supreme Court. What is required to be seen in the caseon hand is as to whether the relief was granted to the assesseesolely for the reason that there was no incriminating materialavailable pursuant to the search. A perusal of the ordersimpugned before us and more particularly the order passed by theTribunal dated 28.3.2019, which is impugned in TCA.No.792 of2019, we find that the Tribunal examined the correctness of theorder passed by the CIT(A), who proceeded entirely on the meritsof the matter and therefore, the assessee was granted relief bythe CIT(A) solely for the reason that there was no incriminatingmaterial. But, the CIT(A), having been satisfied on facts, heldthat no addition needed be made. 46. So far as the order of the Tribunal for theassessment year 2011-12, which is impugned in TCA.No.991 of 2019is concerned, Mr.T.R.Senthilkumar, learned Senior StandingCounsel appearing for the appellant/Revenue is right in hissubmission that the Tribunal granted relief to the assessee forthe reason that no incriminating material had been found in thecourse of search and confirmed the order passed by the CIT(A). 47. However, when we peruse the common order passed bythe CIT(A) dated 12.1.2018 for the assessment years 2011-12,2014-15 and 2015-16 (with which, we are not concerned in thisjudgment), we find that the CIT(A) examined the merits of thematter and found that there was no justification for variousdisallowances. Therefore, the Tribunal probably missed out thisfactual position presumably because a batch of cases were beforethe Tribunal and in all probabilities, both the assessee and theRevenue might not have placed full break up details in aconvenient format. 47. However, when we peruse the common order passed bythe CIT(A) dated 12.1.2018 for the assessment years 2011-12,2014-15 and 2015-16 (with which, we are not concerned in thisjudgment), we find that the CIT(A) examined the merits of thematter and found that there was no justification for variousdisallowances. Therefore, the Tribunal probably missed out thisfactual position presumably because a batch of cases were beforethe Tribunal and in all probabilities, both the assessee and theRevenue might not have placed full break up details in aconvenient format. 48. Be that as it may, the relief granted to theassessee is on facts and on merits of the disallowances made andnot on the ground that no incriminating material was available.In one of the cases, the correctness of this decision was testedby the Tribunal and the view taken by the CIT(A) has beenaffirmed. Since the entire dispute revolves on the factualmatrix, we are not expected to substitute our opinion in anappeal under Section 260A of the Act. Thus, we hold that thereis no question of law, much less substantial question of lawarising for consideration on this issue. 49. Accordingly, on this issue, we dismiss TCA.Nos.792,991, 994 and 995 of 2019. V. Issue pertaining to addition on account of escapement ofsales : 50. This leaves us with only one question to be decidedin TCA. No.792 of 2019, which is substantial question of lawNo.4 framed for consideration. At the risk of repetition, it isextracted as hereunder : “Whether on the facts and thecircumstances of the case, the ITAT wasjustified in deleting the addition inrespect of the receipts from Kannagapattuland purchased from Smt.D.Sangupathi andM/s.SSD Homes & Estate Developers P limitedlater transferred to the assessee asadvances which ought to have been accountedfor sales but has been classified underadvances?" 51. We have carefully considered the submissions made bythe learned counsel on either side. On perusal of the orderpassed by the CIT(A) dated 03.4.2018, it is seen that the CIT(A)considered the factual aspects in a detailed manner and deletedthe additions. This finding has been affirmed by the Tribunalafter re-appreciating the facts. We find no substantial questionof law arising for consideration. Hence, with regard to thisissue, TCA.No.792 of 2019 stands dismissed. 52. In fine, (i) with regard to the issue of land developmentexpenses, all the above tax case appeals filed by the Revenuestand dismissed as no substantial question of law arises forconsideration; (ii) with regard to the issue of disallowance underSection 40A(3) of the Act for the assessment year 2007-08,TCA.Nos. 570 and 571 of 2015 stand dismissed as no substantialquestion of law arises for consideration; (iii) In the light of the order of remand passed by usfor the assessment year 2008-09 with regard to disallowanceunder Section 40A(3) of the Act, TCA.Nos.228 of 2014 and 792 of2019 stand allowed. The relevant substantial questions of laware left open; (iv) with regard to the issue pertaining to presence ofincriminating materials for the assessment year 2008-09 and2011-12 to 2013-14, we dismiss TCA.Nos.792, 991, 994 and 995 of2019 as no substantial question of law arises for consideration;and https://hcservices.ecourts.gov.in/hcservices/ (v) with regard to the issue pertaining to addition onaccount of escapement of sales, TCA.No.792 of 2019 is dismissedas no substantial question of law arises for consideration.No costs. sd/-Assistant Registrar(CS III)/True Copy/ (iii) In the light of the order of remand passed by usfor the assessment year 2008-09 with regard to disallowanceunder Section 40A(3) of the Act, TCA.Nos.228 of 2014 and 792 of2019 stand allowed. The relevant substantial questions of laware left open; (iv) with regard to the issue pertaining to presence ofincriminating materials for the assessment year 2008-09 and2011-12 t