Provisions of sec. 40A(3) not applicable if assessee made cash payment for purchase of stock-in-trade: ITAT
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- Last Updated on 13 June, 2022
Case Details: Vikrant Happy Homes (P.) Ltd. v. DCIT - [2022] 138 taxmann.com 559 (Pune-Trib.)
Judiciary and Counsel Details
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- Inturi Rama Rao, Accountant Member & S.S. Viswanethra Ravi, Judicial Member
- Sanket Joshi for the Appellant.
- M. Jasnani for the Respondent.
Facts of the Case
Assessee-company was engaged in the business of land dealing and development. During the year, it purchased certain lands/plots and made cash payments exceeding the threshold limit prescribed under section 40A(3). During assessment proceedings, the Assessing Officer (AO) made disallowance under section 40A(3) which was further confirmed by the CIT(A).
Aggrieved-assessee filed the instant appeal before the Tribunal.
Before the Tribunal, the assessee contended that all the lands were appearing under the closing stock of the company and no deduction was claimed in respect of purchases for which cash payments were made.
He contended that the provisions of section 40A(3) aren’t attracted towards expenses/purchases when no deduction is claimed. The cash payments were genuine and the provisions of section 40A(3) are not attracted to the genuine cash payments which were identified and acknowledged by the payee. Further, the said cash payments were made keeping in view the business exigency to finalize the deal and to avoid the competitors from snatching the deal.
ITAT Held
The Tribunal held that it is settled law as rightly pointed assessee when there is no deduction no disallowance would follow. In the instant case, the fact remains admitted that the sellers from whom the assessee purchased lands identified the transaction and also acknowledged the cash payments. It shows that the transaction was genuine.
Therefore, there was merit in the contention of assessee that the expenditure incurred in cash forming part of the closing stock for which no deduction had not been claimed while computing the income under the business head, the question of disallowance under section 40A(3) does not arise.
List of Cases Reviewed
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- Madhav Govind Dulshete v. ITO [2018] 99 taxmann.com 56/259 Taxman 149 (Bom.) (para 9) distinguished.
List of Cases Referred to
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- Madhav Govind Dulshete v. ITO [2018] 99 taxmann.com 56/259 Taxman 149 (Bom.) (para 5)
- Anupam Tele Services v. ITO [2014] 43 taxmann.com 199/222 Taxman 318/366 ITR 122 (Guj.) (para 7)
- Smt. Harshila Chordia v. ITO [2008] 298 ITR 349 (Raj.) (para 7)
- Vaduganathan Talkies v. ITO [2020] 120 taxmann.com 25/275 Taxman 599/428 ITR 224 (Mad.) (para 7)
- Nam Estates (P.) Ltd. v. ITO [2021] 123 taxmann.com 218/277 Taxman 169/[2020] 428 ITR 186 (Kar.) (para 7)
- Bagmari Tea Co. Ltd. v. CIT [2002] 121 Taxman 143/[2001] 251 ITR 640 (Cal.) (para 7).
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