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2024 Supreme(Online)(ITAT) 4115
INCOME TAX APPELLATE TRIBUNAL (INDORE BENCH)
Shri Vijay Pal Rao, Shri B.M. Biyani, JJ
Revenue – Appellant
Versus
Assessee – Respondent
ITA No. 206 & 207/Ind/2023 | ITA No. 227/Ind/2023
For the Appellants/Petitioners: Shri Ram Kumar Yadav, CIT DR
For the Respondents: Shri Harsh Vijaywargiya, AR
The deletion of disallowances for cash payments and valuation discrepancies hinges upon establishing business practices that did not contravene Income-tax regulations, emphasizing local economic conditions and employment methods.
Headnote:(A) Income-tax Act, 1961 - Sections 40A(3) and 69 - Disallowance of cash payments made exceeding Rs.20,000 and addition for unexplained investment in construction by the Assessing Officer - Chief Commissioner’s findings were challenged by both parties; CIT(A) reversed AO's disallowances on grounds of business expediency and lack of permanent employment model among workers, with payments made on a daily basis considered as justified, leading to deletion of substantial discrepancies. (Paras 6-14)
(B) Section 142A - Valuation by the Departmental Valuation Officer (DVO) - AO questioned discrepancies between declared values and DVO's valuation estimations - CIT(A) emphasized that local PWD rates should be prioritized over CPWD rates, supporting claims of local market conditions that minimize construction costs, thus justifying reassessment of property investments. (Paras 14-26)
(C) Search proceedings yielded cash found in lockers amounting to Rs.20,49,000, with substantial proceeds termed as unexplained money - CIT(A) upheld AO's methodologies but failed to adequately assess counter-evidence provided by the assessee about cash sources; cash holdings substantiated by business documentation were scrutinized but the order was reaffirmed with provisions applied under section 69A. (Paras 24-28)
| Table of Content |
|---|
| 1. background facts pertaining to the appeals. (Para 1 , 2 , 3) |
| 2. revenue's grounds challenging cit(a)'s actions. (Para 4 , 5 , 6) |
| 3. discussion on applicability of section 40a(3). (Para 7 , 8 , 9) |
| 4. observations by the court on cash payments to hamals. (Para 10 , 11 , 12) |
| 5. court's analysis on dvo's report and valuation dispute. (Para 13 , 14 , 15) |
| 6. conclusions on the estimated cost of the construction. (Para 16 , 17 , 18) |
| 7. final decision regarding the disallowance of expenses. (Para 19 , 20) |
| 8. assessment of locker cash as unexplained. (Para 21 , 22 , 23) |
| 9. final decision on the appeal resolutions. (Para 24 , 25 , 26 , 27) |
ORDER
Per Bench:
The captioned three appeals are related to same assessee. ITA No. 206 & 207/Ind/2023 for AY 2015-16 and 2016-17 respectively are preferred by revenue and ITA No. 227/Ind/2023 for AY 2018-19 is preferred by assessee. All these appeals are directed against appeal-order dated 30.03.2023 passed by learned Commissioner of Income-tax (Appeals)-3, Bhopal [“CIT(A)”] which in turn arise out of assessment-order dated 30.12.2009 passed by ACIT, Ujjain, stationed at Indore [“AO”] u/s 153A/143(3) of the Income-tax Act, 1961 [“the Act”].
2. Since these appeals relate to same assessee, are represented by same counsels and certain issues are identical; they were heard together at the request of parties and are being disposed of by this consolidated order for the sake of convenience, brevity and clarity.
3. The background facts leading to these appeals are such that the assessee-individual was engaged in the business of providing material handling and transportation services connected with railway racks in a proprietorship concern named ‘M/s Rajbeer Roadlines’. The assessee worked mainly for Food Corporation of India (FCI) and Ambuja Cements Limited. A search u/s 132 was carried by Income-tax Authorities on one “Bhatia group” including assessee on 23.01.2018. Consequently, the assessments u/s 153A/143(3) were framed for seven AYs 2012-13 to 2018-19. Presently, we are concerned with three AYs 2015-16, 2016-17 and 2018-19 in these appeals. The AO made assessments of these three AYs after making certain disallowances/additions. The assessee carried matters in first-appeal and succeeded to a large extent. Now, the revenue/assessee have come in these appeals.
Revenue’s ITA No. 206 & 207/Ind/2023 – AY 2015-16 & 2016-17:
4. The grounds raised in these appeals are as under: A.Y. 2015-16:
1. Whether on the facts and the circumstances of the case and in law, the Ld. CIT(A) was justified in deleting the disallowance of Salary/Hammali expenses amounting to Rs. 2,53,63,900/ - made u/s 40A(3) of the IT Act for payment made in cash exceeding Rs. 20,000/ -?.
2. Whether on the facts and the circumstances of the case and in law, the Ld. CIT(A) was justified in deleting the disallowance of Salary/Hammali expenses amounting to Rs. 2,53,63,900/ - made u/s 40A(3) of the IT Act for payment made in cash exceeding Rs. 20,000/ - ignoring that:
a) The payment made in cash exceeding Rs. 20,000/- was found entered in the registers seized during the course of search proceedings conducted in the case of the assessee?
b) The registers, as evidenced at pages 4-6 of the Assessment Order, contain the signature of personnel accepting salary in cash exceeding Rs. 20,000/- on duly affixed Revenue Stamps?
c) The assessee failed to substantiate that the month-wise registers represents daily payment?
3. Whether on the facts and the circumstances of the case and in law, the Ld. CIT(A) was justified in deleting the mad addition of Rs. 4,05,973/- made for unexplained investment u/s 69 of the IT Act in construction of house?
4. Whether on the facts and the circumstances of the case and in law, the Ld. CIT(A) was justified in deleting the addition of Rs. 4,05,973/- made for unexplained investment u/s 69 of the IT Act in construction of house without pointing out any specific defect in the report of the Departmental Valuation Officer?
5. Whethe
