IN THE INCOME TAX APPELLATE TRIBUNAL SMC BENCH, LUCKNOW BEFORE SHRI. SUDHANSHU SRIVASTAVA, JUDICIAL MEMBER Assessment Year: 2015-16 Yash Infratech v. The ACIT A-78, Indira Nagar Range 1 Lucknow (U.P) Lucknow TAN/PAN:AABFY1381R (Appellant) (Respondent)

Appellant by: Shri P. K. Kapoor, C.A.

Respondent by: Shri Sunil Kumar Rajwanshi, D.R.

O R D E R

This appeal has been preferred by the Assessee against the order dated 20.06.2024, passed by the National Faceless appeal Centre, Delhi (NFAC) for Assessment Year 2015-16.

2.0 The brief facts of the case are that the assessee-firm was engaged in the business of sale and purchase of immovable properties. The return of income for the year under consideration was filed by the assessee on 27.09.2015, declaring a loss of Rs.27,78,683/-. The case of the assessee was selected for limited scrutiny under CASS. The Assessing Officer (AO) issued statutory notices to the assessee calling for details of transactions entered into by the assessee. The assessee filed details, vide letter dated 20.11.2017, from which it was noticed by the AO that during the year under consideration, the assessee’s stock-in-trade included three properties purchased during the year, amounting to Rs.27,34,800/- and the mode of payment was cash. The AO, therefore, disallowed the amount of Rs.27,34,800/- spent by the assessee for purchase of land in cash under section 40A(3) of the Income Tax Act, 1961 (hereinafter called “the Act’) and added the same to the income of the assessee. The AO completed the assessment under section 143(3) of the Act, assessing the total loss of the assessee at Rs.43,880/-.

2.1 Aggrieved, the Assessee preferred an appeal before the NFAC, which dismissed the appeal of the assessee by upholding the disallowance.

2.2 Now, the assessee has approached this Tribunal challenging the order of the NFAC, by raising the following grounds of appeal:

1. BECAUSE the Id. "CIT(A)" has grossly erred in not quashing the assessment order even though the Assessing Officer passing the assessment order had not issued the mandatory notice u/s 143(2) of the Act.

2.1 BECAUSE the addition of Rs.27,34,800/- made by the Assessing Officer u/s 40A(3) of the Income-tax Act, 1961 is beyond the scope of limited scrutiny for which the case of the assesse was selected for scrutiny assessment and on a due consideration of this fact alone the ld "CIT(A)" ought to have deleted the addition of the said amount.

2.2 BECAUSE the Id. "CIT(A)" has grossly erred in up-holding the addition of Rs.27,34,800/- u/s 40A(3) of the Income-tax Act, 1961, even though, the said addition was beyond the scope of limited scrutiny [for which the case was selected for scrutiny u/s 143(2)] and the Assessing Officer had not obtained necessary approval from the competent authority to expand the scope of scrutiny.

WITHOUT PREJUDICE TO THE AFORESAID

3. BECAUSE the Id. "CIT(A)" has erred in law and on facts in confirming the addition of Rs.27,34,800/- u/s 40A(3) of the Income-tax Act, made by the Assessing Officer on the ground that the assesse had made cash payment for purchase of immovable properties in excess of limit specified under the said provisions of the Act.

4, BECAUSE while upholding the addition of Rs.27,34,800/- the Id. "CIT(A)" failed to appreciate that the provisions of section 40A(3) of the Act are not attracted in the present case as the immovable properties purchased by the assessee during the year by making cash payment of Rs. 27,34,800/- remained in the closing stock and no deduction of the said amount was claimed by the assesse while computing the total income for the assessment year under appeal.

5. BECAUSE while upholding the addition of Rs.27,34,800/- u/s 40A(3) of the Act, the ld. "CIT(A)" failed to appreciate the un-disputed fact that the cash payment of the said amount was actually made by the assesse to the sellers of the properties which transactions are duly evidenced by the registered sale deeds and thus the genuineness of the payments could