DCIT Vs M/s. Brilliant Sare Reality Pvt. Ltd. (ITAT Indore)
Conclusion: When cash payment was done on insistence of the seller, amount was duly recorded in the sale deed and no doubt was raised with regard to the genuineness of the transaction, disallowance u/s 40A(3) not justifiable.
FACTS –
In February, 2009 search was initiated against M/s. Zoom and the documents of the assesses was found. In connection to the same, on 15.12.2009 notice u/s 153C was issued to the assesses. Assesses challenged the legality of proceedings initiated against them u/s 153C.
In the said year, the assessee had incurred total expense of INR 46,71,49,446/- towards purchase and registration of land. Out of the total amount, payment of INR 3,29,35,000/- was done in cash. AO made addition of INR 6,58,7000 (20% of INR 3,29,35,000) invoking provisions of section 40A(3).
Assesses submitted that the cash payment was only a ‘token money’ and all the subsequent payments were made through proper banking channel. It was submitted that as per the prevalent practice in the real estate market they are required to make the first payment in cash since the parties in the transaction are unknown. Assesses submitted that identity of the payee is disclosed in the registered sale deed and AO has never doubted genuineness of the transaction and hence provisions of section 40A(3) cannot be attracted.
HELD –
Addition u/s 40A(3) was deleted on the basis of following crucial facts –
