Ganesh Builders Ltd. Vs DCIT (ITAT Nagpur)
The appeals before the ITAT Nagpur arose from a common order passed by the Commissioner of Income Tax (Appeals) for Assessment Years 2013–14 and 2014–15. The assessee, a public limited company engaged in business activities, challenged additions made by the Assessing Officer (AO) and confirmed by the CIT(A), primarily relating to disallowance under Section 40A(3) and treatment of agricultural income.
For Assessment Year 2013–14, the assessee had filed its return declaring income of ₹1.07 crore. During scrutiny assessment under Section 143(3), the AO made two additions: (i) ₹21.55 lakh under Section 40A(3) on account of cash payments exceeding ₹20,000 made towards purchase of agricultural land, and (ii) ₹3.83 lakh by treating part of the declared agricultural income as income from other sources.
The assessee explained that it had purchased agricultural land for ₹77 lakh, of which ₹21.55 lakh was paid in cash at the request of the vendors, who were farmers residing in villages and required cash. The assessee contended that the payments were genuine, recorded in books, and made out of business expediency. It was also argued that such payments were not claimed as expenditure in the profit and loss account, as the land was initially shown as an asset and later treated as stock-in-trade upon commencement of construction activity. Therefore, no disallowance under Section 40A(3) was warranted.
