Mange Ram Tyagi, Muzaffarnagar vs Assessee

Appellant by : Shri K.L. Aneja, Advocate. Respondent by : Shri P. Dam Kanunjha, Sr.DR.

Date of hearing : 11.03.2015 Date of pronouncement : 18.03.2015

ORDER

PER G.C. GUPTA, GUPTA, VP :

This appeal by the assessee for the assessment year 2008-09 is directed against the order of learned CIT(A), Muzaffarnagar dated 20th July, 2011.

2. The revised grounds of appeal of the assessee are as under:-

"1. That the learned CIT(A) has erred in law and on facts in confirming the disallowance of Rs.6,85,000/- made by the A.O. by invoking section 43A(3) of Income Tax Act, by not considering exceptional circumstance laid in Rule 6DD(g) of the Income Tax Act.

2. That the learned CIT(A) has erred in law and on facts in confirming the disallowance of Rs.2,45,000/- by 2 ITA-4592/Del/2011

invoking provisions of section 40A(3) of the Income Tax Act.

3. That the authority below have erred in law and on facts in making this allowance of Rs.73,000/- paid to Sh. Rahul Kumar on account of commission but denied by said Rahul Kumar to be receipt of the impune sum as loan from the appellant instead of commission."

3. The learned counsel for the assessee submitted that the assessee is a villager residing in a remote village named Niyama in the district of Muzaffarnagar, Uttar Pradesh and there was not a single bank in the village during the relevant period. He submitted that the assessee has filed a duly sworn-in affidavit to this effect, copy of which has been filed in the compilation before us. He submitted that the Assessing Officer in his remand report dated 25.05.2012 has admitted "Admittedly, there is no bank facility in the native village (Niyamu), where the assessee resides and the bank is situated in a town (Purkazi) which is nearly 10-11 Kms far away from his village". He submitted that in view of no banking facility in the village of the assessee, no addition could be made under Section 40A(3) of the Income-tax Act, 1961. He submitted that the two deponents have appeared before the Assessing Officer in remand proceedings and have confirmed the payments in question. With regard to third person, he has appeared before the Assessing Officer but told that it was a loan transaction. He relied on the decision of Delhi Tribunal in the case of Saraswati Housing & Developers Vs. Additional CIT in ITA No.5795/Del/2011 in support of the case of the assessee.

4. Learned DR, on the other hand, has relied on the order of the Assessing Officer and the CIT(A). He referred to the relevant portion of the order of the Assessing Officer and CIT(A) in support of the case of 3 ITA-4592/Del/2011

the Revenue. He submitted that it is highly improbable that in these times, there was no banking facility in the village of the assessee.

5. We have considered the rival submissions and have perused the order of the Assessing Officer and the CIT(A) and also the contents of the affidavit of the assessee in the compilation filed before us. We find that in the remand report dated 25.05.2012, the Assessing Officer has admitted that there was no banking facility in the native village Niyamu where the assessee resides and the bank was situated in a town Purkazi which is about 10-11 Kms. far from the village. The two persons have appeared before the Assessing Officer in the remand proceedings and have confirmed the transactions in question. The third person has confirmed the transaction with the difference that, according to him, the nature of the transaction was that of loan transaction. In these facts of the case, in view of the admission of the Assessing Officer that there was no banking facility in the village of the assessee, we are of the view that the case of the assessee falls in the exceptions to Rule 6DD of the Income-tax Rules, 1962 and no disallowance under Section 40A(3) of the Act could be made in the case of the assessee. Accordingly, the additions made under Section 40A(3) of the Act are deleted and the revised grounds of appeal No.1 to 3 of the assessee's appeal are allowed.

6. In the result, the appeal of the assessee is allowed.

Decision pronounced in the open Court on 18th March, 2015.

Sd/- Sd/- (T.S. KAPOOR) KAPOOR) (G.C. (G.C. GUPTA) GUPTA) ACCOUNTANT MEMBER VICE PRESIDENT

VK. 4 ITA-4592/Del/2011

Copy forwarded to: -

1. Appellant : Shri Mange Ram Tyagi, S/o Shri Ghayan Chand, V.P.O. Niyamu, Muzaffarnagar.

2. Respondent : Income Tax Officer, Ward- Ward-2(1), Muzaffarnagar.

3. CIT 4. CIT(A) 5. DR, ITAT

Assistant Registrar