Can insistence of cash payment by vendors be considered a necessity for reversal of disallowance by Ld.CIT(A)?

IN THE INCOME TAX APPELLATE TRIBUNAL
‘A’ BENCH : BANGALORE

BEFORE SHRI. B. R. BASKARAN, ACCOUNTANT MEMBER
AND
SMT. BEENA PILLAI, JUDICIAL MEMBER

 ITA No.2272/BANG/2018
Assessment Year : 2013 – 14 

M/s Samrudhi Developers,
#29, 2nd Floor, 1st Main,
3rd Stage, 3rd Block,
Basaveswaranagar,
Bengaluru-560 079.
PAN – ABUFS 5031 J
APPELLANT 

Vs.

The Asst. Commissioner of
Income-tax,
Circle-6(2)(1),
Bengaluru.
RESPONDENT 

Appellant by : Shri V Srinivasan, Advocate
Respondent by : Shri Kannan Narayanan, JCIT

Date of Hearing : 08-07-2021
Date of Pronouncement : 23-07-2021

ORDER

PER BEENA PILLAI, JUDICIAL MEMBER

Present appeal has been filed by assessee against order dated 20/06/2018 passed by the Ld.CIT(A)-6, Bangalore for assessment year 2013-14 on following grounds of appeal: 

Brief facts of the case are as under:

2. The assessee is a firm having income from business. It filed its return of income on 28/09/2013 declaring total income of Rs.3,47,10,000/-. The return was processed under section 143(1) of the Act and the case was selected for scrutiny. Notice under section 143(2) of the Act was issued to assessee, in response to which representative of assessee appeared before the Ld.AO and called requisite details.

2.1 During the course of assessment proceedings, the Ld.AO observed that assessee debited sum of Rs.4,38,21,784/- to the P&L account by way of purchase of land. The Ld.AO treated the land purchased as stock in trade and the cash purchases incurred amounting to Rs.1,41,03,750/- as not allowable under section 40(A)(3) of the Act. The Ld.AO observed that, the payments were made in the name of Laughter Yoga Iternational Foundation, and not in the name of the vendors.

2.2 The Ld.AO called upon assessee to explain why the cash payment and checked payment made in the name of Laughter Yoga Foundation should not be disallowed. In response the assessee submitted that, it acted as agents of Society for acquisition of land and the amounts paid by the society were used to defray the expenses in connection with the purchase of land and ultimately the profit that is derived by assessee is nothing but commission for agency. The assessee submitted that instead of reflecting the income alone, they resorted to show the gross receipts and expenses relating to the project in the profit and loss account. 

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