SANJAY TRADERS, AURAIYA V. ITO WARD1(1)(4), AURAIYA

ITA 06/AGR/2019

• Counselvise Citation: [2020] 110 COUNSELVISE.COM (IT) 8911 (ITAT-AGRA)
• Duration Of Justice: 1 year(s) 6 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-07-2020
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB
• Assessment Year: 2008-2009
• Appeal Filed On: 09-01-2019
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: RAVI AGARWAL SHRI WASEEM
• Keywords: Reasonable cause; Condonation of delay; Reassessment proceedings
• Section: 40A(3); 13; 145(3); 22; 148

Judgement Text

IN THE INCOME-TAX APPELLATE TRIBUNAL, AGRA BENCH, AGRA BEFORE : SHRI LALIET KUMAR, JUDICIAL MEMBER AND DR. MITHA LAL MEENA, ACCOUNTANT MEMBER ITA NO. 06/AGR/2019 ASSESSMENT YEAR: 2008-09 SANJAY TRADERS, PHAPUND ROAD, NEAR VEDIC INTER COLLEGE DIBYAPUR, AURAIYA. PAN- ABAFS 7010F. (APPELLANT) VS. INCOME - TAX OFFICER, WARD 1(1)(4), AURAIYA. (RESPONDENT) APPELLANT BY SHRI RAVI AGARWAL, ADVOCATE RESPONDENT BY SHRI WASEEM ARSHAD, SR. DR ORDER PER LALIET KUMAR, J.M.: THIS IS AN APPEAL FILED BY ASSESSEE AGAINST THE O RDER DATED 31.10.2018 PASSED BY LD. COMMISSIONER OF INCOME-TAX (APPEALS)-I, AGRA FOR THE ASSESSMENT YEAR 2008- 09. THE GROUNDS RAISED BY ASSESSEE READ AS UNDER : 1. BECAUSE PROCEEDINGS INITIATED U/S 148 ON THE BA SIS OF INVESTIGATION REPORT IS ILLEGAL AND BAD IN LAW. THE AO HAS NOT APPLIED HIS M IND TO REOPENING AND RELIED ON THE FINDINGS OF THE INVESTIGATION WING WHICH IS ILLEGAL AND BAD IN LAW. 2. BECAUSE MAINTENANCE OF DISALLOWANCE OF RS. 36883 .00 IN TRUCK REPAIR EXPENSES OF RS. 41060.00 TOTALING TO RS. 77943.00 ARE THE PA RT OF THE TRADING EXPENSES OF THE TRUCK WHICH IS ALREADY INCLUDED IN THE TRADING A CCOUNT WHILE APPLYING THE NET RATE OF PROFIT TO THE RECEIPTS OF THE ASSESSEE. THEREFORE THIS AMOUNT IS DOUBLE ADDITION AND DESERVES TO BE DELETED. DATE OF HEARING 23.07.2020 DATE OF PRONOUNCEMENT 30 .07. 2020 ITA NO. 06/AGR/2019 2 3. BECAUSE DISALLOWANCE OF RS. 52,12,392 UNDER SECT ION 40A(3) OF THE INCOME TAX ACT TO THE ONE SUPPLIER OF GRIT SHRI KISHAN SINGH O F JUHU, KANPUR MADE THROUGH BEARER CHEQUES IS WHOLLY ILLEGAL AND BAD IN LAW. HE IS A BIG SUPPLIER AND ASSESSED IN INCOME TAX DEPARTMENT AT KANPUR. THE LEARNED CIT A PPEAL WAS NOT JUSTIFIED IN NOT APPRECIATING THESE FACTS AND CIRCUMSTANCES O F THE CASE AND HAS ERRED IN CONFIRMING THE DISALLOWANCE OF RS. 52,12,392.00 TO THE INCOME OF THE ASSESSEE UNDER SECTION 40A(3) OF THE INCOME TAX ACT. 4. BECAUSE ASSESSEE IS A CONTRACTOR AND SUPPLIER OF GRIT TO THE MAIN CONTRACTOR AND HE HAS TO PURCHASE THE GOODS FROM THE RENOWNED SUPPLIERS WHO PURCHASE THE GRIT FROM MANUFACTURING UNITS OF THE GRIT SITUA TED IN THE DISTANT AREAS BY CRUSHING THE STONES, WHERE NO BANK FACILITIES ARE A VAILABLE AND THE SUPPLIERS INSIST FOR CASH PAYMENT ON ACCOUNT OF THEIR BUSINES S NECESSITY FOR MAKING FURTHER PAYMENT TO GRIT MANUFACTURING UNITS. THE PAYMENT IS MAINLY MADE BY THE ASSESSEE EMPLOYEES AND AGENTS TO THESE GRIT MANUFAC TURING UNITS ON BEHALF OF THE MAIN SUPPLIER IN CASH. THE PAYMENT TO SUPPLIER IS MA DE BY ASSESSEE ON ACCOUNT OF THEIR INSISTENCE FOR PAYMENT BY BEARER CHEQUES AND IS COVERED UNDER EXCEPTION PROVED IN RULE 6DD OF IT RULES. THE CIT APPEAL WAS NOT JUSTIFIED IN NOT APPRECIATING THESE FACTS. 5. BECAUSE THE PAYMENT MADE TO THE PARTIES WAS GENU INE PAYMENTS AND THE CIT APPEAL WAS NOT JUSTIFIED IN CONFIRMING THE SAME IN VIEW OF VARIOUS DECISIONS OF DELHI HIGH COURT IN THE CASE OF 'RC GOYAL VS CIT TAXM AN 213 PAGE 305. 6. BECAUSE IN THIS CASE, THE ACCOUNTS HAVE BEEN REJ ECTED BY THE ASSESSING OFFICER. HE APPLIED PROFIT RATE TO SALES AND CONFIRMED BY CI T APPEAL BY APPLICATION OF RATE AND CONFIRMED THE RATE OF PROFIT TO THE TURNOV ER AS MADE BY AO. AS PER THE DECISION OF LORDSHIP OF ALLAHABAD HIGH COURT IN THE CASE OF BANWARI L.AL BANSIDHAR VS ITO 229 ITR PAGE 229 AND VARIOUS OTHER D ECISIONS OF PUNJAB & HARYANA HIGH COURT, MP HIGH COURT, NO FURTHER ADDIT ION FOR DISALLOWANCE UNDER SECTION 40A(3) OF THE INCOME TAX ACT CAN BE MADE UN DER LAW ACCORDING TO THEIR LORDSHIP THE DEPARTMENT HAVE ITSELF REJECTED THE AC COUNT AND APPLIED RATE OF PROFIT HENCE HE HIMSELF NOT CONSIDERED THE PURCHASE MADE BY ASSESSEE. 7. BECAUSE THE ORDER OF AO AND CIT APPEAL ARE ILLEGA L AND BAD IN LAW. ITA NO. 06/AGR/2019 3 2. THE BRIEF FACTS OF THE CASE ARE THAT IN THIS CAS E ASSESSMENT WAS COMPLETED U/S. 143(3)/147 OF THE IT ACT VIDE ORDER DATED 11.03.201 6 ASSESSING THE TOTAL INCOME AT RS.76,48,190/- AS AGAINST THE TOTAL INCOME OF RS.3, 01,170/- DECLARED BY THE ASSESSEE. FOLLOWING THREE ADDITIONS WERE MADE BY THE ASSESSIN G OFFICER : (I) ADDITION OF RS.11,58,316/- MADE AFTER REJECTING TH E BOOKS OF ACCOUNTS U/S. 145(3) AND ENHANCING THE GROSS PROFIT AT THE E STIMATED RATE OF 5%. (II) ADDITION OF RS.9,76,613/- MADE BY MAKING PARTIAL DI SALLOWANCE OUT OF TRUCK RUNNING EXPENSES, INCOME TAX PAID AND REPAIR AND MAINTENANCE EXPENSES. (III) ADDITION OF RS.52,12,392/- OUT OF ASSESSEES PURCHA SES U/S. 40A(3). 3. AT THE OUTSET, THE LD. DR HAD SUBMITTED THAT THE DEPARTMENT HAS TO FILE THE CROSS OBJECTION IN THIS APPEAL, AS THE CIT(A) FAILE D TO EXERCISE HIS POWERS VESTED IN HIM U/S. 251(1)(A) OF THE ACT. IT WAS SUBMITTED THA T A LETTER WAS WRITTEN BY THE SR. DR ON 11.03.2020 AND THE CIT DR/SR DR , HOWEVER PRI OR THERETO THEY WERE ON OFFICIAL TRAINING TO KANPUR AND THEREFORE, NO FORMA L COMMUNICATION COULD TAKE PLACE. DURING THE HEARING ON LAST DATE THE SR. DR HAD SOUG HT TIME TO FILE THE CROSS OBJECTION ALONG WITH APPROVAL OF PCIT ON RECORD. TODAY DURING THE HEARING IT WAS SUBMITTED THAT THE APPROVAL HAD BEEN GRANTED BUT THE CO IS RE QUIRED TO BE FILED BY AO . HE HAD SHARED THE COPY OF LETTER DATED 22.7.2020 OF THE AD D. CIT IN THIS REGARD AND SOUGHT FURTHER TIME TO FILE THE CO. ITA NO. 06/AGR/2019 4 4. PER CONTRA, LD. AR HAD SUBMITTED THAT THERE IS N O CROSS OBJECTION ON RECORD TILL DATE AND ONLY A DOCUMENT OF APPROVAL WAS SHOWN BY T HE LD. DR DURING THE VIRTUAL HEARING ON 23.07.2020 WHEREBY THE ADDL. CIT HAS PRI NCIPALLY APPROVED THE FILING OF CROSS OBJECTION ON 22.07.2020. IT WAS FURTHER SUBMI TTED THAT THE GROUNDS RAISED IN THE CROSS OBJECTION AS SHOWN BY THE LD DR CANNOT BE ENTERTAINED AND ARE REQUIRED TO BE REJECTED. IT WAS SUBMITTED THAT THE GROUND OF TH IS NATURE CAN NOT BE ENTERTAINED BY THE BENCH, AS IT WOULD AMOUNT TO DIRECTING CIT T O INVOKE HIS POWER OF ENHANCEMENT OF ADDITION, WHEN AO HIMSELF HAD NOT MA DE THE ADDITION. IF ASSESSING OFFICER WAS CONVINCED THAT THE ADDITIONS SHOULD BE MADE, THEN IT SHOULD HAVE BEEN DONE DURING THE ASSESSMENT PROCEEDINGS. NOW HAVING MISSED THE OPPORTUNITY DURING THE ASSESSMENT STAGE, AO CANNOT BE PERMITTED TO RIDE ON THE SHOULDER OF CIT AND SEEK DIRECTION FROM THE TRIBUNAL, AS IT WOULD B E CONTRARY AND INCOMPATIBLE WITH THE ASSESSING OFFICERS POSITION IN THE ASSESSMENT STAGE. 5. WE HAVE HEARD THE RIVAL CONTENTIONS ON THIS ASPE CT AND GONE THROUGH THE MATERIAL AVAILABLE ON RECORD. ON 12.03.2020, (LAST DATE) THE LD DR HAD SOUGHT TIME TO FILE THE CROSS OBJECTION AGAINST THE ORDER OF LD. C IT(A). HOWEVER, TILL DATE, NO CROSS OBJECTION HAD BEEN FILED IN ACCORDANCE WITH PROVISI ONS OF SECTION 252(4) READ WITH RULE 22 OF THE INCOME TAX APPELLATE TRIBUNAL RULES. ONLY A DOCUMENT SHOWING APPROVAL OF FILING OF CROSS OBJECTION HAS BEEN SHOW N TO US. IN THE ABSENCE OF NON- ITA NO. 06/AGR/2019 5 AVAILABILITY OF CROSS OBJECTION BEFORE THIS TRIBUNA L IN ACCORDANCE WITH LAW TILL DATE EVEN AFTER SEEKING SUFFICIENT TIME, WE DO NOT FIND ANY MERIT IN THE REQUEST OF LD. DR TO GIVE FURTHER TIME TO FILE THE CROSS OBJECTION. WE WOULD LIKE TO MENTION THAT THE APPEAL WAS RECEIVED BY THE REVENUE FOR HEARING ON 0 1.11.2019. ON THAT DATE, SR. DR HAD APPEARED AND THEREAFTER ON 21.11.2019, LD. DR W AS PRESENT. HOWEVER, TILL DATE NO CROSS OBJECTION HAS BEEN FILED. THE PERIOD FOR F ILING THE CROSS OBJECTION AS PER PROVISIONS OF SECTION 253(4) IS ONE MONTH FROM THE RECEIPT OF APPEAL BY THE REVENUE. THE TRIBUNAL CAN ENTERTAIN THE CROSS OBJEC TION BEYOND ONE MONTH IF THE PARTY SHOWS REASONABLE CAUSE FOR NOT FILLING THE CO , IN THE TIME GRANTED BY THE ACT. IN THE PRESENT CASE, NEITHER THERE IS ANY CROSS OBJ ECTION ON RECORD NOR ANY APPLICATION FOR CONDONATION OF DELAY HAD BEEN FILLE D BY THE REVENUE. THE REVENUE SHOULD BE VIGILANT IN PROSECUTING ITS RIGHT IN RIGH T EARNEST WITHIN TIME PROVIDED BY THE ACT. MORE THAN 8 MONTHS HAVE PASSED AFTER RECEI PT OF APPEAL AND THERE IS NO GOOD REASON TO SEEK FURTHER TIME TO FILE THE CROSS OBJEC TION. ACCORDINGLY, THE REQUEST OF THE LD. DR IS REJECTED IN THIS REGARD. WE ARE IN AGREEM ENT WITH AR THAT SUCH KIND OF VAGUE GROUNDS SEEKING DIRECTION FOR EXERCISING THE POWER CANNOT BE CONSIDERED AS GROUND WHICH CAN BE URGED IN CO. FOR THAT WE MAY RE LY ON THE ITAT RULES AND SECTION 253 AND 254 OF THE ACT, WHICH PROVIDES THAT THE CO CAN BE FILLED IN SUPPORT OF DECISION OF CIT(A) IN CASE THE REVENUE WANTS TO SUP PORT THE ORDER ON SOME OTHER GROUNDS OR LOGIC. FURTHER WHEN THE AO HAD NOT MADE THE ADDITIONS IN THE ASSESSMENT ITA NO. 06/AGR/2019 6 PROCEEDINGS AND ASSESSE WAS IN APPEAL ON LIMITED GR OUNDS BEFORE THE CIT(A) OR BEFORE THE TRIBUNAL, THEN IN OUR VIEW THE REVENUE C ANNOT BE PERMITTED TO RAISE ANY GROUND WHICH IS INCOMPATIBLE OR CONTRARY TO THE CAS E OF AO. FOR THIS PURPOSE WE MAY FRUITFULLY RELY UPON THE DECISION OF SPECIAL BE NCH OF TRIBUNAL IN THE MATTER OF MAHINDRA AND MAHINDRA VS. DCIT, 30 SOT 374. HENCE N O TIME CAN BE GRANTED TO THE REVENUE FOR FILLING THE CO. 6. ADDRESSING TO THE DISALLOWANCE U/S. 40A(3), THE LD. AR HAS DRAWN OUR ATTENTION TO PARAGRAPH NO. 11 & 12 OF THE ASSESSME NT ORDER TO THE FOLLOWING EFFECT : 11. ON PERUSAL OF THE ANSWER GIVEN BY THE ASSESSEE ABOVE, IT IS CLEAR THAT HE MADE PAYMENTS IN SUM EXCEEDING RS.20,000/- OTHERWIS E THAN BY AN ACCOUNT PAYEE CHEQUE DRAWN ON A BANK OR ACCOUNT PAYEE BANK DRAFT AND THUS ADMITTED THAT PAYMENTS MADE THROUGH BEARER CHEQUES/IN CASH T O THE SUPPLIERS AGAINST SUPPLY OF GRITS DURING THE YEAR RELEVANT TO AY 2008 -09. ACCORDING TO THE FACTS AND CIRCUMSTANCES OF THE CASE, IT IS EVIDENT THAT T HE ASSESSEE HAD MADE PAYMENTS THROUGH BEARER CHEQUES/IN CASH OF RS.2,60,61,960/- TO ONE GRIT SUPPLIER TO SHRI KISHAN SINGH IN CONTRAVENTION TO PROVISIONS OF SECT ION 40A(3) OF THE INCOME TAX ACT, 1961. 12. THEREFORE, THERE ARE TOTAL PAYMENTS OF RS.2,60,6 1,960/- WERE MADE OTHERWISE THAN BY ACCOUNT PAYEE CHEQUE DRAWN ON A B ANK OR ACCOUNT PAYEE DRAFT IN CONTRAVENTION TO PROVISIONS OF SECTION 40A (3) OF THE INCOME TAX ACT, 1961. ACCORDINGLY, THE DISALLOWANCES FOR MAKING SUC H PAYMENTS AT 20% ARE BEING WORKED OUT AT RS.52,12,392/-, WHICH IS ADDED BACK TO THE INCOME OF THE ASSESSEE. ITA NO. 06/AGR/2019 7 7. THE LD. AR HAS ALSO DRAWN OUR ATTENTION TO PARAG RAPH NO. 8.4 OF THE APPELLATE ORDER TO THE FOLLOWING EFFECT : 8.4. AS REGARDS GROUNDS NO. 7, 8 AND 9, IT IS SEEN THAT THE DISALLOWANCE OF RS.52,12,392/- UNDER THE PROVISIONS OF SECTION 40A( 3) HAS BEEN MADE BY THE A.O. IN RESPECT OF PAYMENTS OF RS.2,60,61,960/- MAD E BY THE APPELLANT THROUGH BEARER CHEQUES/CASH TO A SINGLE SUPPLIER SHRI KISH AN SINGH, JUHI, KANPUR. THE CONTRAVENTION OF THE PROVISIONS OF SECTION 40A(3) W AS INITIALLY DETECTED, AND INQUIRED INTO BY THE INVESTIGATION WING. ON REFEREN CE BY THE INVESTIGATION WING, THE A.O. INITIATED THE IMPUGNED REASSESSMENT PROCEEDINGS AND AFTER CONDUCTING FURTHER INQUIRIES DURING THE SAID PROCEE DINGS, IT WAS CONCLUDED BY HIM THAT THE PROVISIONS OF SECTION 40A(3) ARE ATTRA CTED TO THOSE PAYMENTS. (A) BEFORE ME, THE APPELLANT HAS OPPOSED THE A.O.'S ACTION OF MAKING THIS DISALLOWANCE BY REFERRING TO THE PROVISIONS OF IT R ULE 6DD (E)(I), IT RULE 6DD (G) AND IT RULE 6DD (K). IT HAS ALSO RELIED UPON TH E RATIO LAID DOWN BY HON'BLE DELHI HIGH COURT IN THE CASE OF R.C. GOYAL (SUPRA) AND IN A FEW OTHER JUDGMENTS. FINALLY, VIDE GROUND NO. 9, THE APPELLAN T HAS RELIED UPON CERTAIN OTHER JUDGMENTS IN SUPPORT OF ITS ARGUMENT THAT NO DISALLOWANCE UNDER SECTION 40A(3) CAN BE LEGALLY MADE IN A CASE WHERE GROSS PROFIT WAS APPLIED AFTER REJECTING ITS BOOKS OF ACCOUNT. (B) ON A PERUSAL OF THE FACTS OF THE CASE, IT IS SE EN THAT THE SUPPLIER OF THE APPELLANT TO WHOM PAYMENTS WERE MADE BY THE APPELLA NT IN CONTRAVENTION OF THE PROVISIONS OF SECTION 40A(3), NAMELY, SHRI KISH AN SINGH'S ADDRESS IS 127/24, L-BLOCK, JUHI, KANPUR, WHICH IS VERY MUCH P ART OF KANPUR CITY AND HAS CLOSE ACCESS TO BANKS. IN FACT THE BEARER CHEQUES G IVEN BY THE APPELLANT WERE ENCASHED FROM BANKS BY THE RECIPIENT. PROVISIONS OF IT RULE 6DD (G), THEREFORE, DO NOT' 'COME INTO PLAY. (C) IT IS ALSO OBSERVED THAT THE PAYMENTS HAVE NOT BEEN MADE BY THE APPELLANT THROUGH ANY EMPLOYEE OR AGENT. BEARER CHEQUES HAVE BEEN GIVEN TO THE SUPPLIER AND THOSE ARE ENCASHED BY HIM. IT MAY NOT BE OUT OF PLACE TO NOTE THAT IN ITS WRITTEN SUBMISSION BEFORE ME, THE APPELLANT HAS TRIED TO ADD INCORRECT FACTS TO THE ISSUE BY STATING THAT- ITA NO. 06/AGR/2019 8 'FURTHER, IT IS SUBMITTED THAT ASSESSEE HAS TO COLL ECT THESE GRITS THROUGH HIS EMPLOYEES / AGENTS FROM DIFFERENT SUPPLIERS OF FAR DISTANT PLACES AND VILLAGES WHERE THESE CRUSHING MACHINES ARE LOCATED BY THE SUPPLIERS ON ACCOUNT OF DUST POLLUTION INDUSTRY AND FROM THAT PL ACES THEIR AGENTS LOAD THE GOODS IN ASSESSEE TRUCKS AND OTHERS TRUCKS AND SENT TO THE PLACES OF THE MAIN CONTRACTOR WHERE THEY ARE REQUIRED BY THE CONT RACTOR FROM THE ASSESSEE BEING SUB-CONTRACTOR, THEREFORE THE CASH D OWN PAYMENT OF THESE MATERIAL BECOMES NECESSARY. IN MOST OF THE SUPPLIES THE ASSESSEE DEPUTE HIS AGENTS / EMPLOYEES FOR COLLECTION AND PROCUREME NT OF MATERIAL FROM THESE CRUSHERS AND THIS IS A NATURE OF THIS TRADE, OTHERWISE ASSESSEE CANNOT DO THE BUSINESS IT IS TIME BOUND BUSINESS OF PURCHA SE AND SUPPLY OF MATERIAL TO MAIN CONTRACTOR IN TIME. THE PROCUREMENT OF RAW MATERIAL FROM DISTANT PLACES AND SUPPLY OF THE SAME TO THE P LACE OF PURCHASER ON VERY NOMINAL MARGIN OF PROFIT. THIS TIMELY PROCUREME NT OF MATERIAL IS NECESSARY ON ACCOUNT OF TIME BOUND SUPPLY OF GRIT T O MAIN CONTRACTOR AS PER TERMS OF CONTRACT.' THE REAL FACT IS THAT THE APPELLANT'S PAYMENT OF RS . 2,60,61,960/- BROUGHT TO TAX BY THE A.O. UNDER SECTION 40A(3), WAS MADE NOT TO SEVERAL SUPPLIERS LOCATED AT DISTANT PLACES OR VILLAGES, BUT TO A SIN GLE SUPPLIER LOCATED AT KANPUR, A BIG CITY. PROVISIONS OF IT RULE GDD (K), THEREFORE, ALSO DO N OT COME INTO PLAY. (D) THE APPELLANT HAS RELIED UPON THE PROVISIONS OF IT RULE 6DD (E)(I). ON A CLOSE READING OF THOSE PROVISIONS, IT IS SEEN THAT THEY COME INTO PLAY ONLY WHEN THE PAYMENT IS MADE TO THE CULTIVATOR, GROWER OR PR ODUCER OF ARTICLES, PRODUCE OR PRODUCTS SPECIFIED THEREIN. THERE IS NOTHING ON RECORD WHICH INDICATES THAT THE SUPPLIER IN THE INSTANT CASE, SHRI KISHAN SINGH WAS A PRODUCER OF GRIT WHICH HE SUPPLIED TO THE APPELLANT. FURTHER, THE QUESTION WHETHER GRIT CAN BE INCLUDED UNDER THE CATEGORY OF 'FOREST PRODUCE' REM AINS TO BE ANSWERED. HENCE, IN MY CONSIDERED OPINION, PROVISIONS OF IT R ULE 6DD (E)(I) DO NOT COME TO THE RESCUE OF THE APPELLANT. TWO JUDGMENTS OF TH E HON'BLE JURISDICTIONAL HIGH COURT CONFIRM THAT THIS RULE [ALSO NUMBERED AS RULE 6DD(F)] APPLIES ONLY ITA NO. 06/AGR/2019 9 TO THE GROWER OR PRODUCER OF FOREST PRODUCE AND IT WILL NOT APPLY TO SUPPLIER OF AGRICULTURAL COMMODITIES. CIT VS PEHLAJ RAI DARYANMAL (ALL) 190ITR 242 . IDEAL TANNERY VS CIT (ALL) 117 ITR 34. (E) THE APPELLANT'S RELIANCE ON THE JUDGMENT RENDER ED BY HON'BLE DELHI HIGH COURT IN THE CASE OF R.C. GOYAL (SUPRA), WITH DUE R ESPECT TO IT, IS MISPLACED. THAT JUDGMENT HAS BEEN GIVEN IN REFERENCE TO A PECU LIAR SET OF FACTS, WHICH ARE MATERIALLY DIFFERENT FROM THE ONES IN THE INSTANT C ASE. SIMILARLY, THE APPELLANT'S ARGUMENT THAT WHEN PAYMENTS MADE BY IT ARE GENUINE, NO DISALLOWANCE CAN BE MADE, WITH DUE RESPECT TO THE JUDICIAL PRECEDENTS C ITED BY IT, IS NOT ACCEPTABLE. (F) IN RESPECT OF ITS ARGUMENT THAT NO DISALLOWANCE CAN BE MADE IN A CASE WHERE BOOKS OF ACCOUNT ARE REJECTED, THE APPELLANT HAS RELIED HEAVILY ON THE DECISION RENDERED BY THE JURISDICTIONAL HIGH COURT IN THE CASE OF BANWARILAL BANSIDHAR (SUPRA). THE FACTS OF THAT CASE ARE MATER IALLY DIFFERENT TO THE ONES OF APPELLANT'S CASE. IN THAT CASE, HON'BLE HIGH COURT HAS HELD AFFIRMING THE DECISION OF THE TRIBUNAL, THAT NO DISALLOWANCE COULD BE MADE IN VIEW OF THE P ROVISIONS OF SECTION 40A(3) READ WITH RULE 6DD(J) OF THE INCOME-TAX RULE S, 1962, AS NO DEDUCTION WAS ALLOWED TO AND CLAIMED BY THE ASSESSES. WHEN TH E GROSS PROFIT RATE WAS APPLIED, THAT WOULD TAKE CARE OF EVERYTHING AND THE RE WAS NO NEED FOR THE A.O. TO MAKE SCRUTINY OF THE AMOUNT INCURRED ON THE PURC HASES MADE BY THE ASSESSEE. CONTRARY TO THE FACTS IN THAT CASE, THE APPELLANT H AS CLAIMED DEDUCTION OF PURCHASES VALUING RS. 8,39,35,174/- . OUT OF THESE, PURCHASES OF RS. 2,60,61,960/- HAVE BEEN FOUND BY THE A.O. AS TO BE MADE IN CONTRAVENTION OF THE PROVISIONS OF SECTION 40A(3) OF THE ACT. FURTHE R, THE DISALLOWANCE OF RS. 52,12,392/- MADE UNDER SECTION 40A(3) IN THE INSTAN T CASE, FAR EXCEEDS THE ADDITION OF RS. 11,58,316/- MADE BY THE A.O. TO THE APPELLANT'S RETURNED INCOME BY WAY OF ESTIMATING ITS GP RATE @ 5%. HENCE , UNLIKE IN THE CASE BEFORE THE HON'BLE HIGH COURT OF ALLAHABAD, IN THE INSTANT CASE, THE ADDITION ITA NO. 06/AGR/2019 10 MADE BY THE A.O. BY REJECTING THE APPELLANT'S BOOKS OF ACCOUNT DID NOT TAKE CARE OF EVERYTHING. IN THIS CONTEXT, RELEVANT EXTRA CT OF THE JUDGMENT OF HON'BLE HIGH COURT IS REPRODUCED BELOW:- 'WE SEE FORCE IN THE VIEW TAKEN BY THE APPELLATE TR IBUNAL THAT WHEN THE INCOME OF THE ASSESSES WAS COMPUTED APPLYING THE GR OSS PROFIT RATE AND WHEN NO DEDUCTION WAS ALLOWED IN REGARD TO THE PURC HASES OF THE ASSESSEE, THERE WAS NO NEED TO LOOK INTO THE PROVISIONS OF SE CTION 40A(3) AND RULE 6DD(J). NO DISALLOWANCE COULD HAVE BEEN MADE IN VIE W OF THE PROVISIONS OF SECTION 40A(3) READ WITH RULE 6DD(J) AS NO DEDUCTIO N WAS ALLOWED TO AND CLAIMED BY THE ASSESSEE IN RESPECT OF PURCHASES. WH EN THE GROSS PROFIT RATE IS APPLIED, THAT WOULD TAKE CARE OF EVERYTHING AND THERE WAS NO NEED FOR THE ASSESSING OFFICER TO MAKE SCRUTINY OF THE AMOUN T INCURRED ON THE PURCHASED BY THE ASSESSEE. ' (G) IN LIGHT OF THE DISCUSSION MADE ABOVE, IT IS HELD THAT THE DISALLOWANCE UNDER SECTION 40A(3) HAS BEEN LEGALLY MADE AS PER T HE FACTS AVAILABLE ON RECORD AND THE ADDITION OF RS. 52,12,392/-TO THE AP PELLANT'S RETURNED INCOME IS CONFIRMED. 8. THE CORE CONTENTIONS OF THE LD. AR ARE THAT THE ASSESSING OFFICER IN PARAGRAPH NO. 5 OF THE ASSESSMENT ORDER, AFTER CONSIDERING TH E SALES AND PURCHASES MADE IN CASH HAS ESTIMATED/ENHANCED THE DECLARED PROFIT RAT E AND MADE GP ADDITION TO THE EXTENT OF RS.11,58,316/-. IT WAS SUBMITTED THAT ONC E THE BOOKS OF ACCOUNTS HAVE BEEN REJECTED AND G.P. ADDITION HAS BEEN MADE ON PU RCHASE AND SALES OF THE ASSESSEE, IT WOULD TAKE CARE OF ALL SUCH PURCHASES MADE IN CASH AND NO FURTHER ADDITION CAN BE MADE U/S. 40A(3) OF THE ACT. IT WAS SUBMITTED THAT THE ASSESSEE CANNOT BE MADE TO SUFFER TWICE ONCE IN GP ADDITIO N AND OTHER IN ADDITION U/S. 40A(3) OF THE ACT. ITA NO. 06/AGR/2019 11 9. PER CONTRA, LD. DR HAD DRAWN OUR ATTENTION TO TH E ORDER OF LD. CIT(A) PARA 8.4 (SUPRA) AND IT WAS SUBMITTED THAT NO DISALLOWANCE W AS MADE ON ACCOUNT OF PURCHASES OF THE ASSESSEE AND THEREFORE, THE DECISI ON OF HONBLE DELHI HIGH HIGH COURT, RELIED BY ASSESSEE, IN THE CASE OF R.C. GOY AL VS. CIT, 213 TAXMAN 305 AND OTHER DECISIONS ARE NOT APPLICABLE. IT WAS FURTHER CONTENDED BY THE LD. DR THAT THE TRIBUNAL HAVING CO-TERMINUS POWERS U/S. 255 OF THE ACT SHOULD HAVE DECIDED THE ISSUE BY INVOKING THE ENHANCEMENT JURISDICTION FOR MAKING ENHANCEMENT IN ADDITION. 10. IN REBUTTAL, THE LD. AR OF THE ASSESSEE SUBMITT ED THAT THE TRIBUNAL IS DUTY BOUND TO DECIDE THE ISSUE ON THE BASIS OF LIS BEFOR E THEM AND HAS NO POWER TO ENHANCE THE ADDITION AND FOR THAT PURPOSE, THE LD. AR RELIED UPON THE DECISIONS OF HONBLE MADRAS HIGH COURT, DELHI HIGH COURT AND JUD GMENT OF HONBLE SUPREME COURT. HE HAS ALSO REFERRED TO THE RECENT DECISION OF HONBLE SUPREME COURT IN THE MATTER OF SHIV RAJ GUPTA VS. CIT. 11. WE HAVE HEARD THE RIVAL SUBMISSIONS AND HAVE GO NE THROUGH THE MATERIAL AVAILABLE ON RECORD. IN PARAGRAPH NO. 5 OF THE ASSE SSMENT ORDER, THE AO HAS MENTIONED AS UNDER : ITA NO. 06/AGR/2019 12 5. THE BOOKS OF ACCOUNT AND COPIES OF LEDGER ACCOUN TS OF THE ASSESSEE WERE EXAMINED. I IS SEEN THAT MOST OF THE SALES & PURCHA SES WERE MADE THROUGH BEARER CHEQUES (IN CASH), THIS S WHY THE ASSESSEE WAS FAIL ED TO SUBSTANTIATE THE GENUINENESS OF ACTUAL TRANSACTION MADE TOWARDS PURC HASES AND SALES OF GRITS. IN ABSENCE OF ADEQUATE EVIDENCES AND PROPER EXPLANATIO NS, THE PURCHASES AND SALES ARE NOT VERIFIABLE AND THUS THE GROSS PROFIT RATES SHOWN BY THE ASSESSEE ARE ALSO NOT RELIABLE. IN THE GIVEN CIRCUMSTANCES AND LOOKIN G TO THE FACTS OF THE CASE, THE GROSS PROFIT RATE SHOWN BY THE ASSESSEE ARE NOT ACC EPTABLE AND HENCE REJECTED. AFTER EXAMINATION OF BOOKS OF ACCOUNTS, RELEVANT DE TAILS OF PURCHASES AND SALE SHOWN IN THE PROFIT & LOSS ACCOUNT, THE GROSS PROFI T RATES ARE BEING APPLIED AT 5.0% ON TOTAL TURNOVER OF 9,62,09,332/-. ACCORDINGL Y, THE GROSS PROFIT OF ASSESSEES BUSINESS AT 5.0% IS WORKED OU AT RS.48,1 0,467/-. THE ASSESSEE ALREADY DECLARED GROSS PROFIT AT RS. 36,52,151/-, THEREFORE , THE DIFFERENCE OF RS.11,58,316/- (RS.48,10,467 - RS.36,52,151) IS AD DED BACK TO THE INCOME OF THE ASSESSEE. 12. A CONJOINT READING OF PARA NO. 5 OF THE ASSESSM ENT ORDER CLEARLY SHOWS THAT THE ASSESSING OFFICER WHILE COMPUTING THE INCOME OF THE ASSESSEE HAD TAKEN INTO ACCOUNT, THE PURCHASES MADE IN CASH AND THEREAFTER HAD CALCULATED THE INCOME OF THE ASSESSEE. THE LD. CIT(A) HAD REPRODUCED THE DECISIO N OF HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF BANWARILAL BANSIDHAR (SUPRA) A T PAGE 11 AND 12 OF THE IMPUGNED ORDER, WHEREIN THE HIGH COURT HAS DELETED THE ADDITION OVER AND ABOVE THE ESTIMATION OF PROFIT DONE BY THE ASSESSING OFFI CER, AS THE HIGH COURT WAS OF THE OPINION THAT THE SAID ELEMENT OF PURCHASE IN CASH W AS SUBSUMED IN THE INCOME CALCULATED BY THE ASSESSING OFFICER. WE DO NOT FIND ANY DISTINGUISHABLE FACTS OF THE SAID DECISION WITH THE PRESENT CASE, AS REPRODUCED IN PARAGRAPH NO. (F) OF THE IMPUGNED ORDER (SUPRA). IN VIEW OF THE ABOVE, WE FI ND SUBSTANTIAL FORCE IN THE ITA NO. 06/AGR/2019 13 GROUNDS OF APPEAL ON THIS ISSUE AND THE SAME ARE AL LOWED AND THE DISALLOWANCE MADE U/S. 40A(3) IS DELETED. 13. NO EFFECTIVE ARGUMENTS HAVE BEEN MADE BY THE LD . AR ON ANY OTHER GROUND OF APPEAL. ACCORDINGLY, GROUND NO. 2 PERTAINING TO DIS ALLOWANCE OF EXPENSES HAS TO BE DISMISSED. 14. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PA RTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 30/07/2020. SD/- SD/- (DR. MITHA LAL MEENA) (LALIET KUMAR) ACCOUNTANT MEMBER JUDICIAL MEMBER *AKS* COPY OF ORDER FORWARDED TO: (1) THE APPELLANT (2) THE RESPONDENT (3) COMMISSIONER (4) CIT(A) (5) DEPARTMENTAL REPRESENTATIVE (6) GUARD FILE BY ORDER ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL AGRA BENCH, AGRA