Ashiq Khan Sher Khan, Bhusawal V. Asst.. Comm. of Income-tax, Jalgaon

ITA 1371/PUN/2011

• Counselvise Citation: 137124514 RSA 2011
• Duration Of Justice: 1 year(s) 10 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-09-2013
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 26-09-2013
• Assessment Year: 2003-2004
• Appeal Filed On: 08-11-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: H C LEUVA
• Section: 40A(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH A, PUNE BEFORE SHRI SHAILENDRA KUMAR YADAV, JUDICIAL MEMBER AND SHRI R.K. PANDA, ACCOUNTANT MEMBER ITA NO. 1371, 1372 AND 1373/PN/2011 (ASSESSMENT YEARS 2003-04, 2004-05 & 2007-08) ASHIQ KHAN SHER KHAN, PROP. A.S. TRADING COMPANY, KHADKA ROAD, BHUSAWAL, PAN NO. AIUPK8573A .. APPELLANT VS. ACIT, CIRCLE-2, JALGAON .. RESPONDENT APPELLANT BY : SHRI NIKHIL PATHAK RESPONDENT BY : SHRI H.C. LEUVA DATE OF HEARING : 26-09-2013 DATE OF PRONOUNCEMENT : 27-09-2013 ORDER PER R.K. PANDA, AM : THE ABOVE 3 APPEALS FILED BY THE ASSESSEE ARE DIREC TED AGAINST THE COMMON ORDER DATED 24-08-2011 OF THE CIT(A)-II, NAS HIK RELATING TO ASSESSMENT YEARS 2003-04, 2004-05 & 2007-08 RESPECT IVELY. SINCE IDENTICAL GROUNDS HAVE BEEN TAKEN BY THE REVENUE IN ALL THESE APPEALS, THEREFORE, THESE WERE HEARD TOGETHER AND ARE BEING DISPOSED OF BY THIS COMMON ORDER. ITA NO.1371/PN/2011 (A.Y. 2003-04) : 2. FACTS OF THE CASE, IN BRIEF ARE THAT THE ASSESSE E IS AN INDIVIDUAL ENGAGED IN THE BUSINESS OF TRADING IN SCRAP AND HAV ING TURNOVER BELOW RS.40 LAKHS. HE FILED HIS RETURN OF INCOME ON 18-0 6-2008 SHOWING TOTAL INCOME OF RS.71,535/-. THE ASSESSING OFFICER NOTED THAT INFORMATION WAS COLLECTED FROM MAHARASHTRA STATE POWER GENERATI ON COMPANY LTD. 2 DEEPNAGAR, BHUSAWAL ACCORDING TO WHICH THE ASSESSEE HAD MADE PURCHASES OF RS.13,33,093/- FOR THE PERIOD FROM 29 -10-2002 TO 20-12- 2002. THE ASSESSING OFFICER NOTED THAT THE ASSESSE E HAS PAID THE ENTIRE AMOUNT IN CASH ON DIFFERENT DATES EACH AMOUNT EXCEE DING RS.20,000/-. HE THEREFORE ASKED THE ASSESSEE TO EXPLAIN AS TO WH Y 20% OF THE ABOVE AMOUNT SHOULD NOT BE DISALLOWED IN VIEW OF PROVISIO NS OF SECTION 40A(3). IT WAS EXPLAINED BY THE ASSESSEE THAT THE RETURN HAS BEEN FILED ON ESTIMATE BASIS U/S.44AF AND THEREFORE PROVISIONS OF SECTION 40A(3) ARE NOT APPLICABLE. RELYING ON VARIOUS JUDICIAL DE CISIONS AND STATING THAT PROVISIONS OF SECTION 44AF IS APPLICABLE FOR TRADIN G IN SCRAP IN WHICH THE ASSESSEE IS ENGAGED IN, THE ASSESSEE SUBMITTED THAT PROVISIONS OF SECTION 40A(3) ARE NOT APPLICABLE. 3. HOWEVER, THE ASSESSING OFFICER WAS NOT SATISFIED WITH THE EXPLANATION GIVEN BY THE ASSESSEE. HE OBSERVED THAT VIOLATION OF PROVISIONS OF SECTION 40A(3) HAS BEEN DETECTED BY T HE REVENUE DUE TO ENQUIRIES CONDUCTED BY IT. THE ASSESSEE IS A DEALE R IN SCRAP WHICH IS NOT A SIMPLE ITEM IN WHICH SINGLE CUSTOMER MAY PURCHASE ANY ITEM FROM HIM FOR HIS PERSONAL USE AND THEREFORE IT IS NOT A RETA IL TRADE. FURTHER, THE ASSESSEE COULD NOT DEMONSTRATE BY FILING DOCUMENTS THAT HE IS A RETAIL TRADER. REJECTING THE VARIOUS EXPLANATIONS GIVEN B Y THE ASSESSEE THE ASSESSING OFFICER DISALLOWED AN AMOUNT OF RS.2,66,6 18/- BEING 20% OF THE PURCHASE OF RS.13,33,093/-. 4. IN APPEAL THE LD.CIT(A) UPHELD THE ACTION OF THE ASSESSING OFFICER BY OBSERVING AS UNDER : 3 6.2 I HAVE CAREFULLY CONSIDERED THE FACTS OF THE C ASE AND RIVAL CONTENTIONS. THE CONTENTION OF THE APPELLANT THAT THE APPELLANT IS RETAILER CANNOT BE ACCEPTED AS THE AO HAS CORRECTLY POINTED OUT THAT T HE SCRAP HAS BEEN PURCHASED AND SOLD IN SUBSTANTIAL QUANTITY FROM FEW SUPPLIERS AND FEW CUSTOMERS. THE SCRAP TRADED HAS NOT BEEN SOLD TO T HE CUSTOMERS FOR THEIR PERSONAL USE AND HENCE THE APPELLANT IS NOT A RETAI L TRADER AS ENVISAGED BY PROVISIONS OF SECTION 44AF OF THE ACT. THE CONTENT ION OF THE APPELLANT THAT THE APPELLANT HAS PURCHASED GOODS FROM AND MADE PAY MENT TO ELECTRICITY GENERATING UNIT AND CORPORATION OWNED BY MAHARASHTR A GOVT. CANNOT BE ACCEPTED AS NO SUCH EXCEPTION HAS BEEN PROVIDED IN SECTION 40A(3) OR RULE 6DD. THE CONTENTION OF THE APPELLANT THAT AS THE PR OFIT IS ESTIMATED AT 5% , THE PROVISIONS OF SECTION 40A(3) ARE NOT APPLICABLE IS ALSO NOT ACCEPTED AS THE ACTUAL PROFIT CAN BE ARRIVED AT ON THE BASIS OF PUR CHASE AND SALE FIGURES AND EXPENSES APPEARING IN THE TRADING AND PROFIT AND LO SS ACCOUNT PREPARED AND FILED BY THE APPELLANT. INFACT GROSS PROFIT FOR THE YEARS UNDER APPEAL IS DEDUCED FROM THE FIGURES SUPPLIED BY THE APPELLANT IN REGARD TO OPENING STOCK, PURCHASES, SALES AND CLOSING STOCK. THERE IS NO EL EMENT OF ESTIMATION IN THE GROSS PROFIT. SINCE PURCHASES FORM PART OF THE TRA DING ACCOUNT, WHICH IS BASED ON ACTUAL PURCHASES AND SALES, APPELLANTS CONTENTI ON THAT NO ADDITION CANBE MADE U/S.40A(3) OF THE ACT ON ESTIMATED PROFIT IS D EVOID OF ANY MERIT AND THEREFORE, NOT TENABLE. THE APPELLANT HAS GIVEN FI GURES FOR EXPENSES. THE SAID EXPENSES ARE ACCEPTED IN TOTO AND THE GP AND N ET PROFIT FOR THE AYS UNDER APPEAL ARE WORKED OUT AS FOLLOWS : A.Y. OP STOCK PURCHASE AND MVAT 5% SALES SALES CL.STOCK G.P. EXPS. CLAIMED BY APPELLANT NET PROFIT 03-04 NIL 13,33,093 15,03,384 NIL 1,70,291 83,295 8 6,996 04-05 NIL 29,65,433 31,73,013 NIL 2,07,580 48,929 1 ,58,651 05-06 NIL 10,00,266 11,35,520 NIL 1,35,254 78,478 5 6,776 06-07 NIL 13,15,203 14,31,615 NIL 1,16,412 44,831 7 1,581 07-08 NIL 37,20,641 39,06,673 37,500 2,23,532 28,19 8 1,95,334 FROM THE ABOVE IT IS ESTABLISHED THAT ALL THE PURCH ASE WHICH ARE MAINLY FROM MAHARASHTRA STATE POWER GENERATION CO. LTD. ARE ACC OUNTED FOR. SIMILARLY SALES FIGURES ARE MAINTAINED BY THE APPELLANT. TAKING INT O CONSIDERATION THE ABOVE, TRADING ACCOUNT OF THE APPELLANT IS PREPARED AS ABO VE AND GP CALCULATED. THERE IS ALSO NO QUESTION OF ESTIMATING THE PROFIT ESPECIALLY WHEN THE EXPENSES CLAIMED BY THE APPELLANT ARE ACCEPTED AS S UCH. IN VIEW OF THE ABOVE, WITHOUT ESTIMATING THE NET PROFIT, THE GROSS/NET PR OFIT FOR AYS UNDER APPEAL ARE DERIVED ON THE BASIS OF FIGURES DECLARED BY THE APPELLANT IN TRADING, PROFIT AND LOSS ACCOUNT PREPARED AND FILED BY HIM. THE PUR CHASES FROM THE GOVT. COMPANY AND CORPORATION HAVE BEEN FOUND BY INVESTIG ATION WING AND ARE DULY SUPPORTED. THE CASH PAYMENTS ARE ALSO NOTED AS PER PAYMENTS MADE TO THE SAID CONCERNS. THE SALES ARE ALSO SUPPORTED AS PER TRADING ACCOUNTS FILED BY THE APPELLANT WHEREIN EXACT SALES IN ODD FIGURES HAVE BEEN MENTIONED. THE DECISIONS RELIED ON BY THE APPELLANT ARE ON DISTING UISHABLE FACTS. IN THE SAID DECISIONS NET PROFIT HAS BEEN ESTIMATED BY THE AO, WHEREAS IN THE CASE UNDER APPEAL, I AM NOT ESTIMATING THE NET PROFIT OF THE A PPELLANT BUT DERIVING THE GROSS PROFIT AND CALCULATING NET PROFIT THERE FROM BY USING APPELLANT'S TRADING FIGURES AND PROFIT AND LOSS ACCOUNT. THE APPELLANT HAS AVOIDED TO PRODUCE BOOKS OF ACCOUNTS OR HAS NOT PREPARED REGULAR BOOKS OF ACCOUNTS TO AVOID DISALLOWANCE U/S 40A(3) OF THE ACT. THE LEGISLATURE HAS INTRODUCED SECTION 40A(3) TO AVOID CASH TRANSACTIONS OF PURCHASE AND S ALE WHICH ARE GENERALLY NOT RECORDED BY THE ASSESSEES IN THE BOOKS OF ACCOUNTS TO SUPPRESS THE PROFIT. IT IS WORTH NOTING HERE THAT THE LEGISLATURE HAS NOT PRES CRIBED FORM OF KEEPING AND MAINTAINING BOOKS OF ACCOUNTS FOR PERSONS ENGAGED I N BUSINESS. THE APPELLANT CAN MAINTAIN RECORD FROM WHICH PROFIT OF THE BUSINE SS COULD BE REASONABLY 4 ASCERTAINED. IT IS A SETTLED LAW THAT IN THE CASES WHERE THOUGH THE REGULAR BOOKS OF ACCOUNTS ARE NOT MAINTAINED BUT PROFIT CAN BE RE ASONABLY ASCERTAINED FROM THE RECORDS MAINTAINED, PENALTY FOR NON MAINTENANCE OF BOOKS IS NOT LEVIABLE. IT HAS ALSO BEEN LAID DOWN BY HON'BLE ITAT, DELHI I N THE CASE OF SMT. RAJNI VS. ITO (2004) 91 TTJ 26 THAT WHEN THE ASSESSEE IS MAIN TAINING RECORD OF BANK TRANSACTIONS, SUNDRY DEBTORS AND CREDITORS, INVESTM ENTS AND WITHDRAWALS FROM WHICH BALANCE SHEET IS DRAWN AND IS DECLARING INCOM E BY COMPARING INCREASE OF ASSETS OVER THOSE IN LAST YEAR AND NO FORM OF KE EPING MAINTAINING ACCOUNTS HAVING BEEN PRESCRIBED FOR PERSONS ENGAGED IN BUSIN ESS, PENALTY U/S 271A COULD NOT BE SUSTAINED. THEREFORE, THE LEGISLATURE ALSO DOES NOT REQUIRE THE APPELLANT CARRYING ON BUSINESS TO MAINTAIN PARTICUL AR BOOKS OF ACCOUNTS BUT IT IS SUFFICIENT TO MAINTAIN RECORD FROM WHICH PROFIT CAN BE REASONABLY ASCERTAINED. IN THE CASE UNDER APPEAL, THE APPELLAN T HAS MAINTAINED THE RECORD FOR PURCHASE AND SALES, PURCHASE EXPENSES AND HAS A LSO DRAWN BALANCE SHEET FOR THE YEARS UNDER APPEAL. IN FACT THE APPELLANT H AS PRODUCED COPY OF THE B/S FOR AY 2002-03 TO EXPLAIN OPENING BALANCE OF CAPITA L ACCOUNT FOR AY 2003-04. THEREFORE, THE APPELLANT HAS REASONABLY ARRIVED AT GROSS PROFIT AND ALSO NET PROFIT OF HIS BUSINESS, WHICH HAS BEEN DULY ACCEPTE D BY ME. THEREFORE THE CONTENTION OF THE APPELLANT THAT IN THE ABSENCE OF BOOKS PROFIT IS ESTIMATED AND HENCE DISALLOWANCE U/S 40A(3) IS NOT JUSTIFIED IS R EJECTED. THE APPELLANT SEEMS TO HAVE ADOPTED COLORABLE DEVICE TO EVADE TAX ON ACCOUNT OF DISALLOWANCES U/S 40A(3) BY STATING THAT HE HAS NOT MAINTAINED BOOKS OF ACCOUNTS AND HIS PROFITS WERE ON ESTIMATED BASIS. I N VIEW OF THE ABOVE FACTS THE ADDITION MADE BY THE AO ON ACCOUNT OF DISALLOWANCE U/S 40A(3) AMOUNTING TO ` 2,66,418/-, ` 1,05,983/-, ` 7,02,081/- IN AYS. 2003-2004, 2004-2005 AND 2007- 2008 IS CONFIRMED. GROUND NO.2 FOR AYS 2003-2004, 2 004-2005 AND 2007-2008 RELATING TO DISALLOWANCE U/S 40A(3) ARE THEREFORE D ISMISSED. 5. AGGRIEVED WITH SUCH ORDER OF THE LD. CIT(A) THE ASSESSEE IS IN APPEAL BEFORE US WITH THE FOLLOWING GROUNDS : THE FOLLOWING GROUNDS ARE TAKEN WITHOUT PREJUDICE TO EACH OTHER. ON FACTS AND IN LAW: 1] THE LEARNED CIT(A) ERRED IN CONFIRMING THE DISA LLOWANCE OF RS.2,66,618/- U/S 40A(3) OF THE ACT. 2] THE LEARNED CIT(A) ERRED IN HOLDING THAT - A. THE ASSESSEE HAD VIOLATED THE PROVISIONS OF SECT ION 40A(3) AND THEREFORE, THE DISALLOWANCE MADE BY THE A.O. WAS JU STIFIED. B. THE ASSESSEE HAD MAINTAINED BOOKS OF ACCOUNTS AN D THE PROFITS WERE NOT ESTIMATED AND THEREFORE, THE A.O. WAS JUSTIFIED IN MAKING THE DISALLOWANCE U/S 40A(3). 3] THE LEARNED CIT(A) FAILED TO APPRECIATE THAT - A. THE ASSESSEE HAD ESTIMATED ITS PROFITS AND THE A .O. HAD ALSO ESTIMATED THE INCOME OF THE ASSESSEE AND THEREFORE, THE QUEST ION OF DISALLOWANCE U/S 40A(3) DID NOT ARISE. B. THE ASSESSEE HAD NOT MAINTAINED PROPER BOOKS OF ACCOUNTS AND THEREFORE , THE INCOME WAS ESTIMATED AND IN SUCH A SCENARIO, NO DISALLOWANCE U/S 40A(3) COULD BE MADE. 5 4] THE LEARNED CIT(A) ERRED IN HOLDING THAT THE CA SE OF THE ASSESSEE WAS NOT COVERED WITHIN THE EXCEPTIONS PROVIDED IN RULES 6DD AND HENCE, THE LEARNED A.O. WAS JUSTIFIED IN MAKING THE DISALLOWAN CE. 5] THE LEARNED CIT(A) FAILED TO APPRECIATE THAT TH E ASSESSEE HAD MADE PAYMENTS TO GOVT. UNDERTAKINGS AND THEREFORE, THE C ASE WAS COVERED UNDER RULE 6DD(B) AND HENCE, DISALLOWANCE MADE WAS NOT JU STIFIED. 6] THE LEARNED CIT(A) ERRED IN HOLDING THAT THE PA YMENTS MADE BY THE ASSESSEE TO MSRTC / MSEB, ETC. WERE NOT COVERED WIT HIN THE EXCEPTION PROVIDED UNDER RULE 6DD(B) AND THUS, THE DISALLOWAN CE MADE BY THE LEARNED A.O. WAS JUSTIFIED. 7] THE LEARNED CIT(A) FAILED TO APPRECIATE THAT TH ERE WERE BUSINESS COMPULSIONS BECAUSE OF WHICH THE ASSESSEE HAD MADE THE PAYMENTS IN CASH EXCEEDING RS.20,000/- AND THEREFORE, IT IS SUBMITTE D THAT SINCE THE PAYMENTS WERE MADE TO GOVT. THE DISALLOWANCE MADE OUGHT TO H AVE BEEN DELETED. 8] THE APPELLANT CRAVES LEAVE TO ADD, ALTER, AMEND OR DELETE ANY OF THE ABOVE GROUNDS OF APPEAL. 6. THE LD. COUNSEL FOR THE ASSESSEE AT THE OUTSET R EFERRING TO THE ORDER OF THE TRIBUNAL IN THE CASE OF SATISHKUMAR VI SHNUDAS BHUTADA VIDE ITA NO.1522/PN/2011 AND OTHER CONNECTED APPEALS ORD ER DATED 19-04- 2013 SUBMITTED THAT PROVISIONS OF SECTION 40A(3) CA NNOT BE APPLIED IN CASE WHERE THE ASSESSEE DOES NOT MAINTAIN BOOKS OF ACCOUNTS AND THE PROFIT IS ESTIMATED. REFERRING TO THE COPY OF THE ASSESSMENT ORDER THE LD. COUNSEL FOR THE ASSESSEE DREW THE ATTENTION OF THE BENCH TO THE VERY FIRST PARAGRAPH OF THE ASSESSMENT ORDER AND SUBMITTED THA T THE ASSESSING OFFICER HIMSELF HAD OBSERVED THAT THE ASSESSEE DID NOT MAINTAIN ANY BOOKS OF ACCOUNTS. HE ACCORDINGLY SUBMITTED THAT S INCE THE ASSESSEE DOES NOT MAINTAIN BOOKS OF ACCOUNTS AND PROFIT HAS BEEN ESTIMATED, THEREFORE, IN VIEW OF THE DECISION OF THE TRIBUNAL IN THE CASE OF SATISHKUMAR VISHNUDAS BHUTADA (SUPRA) NO DISALLOWAN CE U/S.40A(3) CAN BE MADE. 7. THE LD. DEPARTMENTAL REPRESENTATIVE ON THE OTHER HAND HEAVILY RELIED ON THE ORDER OF THE CIT(A) AND SUBMITTED THA T THE ORDER OF THE 6 CIT(A) BEING A REASONABLE ONE AND IN ACCORDANCE WIT H LAW, THEREFORE, THE SAME SHOULD BE UPHELD. 8. WE HAVE CONSIDERED THE RIVAL ARGUMENTS MADE BY B OTH THE SIDES, PERUSED THE ORDERS OF THE ASSESSING OFFICER AND THE CIT(A) AND THE PAPER BOOK FILED ON BEHALF OF THE ASSESSEE. WE HAV E ALSO CONSIDERED THE VARIOUS DECISIONS RELIED ON BY BOTH THE SIDES. IN THE INSTANT CASE, WE FIND THE ASSESSING OFFICER IN THE VERY FIRST PARAGRAPH O F THE ASSESSMENT ORDER HAS MENTIONED THAT THE ASSESSEE DID NOT MAINTAIN AN Y BOOKS OF ACCOUNTS. FURTHER, IT IS AN UNDISPUTED FACT THAT THE ASSESSEE HAS DECLARED ITS PROFIT U/S.44AF. WE FIND THE ASSESSING OFFICER MADE DISAL LOWANCE OF RS.2,66,618/- U/S.40A(3) ON THE GROUND THAT THE ASS ESSEE HAS MADE CASH PAYMENTS EXCEEDING RS.20,000/- AND THEREBY VIOLATED THE PROVISIONS OF SECTION 40A(3). WE FIND THE LD.CIT(A) UPHELD THE A CTION OF THE ASSESSING OFFICER BY REJECTING THE CONTENTION OF TH E ASSESSEE THAT ASSESSEE HAS NOT MAINTAINED PROPER BOOKS OF ACCOUNT S AND PROFIT HAS BEEN ESTIMATED AND THEREFORE PROVISIONS OF SECTION 40A(3 ) ARE NOT APPLICABLE. IT IS THE CASE OF THE LD. COUNSEL FOR THE ASSESSEE THAT SINCE THE ASSESSEE DOES NOT MAINTAIN BOOKS OF ACCOUNTS AS HAS BEEN HEL D BY THE ASSESSING OFFICER AND SINCE THE PROFIT HAS BEEN ESTIMATED, TH EREFORE, PROVISIONS OF SECTION 40A(3) ARE NOT APPLICABLE IN VIEW OF THE DE CISION OF THE PUNE BENCH OF THE TRIBUNAL IN THE CASE OF SATISHKUMAR VI SHNUDAS BHUTADA (SUPRA). WE FIND THE TRIBUNAL FROM PAGE 29 TO 34 O F THE SAID ORDER HAS DISCUSSED THE ISSUE OF ADDITION U/S.40A(3) WHEN THE ASSESSEE DOES NOT MAINTAIN BOOKS OF ACCOUNTS AND PROFIT IS ESTIMATED. THE RELEVANT ARGUMENTS BY BOTH THE SIDES AND THE FINDING OF THE TRIBUNAL ARE AS UNDER : 7 29. THE LEARNED COUNSEL FOR THE ASSESSEE VEHEMENTL Y OPPOSED THE ADDITION SUSTAINED BY THE CIT(A). HE SUBMITTED THAT WHEN TH E ASSESSEE DOES NOT MAINTAIN BOOKS OF ACCOUNTS AND ALL TRANSACTIONS ARE UNACCOUNTED FOR WHICH THE ASSESSING OFFICER HAS ESTIMATED THE PROFIT THEN IN THAT CASE ADDITION U/S.40A(3) IS NOT WARRANTED. 29.1 REFERRING TO THE DECISION OF THE PUNE BENCH OF THE TRIBUNAL IN THE CASE OF KIRTIKUMAR VISHNUDAS BHUTADA, (A COPY OF WHICH W AS FILED IN THE PAPER BOOK) HE SUBMITTED THAT UNDER IDENTICAL FACTS AND C IRCUMSTANCES THE TRIBUNAL HAS DELETED THE ADDITION MADE BY THE ASSESSING OFFI CER U/S.40A(3). HE ALSO REFERRED TO THE DECISION OF HONBLE ALLAHABAD HIGH COURT IN THE CASE OF CIT VS. BANWARI LAL BANSHIDHAR REPORTED IN 229 ITR 229 AND SUBMITTED THAT WHEN THE GROSS PROFIT RATE IS APPLIED THAT WOULD TA KE CARE OF EVERYTHING AND THERE WAS NO NEED FOR MAKING ADDITION U/S.40A(3). HE ACCORDINGLY SUBMITTED THAT UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE NO ADDITION U/S.40A(3) IS CALLED FOR. 30. THE LEARNED DEPARTMENTAL REPRESENTATIVE ON THE OTHER HAND RELIED ON THE ORDER OF THE HONBLE SUPREME COURT IN THE CASE OF ATTAR SINGH GURMUKH SINGH VS. ITO REPORTED IN 191 ITR 667 AND SUBMITTED THAT THE PURPOSE OF INTRODUCTION OF SECTION 40A(3) WAS TO CURB BLACK MO NEY AND TO REGULATE THE BUSINESS TRANSACTION. THEREFORE, THE LD. CIT(A) WA S FULLY JUSTIFIED IN UPHOLDING THE ADDITION MADE BY THE ASSESSING OFFICE R U/S.40A(3) OF THE ACT FOR VIOLATION OF THE PROVISIONS OF THE SAID SECTION . REFERRING TO THE DECISION OF HONBLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF CIT VS. SAI METAL WORKS REPORTED IN 241 CTR 377 HE SUBMITTED THAT EVE N IN CASES OF ESTIMATION OF PROFIT PROVISIONS OF SECTION 40A(3) WOULD BE APP LICABLE. 31. THE LEARNED COUNSEL FOR THE ASSESSEE IN HIS REJ OINDER SUBMITTED THAT THE TRIBUNAL IN THE CASE OF KIRTIKUMAR VISHNUDAS BHUTAD A (SUPRA) HAS CONSIDERED THE DECISION OF HONBLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF CIT VS. SAI METAL WORKS (SUPRA) AND APPLIED THE RATIO LAID DOWN BY THE HONBLE SUPREME COURT IN THE CASE OF CIT VS. VEGETABLE PROD UCTS REPORTED IN 88 ITR 1 (SC) AND ACCEPTED THE VIEW FAVOURABLE TO THE ASSE SSEE. SINCE THE PROFIT HAS BEEN ESTIMATED IN ABSENCE OF MAINTENANCE OF REGULAR BOOKS OF ACCOUNTS, THEREFORE, NO DISALLOWANCE U/S. 40A(3) IS CALLED FO R. 32. WE HAVE CONSIDERED THE RIVAL ARGUMENTS MADE BY BOTH THE SIDES, PERUSED THE ORDERS OF THE AO AND THE CIT(A) AND THE PAPER BOOK FILED ON BEHALF OF THE ASSESSEE. WE HAVE ALSO CONSIDERED TH E VARIOUS DECISIONS CITED BY BOTH THE SIDES. THERE IS NO DISPUTE TO THE FACT THAT IT IS A CASE OF NON- MAINTENANCE OF ACCOUNTS AND PROFIT HAS BEEN ESTIMAT ED BY REJECTING THE BOOK RESULTS. THERE IS ALSO NO DISPUTE TO THE FACT THAT DISALLOWANCE OF RS.6,08,222/- HAS BEEN MADE ON ACCOUNT OF VIOLATION OF PROVISIONS OF SECTION 40A(3). IT IS THE CASE OF THE ASSESSEE THAT SINCE PROFIT HAS BEEN ESTIMATED AND ASSESSEE DOES NOT MAINTAIN ANY ACCOUNTS, THEREFORE, NO ADDITION C AN BE MADE U/S.40A(3) IN VIEW OF THE VARIOUS DECISIONS. IT IS THE CASE OF T HE REVENUE THAT EVEN IN CASE WHERE PROFIT IS ESTIMATED DISALLOWANCE U/S.40A(3) C AN BE MADE. 33. WE FIND THE PUNE BENCH OF THE TRIBUNAL IN THE C ASE OF KIRTIKUMAR VISHNUDAS BHUTADA (SUPRA) UNDER SOMEWHAT SIMILAR CI RCUMSTANCES HAS DELETED THE DISALLOWANCE MADE U/S.40A(3) BY HOLDING AS UNDER : 19. HAVING GONE THROUGH THE ABOVE CITED DECISIONS BY THE PARTIES, WE FIND THAT IN VIEW OF SEVERAL DECISIONS INCLUDING TH E DECISION OF THE HON'BLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF M/S. SAI METAL WORKS (SUPRA), THE PUNE BENCH OF THE TRIBUNAL IN ITS RECENT DECISI ON IN THE CASE OF ACIT VS. M/S. RUSHIRAJ BUILDERS & DEVELOPERS (SUPRA) HAS COM E TO THE FOLLOWING CONCLUSION ON THE ISSUE: 8 9. CONSIDERING THE ABOVE SUBMISSIONS, WE FIND THAT THE LEARNED CIT(A) HAVE DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE FOLLOWI NG THE DECISION OF NAGPUR BENCH OF THE TRIBUNAL IN THE CASE OF SADHURA M WADHWANI (SUPRA) HOLDING THAT THE DISALLOWANCE U/S. 40A(3) IN THE BL OCK ASSESSMENT WAS OUTSIDE THE AMBIT OF CHAPTER XIV B OF THE I.T. ACT. THE LD CIT(A) HAS DISCUSSED SEVERAL DECISIONS RELIED UPON BEFORE HIM INCLUDING THE DECISIONS OF PUNE BENCH OF THE TRIBUNAL IN THE CASE OF JANATA TILES, 66 TTJ 695 (PUNE) AND SHARMA ASSOCIATES, 55 ITD 171 (PUNE) HOL DING THAT ONCE THE TRANSACTIONS ARE UNRECORDED AND UNDISCLOSED FROM TH E REGULAR BOOKS OF ACCOUNT, THERE CAN'T BE FURTHER DISALLOWANCE U/S. 4 0A(3) OF THE ACT. RELIANCE HAS ALSO BEEN PLACED ON THE DECISION OF MU MBAI BENCH OF THE TRIBUNAL IN THE CASE OF WESTERN INDIA BAKERS (P) LT D. VS. DCIT (2004) 84 TTJ (MUM) 223 EXPRESSING THE SIMILAR VIEW WITH THIS OBSERVATION THAT HEADING OF CHAPTER XIV B IS SPECIAL PROCEDURE FOR A SSESSMENT OF SEARCH CASES. SECTION 158BA DEALS ASSESSMENT OF UNDISCLOSE D INCOME AS A RESULT OF SEARCH. THIS SECTION OPENS WITH A NON-OBSTINATE CLA USE AND THIS ENACTS PROVISIONS OF OVERRIDING NATURE SO AS TO PREVAIL OV ER ANY OTHER PROVISIONS OF THE ACT. THE ASSESSED UNDISCLOSED INCOME IS ASSE SSED AT THE HIGHER RATE OF 60% U/S. 113 OF THE ACT, OBSERVED THE TRIBUNAL. WE, HOWEVER, FIND THAT DIFFERENT VIEWS HAVE BEEN EXPRESSED BY DIFFERENT HI GH COURTS ON THE ISSUE AND NO DECISION OF HON'BLE JURISDICTIONAL HIGH COUR T ON THE ISSUE HAS BEEN BROUGHT TO OUR NOTICE BY THE PARTIES. UNDER TH ESE CIRCUMSTANCES, IN VIEW OF THE DECISIONS OF HON'BLE SUPREME COURT IN T HE CASES OF CIT VS. VEGETABLE PRODUCTS (SUPRA) AND CIT VS. PODAR CEMENT PVT. LTD. (SUPRA), WE ADOPT THE JUDGMENT ON THE ISSUE WHICH IS FAVOURABLE TO THE ASSESSEE. WE THUS RESPECTFULLY ARE FOLLOWING THE DECISION OF CARGO CL EARING AGENCY (GUJ.) VS. JCIT (SUPRA) & OTHERS RELIED UPON BY THE LD. A.R. H OLD THAT THE LD CIT(A) HAS RIGHTLY DELETED THE DISALLOWANCE U/S. 40A(3) OF THE ACT MADE BY THE A.O WITH DIRECTION TO DELETE THE SAME INVOLVING AMOUNT OF RS.24,15,160/-. THE SAME IS UPHELD. GROUND NO.3 TO 5 INVOLVING THIS ISS UE IS THUS REJECTED.' IN VIEW OF THE ABOVE DECISION OF THE PUNE BENCH IN THE CASE OF ACIT VS. M/S.RUSHIRAJ BUILDERS & DEVELOPER (SUPRA), WE THUS HOLD THAT ONCE THE TRANSACTIONS ARE UNRECORDED AND UNDISCLOSED FROM TH E REGULAR BOOKS OF ACCOUNT, THERE CANNOT BE FURTHER DISALLOWANCE U/S. 40A(3) OF THE ACT. WE THUS WHILE SETTING ASIDE ORDERS OF THE AUTHORITIES BELOW DIRECT THE A.O. TO DELETE THE DISALLOWANCE OF RS.2,27,978/- MADE U/S. 40 A(3) OF THE ACT. THE GROUND NO. 4 IS THUS ALLOWED. 34. RESPECTFULLY FOLLOWING THE DECISION OF THE COOR DINATE BENCH OF THE TRIBUNAL WE SET-ASIDE THE ORDER OF THE CIT(A) AND D IRECT THE ASSESSING OFFICER TO DELETE THE ADDITION MADE U/S.40A(3) IN T HE INSTANT CASE WHERE ADMITTEDLY PROFIT HAS BEEN ESTIMATED IN ABSENCE OF MAINTENANCE OF BOOKS OF ACCOUNTS. GROUNDS RAISED BY THE ASSESSEE ARE ACCOR DINGLY ALLOWED. 8.1 CONSIDERING THE FACT THAT THE ASSESSEE DOES NOT MAINTAIN BOOKS OF ACCOUNTS AND PROFIT HAS BEEN ESTIMATED U/S.44AF, TH EREFORE, RESPECTFULLY FOLLOWING THE DECISION OF THE TRIBUNAL CITED (SUPRA ) WE HOLD THAT THERE IS NO NEED FOR DISALLOWANCE U/S.40A(3) IN THE FACTS AN D CIRCUMSTANCES OF 9 THIS CASE. WE ACCORDINGLY SET-ASIDE THE ORDER OF T HE CIT(A) ON THIS ISSUE AND THE GROUNDS RAISED BY THE ASSESSEE ARE ALLOWED. ITA NO.1372/PN/2011 AND 1373/PN/2011 (A.YRS. 2004- 05 & 2007- 08) : 9. AFTER HEARING BOTH THE SIDES, WE FIND THE ASSESS EE IN THE ABOVE 2 APPEALS HAS CHALLENGED THE ADDITION OF RS.1,05,983/ - AND RS.7,02,081/- RESPECTIVELY U/S.40A(3) BY THE ASSESSING OFFICER FO R THE ABOVE 2 YEARS WHICH HAS BEEN UPHELD BY THE CIT(A). WE FIND THE GR OUNDS RAISED BY THE ASSESSEE IN THE ABOVE 2 APPEALS ARE IDENTICAL TO TH E GROUNDS OF APPEAL IN ITA NO.1371/PN/2011. WE HAVE ALREADY DECIDED THE I SSUE AND THE GROUNDS RAISED BY THE ASSESSEE HAVE BEEN ALLOWED. FOLLOWING THE SAME RATIO, THE GROUNDS RAISED BY THE ASSESSEE ARE ALLOW ED. 10. IN THE RESULT, ALL THE 3 APPEALS FILED BY THE A SSESSEE ARE ALLOWED. PRONOUNCED IN THE OPEN COURT ON THIS THE 27 TH DAY OF SEPTEMBER 2013 SD/- SD/- (SHAILENDRA KUMAR YADAV) (R.K. P ANDA) JUDICIAL MEMBER ACCOUNT ANT MEMBER PUNE DATED: 27 TH SEPTEMBER 2013 SATISH COPY OF THE ORDER FORWARDED TO : 1. ASSESSEE 2. DEPARTMENT 3. CIT(A)-II, NASHIK 4 CIT-II, NASHIK 5. THE D.R, A PUNE BENCH 6. GUARD FILE BY ORDER // TRUE COPY // SENIOR PRIVATE SECRETARY ITAT, PUNE BENCHES, PUNE