The DCIT1(1), Indore V. Shri Ravi Arora, Indore

ITA 212/Ind/2020

AI Insights

The case involves an appeal by the Deputy Commissioner of Income Tax against the order of the Commissioner of Income-Tax (Appeals), which had deleted several additions made by the Assessing Officer in the assessment of Shri Ravi Arora for the Assessment Year 2011-12. The additions pertained to unsecured loans, interest on loans, disallowance of salary expenditure, and treatment of capital gains. The Tribunal examined each ground of appeal, considering the arguments and evidence presented by both the revenue and the assessee, and upheld the CIT(A)'s decision in most respects, except for the issue of disallowance under section 40A(3), which was remanded for further examination.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 130673 (ITAT-INDORE)
• Duration Of Justice: 3 year(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-07-2023
• Appeal Filed By: Department
• Order Result: PartlyAllowed
• Bench Allotted: DB
• Next Hearing Date: 03-05-2023
• Assessment Year: 2011-2012
• Appeal Filed On: 22-07-2020
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Capital asset; Principle of natural justice; Opportunity of cross examination; Additional evidence; Capital receipt; Onus to prove; Bogus loan; Cancellation of registration; TDS; Capital Gains
• Section: 131; 68; 40A(3); 143(3); 133(6); 72; 13; 22

Judgement Text

Page 1 of 37 आयकर अपीलȣय अͬधकरण, इंदौर Ûयायपीठ, इंदौर IN THE INCOME TAX APPELLATE TRIBUNAL INDORE BENCH, INDORE BEFORE SHRI VIJAY PAL RAO, JUDICIAL MEMBER AND SHRI B.M. BIYANI, ACCOUNTANT MEMBER ITA No. 212/Ind/2020 Assessment Year:2011-12 DCIT-5(1), Indore बनाम/ Vs. Shri Ravi Arora, 1007, Khatiwala Tank, 236, Indraprasth Tower, 6, M.G. Road, Indore. (Revenue / Appellant) (Assessee / Respondent) PAN: AGDPA8921H Assessee by Shri Yash Kukreja, CA and Shri Hitesh Chimnani, Adv & Ld. Ars Revenue by Shri P.K.Mishra, CIT DR Date of Hearing 04.05.2023 Date of Pronouncement 31.07.2023 आदेश / O R D E R Per B.M. Biyani, A.M.: Feeling aggrieved by appeal-order dated 31.01.2020 passed by learned Commissioner of Income-Tax (Appeals)-II, Indore [“Ld. CIT(A)”], which in turn arises out of assessment-order dated 25.02.2014 passed by Dy. CIT, Circle 5(1), Indore, [“Ld. AO”] u/s 143(3) of Income-tax Act, 1961 [“the Act”] for Assessment-Year [“AY”] 2011-12, the Revenue has filed this appeal on following grounds: “(1) Whether on the facts and in the circumstances of the case and the Ld. CIT(A) has erred in deleting the addition of Rs. 2,07,01,936/- in respect of unsecured loans and interest of Rs. 12,65,695/- thereon. Without considering the fact that assessee had taken unsecured loans from the DCIT v. Ravi Arora ITA No.212/Ind/2020 Assessment year 2011-12 Page 2 of 37 companies such as M/s. Jayant Securities & Finance Ltd., which has been proved entry provider company after investigation. (2) Whether on the facts and in the circumstances of the case and the Ld. CIT(A) has erred in raising the G.P. from 10.97% to 12% and hence giving relief of Rs. 4,99,63,000/- in respect of disallowance under the head salary. Without considering the fact that assessee had not produced identity proof of employees and also not made TDS on salary payment. Assessee had produced only self made vouchers to justify the salary payments. (3) Whether on the facts and in the circumstances of the case and the Ld. CIT(A) has erred in treating as Short Term Capital Gain as Long Term Capital Gain and hence giving relief of Rs. 44,81,373/- without considering the fact that the company m/s. Eden Financial Services, from whom the shares were purchased off line and the registration of company i.e. No. INB 230660520 was cancelled by SEBI. (4) Whether on the facts and in the circumstances of the case and the Ld. CIT(A) has erred in deleting the addition of amount of Rs. 35,50,000/- paid by World Class Services. Without considering the fact that entry of Rs. 32,43,791/- is appearing as loan & advances and deposits in the balance sheet of M/s. Jayant Securities & Finance Ltd, which was an accommodation entry providing paper entity and indulged in the transactions of routing unaccounted income of the assessee through bogus Loan and Advances. (5) Whether on the facts and in the circumstances of the case and the Ld. CIT(A) has erred in deleting the addition of Rs. 14,34,307/- without appreciating the facts without considering the fact that the assessee had made payments over Rs. 20,000/- in cash to various persons in contravention to provisions of section 40A(3) of the I. T. Act.” 2. Heard the learned Representatives of both sides at length and case- records perused. 3. Brief facts leading to present appeal are such that the assessee- individual submitted his return of income declaring a total income of Rs. 17,29,650/- which was subjected to scrutiny assessment u/s 143(2). Finally, Ld. AO passed assessment-order assessing total income at Rs. 8,42,92,165/- as under: Income as per return 17,29,650 DCIT v. Ravi Arora ITA No.212/Ind/2020 Assessment year 2011-12 Page 3 of 37 1 Addition on account of unsecured loans u/s 68 2,07,01,936 2 Disallowance of interest on unsecured loans 12,65,695 3 Disallowance of salary expenditure 5,11,29,204 4 Addition for non-genuine exempted capital gain 44,81,373 5 Addition of amounts paid by WCS 35,50,000 6 Disallowance u/s 40A(3) 14,34,307 Assessed income 8,42,92,165 4. Aggrieved by the additions/disallowances made by AO, the assessee carried matter in first-appeal and succeeded partly. Now, the revenue has come in this appeal on various grounds assailing the relief given by CIT(A). We would be deciding grounds one by one in seriatim. Ground No. 1: 5. In this ground, the revenue claims that the CIT(A) has erred in deleting the addition of Rs. 2,07,01,936/- made by AO u/s 68 on account of bogus unsecured loans and the interest of Rs. 12,65,695/- thereon. 6. Ld. DR for the revenue drew our attention to Para No. 3 of assessment-order where the AO has dealt this addition. He submitted that the assessee did not submit the bank accounts of lenders, purpose of loan and addresses of lenders to AO. He submitted that the assessee did not produce the lenders despite required by AO. Therefore, the AO himself enforced the presence of directors of two lender-companies, M/s K.K. Patel DCIT v. Ravi Arora ITA No.212/Ind/2020 Assessment year 2011-12 Page 4 of 37 Finance Ltd. and M/s Jayant Securities Ltd.; the statutory auditors of those two lender companies; and assessee himself through summons u/s 131 and based on the questions raised before them and replies given by them, the AO found that the lender-companies were paper companies and the loan transactions were bogus which existed only on paper. Referring to Page No. 33 of assessment-order, he submitted that the assessee filed A/cs confirmations of lenders, their Balance-Sheets, P&L A/cs, ITRs but from the statements of various persons, the AO observed that neither the lender- companies were genuine nor the loan transactions. He submitted that AO found that the tests of identity, genuineness and creditworthiness were not satisfied. Therefore, the AO treated unsecured loans as unexplained u/s 68 and made addition. He submitted that the AO’s approach is very much correct, lawful and justified in the circumstances. He submitted that the CIT(A) has, in Para No. 5.9 of appeal-order, blamed the AO for not providing opportunity of cross-examination to assessee but CIT(A) has missed to consider that the lenders were witnesses of assessee and not of AO. According to Ld. DR, it was burden of assessee to provide presence of lenders but since the assessee failed to do so, the AO had to issue summons u/s 131 and record statements. Therefore, it is unreasonable on the part of assessee to demand cross-examination and also on the part of CIT(A) to speak in favour of assessee’s demand. He submitted that the CIT(A) has wrongly granted relief to assessee. With these submissions, Ld. DR prayed us to uphold the entire addition made by AO. 7. Per contra, Ld. AR for the assessee straightaway carried us to Para No. 3.2 of assessment-order to show as to how the AO has arrived at the quantum of addition of Rs. 2,07,01,936/- plus Rs. 12,65,695/-. The order of AO is re-produced below for an immediate reference: “3.2 The details of unsecured loans & interest thereon had been shown are reproduced as under : DCIT v. Ravi Arora ITA No.212/Ind/2020 Assessment year 2011-12 Page 5 of 37 S.No. Name Repayment Accepted Interest shown 1. C.M.Industries- Bhikangaon 2522747 2522747 99645 2. Jayant Security & Finance Limited 7286373 318192 3. K.K.Patel Finance 3023301 3023301 213819 4. Sharan Kaur Bagga 771279 83532 5. Sheetal Finance & Shares 1912921 159263 6. Shri Anekant Shares & Sec. P.Ltd. 587450 48909 7. Siddh Finance & Services 1912921 159263 8. Surjeet Kaur Arora 11,66,303 1166303 58752 9. Unno Industries Limited 1518641 124320 2,07,01,936 12,65,695 *(The amount of unsecured loan has been taken from the annexure-4 of audit report, submitted by assessee on 23.12.2013 and the amount of interest has been taken from the confirmation of account of above parties submitted by assessee on 03.02.2014) DCIT v. Ravi Arora ITA No.212/Ind/2020 Assessment year 2011-12 Page 6 of 37 As worked out in above table from 09 parties unsecured loan was shown to have been received totaling to Rs. 2,07,01,936.- and interest shown of Rs. 12,65,695/-” 8. Then, the Ld. AR carried us to the order of first appeal to show as to how the CIT(A) has dealt this issue. For the sake of immediate understanding, we re-produce below the relevant portion of order: “Ground No.3 and 4: 5.0 These grounds of appeal have been raised against the addition of unsecured loan amounting to Rs. 2,07,01,936 u/s 68 of the IT Act, 1961, so made by the AO. I have carefully gone through the assessment order as well as the submission of the appellant in this regard. 5.1 The Appellant has submitted a summarized table of amounts taken as unsecured loans added to the income of Appellant i.e.: Name of Lender Opening Balance Loans accepted during the year Loans repaid during the year Interest provided during the year Closing balance as on 31.03.2011 C.M.Industries , Bhikangaon 2522747 0 2522747 99645 89680 Jayant Securities & Finance Ltd 1513315 550000 0 318192 7286373 K.K.Patel Finance Limited 3023301 0 3023301 213819 192437 Sharan Kumar Bagga 696100 0 0 83532 771279 Sheetal Finance & Shares 1769584 0 0 159263 1912921 Shri Anekant Shares & Sec. P.Ltd. 543432 0 0 48909 587450 DCIT v. Ravi Arora ITA No.212/Ind/2020 Assessment year 2011-12 Page 7 of 37 Siddh Finance Credit Overseas 1769584 0 0 159263 1912921 Unno Industries Ltd 1518641 0 1518641 124320 111888 Surjit Kaur Arora 1113426 0 1166303 58752 0 Total 14470130 5500000 8230992 1265695 12864949 5.2 The amount of addition Rs. 2,07,01,936/- had been arrived at by the AO by aggregating as follows:- Opening balance of parties to whom loan was repaid during the year: C.M. Industries Rs. 2522747 KK Patel Finance Ltd Rs. 3023301 Unno Industries Rs. 1518641 Closing balance (which included interest): Jayant Security and Finance Rs. 7286373 Sheetal Finance and Shares Ltd Rs. 1912921 Shri Anekant Shares and Securities Limited Rs. 587450 Sharan Kaur Bagga (mother of appellant ) Rs. 771279 Siddh Finance Credit Overseas Rs. 1912921 Repayment amount of loan: Surjit Kaur Arora (mother of appellant) Rs. 1166303 5.3 As can be seen from above, the AO had applied different criteria for making addition by considering highest of opening balance, closing balance and repayment amount of unsecured loans for making addition u/s 68 of the Act. On perusal of records, it is clear that only Rs. 55,00,000 had been accepted during the year and Rs. 1,44,70,130/- was opening balance of such loan which is uncontroverted by the AO even in his remand report. These opening balances of unsecured loans had not been received in the year under consideration. Further, out of such opening balances of Rs. 1,44,70,130/- DCIT v. Ravi Arora ITA No.212/Ind/2020 Assessment year 2011-12 Page 8 of 37 around Rs. 82,30,992/- had been repaid in the year under consideration and remaining loans except that of Mrs. Sharan Kaur Bagga had been repaid fully. Further, in the remand report, the AO had discussed only about two companies i.e. Jayant Security and Finance Limited and K.K. Patel Finance Limited. However, unsecured loans in question were from 9 persons in respect of whom the Appellant had filed various documents to discharge the onus on the Appellant. 5.4 The Appellant has placed reliance on the decision of Hon'ble Delhi High Court in case of CIT vs. Usha Stud Farms (301 ITR 384) for the proposition that no addition can be made u/s 68 in respect of amounts not received during the year. The Hon'ble High Court has held as follows :- “Since it is a finding of fact recorded by the CIT(A) that this credit balance appearing in the accounts of the assessed, does not pertain to the year under consideration, under these circumstances, the Assessing Officer was not justified in making the impugned addition under Section 68 of the Act and as such no fault can be found with the order of the Tribunal which has endorsed the decision of the CIT(A).” 5.5 Further, in case of Shri Vardhman Overseas Ltd vs. ACIT (2008) 24 SOT 393 (Del), the above principle is reiterated that: “From the perusal of copy of account of all the creditors with regard to which the addition had been made, it was revealed that no new amount had been credited by the assessee in their accounts during the year under consideration. Therefore, applicability of section 68 was ruled out and addition could not be made under this section.” 5.6 In case of DCIT vs. Global Mercantiles (P) Ltd. (2016) 157 ITD 924 (Kolkata Trib) it was clearly held that admittedly no moneys were received during the assessment year under appeal and hence there is no scope for invoking the provisions of section 68 of the Act. 5.7 The Hon'ble Bench of ITAT, Indore in the case of Shri Girish Kumar Sharda (I.T.A.(SS) Nos. 30 to 33/Ind/2012) had upheld the deletion of additions of unsecured loans received from M/s. K.K. Patel Finance made u/s 68 of the IT Act, 1961 by CIT(A). 5.8 In view of above facts and judicial decision so cited and discussed above, I find force with the contention of Appellant that no addition can be made in respect of amounts not received in the year under appeal or in respect of interest credited u/s 68 of the Act. Further, the Appellant has discharged its onus by submitting all the documents to prove Idenity, genuineness and creditworthiness of such unsecured loans which have not been adversely found by the ld. AO in his remand repot. Accordingly, I accept the contention of Appellant that the arbitrary additions made in respect of old outstanding loans by considering their opening balance, closing balance and repayment amount cannot be added u/s 68 of the act in the year under consideration. Hence, the addition of Rs. 1,52,01,936/- (total addition made u/s 68 of Rs. 2,07,01,936/- (-) Rs. 55,00,000 (amount received during the year) get deleted on this account. DCIT v. Ravi Arora ITA No.212/Ind/2020 Assessment year 2011-12 Page 9 of 37 5.9 During the year under consideration, the Appellant has received Rs. 55,00,000/- from M/s. Jayant Security and Finance Limited as unsecured loan. Opening balance of such loan was Rs. 15,13,315/- and interest accrued during the year of Rs. 3,18,192/- aggregated to closing balance of Rs. 72,86,373/-. The Appellant has filed confirmation of such loan financials including copy of ITR & Balance Sheet and other details to prove the identity, creditworthiness and genuineness of the loan. On the other hand, the ld. AO has placed reliance on statement of certain persons for making such disallowance. To rebut such statements the Appellant had made specific request for cross examination of the persons and summon he persons whose statements were relied upon to make the addition of unsecured loan from Jayant Security and Finance Limited. However, no effort was made by the AO to provide any opportunity of cross examination of the statements which were relied for making the additions which contravenes the settled principle of natural justice. 5.10 The Hon'ble Jurisdictional High Court of Madhya Pradesh in the case of CIT vs. Metachem Industries as reported in 245 ITR 160 has held that (Refer para 3 to 6):- “3. We have heard learned counsel for the parties. Section 68 of the Act of 1961 says that where any sum is found credited in the books of an assessee maintained for any previous year, and the assessee offers no explanation about the nature and source thereof or the explanation offered by him is not, in the opinion of the Income-tax Officer, satisfactory, the sum so credited may be charged to income-tax as the income of the assessee of that previous year. Therefore, according to Section 68, the first burden is on the assessee to satisfactorily explain the credit entry in the books of account of the previous year. If the explanation given by the assessee is satisfactory, then that entry will not be charged with the income of the previous year of the assessee. In case the explanation offered by the assessee is not satisfactory or the source offered by the assessee-firm is not satisfactory, then in that case, the amount should be taken to be the income of the assessee. In the present case, the Assessing Officer did not feel satisfied with the explanation given by the assessee and accordingly assessed all the three credit entries to the account of the assessee as the income. 4. On appeal, the Commissioner of Income-tax (Appeals) examined the matter in detail and found that Shri S. K. Gupta was the real owner of the business. The explanation given by the assessee was found to be satisfactory and he deleted the aforesaid three entries. The same finding of fact has been affirmed by the Tribunal. Once it is established that the amount has been invested by a particular person, be he a partner or an individual, then the responsibility of the assessee-firm is over. The assessee-firm cannot ask that person who makes investment whether the money invested is properly taxed or not. The assessee is only to explain that this investment has been made by the particular individual and it is the responsibility of that individual to account for DCIT v. Ravi Arora ITA No.212/Ind/2020 Assessment year 2011-12 Page 10 of 37 the investment made by him. If that person owns that entry, then the burden of the assessee-firm is discharged. It is open to the Assessing Officer to undertake further investigation with regard to that individual who has deposited this amount. 5. So far as the responsibility of the assessee is concerned, it is satisfactorily discharged. Whether that person is an income-tax payer or not or from where he has brought this money is not the responsibility of the firm. The moment the firm gives a satisfactory explanation and produces the person who has deposited the amount, then the burden of the firm is discharged and in that case that credit entry cannot be treated to be the income of the firm for the purposes of income-tax. It is open to the Assessing Officer to take appropriate action under Section 69 of the Act, against the person who has not been able to explain the investment. In the present case, there is the concurrent finding of both the Commissioner of Income-tax (Appeals) as well as of the Tribunal that the firm has satisfactorily explained the aforesaid entries. 6. We are, therefore, of the opinion that the view taken by the Tribunal is correct and the aforesaid question is answered against the Revenue and in favour of the assessee.” 5.11 The Hon'ble High Court of Madhya Pradesh in the case of CIT vs. Agrawal Warehousing & Leasing Ltd reported in 70 CCH 0522 MPHC has held that – “Precedent – Order of Tribunal – Binding nature – Orders passed by the Tribunal are binding on all Revenue authorities functioning under the jurisdiction of the Tribunal – CIT(A) not only committed judicial impropriety but also erred in law in refusing to follow the order of the Tribunal – Even if he had some reservations about the correctness of the decision of the Tribunal he had to follow the order. 5.12 The Hon'ble Madhya Pradesh High Court had further observed, “the tribunal is created u/s 253 of the I.T. Act, consisting of as many judicial and accountant members as may be appointed by the Central Government. Once such judicial member of the Tribunal is normally appointed as the President thereof. Any assessee aggrieved by the orders passed by the authorities as enumerated under clauses (a) to (c) of Sub-section (1) of section 253 may appeal to the Tribunal. The Tribunal has power to pass such orders on such an appeal as it thinks fit. Sub section (4) of section 254 attaches finality to, the orders of the Tribunal subject to the provisions of section 256 ( or section 260A). Needless to say the orders passed by the Tribunal are binding on all the Revenue authorities functioning under the jurisdiction of the Tribunal.” 5.13 The Hon'ble M.P. High Court had also categorically stated that “obviously, the CIT(A) not only committed judicial impropriety but also erred in law in refusing to follow the order of the Appellate Tribunal. Even where he may have some reservations about the correctness of DCIT v. Ravi Arora ITA No.212/Ind/2020 Assessment year 2011-12 Page 11 of 37 the decision of the Tribunal, he had to follow the order. He could and should have left it to the Department to take the matter in further appeal to the Tribunal and get the mistake, if any, rectified.” 5.14 The Hon'ble Supreme Court in the case of Union of India vs. Kamlakshi Finance Corporation Ltd., AIR 1992 SC 711 (1991) 55 IFT 433 (S.C.) had given the following findings : “It cannot be too vehemently emphasised that it is of utmost importance that, in disposing of the quasi-judicial issues before them, revenue officers are bound by the decisions of the appellate authorities; The order of the Appellate Collector is binding on the Assistant Collectors working within his jurisdiction and the order of the Tribunal is binding upon the Assistant Collectors and the Appellate Collectors who function under the jurisdiction of the Tribunal. The principles of judicial discipline require that the orders of the higher appellate authorities should be followed unreservedly by the subordinate authorities. The mere fact that the order of the appellate authority is not "acceptable" to the department - in itself an objectionable phrase - and is the subject matter of an appeal can furnish no ground for not following it unless its operation has been suspended by a competent court. If this healthy rule is not followed, the result will only be undue harassment to assessee and chaos in administration of tax laws.” 5.15 The Hon'ble Bench of ITAT, Indore in the case of M/s. Tirupati Construction ITA No.522/Ind/2014 had given the decision in favour of the appellant u/s 68 of the IT Act, 1961 on account of loan taken from M/s. Jayant Securities & Finance Ltd. The relevant extract of the said order is reproduced hereunder :- “18. Brief facts of the case are that the Assessing Officer observed that the assessee has received unsecured loans from the following three parties: 1. M/s East West Finvest India Ltd. Rs.75 lacs 2. M/s Jayant Securities & Finance Ltd. Rs. 80 lacs 3. M/s K.K. Patel Finance Ltd.Rs. 75 lacs. He observed that the assessee was paying interest on these loans at very small rate of 3.6% whereas interest payment to other ranges from 7% to 21.6%. According to him, charging of such low interest rate on the huge amount of loans raises doubt. In order to verify the identity and genuineness of the parties, notice u/s 133(6) of the Act was issued on 26.12.2012 asking these parties to furnish details on or before 4.1.2013. No reply was received till 7.2.2013. Thereafter the Assessing Officer asked the assessee to produce all the directors of the three concerns and to produce the bank statement reflecting the source of the amount advanced as unsecured loan. The assessee submitted reply on 22.2.2013 but failed to produce directors of the company. The Assessing Officer further noted that the assessee also failed to produce the bank statements and explain the source of these amounts through bank trails advance by these parties to verify the credit worthiness of these parties. The assessee submitted before the Assessing Officer that the parties have informed him that no notice u/s 133(6) was received by them. The Assessing Officer noted that the notices were despatched at the addresses given by DCIT v. Ravi Arora ITA No.212/Ind/2020 Assessment year 2011-12 Page 12 of 37 the assessee and, therefore, the contention of the assessee is rejected. Therefore, the Assessing Officer made addition of Rs.2,30,00,000/- and disallowed the interest payment of Rs.2,79,808/- made to these parties. 19. Before the learned CIT(A) it was contended that the assessee furnished copy of return of income of the loan creditors. The learned CIT(A) observed that in the return of income the parties were having loss/very small positive income and he, therefore, inferred that it was not possible to give huge loans by the said companies. 20. Before us, the learned counsel for the assessee argued that the assessee filed – (i) copy of confirmation letters from the loan creditors. (ii) copy of ledger account of the assessee firm in books of three companies. (iii) copy of bank statement of the assessee companies from where they have transferred the loan amount to the assessee firm. (iv) copy of income tax return, PAN and balance sheet of the three companies for the year under appeal. (v) copy of assessment orders (vi) copy of bank statement of the assessee firm wherein credit of unsecured loans is accepted and appearing. (vii) copy of loan account of the loan creditors in the books of the assessee firm (viii) copy of ledger account of loan creditors in the books of the assessee firm for the year of repayment along with copy of bank statement from where the amount of repayment has been made and (ix) copy of TDS certificate for TDS made on interest paid to the parties. It was, therefore, submitted that the assessee firm duly discharged its onus that the loan was genuinely accepted through banking channel from the companies and discharged its onus to prove the transaction. It was argued that merely because the directors of the company could not be produced by the assessee, it cannot be held in the light of overwhelming evidence filed by the assessee that the loans are not genuine or that there was no credit worthiness of the parties to advance such loan. It was argued that the assessee was required to prove the source of credit in its books of accounts and not about the source of source. Hence, it was prayed that the addition made should be deleted. DCIT v. Ravi Arora ITA No.212/Ind/2020 Assessment year 2011-12 Page 13 of 37 21. On the other hand, the learned DR supported the orders of the authorities below. 22. We have heard the rival contentions of both the sides. In the instant case during the year under consideration the assessee has received Rs. 2,30,00,000/- from three companies and also made interest payment of Rs.2,79,808/-. The Assessing Officer disallowed the same on the ground that the assessee has made interest payment at a very small rate of interest of 3.6% whereas in other cases interest payment ranged from 7% to 26.1%. Therefore, it raised a doubt that the loans were not genuine. On appeal, the learned CIT(A) confirmed the action of the Assessing Officer on the ground that from the copies of income tax return it is seen that these companies have shown loss/small amounts of income and, therefore, the loan creditors did not have credit worthiness to advance the sum of money to the assessee. The learned counsel for the assessee submitted that the assessee had filed overwhelming evidence such as confirmation letters from the loan creditors, ledger copies of the accounts in the books of the loan creditors, copy of bank statement of the loan creditor, copies of income tax return and balance sheet, copy of assessment order, the loans have been received through banking channel and the Assessing Officer has brought no material after verifying these evidences to show that the loans received by the assessee during the year are not genuine or loan creditors did not have the credit worthiness to advance sum of money to the assessee. It is not in dispute that the assessee has received the amount through banking channel and has also filed confirmation of loan creditors together with PAN, copy of income tax return and balance sheet together with assessment order in support of the loan received by the assessee. We find that since the rate of interest paid by the assessee on the said loan was 3.06% and to other creditors it was 7% to 26.1% the Assessing Officer doubted the genuineness of the loan transaction He has brought no material on record after making inquiries on the basis of material filed by the assessee to show that the loan creditors are not genuine or that they had no credit worthiness to advance the sum of money to the assessee. We find that the learned CIT(A) also on the basis of suspicion while verifying the income tax returns of the companies having found that they have returned loss/meagre amount of profit, held a doubt that the loan creditors are not genuine. In our considered view, no suspicion howsoever grave, cannot take place of proof. After investigation, the Assessing Officer is required to bring material on record to show that the loan transactions are not genuine or that the credit worthiness of the loan creditors is doubtful. Merely from the return of income filed it cannot be deciphered whether the loan creditors had the credit worthiness to advance the sum of money to the assessee. The company may have received the amount by issue of share capital, debentures, preference shares which are all capital receipts not liable to tax and, therefore, will not find its place either in the profit and loss account or in the return of income. The assessee has filed copies of balance sheet and after verifying the same, it is not the case of any of the lower authorities either the Assessing Officer or the learned CIT(A) that the loan advanced to the assessee is not appearing in the balance sheet of these companies. Further it is also not the case of the revenue that the amount advances to the assessee was not through banking channel or that before issue of cheque to the assessee DCIT v. Ravi Arora ITA No.212/Ind/2020 Assessment year 2011-12 Page 14 of 37 company, the company has deposited the amount in cash for the sum advanced to the assessee. The assessee has filed copies of bank statement as noted in the order of the CIT(A) of three companies from whom the assessee has received the loans. The assessee has filed bank statements evidencing the fact of repayment of loan in the subsequent years. After considering the entire facts and circumstances, we are of the view that the addition as made by the Assessing Officer and confirmed by the learned CIT(A) by invoking the provisions of section 68 of the Act is unsustainable. Here we would like to cite the decision of the Hon'ble Delhi High Court in the case of CIT vs. Gangeshwari Metal P. Ltd. (2014) wherein it was held – “Where amounts are shown as share application money it is a simple question of whether the assessee has discharged the burden placed upon it under section 68 of the Income-tax Act, 1961, to prove and establish the identity and creditworthiness of the share applicant and the genuineness of the transaction. In such a case, the Assessing Officer cannot sit back with folded hands till the assessee exhausts all the evidence or material in its possession and then merely reject it, without carrying out any verification or enquiry into the material placed before him. For the assessment year 2004-05, the Assessing Officer sought to include a sum of Rs. 55.5 lakhs in the total income of the assessee. In response to the query with regard to the sum of Rs. 55.5 lakhs, the assessee had furnished various documents in support of the share application money received by it. Those documents included: (i) complete names and addresses of the share applicants and PAN/GIR details ; (ii) confirmatory letters of the share applicants ; (iii) copies of bank statements of the share applicants ; (iv) copies of bank account of the appellant ; (v) certificate of incorporation of the share applicants ; (vi) memorandum of association of the share applicants; (vii) copies of the share application forms. The Assessing Officer rejected the explanation and added the sum of Rs. 55.5 lakhs to the total income of the assessee. The addition was deleted by the Commissioner (Appeals) and this was confirmed by the Tribunal. On appeal to the High Court: “Held, dismissing the appeal, that there was a clear lack of inquiry on the part of the Assessing Officer once the assessee had furnished all the material. In such an eventuality no addition could be made under section 68 of the Act.” Therefore, for the forthgoing reasons, we set aside the orders of the lower authorities and delete the addition of Rs. 2,30,00,000/- made u/s 68 of the Act.” 5.16 Although, I do have reservation with respect to the correctness of the decision of ITAT, Indore in accepting the identity, creditworthiness and genuineness of loan received from Jayant Securities and consequently deleting the addition u/s 68; however, as a matter of judicial proprietary and judicial discipline; in light of the order of Jurisdictional Madhya Pradesh High Court in the case of Agrawal Warehousing (Supra); I am bound to follow the order of Jurisdictional Tribunal. Hence, as judicial proprietary; keeping in mind and DCIT v. Ravi Arora ITA No.212/Ind/2020 Assessment year 2011-12 Page 15 of 37 respectfully following the decision of Hon'ble Jurisdictional Bench of ITAT, Indore in the case of Tirupati Construction (supra), I delete the addition of Rs. 55,00,000/- so received from M/s. Jayant Securities & Finance Ltd. Made u/s 68 of the IT Act, 1961, and accordingly, the ground of appeal is allowed. Ground No. 5 and 6: 6.0 This ground relates to addition of interest on aforesaid unsecured loans amounting to Rs. 1265695/-. During the year under consideration, the Appellant has debited interest amounting to Rs. 12,65,695/- on the aforesaid unsecured loans after deduction of tax at source. 6.1 In view of the fact that the addition of unsecured loans has been deleted the allowance of interest on such loan is consequential. Accordingly, this ground of appeal is allowed.” 9. Ld. AR compared the details of loan transactions noted by AO in assessment-order and by CIT(A) in Para No. 5.1 of appeal-order (both details re-produced in foregoing paragraphs) and pointed out a serious flaw in the details noted by AO. He submitted that the AO has noted that the assessee accepted loans of Rs. 2,07,01,936/- from 9 persons during the year, but the fact is such that the assessee accepted loan of Rs. 55,00,000/- only from 1 person, namely M/s Jayant Securities & Finance Ltd. [“M/s Jayant”]; in all other cases there were opening balance and repayments during the year but there was no acceptance of loan during the year. He submitted that the AO has mixed-up details of opening balances, closing balances and repayments and made addition as if the assessee had taken loans of Rs. 2,07,01,936/- which is factually wrong. He submitted that the CIT(A) has noted correct details of all 9 persons in the tabular format under column headings, ‘opening balance’, ‘loans accepted during the year’, ‘loans repaid during the year’ ‘interest provided during the year’ and ‘closing balance as on 31.03.2011’. Therefore, the AO’s action in considering the figure of Rs. 2,07,01,936/- is wrong in the first instance. He submitted that the CIT(A) has, taking into account correct data, split his adjudication in two parts precisely as under: (i) In Para No. 5.4 to 5.8 of appeal-order, he has dealt the cases of opening balances and held that no addition could be made in respect DCIT v. Ravi Arora ITA No.212/Ind/2020 Assessment year 2011-12 Page 16 of 37 of opening balances. He has relied upon certain judicial rulings directly holding this proposition. Finally, he has deleted the addition to the extent of Rs. 1,52,01,936/-. (ii) In Para No. 5.9 to 5.16, he has dealt the loan of Rs. 55,00,000/- taken by assessee during the year from M/s Jayant. There also he has deleted addition following the binding decision of ITAT, Indore in Tirupati Construction ITA No. 522/Ind/2014 wherein the identity, creditworthiness and genuineness of loans taken from M/s Jayant had been accepted. 10. Ld. AR submitted that the decision of AO is fallacious as against which the order passed by CIT(A) reversing the conclusion of AO is very much correct, both on facts and in law, and therefore the order of CIT(A) deserves to be upheld. 11. In rejoinder, Ld. DR emphasized the Para No. 5.16 of CIT(A)’s order re- produced below and pointed out that the CIT(A) has categorically noted his reservation with respect to correctness of decision of ITAT, Indore in Tirupati Construction qua the identity, creditworthiness and genuineness of M/s Jayant, but however he has followed the decision to maintain judicial proprietary and with utmost respect to Hon’ble ITAT: “5.16 Although, I do have reservation with respect to the correctness of the decision of ITAT, Indore in accepting the identity, creditworthiness and genuineness of loan received from Jayant Securities and consequently deleting the addition u/s 68; however, as a matter of judicial proprietary and judicial discipline; in light of the order of Jurisdictional Madhya Pradesh High Court in the case of Agrawal Warehousing (Supra); I am bound to follow the order of Jurisdictional Tribunal. Hence, as judicial proprietary; keeping in mind and respectfully following the decision of Hon'ble Jurisdictional Bench of ITAT, Indore in the case of Tirupati Construction (supra), I delete the addition of Rs. 55,00,000/- so received from M/s. Jayant Securities & Finance Ltd. Made u/s 68 of the IT Act, 1961, and accordingly, the ground of appeal is allowed.” Ld. DR also sought to distinguish the applicability of decision in Tirupati Construction to present case on the footing that in Tirupati Construction the DCIT v. Ravi Arora ITA No.212/Ind/2020 Assessment year 2011-12 Page 17 of 37 AO did not make any independent enquiry from M/s Jayant but in present case of assessee, the AO recorded statements of director of M/s Jayant and thereafter came to conclusion. In rebuttal, Ld. AR for assessee, submitted that the said statements were recorded at the back of assessee and no opportunity of cross-examination was allowed to assessee. Ld. AR also relied upon decision of ITAT, Mumbai in Abhijavala Developers (P) Ltd. Vs. ITO (2021) 124 taxmann.com 72 (Mumbai-ITAT) to support the proposition that no addition can be validly made on the basis of any statement without affording opportunity of cross-examination to assessee, copy of order is also placed before us. 12. We have considered rival submissions of both sides and carefully perused the orders of lower-authorities. At the outset, we find the mis- matches in the details of loans noted by AO in assessment-order and by CIT(A) in appeal-order. On a careful consideration, we find that the CIT(A) has, in Para No. 5.1 of his order, noted the data of loans meticulously in a tabular format giving a complete tally. Further, in next Para No. 5.2, the CIT(A) has also marshalled as to how the AO has mixed up the opening balance, loans accepted during year and loans repaid during the year and taken a wrong figure of Rs. 2,07,01,926/- as loan accepted during the year. The details noted by CIT(A) are not controverted by Ld. DR before us. Therefore, we are accepting the details noted by CIT(A) as well conclusion taken by him that during the year, the assessee accepted a loan of Rs. 55,00,000/- only from one lender, M/s Jayant and all other loans were merely opening balances brought forward from earlier years. With this accepted factual matrix, we firstly agree with the deletion of Rs. 1,52,01,936/- made by Ld. CIT(A) on the footing that section 68 does not permit any addition qua the opening balances which are carried forward from earlier year and not accepted during the year. Ld. CIT(A) has rightly taken into account the decision of (i) Hon'ble Delhi High Court in case of CIT vs. Usha Stud Farms (301 ITR 384), (ii) Shri Vardhman Overseas DCIT v. Ravi Arora ITA No.212/Ind/2020 Assessment year 2011-12 Page 18 of 37 Ltd vs. ACIT (2008) 24 SOT 393 (Del), and (iii) DCIT vs. Global Mercantiles (P) Ltd. (2016) 157 ITD 924 (Kolkata Trib) in which it has been loudly held that no addition could be made u/s 68 in respect of opening balances when there is no sum credited in the current year. Secondly, in so far as the loan of Rs. 55,00,000/- accepted during the year from M/s Jayant is concerned, the CIT(A) has followed the decision of ITAT, Indore Bench in Tirupati Construction (supra) where the identity, creditworthiness and genuineness of loans taken from M/s Jayant had been accepted. The relevant paragraph of the said decision is noted by CIT(A) in Para No. 5.15 of his order and since we have already reproduced the CIT(A)’s order in foregoing paragraph, we refrain from re-mentioning the same. We only suffice to say that the identity, creditworthiness and genuineness of loan taken from M/s Jayant is accepted by ITAT, Indore and we too accept the same following ITAT’s decision. In so far as the distinction attempted to be made by Ld. DR regarding applicability of Tirupati Construction (supra) to present case, we find merit in the rebuttal made by Ld. AR that the statements of director of M/s Jayant were recorded by AO at the back of assessee and no opportunity of cross-examination was allowed. Ld. AR has correctly placed reliance on Abhijavala Developers (P) Ltd. (supra) to support his rebuttal. 13. The above discussion brings us to conclude that CIT(A) has carefully and extensively decided the issue and deleted the addition of Rs. 2,07,01,926/- relating to loans as well as interest of Rs. 12,65,695/- relatable to those loans and we do not find any valid reason to interfere with the order of CIT(A). Consequently, we uphold the deletion done by CIT(A). The revenue fails in this ground. Ground No. 2: 14. In this ground, the revenue claims that the CIT(A) has erred in raising the Gross-Profit from 10.97% to 12% and thereby giving partial-relief to DCIT v. Ravi Arora ITA No.212/Ind/2020 Assessment year 2011-12 Page 19 of 37 assessee out of disallowance of Rs. 5,11,29,204/- made by AO in respect of salary expenditure claimed by assessee. 15. Apropos to this issue, Ld. DR carried us to Para No. 4 of assessment- order, more particularly sub-para No. 6.9 to 4.12 thereof (some mistake in serial numbering of sub-paras in assessment-order, we refer the serial numbers without making any modification). He submitted that during assessment-proceeding, the AO provided ample opportunities to assessee to substantiate the claim of salary expenditure but the assessee provided incomplete vouchers and details. The assessee could not provide the details of number of employees, nature of work carried out by them, etc. The assessee did not furnish the ID proof and addresses of employees. The AO recorded statement of assessee u/s 131 qua salary expenditure which are re-produced in assessment-order. He submitted that in Q.No. 18 and 20 of statement, the assessee stated to have 400 to 800 employees fluctuating from time to time but the assessee could not explain how the employees are recruited. The assessee has not deducted TDS out of salary payments which is also a factor to be taken into account. The assessee has made PF deductions out of salary payment of Rs. 61,22,584/- only. The AO has also scanned and re-produced a few vouchers in assessment-order to show that the vouchers were self-made. Due to such shortcomings, the AO has ultimately allowed deduction of Rs. 61,22,584/- to the extent proved by PF returns and remaining claim of Rs. 5,11,29,204/- [Rs. 5,72,51,788 (-) Rs. 61,22,584] was disallowed. 16. Then, Ld. DR attacked on Para No. 7.3 of order of CIT(A) and submitted that the CIT(A) has accepted the assessee’s version that in scrutiny assessments of earlier years and subsequent AY 2012-13 and 2013-14 the salary claim was accepted as genuine and no disallowance was made by AO but in recording this finding, the CIT(A) has not made any examination whether the salary claim was adequately scrutinized in those years or not? DCIT v. Ravi Arora ITA No.212/Ind/2020 Assessment year 2011-12 Page 20 of 37 17. Lastly, Ld. DR carried us to Para No. 7.10 of the order passed by CIT(A) and submitted that the CIT(A) has taken a side route of applying 12% gross-profit rate in case of assessee and accordingly directed the AO to estimate the gross-profit of assessee; thereby granted part-relief to assessee from salary disallowance. He submitted that the CIT(A) has, rather than adjudicating the core issue of disallowance of salary, taken a different route of gross-profit rate which is not a correct adjudication of issue by him. 18. Per contra, Ld. AR strongly supported the order of CIT(A). He submitted that we have to firstly look into the nature of business of assessee which is supply of manpower to various corporate clients like Airtel, Big Bazar, etc. He submitted that the employees recruited/deputed by assessee are placed at multiple locations/divisions/units/work-areas by those corporate clients for varieties of their business needs. He submitted that the employees are directly reporting to clients and the assessee is paying salary to those employees based on actual attendance of working received from those clients. He submitted that in the statements recorded by AO u/s 131, the assessee has explained that number of employees fluctuate and their strength remain in the range of about 400 to 800; these are realistic facts but the AO has wrongly taken adverse interpretation. Regarding non- deduction of TDS, Ld. AR submitted that TDS was not required to be made because the employees of assessee are low-paid and did not cross the threshold to deduct TDS. Regarding PF, he submitted that the PF was not applicable to all employees which is also a fact and therefore the assessee deducted PF only in those cases where there was a legal requirement under PF rules. Regarding AO’s adverse observations on vouchers of salary, Ld. AR carried us to a few vouchers scanned by AO in assessment-order and submitted that those vouchers are realistic vouchers maintained by assessee which are on printed stationary of assessee’s business concern “Man & Machine”; the vouchers contain all details like dates, amounts, payee’s names, etc.; the vouchers are signed by respective DCIT v. Ravi Arora ITA No.212/Ind/2020 Assessment year 2011-12 Page 21 of 37 payees/employees. These vouchers are maintained as part of books of account of assessee in the normal course of business. Ld. AR contended that the salary vouchers of any organization would be alike these only; the AO is not justified in speculating adverse features by branding them as “self- made” vouchers. Regarding furnishing of details of salary, Ld. AR submitted that the details of salary are voluminous since the assessee is engaged in manpower business. But the assessee compiled employee-wise details under broad headings such as client name, employee name, designation, mode of payment, month, no. of days, rate of salary and amount paid, etc. and filed to CIT(A), copies are placed in Paper-Book-IV Page No. 1 to 166 and Paper- Book IV-A Page No. 1 to 44. Ld. AR also submitted that during assessment- proceeding on 21.02.2014, Shri Kirti Kumar Joshi, CA and representative of assessee produced Attendance Sheets obtained from clients alongwith vouchers of payment of salary and this fact is averred in an solemnized affidavit given by Shri Kirti Kumar Joshi (copy of the affidavit is at Page No. 62 of Paper-Book). Having explained these facts, Ld. AR submitted, rather contended, that the assessee has declared receipts from sale of manpower supply to corporate clients and the same are assessed by AO, then how can the salary payments to manpower be disallowed? Ld. AR submitted that the AO has made disallowance of Rs. 5,11,29,204/- out of total salary expenditure of Rs. 5,72,51,788/- claimed by assessee; the whopping disallowance is absolutely bad in the first look itself. He submitted that the disallowance has been made on conjecture and surmises only in utter disregard of nature of business carried on by assessee. Lastly, Ld. AR submitted that although no disallowance was required in the case of assessee yet when the CIT(A) has directed the AO to apply gross-profit rate of 12%, the assessee did not contest further to end the litigation. On justification of 12% gross-profit rate, Ld. AR carried us to the comparable instances submitted by assessee to CIT(A), copy at Page No. 7 of the Paper- Book-IV, according to which the assessee declared 10.97% gross-profit rate and two comparable companies, namely M/s Balaji Security (P) Ltd., Indore DCIT v. Ravi Arora ITA No.212/Ind/2020 Assessment year 2011-12 Page 22 of 37 declared 9.90% and M/s Tops Security Limited, a listed company declared 12% in financial year 2010-11. The financial statements of these comparable companies were also filed to CIT(A). Ld. AR submitted that the CIT(A), after due consideration, has himself mentioned “It is also important to note that Department has accepted the salary in subsequent assessments as genuine and also the fact that the gross profit of the Appellant i.e. 10.97% as submitted is comparable to the gross margin of other manpower suppliers in the market. However, considering the totality of circumstances and in the interest of justice I hereby direct the AO to estimate the gross profit at 12% of gross receipts.” Thus, Ld. AR prayed that the assessee has accepted the final order of CIT(A) and the same must be upheld. 19. We have considered rival submissions of both sides and perused the orders of lower-authorities. At first, we would like to extract the relevant portion of the order of CIT(A) in this regard: “Ground no. 7: 7.0 This ground relates to disallowance of salary expenses of Rs. 5,72,51,788/- paid to its employees in its business of manpower supply to its various corporate clients like Airtel, Big Bazar etc. The ld. AO has considered only Rs. 61,22,584/- in respect of which Provident fund has been paid. 7.1 On the other hand, the Appellant has submitted that its business is manpower supply and the salary is paid to its employees based on actual attendance received from clients. With regard to nonpayment of P. F. on salary amounting to, Rs. 5,11,29,204/-, it has been submitted that on such payments the Appellant was not liable to deduct P. F. as per the Provident Fund Act. 7.2 The Appellant had produced contracts with clients, Attendance details of employees provided by the clients for processing salary, mode of payment wherein in respect of certain clients as a policy salary has been paid directly in bank accounts of employees. 7.3 It was also brought to my notice that in the scrutiny assessment of earlier years as well as subsequent years i.e. A.Y. 2012-13 and 2013-14, no disallowance of salary expenses have been made in the assessments and the same has been accepted as genuine on identical facts and circumstances. 7.4 After going through the previous year assessment order, it is also clear that the AO had accepted the appellant’s income in the previous years while the facts and circumstances were similar to, the year under consideration. It DCIT v. Ravi Arora ITA No.212/Ind/2020 Assessment year 2011-12 Page 23 of 37 would be in the fitness of things to refer to the Hon'ble Supreme Court in the case of Radhasoami Satsang v. CIT (1992) 193 ITR 321. The relevant extract of the said order is reproduced hereunder:- “We are aware of the fact that strictly speaking res judicata does not apply to income tax proceedings. Again, each assessment year being a unit what is decided in one year may not apply in the following year but where a fundamental aspect permeating through the different assessment years has been found as a fact one way or the other and parties have allowed that position to be sustained by not challenging the order, it would not be at all appropriate to allow the position to be changed in a subsequent year. On these reasoning in the absence of any material change justifying the Revenue to take a different view of the matter and if there was not change it was in support of the assessee, we do not think the question should have been reopened and contrary to what had been decided by the CIT in the earlier proceedings, a different and contradictory stand should have been taken.” 7.5 The same view was taken by the Apex Court in the case of South India Trust Association vs. Telugu Church Council, (1996) 2 SCC 520. 7.6 In the case of Municipal Corporation of City of Thane vs. Vidyut Mettalies Ltd., (2007) 8 SCC 688, the Hon'ble Supreme Court had held that in the facts of the present case it was not possible to hold that the earlier decision would not continue to operate in subsequent years unless it is shown that there are changed circumstances. 7.7 In the light of the above facts and judicial decisions so discussed above, it is clear that although res-judicata does not apply in Income Tax proceedings, however, the revenue cannot change its fundamental stance in the identical facts and circumstances unless there is change in circumstances which is categorically brought on record. 7.8 The submissions of Appellant alongwith evidences furnished were sent to the AO for comments wherein the ld. AO has accepted in the remand report that salary paid by banking channels may be further allowed apart from salary on which provident fund has been paid. However, the Appellant has rebutted by contending that corresponding revenue and rendering of services for which the salary cost is incurred has not been doubted and the AO has further accepted the salary expense and the profit margin is commensurate to other entities engaged in similar line of labour supply. 7.9 The Appellant has also relied on the following judicial decisions for the proposition that when the sale of services has been accepted the corresponding expenses cannot be disallowed for non-payment of provident fund or by its mode of payment. - In Addl. CIT v. Shree Ambica Auto Sales (I.T.A.No. 2042/AHD/2008), where it is categorically held that mere “non-deduction of PF” cannot be a ground for making disallowance of salary expenditure. DCIT v. Ravi Arora ITA No.212/Ind/2020 Assessment year 2011-12 Page 24 of 37 - In ITO v. Durgawati Jitendra Tiwari (ITA 5373/Mum/2010), it is categorically held that “merely because the assessee has not deducted the PF and ESIC on such payment of wages does not mean that the said payments of wages have not been incurred wholly and exclusively for the purpose of the business and accordingly we are inclined to uphold the finding of the Ld. CIT(A) in deleting the disallowance made by the AO. - In case of DCIT v. Arjun Bhowmick (ITA 1071/Kol/2010) it is held that – “Admittedly, assessee has produced a register, which contained payments to various laborers. Admittedly, this register does not contain the addresses of the laborers nor it contains revenue stamp, nor is it signed by the Labour Department, no PF has also been deducted. Does all these wrongs in its entirety or individuality make the expenses incurred by the assessee deniable? Can this defect be held to be changing the mode of payment of the assessee from one mode to another ? Here we would answer ‘no’.......................................... A violation of the provisions of Provident Fund Act could have best lead to initiation of proceedings under the P. F. Act. Not maintaining the labour register as per the required Laws of the Labour Laws is a violation of the Labour Laws and not of the Income Tax Act. In short, violation of any law as long as the payment does not become illegal on account of such violation; the same cannot be hit under the Income Tax Act. It is humbly submitted that it is not possible to receive such huge revenue of in the business of manpower without providing manpower services to the respective clients and therefore considering the salary as bogus and ad hoc disallowance of 511 Lakhs is unjust, unwarranted and liable to be deleted. In the case of DCIT v. Ankur Mahalwala (ITA 3775/Del/09) where under the identical facts salary expenses of Assessee engaged in the business of manpower supply were disallowed the Hon'ble Tribunal held that :- “Considering the fact that the assessee is in the business of supply of manpower to various clients and the fact that the payment received by the assessee including the services charges from the clients itself, the assessee could not have received the payment but for the employment of manpower and supplying the same to the clients. The clients also maintained the records as to the attendance of various persons at their site. Para 8.” It is reiterated that the Appellant recruits the manpower and provides them to its clients for a reasonable margin and when the revenue from such activity has been accepted then the corresponding salary expense cannot be held as bogus. The inference of AO that total revenue from manpower providing services is taxable however corresponding salary expense is bogus and thereby taxing gross income is against the principles of natural justice and settled principles of law. When the income has been accepted then the corresponding expenses cannot be regarded as bogus. The ld. AO has not appreciated that the DCIT v. Ravi Arora ITA No.212/Ind/2020 Assessment year 2011-12 Page 25 of 37 salary disallowed is not for any indirect activity carried out by the appellant. Procuring of services of manpower and its provisioning to clients is main activity of Appellant and Salary expense as its direct expense. In other words, the Appellant is engaged in purchase and sale of manpower services. It is a settled principle of law in following precedents that when sales is not doubted then purchases cannot be held bogus, similarly when the revenue from providing manpower is accepted and undisputed then the corresponding salary can also not be regarded as bogus and disallowable. - CIT vs. Nangalia Fabrics P.Ltd., (2014) 220 Taxman 17 (Mag) (Guj) - Rajesh P. Soni v. ACIT, (2006) 100 TTJ 892 (Ahd.)(Trib) - CIT vs. Nikunj Exim Enterprises (P)Ltd. (2013) 216 Taxman 171 (Bom) - G. G. Disamond International v. Dy. CIT, 104 TTJ 809 (Mum)(Trib) - ITO v. Surana Traders, (2005) 92 ITD 212 (Mum)(Trib.) - Balaji Textile Industries (P) Ltd. V. ITO, (1994) 49 ITD 177 (Mum) Without prejudice to above total disallowance of salary and taxing Gross revenue is not justified. Attention is invited to the decision of Hon'ble Supreme Court in case of Sanjeev Woolen Mills v. CIT, (2005) 279 ITR 434 (S.C.) where it is held that it is a settled principle of income-tax law that it is the real income which is taxable under the Act.” 7.10 I have considered the above and find force in the above contentions of the Appellant that the AO was unjustified in disallowing the major salary inspite of accepting the manpower supply business. Further, I find that the ld. AO in remand report has accepted genuineness of salary partly to extent of payment through cheques. It is also important to note that Department has accepted the salary in subsequent assessments as genuine and also the fact that the gross profit of the Appellant i.e. 10.97% as submitted is comparable to the gross margin of other manpower suppliers in the market. However, considering the totality of circumstances and in the interest of justice I hereby direct the AO to estimate the gross profit at 12% of gross receipts. Accordingly, this ground of appeal is partly allowed.” 20. On perusal of same and after a careful consideration of the arguments of both sides, we find that the assessee is engaged in the business of manpower supply to corporate clients and the assessee has declared receipts from those clients and that is why incurred expenditure on payment of manpower supply. Thus, the business of assessee is service-oriented. We further find that various shortcomings noted by AO are well resolved in the order of CIT(A) and also by Ld. AR in his arguments. On a careful consideration, we find that there might be some lapses on the part of assessee in giving full details before AO although the assessee is contending DCIT v. Ravi Arora ITA No.212/Ind/2020 Assessment year 2011-12 Page 26 of 37 that all details were produced through his representative. Therefore, the AO allowed a portion of salary expenditure supported by PF documents. But at the same time we also find that the AO allowed, based on PF documents, as low as Rs. 61,22,584/- only and made a whopping disallowance of Rs. 5,11,29,204/- out of total claim of Rs. 5,72,51,788/- made by assessee. We find that the CIT(A) has, perhaps realizing the fact that the assessee’s business is manpower supply, the major portion of assessee’s expenditure is on payment of salary and therefore a suitable gross-profit rate can be applied which would also subsume the deduction of salary-expenditure too, invoked gross-profit rate. There also, Ld. CIT(A) has mentioned that the gross-profit rate of 10.97% declared by assessee was comparable to gross margin of other suppliers in market but still he applied slightly better rate of 12%. We are of the considered view that the approach of CIT(A) is reasonable in the case at least to cut-short the litigation, particularly when no part of salary expenditure had been disallowed in scrutiny-assessments of earlier/subsequent years. Therefore, we do not find any valid reason to upset the conclusion made by Ld. CIT(A) on this issue. Consequently, finding no merit in revenue’s ground, we are inclined to dismiss the same. Ground No. 3: 21. In this ground, revenue precisely claims that the CIT(A) has erred in treating the non-genuine capital gain of Rs. 44,81,373/- declared by assessee as short-term gain and thereafter giving relief to assessee. 22. First of all, let us understand the exact grievance of revenue carefully. In the return of income, the assessee declared having earned long-term capital gain exempted u/s 10(38) of Income-tax Act, from shares of Satyam Computer Services. During assessment-proceeding, the AO held the impugned capital gain as non-genuine and accordingly made addition of Rs. 44,81,373/- in total income. During first-appeal, the CIT(A) accepted the capital gain as genuine but at the same time held the long-term capital gain DCIT v. Ravi Arora ITA No.212/Ind/2020 Assessment year 2011-12 Page 27 of 37 as short-term capital gain based on holding period. Thus, while the addition of Rs. 44,81,373/- as made by AO is sustained by CIT(A), the same is now held as short-term capital gain instead of non-genuine gain. Ld. DR explained that short-term capital gain is having lesser rate of tax than the non-genuine gain. Therefore, the revenue is aggrieved by action of CIT(A). 23. Now coming to the facts, during assessment-proceeding, the AO observed that the assessee claimed to have sold shares in three tranches, namely 20,000 each on 07.06.2010, 13.07.2010 and 27.10.2020 out of total quantity of 60,000 shares purchased on 09.01.2009. To verify claim of assessee, the AO called De-mat A/c u/s 133(6) from share-broker M/s Arihant Capital Markets Ltd. and found that though the transactions of impugned shares were reflected in De-mat A/c, the date of purchase was not reflected. The AO further noted that the shares were credited in De-mat A/c before 3-4 days of sale which showed that the shares were not held for a period more than one year. The AO further noted that the assessee claimed to have purchased shares offline from M/s Eden Financial Services and in support the assessee filed A/c Confirmation of M/s Eden Financial Services showing payment of purchase price by cheque No. 881977 dated 30.03.2010. Thus, the payment is made on 31.03.2010 which again is after about 1 year from 09.01.2009 being the date of purchase claimed by assessee. The AO noted that the assessee filed a Contract Note of M/s Eden Financial Services to show purchase-date as 09.01.2009. The AO noted that the registration of M/s Eden Financial Services was cancelled by SEBI vide order dated 28.08.2004, therefore the documents issued by M/s Eden Financial Services cannot be said to be genuine. The AO recorded statement of assessee u/s 131 and from there concluded that the assessee was not aware of the details of shares. 24. During first-appeal, Ld. CIT(A) passed following order: “Ground No. 8: DCIT v. Ravi Arora ITA No.212/Ind/2020 Assessment year 2011-12 Page 28 of 37 8.0 This ground of appeal related to the disallowance of exemption of long term capital gains u/s 10(38) of the Act amounting to Rs. 44,81,373/- in respect of sale of listed equity shares of Satyam Companies Limited. Details of transactions are as follows :- Name of Share Date of Purchase Cost of Purchase Date of Sale Sale Price Qty. Sold LTCG Satyam Computer Services Ltd 09.01.2009 1,82,849 07.06. 2010 17,32,336 25,000 15,08,959 Satyam Computer Services Ltd 09.01.2009 1,37,137 13.07.2010 18,05,628 50,000 16,38,095 Satyam Computer Services Ltd 09.01.2009 2,18,562 27.10.2010 16,13,541 70,000 13,34,319 Total 44,81,373 8.1 The Appellant had submitted confirmation as evidence in respect of off- market purchase through broker M/s. Eden Financial Services, copies of sale invoices executed online through stock exchange after payment of Securities transaction tax, copies of ledger and other supporting documents and claimed that the disallowance of exemption be deleted. 8.2 However, on perusal of the demat account of the Appellant it is seen that the shares were not “held for more than one year” in the demat account of the Appellant and therefore, the same could not be considered as gain arising from sale of long term capital asset. 8.3 In case of Omprakash Phatandas Panjwani vs. ACIT (2018) 32 ITJ 389 (Trib–Indore) it is held by jurisdictional Indore Bench following the decision of Hon'ble Gujarat High Court in the case of CIT vs. Himani M. Vakil, (2014), 41 taxmann.com 425 (Guj) have that where the sale of listed equity shares is oneline through stock exchange the sale proceeds cannot be treated as unexplained and have to be considered as short term capital gains. 8.4 Further in case of Smt. Annapurna Maheshwari v. ACIT (2019 34 ITJ 139 (Trib. – Indore) in similar circumstances it was held by jurisdictional Indore Bench that where the Appellant has held the shares in demat account for a period less than one year the same have to be treated as gains arising from short term capital asset. DCIT v. Ravi Arora ITA No.212/Ind/2020 Assessment year 2011-12 Page 29 of 37 8.5 In the instant case the Appellant has submitted the proof of purchase and confirmation from broker which could not be controverted by the AO by disproving the said documents through any enquiry. Shares have been transferred to demat account after payment of purchase consideration and have been sold after payments of STT through recognized stock exchange. 8.6 In view of the above, respectfully following the decision of Indore Bench in case of Annapurna Maheshwari (supra), and on considering the facts of the instant appeal I find that the alleged transaction claimed by the appellant to have resulted into Long Term Capital Gain is not sustainable and the impugned gains of Rs. 44,81,373 should be taxed by the AO treating it as Short Term Capital Gain because the equity shares sold in these transactions were held for less than 12 months and therefore they were in the category of Short Term. I hereby direct accordingly to treat this as Short Term Capital Gain. In the result, this ground of appeal is partly allowed.” 25. Before us, Ld. DR questioned the action of CIT(A). He pleaded that when the registration of broker M/s Eden Financial Services (through whom the shares were purchased) had been cancelled by SEBI, how can the CIT(A) accept the capital gain as genuine? 26. Per contra, Ld. AR emphasised certain facts: that the purchase consideration was paid through banking channel and not in cash; the shares were credited and debited in D-mat A/c; Securities Transaction Tax was paid. Further, he submitted that the assessee filed all documentary evidences to AO such as De-mat A/c showing debit and credit of impugned shares (Page No. 5 of Paper-Book-V); the contract-notes of purchase to show date of purchase on 09.01.2009 were filed (Page No. 6 of Paper-Book-V). Furthermore, the assessee also filed a confirmatory-certificate of M/s Eden Financial Services (Page No. 10 of Paper-Book) to the effect that the shares were held in Broker’s Pool A/c from date of purchase (09.01.2009) on assessee’s behalf. Ld. AR contended that these documentary evidences are not rebutted or disputed by AO but the AO has treated the capital gain declared by assessee as non-genuine precisely for the reason that there was some order of SEBI cancelling the registration of M/s Eden Financial Services. Ld. AR submitted that firstly the assessee is neither aware of cancellation of registration of M/s Eden Financial Services nor it is having any relevance with the shares purchased by assessee. Ld. AR also made a DCIT v. Ravi Arora ITA No.212/Ind/2020 Assessment year 2011-12 Page 30 of 37 submission as well as contention that the order of SEBI, if any, was never confronted to assessee. He submitted that the cancellation of registration could be for hundred and one reasons and nobody is aware of exact reason, then how can it be a basis for denying genuineness of asessee’s transactions. Ld. AR submitted that the AO has made addition merely on conjecture and surmises without establishing any adversity in the documents filed by assessee and just on the basis of cancellation-order of share broker and that too without confronting the assessee. Ld. AR requested that the view taken by AO against assessee is therefore not correct. Lastly, he submitted that the CIT(A) has sustained the addition but treated the same as short-term capital gain for the reason that the holding period reflected by De-mat A/c was less than one year; the assessee has accepted the view taken by CIT(A) to close the matter and not agitated further. Therefore, the order of CIT(A) must be upheld. 27. We have considered rival contentions of both sides and seen the documents placed in Paper-Book filed before us. After a careful consideration, we find that the assessee has filed documentary evidences in support of purchase and sale of shares, holding in De-mat A/c and flow of considerations through banking channel. These facts are not disputed by revenue. However, the revenue’s case is built on the premise that the registration of M/s Eden Financial Services was cancelled by some SEBI order dated 28.08.2004. But then the assessee claims that the said order of SEBI was never confronted to assessee. The assessee also claims that there can be variety of reasons for cancellation of registration of a broker by SEBI and nobody knows what was the reason and how could it disturb the genuineness of assessee’s transactions. We find these contentions of assessee as meritorious. We further find that the AO has stated the cancellation of registration through order dated 28.08.2004 but the assessee is claiming to have purchased shares on 09.01.2009 much after 28.08.2004. We have given our anxious consideration to the Contract Note issued by DCIT v. Ravi Arora ITA No.212/Ind/2020 Assessment year 2011-12 Page 31 of 37 M/s Eden Financial Services Ltd, filed at Page No. 6 of Paper-Book-V, and found that in the said Contract Note dated 09.01.2009 M/s Eden Financial Services have categorically mentioned “Member : The National Stock Exchange of India Ltd.” and “SEBI Regn. INB 230660520/ Clearing No. 06605” besides “PAN - AGDPA8921H” and they have also charged brokerage, service-tax, securities transaction tax and stamp duty. Therefore, the SEBI Regn. No. is clearly mentioned. In such circumstances, it is little difficult to say that their registration was not in force. Even for the sake of discussions we assume that their registration was cancelled wayback in the year 2004 for any reason, it is also possible that the registration was re- stored/re-made in the year 2009. In any case, the assessee’s case has to be seen in the year 2009 and not in the year 2004 because the assessee purchased shares in 2009 and not in or prior to 2004. Therefore, the lame basis made out by AO for denying genuineness of transactions, namely the cancellation of registration of M/s Eden Financial Services, has not validity or relevance in assessee’s case, more particularly when the said cancellation-order was never confronted to assessee. Now, coming to the adjudication made in first-appeal, Ld. CIT(A) has rightly treated the capital gain as genuine in such circumstance. As to characterizing the capital gain from long-term to short-term based on holding period demonstrated by De- mat A/c, since the assessee has no grievance and accepted the same, we have no point to offer anything from our side. That brings us to conclude that there is nothing to interfere with the order passed by CIT(A); we uphold the same. The revenue fails in this ground. Ground No. 4: 28. In this ground, the revenue claims that the CIT(A) has erred in deleting the addition of Rs. 35,50,000/- in respect of payment made to World Class Service (WCS). 29. During assessment-proceeding, the AO found that the assessee has debited a total sum of Rs. 35,50,000/- in Ledger A/c “Infratel Registry DCIT v. Ravi Arora ITA No.212/Ind/2020 Assessment year 2011-12 Page 32 of 37 Charges” with narration of “WCS-Current A/c”. When the AO called explanation from assessee, the assessee submitted that the expenditure were met by WCS which is a proprietorship concern of assessee’s brother Shri Devendra Arora. The AO observed that no such details were mentioned by auditors of assessee in section 40A(2)(b) or section 269SS & 269T. He further found that in the Balance-Sheet of M/s Jayant (the same person from whom the assessee has taken unsecured loans and we have held M/s Jayant as genuine lender in earlier paragraph), the name of WCS was appearing in the list of “Loans & Advances” with an amount of Rs. 32,43,791/-. Based on this, the AO inferred that the undisclosed income of assessee had been routed through WCS from M/s Jayant. Lastly, the AO noted that the assessee did not furnish audit report, balance-sheet, P&L A/c, return of income of WCS. With these observations, the AO made addition of Rs. 35,50,000/-. 30. During first-appeal, Ld. CIT(A) deleted addition by observing and holding thus: “Ground No. 9 9.0 This ground of appeal is against the adhoc disallowance of Rs. 35,50,000 amounts paid to M/s. World Class Services which is a sister concern of the Appellant. The amounts have been paid to reimburse the infragtel registry charges paid by WCS on behalf of the Appellant. The Appellant has submitted that the ld. AO has examined books of account and vouchers of expenses of “infratel registry charges” and has accepted it as genuine expenses incurred to render the service to its client Airtel against which revenue has also been generated. The ld. AO had made addition of such reimbursements holding that no documents in respect of WCS have been submitted. The submissions of the Appellant alongwith relevant documents of WCS were remanded back to the AO, however, the Ld. AO has not made comments on merits thereof. 9.1 From the perusal of the assessment order and remand report and submissions of Appellant, it is clear that the “infratel registry expenses” have not been doubted but the consequent payment of outstanding due has been added in an adhoc manner. The findings of AO are based on presumptions and adhoc in nature. DCIT v. Ravi Arora ITA No.212/Ind/2020 Assessment year 2011-12 Page 33 of 37 9.2 The Hon'ble Supreme Court in Dhakeshwari Cotton Mills Limited v. CIT, (26 ITR 775) has held that the ITO cannot make assessment on a pure guess without any evidence or material and hence, such adhoc disallowance is unjustified. 9.3 In view of the above, I hereby direct to delete the addition of payment made for reimbursement of expenses paid by WCS on behalf of Appellant. In the result this ground is allowed.” 31. Ld. DR made a single pleading that which of the documents were forwarded by CIT(A) to AO and how those documents were basis for accepting genuineness, is not clearly borne out from order of CIT(A). 32. Per contra, Ld. AR firstly submitted that the AO asked the assessee to produce documents relating to WCS on 22.02.2014 and within 3 days he passed assessment-order on 25.02.2014. Therefore, the assessee could not file documents to AO but then the assessee filed all documents such as ITR, Tax Audit Report, Audited Financial Statements and A/c Confirmation of WCS by way of additional evidences to CIT(A), copies placed in Paper-Book- VI at Page No. 3 to 53. Ld. AR submitted that these are the documents which were forwarded by CIT(A) to AO but the AO has not controverted them in remand-report as noted by CIT(A) in Para No. 9 of his order. As to the nature of transaction done through WCS, Ld. AR re-iterated the finding made by CIT(A) which, at the cost of repetition, is re-produced below: “9.0 This ground of appeal is against the adhoc disallowance of Rs. 35,50,000 amounts paid to M/s. World Class Services which is a sister concern of the Appellant. The amounts have been paid to reimburse the infragtel registry charges paid by WCS on behalf of the Appellant. The Appellant has submitted that the ld. AO has examined books of account and vouchers of expenses of “infratel registry charges” and has accepted it as genuine expenses incurred to render the service to its client Airtel against which revenue has also been generated. The ld. AO had made addition of such reimbursements holding that no documents in respect of WCS have been submitted. The submissions of the Appellant alongwith relevant documents of WCS were remanded back to the AO, however, the Ld. AO has not made comments on merits thereof. 9.1 From the perusal of the assessment order and remand report and submissions of Appellant, it is clear that the “infratel registry expenses” have not been doubted but the consequent payment of outstanding due has been DCIT v. Ravi Arora ITA No.212/Ind/2020 Assessment year 2011-12 Page 34 of 37 added in an adhoc manner. The findings of AO are based on presumptions and adhoc in nature.” 33. We have considered submissions of both sides and perused the orders of lower authorities alongwith the documents placed by Ld. AR in Paper- Book. We find that the CIT(A) has given sufficient finding not only on the documents filed by assessee and the nature of transaction done through WCS but also on the fact that those documents were sent to AO but in the remand-report the AO has not given anything on merit. Thus, the claim of AO that during assessment-proceeding, documents regarding WCS were not filed is dissolved by filing of documents before CIT(A). Further, the AO has not controverted those documents in remand-report. Faced with this situation, we do not find any valid reason to upset the finding and conclusion made by first-appellate authority. Therefore, we uphold the order of CIT(A) and this ground of revenue is also dismissed. Ground No. 5: 34. In this ground, the revenue claims that the CIT(A) has erred in deleting the addition of Rs. 14,34,307/- made by AO on account of cash payments violating section 40A(3). 35. During assessment-proceeding, the AO has made a detailed chart of various vouchers, as many as 27, recorded by assessee in books of account whose amounts aggregate to Rs. 14,34,307/-. In the chart, the AO has given brief details of each voucher alongwith the reason for disallowance. Ultimately, the AO has concluded that the cash-payments made by assessee exceeded Rs. 20,000/-, the ceiling limit prescribed in section 40A(3). Accordingly, the AO made disallowance. 36. During first-appeal, Ld. CIT(A) deleted the disallowance by observing and holding thus: “Ground No.10: DCIT v. Ravi Arora ITA No.212/Ind/2020 Assessment year 2011-12 Page 35 of 37 10.0 This ground is raised against the disallowance u/s 40A(3) of the Act amounting to Rs. 14,34,307/- on ground that payment has been made over Rs. 20,000 to a single person in single day in its business. 10.1 On the other hand, the Appellant contended that there is no contravention of Section 40A(3) since every voucher is against various bills and is not a payment to single person on a single day on same bill. It was also contended that the names of persons mentioned in narration by the ld. AO are employees of Appellant who compile various bills and take payment through voucher. Therefore, it was contended that there is no contravention of Section 40A(3) and accordingly no disallowance is warranted. The appellant submitted various documents in support of his claim. 10.2 I have considered the material on record and rival contentions. However, it needs to be appreciated that the profits of the business have been estimated at 12% as discussed above. On such facts I am guided by the decision of Jurisdictional Madhya Pradesh High Court in case of CIT vs. Purshottamlal Tamrakar (2004) 270 ITR 314 (MP) wherein it is observed that when profit rate is applied and income of the Appellant is estimated form business, no separate disallowance is called for under Section 40A(3) of the Act. 10.3 Also in case of Singhal Builders Contractor v. Addl. CIT, (2011) 12 taxmann.com 199 (Jaipur) it is held that where the AO applies gross profit rate or net profit rate, no further disallowance can be made under section 40A(3) of the Act. 10.4 In view of the fact that the profit of the business has been estimated, I respectfully following above precedents find that there is no need of separate disallowance u/s 40A(3) of the Act and accordingly direct the AO to delete the disallowance. In the result this ground is allowed.” 37. Before us, Ld. DR submitted that the department is opposing the CIT(A)’s very action of applying gross-profit rate to assessee (as discussed in an earlier paragraph while adjudicating Ground No. 2). Therefore, the department is strongly opposing the deletion of addition u/s 40A(3) also. 38. Per contra, Ld. AR supported the order of CIT(A) and submitted that once the gross-profit rate of 12% is held as acceptable, this addition is not sustainable as decided by Ld. CIT(A) on the basis of decisions of Hon’ble Court as mentioned in Para No. 10.2 and 10.3 of his appeal-order. Without prejudice, Ld. AR re-iterates the following contention made by assessee during first-appeal which is noted by CIT(A) in his order but the same remained unadjudicated by CIT(A): DCIT v. Ravi Arora ITA No.212/Ind/2020 Assessment year 2011-12 Page 36 of 37 “10.1 On the other hand, the Appellant contended that there is no contravention of Section 40A(3) since every voucher is against various bills and is not a payment to single person on a single day on same bill. It was also contended that the names of persons mentioned in narration by the ld. AO are employees of Appellant who compile various bills and take payment through voucher. Therefore, it was contended that there is no contravention of Section 40A(3) and accordingly no disallowance is warranted. The appellant submitted various documents in support of his claim.” 39. We have considered rival contentions of both sides. Firstly, we find that in the end the CIT(A) has deleted addition made by AO on the footing that the gross-profit rate of 12% is applied by him while adjudicating another ground. Therefore, no separate disallowance u/s 40A(3) can be made. Although we accept in principle that once gross-profit or net-profit rate is applied, no separate disallowance u/s 40A(3) can be made. But while applying this judicial ratio, we have to be little cautious. In the present case, the CIT(A) has applied gross-profit rate of 12% and not net-profit rate. Therefore it becomes necessary to scrutinize as to which of the 27 vouchers listed by AO in assessment-order for making disallowance u/s 40A(3), formed part of expenses deductible before arriving at gross-profit and which of them were deductible from gross-profit itself in arriving at net profit. It is only the former category of vouchers/expenses that the CIT(A)’s view that no separate disallowance u/s 40A(3) shall be made, would be valid but not in later case. Therefore, this aspect needs to be verified at AO level only. Hence, we are inclined to refer this issue back to the file of AO who will look into this aspect and thereafter make or not make suitable disallowance as called for. We would also like to add one more aspect here. The CIT(A) has not decided the contention raised by assessee before him that there is no contravention of Section 40A(3) since every voucher is against various bills and is not a payment to single person on a single day on same bill. The names of names of persons mentioned in the narration are employees of assessee who compile various bills and take payment through voucher. The assessee shall be at liberty to prove this contention as well before AO and the AO shall consider if the assessee substantiates his contention by filing necessary details/documents. DCIT v. Ravi Arora ITA No.212/Ind/2020 Assessment year 2011-12 Page 37 of 37 Accordingly, this ground is remanded back to AO for consideration afresh in terms mentioned here. 40. Resultantly, this appeal of revenue is partly allowed. Order pronounced in the open court on 31.07.2023. Sd/- sd/ (VIJAY PAL RAO) (B.M. BIYANI) JUDICIAL MEMBER ACCOUNTANT MEMBER Indore Ǒदनांक /Dated : 31.07.2023 CPU/Sr. PS Copies to: (1) The appellant (2) The respondent (3) CIT (4) CIT(A) (5) Departmental Representative (6) Guard File By order UE COPY Assistant Registrar Income Tax Appellate Tribunal Indore Bench, Indore