M/S. S.R. BUILDERS & DEVELOPERS, Indore V. THE DCIT 3(1), Indore

ITA 304/IND/2015

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 5764 (ITAT-INDORE)
• Duration Of Justice: 1 year(s) 4 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-09-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2006-2007
• Appeal Filed On: 07-05-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MOHD JAVED
• Assessee Lawyers: S N AGRAWAL
• Keywords: Depreciation; Opportunity of being heard
• Section: 40A(3); 143(3); 142(1); 234B

Judgement Text

M/S S.R. BUILDERS & DEVELOPERS ITA NO. 304/IND/2015 1 IN THE INCOME TAX APPELLATE TRIBUNAL, INDORE BENCH, INDORE BEFORE SHRI D.T. GARASIA, JUDICIAL MEMBER AND SHRI O.P. MEENA, ACCOUNTANT MEMBER M/S. S.R. BUILDERS & DEVELOPERS INDORE V S DCIT 3(1) INDORE APPELLANT RESPONDENT APPELLANT BY SHRI S.N. AGRAWAL & SHRI PANKAJ MOGRA RESPONDENT BY SHRI MOHD. JAVED DATE OF HEARING 23.8.2016 DATE OF PRONOUNCEMENT 14.9.2016 O R D E R PER O.P. MEENA ACCOUTANT MEMEBR. THIS APPEAL IS FILED BY THE ASSESSEE AGAINST THE OR DER OF LD. COMMISSIONER OF INCOME-TAX (APPEALS)-I, INDORE [HER EINAFTER REFERRED TO AS THE CIT(A)] DATED 29.12.2014 AND PERTAINS TO ASSESSMENT YEAR 2006-07 AS AGAINST APPEAL DECIDED IN ASSESSMENT OR DER U/S. 254 R.W.S. 143(3) OF INCOME TAX ACT,1961( HEREIN AFTER REFERRED TO AS 'THE I.T.A. NO. 304/IND/2015 ASSESSMENT YEAR: 2006-07 M/S S.R. BUILDERS & DEVELOPERS ITA NO. 304/IND/2015 2 ACT) DATED 20.3.2013 OF ACIT 3(1), INDORE [HEREINAF TER REFERRED TO AS THE AO]. 2. THE SUM AND SUBSTANCE OF THE GROUNDS OF APPEAL T AKEN BY THE ASSESSEE IS THAT THE CIT(A) WAS NOT JUSTIFIED IN CO NFIRMING THE ADDITION OF RS.24,71,668/- AS ALSO ENHANCING THE SA ME TO RS.32,95,556/- BY INVOKING THE PROVISIONS OF SECTIO N 40A(3) OF THE ACT. 3. THE FACTS, IN NUTSHELL, ARE THAT THE DURING THE COURSE OF ASSESSMENT PROCEEDINGS U/S 143(3) OF THE ACT, ADDIT ION OF RS.24,71,668/- WAS MADE BY THE AO UNDER SECTION 40A (3) OF THE ACT ON ACCOUNT OF PAYMENT MADE IN CASH EXCEEDING RS. 2 0,000/- TO THE ASSOCIATED CONCERN, M/S S.R. TRADERS. THIS ADDITION WAS ENHANCED IN APPEAL BY THE LD. CIT(A) AGAINST WHICH THE ASSESSEE PREFERRED APPEAL BEFORE THE I.T.A.T. AND THE I.T.A.T. IN ITS TURN DI RECTED THE AO TO EXAMINE THE CLAIM OF THE ASSESSEE AS PER THE PROVIS IONS OF THE ACT. ACCORDINGLY, THE AO ISSUED NOTICE U/S 142(1) OF THE ACT IN RESPONSE TO WHICH THE LEARNED COUNSEL FOR THE ASSESSEE APPEA RED AND FILED DETAILED REPLY AND DOCUMENTS. AFTER EXAMINING THE S AME IN DETAIL, THE AO OBSERVED THAT THE ASSESSEE WAS SPECIFICALLY ASKED TO PRODUCE M/S S.R. BUILDERS & DEVELOPERS ITA NO. 304/IND/2015 3 THE MATERIAL EVIDENCE TO ESTABLISH THAT NO PAYMENT IN CASH EXCEEDING RS. 20,000/- IN VIOLATION TO THE PROVISIONS OF SECT ION 40A(3) OF THE ACT WAS MADE TO THE ASSOCIATED CONCERN M/S S.R. TRADERS , BUT THE ASSESSEE COULD NOT PRODUCE ANY RELEVANT DOCUMENT IN SUPPORT OF ITS CLAIM. THE AO, THEREFORE, HELD THAT THE TRANSACTION S OF PURCHASES OF OF RS1,64,77,778/- WERE MADE IN CASH FROM M/S S.R. TRADERS AND SINCE SUCH TRANSACTIONS WERE EXCEEDING RS.20,000/-, PROVISIONS OF SECTION 40A(3) OF THE ACT WERE CLEARLY APPLICABLE. THE AO, THEREFORE, RESTRICTED THE DISALLOWANCE TO RS.24,74,668/- AT TH E RATE OF 15% OF TOTAL OF SUCH AMOUNT OF RS.1.64 CRORE. 4. BEING AGGRIEVED WITH THE ADDITION SO MADE, THE A SSESSEE PREFERRED FIRST APPEAL BEFORE THE CIT(A) BUT AGAIN THE ASSESSEE MET WITH THE SAME FATE. HOWEVER, THE LEARNED CIT(A) AF TER CONSIDERING THE ISSUE AT LENGTH, ENHANCED THE DISALLOWANCE TO RS.32 ,95,556/- ON THE GROUND THAT U/S 40A(3) OF THE ACT, DISALLOWANCE OF 20% IS PROVIDED AND NOT 15% AS MADE BY THE AO. THE DETAILED FINDING S OF THE LEARNED CIT(A) ARE REPRODUCED BELOW :- M/S S.R. BUILDERS & DEVELOPERS ITA NO. 304/IND/2015 4 2. THE RELEVANT PARAS FROM AOS ORDER ARE REPROD UCED HEREUNDER:- THE ASSESSEE FILED ITS RETURN OF ON 31-10-2006 DECL ARING TOTAL INCOME OF RS.13,561/-. THE CASE WAS SELECTED FOR SCRUTINY AND SCRUTINY ASSESSMENT U/S 143(3) WAS COMPLETED ON 31-12-2008 BY MAKING ADDITION U/S 40(A )(3) OF THE I.T. ACT AMOUNT TO RS.32,95,556/- AND DISALLOWANCE OF DEPRECIATION AMO UNTING TO RS.27,694/-. THEREBY AT TOTAL ASSESSED INCOME OF RS.33,36,810/-. AGGRIEVED WITH THE ORDER, PASSED BY THE AO, THE ASS ESSEE PREFERRED APPEAL BEFORE THE LD CIT(A) AND THE SAME WAS DECIDED BY THE LD CI T(A) ON 25-3-2010. THE ASSESSE PREFERRED AN APPEAL BEFORE THE HON'BLE IT AT. HON'BLE ITAT VIDE ITS ORDER ITA NO. 322/IND/2010 DATED: 10-10-2011 HAS DE CIDED THE APPEAL AND SET- ASI.DE THE MATTER TO THE FILE OF THE ASSESSING OFFICER. TH E RELEVANT PART OF THE ORDER PASSED BY THE HON'BLE 1TAT, DATED: 10-10-2011, IS BEING REPRODUCED AS UNDER: 'ON PERUSAL OF RECORD AND ALTER HEARING THE RIVAL S UBMISSIONS, WE RESTORE BOTH THESE GROUNDS TO THE FILE OF THE ASSESSING OFFICER WHO WI LL EXAMINE THE CLAIM OF THE ASSESSEE AND ALSO WHETHER THE PAYMENTS CLAIMED TO BE MADE IN RESPECT OF EXPENDITURE AND DECIDE AS PER THE PROVISIONS OF THE ACT FOR WHICH D UE OPPORTUNITY OF BEING HEARD BE PROVIDED TO THE ASSESSE.' THEREAFTER IN CONTINUATION OF PROCEEDINGS SO STARTE D, FURTHER NOTICE U/S 142(1) DATED: 11-05-2012 WAS ISSUED TO THE ASSESSEE. AGAIN DUE TO CHANGE IN INCUMBENT, NOTICE U/S 142(1) DATED: 30-01-2013 WAS ISSUED TO THE ASSE SSEE. IN RESPONSE TO THE AFOREMENTIONED NOTICES, AR OF THE ASSESSEE SHRI S.N . AGRAWAL CA APPEARED AND SUBMITTED DETAILED REPLY AND DOCUMENTS AS FILED WHIC H IS PERUSED AND PLACED ON RECORD. DISALLOWANCES U/S 40(A) (3): DURING THE COURSE OF SCRUTINY ASSESSMENT U/S 143(3) DATED: 30-12-2008 FOR THE A. Y. 2006-07 ADDITION FOR RS.32,95,556/- BEING 20% OF THE TOTAL, PAYMENT AMOUNTING TO RS.1,64,77,778/-, ON ACCOUNT OF PAYMENT MADE IN CAS H EXCEEDING RS.20,000/- TO THE ASSOCIATED CONCERN M/S S. R. TRADERS. AND NOW WHEN THE AR OF THE ASSESSEE WAS ASKED TO PRODUCED THE MATERIAL EVIDENCE TO ESTABLISH THAT NO ANY PAYMENT IN CASH EXCEEDING RS.20,000/- HAS BEEN MADE BY THE ASSESSEE FINN AND P ROVISION OF SECTION 40A (3) OF THE INCOME TAX ACT HAS NOT BEEN VIOLATED AT ALL. IN RESPONSE TO THAT THE ASSESSEE, VIDE LETTER 08-02 -2013 PRODUCED DETAILED SUBMISSION WHICH IS PERUSED AND PLACED ON RECORD ALO NG WITH ITS REPLY AND URGED REGARDING NON APPLICABILITY OF PROVISION OF SECTION 40(A) (3) OF THE I.T. ACT IN THIS CASE. THE RELEVANT PARA OF SAME REPLY IS BEING REPRODUCED AS UNDER: COPY OF LEDGER OF M/S S.R TRADERS AS MAINTAINED IN THE BOOK OF THE ASSESSEE IS ENCLOSED. THAT AS EXPLAINED M/S S R TRADERS IS NOTH ING BUT CONSIDERED AS PROPRIETORSHIP CONCERN OF SHRI RAJESH CHOUKSE, PARTNER OF THE ASSE SSEE FIRM. THE ASSESSEE HAD NOT PURCHASED ANY MATERIAL FROM THAT FIRM BUT MATERIAL WERE SUPPLIED BY SOME OTHER SUPPLIERS. HOWEVER, IN THE BOOKS OF THE ASSESSEE INS TEAD OF MAINTAINING INDIVIDUAL LEDGER OF DIFFERENT SUPPLIERS, ENTIRE MATERIAL SHOWN AS PU RCHASED THROUGH M/S S R TRADERS. THAT INDIVIDUAL PAYMENT TO THE SUPPLIERS WERE NOT IN EXC ESS OF RS.20,000/-. HENCE, PROVISION OF SECTION 40A (3) OF THE INCOME TAX ACT IS NOT APPLIC ABLE. THE ASSESSEE FIRM HAS NOT MADE ANY PAYMENT IN EXCES S OF RS.20,000/- TO ITS SUPPLIERS. HENCE, PROVISION OF SECTION 40A(3) IS NO T BEING APPLIED ON THE FACTS OF THE PRESENT CASE. THE AMOUNT AS PAID IN CASH SHOWN IN E XCESS OF RS.20,000/- TO M/S S R M/S S.R. BUILDERS & DEVELOPERS ITA NO. 304/IND/2015 5 TRADERS REPRESENTS THE AMOUNT ACTUALLY PAID TO DIFF ERENT SUPPLIERS THROUGH ITS PARTNER SHRI RAJESH CHOUKSE. HENCE, FOR THE PURPOSE OF PROV ISION OF SECTION 40A(3), WHEN WE CONSIDER ACTUAL PAYMENT TO THE SUPPLIERS, IN THAT C ASE, NO PAYMENT WAS MADE TO ANY SUPPLIER IN EXCESS OF RS.20,000/. THE FACT CAN ALSO BE VERIFIED FROM THE INDIVIDUAL BILLS OF THE SUPPLIERS. ' IN THIS CONNECTION, THE DETAIL PRODUCED BY THE ASSE SSEE IS DULY PERUSED AND HERE IT IS WORTH MENTIONING THAT ASSESSEE HAS ALSO FILED A COPY OF AFFIDAVIT WHEREIN MR. RAJESH CHOUKSE HAS SOLEMNLY AFFIRMED THAT HE IS NOT HAVING ANY PROPRIETARY CONCERN IN HIS NAME, CALLED M/S S.R. TRADERS. IN INCOME TAX PROCEEDINGS SUCH SOLEMN AFFIRMATION H AS NO ANY VALUE. NOW AS FAR AS COPY OF BILLS FURNISHED IN THIS REGARD, ON MINUTE LY OBSERVATION OF THE SAID BILLS, IT IS OBSERVED THAT MANY OF THE BILLS ARE WRITTEN IN SIMIL AR HANDWRITING. HERE IT IS ALSO IMPORTANT TO MENTION THAT F.Y. 2005-06 IS UNDER CO NSIDERATION. THEREFORE IT IS NOT POSSIBLE TO VERIFY EACH AND EVERY TRANSACTION. FURTH ERMORE, ON THE OBSERVATION OF THE SAID BILL, IT IS ALSO WORTH MENTIONING THAT SOME OF THE BILLS PRODUCED BY THE ASSESSEE, SUCH AS; BILL DAWN BY RADHEKRISHNA SAW MILL DATED: 22-03-200 6. BILL NO. 454 OF RS.18,317/- AT PAGE NO. 989 (IN SUBMISSION MADE BY T HE ASSESSEE) THE HANDWRITING THEREIN IS COMPLETELY SIMILAR TO THAT OF IN BILL DR AWN BY INDERSINGH ARJUN SINGH DATED: 20-03-2006. BILL NO. 461 OF RS.19,499/- AT P AGE NO. 986. FURTHERMORE BILL IN THE NAME OF S.R. BUILDERS & DEV ELOPERS, DRAWN BY SIDDHARTH ENTERPRISES ON 21-06-2006 OF RS.37,507/- AT PAGE NO. 855 AND BILL DRAWN BY TIWARIS STEELS ON 04-01-2006 OF RS.12,600/ - AT PAGE NO. 842, BOTH BILLS ARE WRITTEN IN SAME HANDWRITING. HOW IS IT POSSIBLE THAT AT TWO DIFFERENT BUSINESS CONCERN, TWO BILLS DRAWN IN THE NAME S. R. BUILDERS & DEVELOP ERS BY THE PERSON WHOSE HANDWRITING IS SAME? FURTHERMORE IT IS ALSO EVIDENT THAT, BILL AT PAGE NO. 842 DRAWN BY TIWARI STEELS APPEARS TO BE DUBIOUS AT FIRST GLANCE, AS ON THIS BILL THERE IS NO ANY TIN NO. PHONE NO OF BUSINESS ENTERPRISE ETC. FURTHERMORE BILL IN THE NAME OF S.R BUILDERS & DEVE LOPERS, DRAWN BY OMPRAKASH TRADERS ON 18-11-2005 OF RS.11,080/- AT P AGE NO. 761 AND BILL DRAWN BY KUMAWAT MATERIAL SUPPLIERS ON 18-11-2005 OF RS.12,3 15/- AT PAGE NO. 760, BOTH BILLS ARE WRITTEN IN HINDI AND IN SAME HANDWRITING. HOW IS IT POSSIBLE THAT AT TWO DIFFERENT BUSINESS CONCERN, TWO BILLS DRAWN IN THE N AME S. R. BUILDERS & DEVELOPERS AND EVEN BY THE PERSON WHOSE HANDWRITING IS SAME? FURTH ERMORE IT IS ALSO EVIDENT THAT FORMAT OF BOTH BILLS ARE EXACTLY SAME. IT IS NOT POSS IBLE AT ALL THAT TWO BILLS DRAWN IN THE NAME OF S.R. BUILDERS & DEVELOPERS ON SAME DAY AND FORMAT OF BOTH BILLS ARE EXACTLY SAME. EVEN APPEARANCE OF SOME OF THE BILLS PRODUCED BY THE ASSESSES, DOES NOT LOOK LIKE THAT THESE BILLS HAVE BEEN DRAWN ALMOST FIVE TO SIX Y EAR BEFORE AS CONDITION OF SUCH HILL ARE THAT AS IF IT HAS BEEN DRAWN RECENTLY. THEREFORE IN VIEW OF FACTS DISCUSSED ABOVE, IT IS NO T POSSIBLE TO VERIFY EACH AND EVERY TRANSACTION NOW, ALTHOUGH THE CONTENTION OF T HE ASSESSEE MAY BE GENUINE BUT IN THE CASES OF MOST OF THE BILLS, WHICH APPEAR TO BE DO UBTFUL, THE CLAIM OF THE ASSESSEE CANNOT BE ACCEPTED IN TOTO. THEREFORE, IN THE LIGHT OF AFOREMENTIONED FACTS THE VERACITY OF BILLS PRODUCED BY THE ASSESSEE IS DOUBTFUL. THEREFORE ADDITION MADE BY THE THEN AO WHILE PASSING THE ORDER US 143(3) DATED: 30-12-2008 IS BEI NG RESTRICTED TO 15% IN RESPECT OF M/S S.R. BUILDERS & DEVELOPERS ITA NO. 304/IND/2015 6 PAYMENTS WHICH WERE MADE IN CASH IN EXCESS OF RS.20 ,000;- AND ADDED IN THE TOTAL INCOME U/S 40A (3) OF THE I. T. ACT. THEREFORE IN V IEW OF ABOVE DISCUSSION RS.24,71,668/- IS BEING ADDED IN THE TOTAL INCOME OF THE ASSESSEE. ADDITION: RS.24,71,668/- 3. DURING THE APPEAL PROCEEDINGS APPELLANT FILED WRITT EN SUBMISSION, RELEVANT PARA ARE REPRODUCED. THIS APPEAL IS FILED AGAINST THE ORDER U/S 254 R.W. S 143[3] OF THE INCOME TAX ACT FOR THE ASSESSMENT YEAR 2006-07. WITH REGARD TO THE SAI D APPEAL, WE HAVE BEEN DIRECTED BY THE ASSESSEE TO SUBMIT AS UNDER:- 1] GROUND NO 1 1.1] THE ASSESSEE IN THIS GROUND OF APPEAL HAS CHA LLENGED THE ADDITION OF RS.24,71,668/- AS MAINTAINED BY THE ASSESSING OFFICER U/S 40A[3] OF THE INCOME TAX ACT. 1.2.1] THE ASSESSING OFFICER WHILE PASSING THE ORI GINAL ASSESSMENT ORDER U/S 143[3] DISALLOWED AN AMOUNT OF RS.32,95,556/- BY INVOKING THE PROVISION OF SECTION 40A[3] IN RESPECT OF PURCHASES MADE THROUGH M/S S R TRADERS. 1.2.2] THAT M/S S R TRADERS IS NOTHING BUT PROPRIE TORSHIP CONCERN OF ONE OF THE PARTNER WHO ACT AS A AGENT ON BEHALF OF THE ASSESSEE FIRM A ND PURCHASE BUILDING CONSTRUCTION MATERIAL FOR AND ON BEHALF OF THE ASSESSEE. THAT EN TIRE BILLS WERE RECEIVED IN THE NAME OF THE ASSESSEE FIRM AND SMALL PAYMENT MADE THROUGH TH E PARTNERS OF THE FIRM. 1.2.3] THAT COPIES OF ALL THE BILLS WERE FILED BEF ORE THE HONBLE ITAT AND SAME SETS WERE ALSO FILED BEFORE THE ASSESSING OFFICER IN THE SET- ASIDE PROCEEDING. 1.2.4] THAT FROM THE BILLS IT IS CLEAR THAT MOST OF THE BILLS ARE LESS THAN RS.20,000/- AND THEREFORE THE STAND OF THE ASSESSING OFFICER WAS NO T CORRECT WHILE PASSING THE ORIGINAL ASSESSMENT PROCEEDING. 1.3.1] THAT DURING THE COURSE OF SET- ASIDE PROCEE DING THE ASSESSING OFFICER DOUBTED THE GENUINENESS OF THE BILLS AS SUBMITTED BY THE ASSESS ING BY LINKING THE HAND WRITING OF FEW BILLS WITH OTHERS. THE BASIS OF DOUBTING THE BILLS AS SUBMITTED BY THE ASSESSEE WAS NOT CORRECT SIMPLY FOR THE REASON THAT HANDWRITING OF D IFFERENT BILLS ARE SAME. SINCE, IN THE BUILDING MATERIAL SUPPLY, ONE FAMILY HAVING ONE AND MORE FIRMS AND AT THE SAME TIME, ONE PERSON WORKED WITH ONE AND MORE FIRMS. HENCE, THIS IS NOT THE BASIS FOR DOUBTING THE GENUINENESS OF THE EXPENSES IN THE SET0 ASIDE PROCE EDING MORE SO WHEN IN THE ORIGINAL ASSESSMENT PROCEEDING DISALLOWANCES WAS MADE BY INV OKING THE PROVISION OF SECTION 40A[3] OF THE ACT. 1.3.2] THE ASSESSING OFFICER AT THE TIME OF PASSIN G OF THE ORIGINAL ASSESSMENT DISALLOWED AN AMOUNT OF RS.32,95,556/- BY INVOKING THE PROVISI ON OF SECTION 40A[3] OF THE ACT. THAT IN THE SET- ASIDE PROCEEDING, THE ASSESSEE HAS PROVIDE D THE COMPLETE BILLS BEFORE THE ASSESSING OFFICER AND ON PERUSAL OF THESE BILLS IT WAS ALSO CLEAR THAT MOST OF THE PAYMENTS WERE MADE BY THE ASSESSEE FOR LESS THAN RS.20,000/- . HENCE, THERE WAS NO JUSTIFICATION FOR MAKING ANY DISALLOWANCE U/S 40A[3] OF THE ACT. 1.4.1] THE ASSESSING OFFICER HIMSELF IN THE CONCLU DING PARA ON PAGE NO 5 HAS STATED THAT:- M/S S.R. BUILDERS & DEVELOPERS ITA NO. 304/IND/2015 7 THEREFORE IN VIEW OF FACTS DISCUSSED ABOVE, IT IS NOT POSSIBLE TO VERIFY EACH AND EVERY TRANSACTION NOW, ALTHOUGH THE CONTENTION OF THE ASSESSEE MAY BE GENU INE BUT IN THE CASES OF MOST OF THE BILLS, WHICH APPEAR TO BE DOUB TFUL, THE CLAIM OF THE ASSESSEE CANNOT BE ACCEPTED IN TOTO. THEREFORE, IN THE LIGHT OF AFOREM ENTIONED FACTS THE VERACITY OF BILLS PRODUCED BY THE ASSESSEE IS DOUBTFUL. THEREFORE ADD ITION MADE BY THE THEN AO WHILE PASSING THE ORDER U/S 143[3] DATED 30-12-2008 IS BE ING RESTRICTED TO 15% IN RESPECT OF PAYMENT WHICH WERE MADE IN CASH IN EXCESS OF RS.20, 000/- AND ADDED IN THE TOTAL INCOME U/S 40A[3] OF THE I. T. ACT. THEREFORE, IN VIEW OF THE ABOVE DISCUSSION RS.24,71,668/- IS BEING ADDED IN THE TOTAL INCOME OF THE ASSESSEE. 1.4.2] THE ASSESSING OFFICER WAS GROSSLY ERRED IN MAINTAINING ADDITION OF RS.24,71,668/- EVEN WHEN NO PAYMENT WAS MADE TO THE SUPPLIER IN EX CESS OF RS.20,000/-. 1.4.3] THE REASON AS MENTIONED BY THE ASSESSING OF FICER WAS ALSO NOT SOUNDED REASON FOR MAKING DISALLOWANCES BY INVOKING THE PROVISION OF S ECTION 40A[3] OF THE ACT. THE ASSESSING OFFICER ALSO NOT RIGHT IN MAINTAINING DISALLOWANCES BY DOUBTING THE GENUINENESS OF THE EXPENSES AS CLAIMED BY THE ASSESSEE. 1.5.1] THAT IN THE ORIGINAL ASSESSMENT PROCEEDING T HE DISALLOWANCE WAS MADE BY INVOKING THE PROVISION OF SECTION 40A[3] OF THE ACT. HOWEVER , IT WAS CLARIFIED BEFORE THE LD CIT[A], THAT NO MATERIAL WAS PURCHASED FROM M/S S R TRADERS BUT M/S S R TRADERS IS A PROPRIETORSHIP CONCERN OF ONE OF THE PARTNER OF THE ASSESSEE FIRM AND ACT AS AGENT FOR PURCHASING OF BUILDING MATERIAL. THAT ENTIRE BILLS WERE OBTAINED IN THE NAME OF THE ASSESSEE FIRM AND THE AMOUNT OF BILLS WAS LESS THAN RS 20,000/-. HENCE, THERE WAS NO REASON FOR INVOKING THE PROVISION OF SECTION 40A[3] OF THE ACT. 1.5.2] THE ASSESSING OFFICER WHILE PASSING THIS AS SESSMENT ORDER REACHED TO A CONCLUSION THAT EXPENSES AS CLAIMED BY THE ASSESSEE WAS NOT GE NUINE. THE BASIS OF ADDITION AS ADOPTED BY THE ASSESSING OFFICER WAS NOT PROPER AND BEYOND THE SCOPE OF THE SET- ASIDE ASSESSMENT. IF THE ASSESSING OFFICER HAS ANY DOUBT ABOUT THE GENUINENESS OF THE EXPENSES. HE CANNOT SIT WITH FOLDED HAND AND SIMPLY DISALLOWE D AN AMOUNT OF RS.24,71,668/- BY INVOKING THE PROVISION OF SECTION 40A[3] OF THE ACT . 1.6] THAT FOLLOWING DOCUMENTS ARE ENCLOSED FOR YOU R READY REFERENCE:- S. NO PARTICULARS PAGE NOS 1 COPY OF ACKNOWLEDGEMENT AND COMPUTATION OF INCOME AS FILED FOR THE ASST YEAR 2006-07 5-6 2 COPY OF AUDITED FINAL ACCOUNT FOR THE YEAR ENDED ON 31.03.06 7-20 3 COPY OF PARTNERSHIP DEED 21-24 4 COPY OF LETTER DT 08-02-2013 AS FILED BEFORE THE ASSESSING OFFICER 25-27 5 COPY OF AFFIDAVIT OF PARTNER SHRI RAJESH CHOUKSE 28-29 6 COPY OF ORIGINAL ASSESSMENT ORDER PASSED U/S 143[ 3] OF THE ACT 30-37 7 COPY OF LETTER DT 19-12-2009 AS FILED BEFORE THE LD CIT[A] IN ORIGINAL APPEAL PROCEEDING 38-41 8 COPY OF BUILDING MATERIAL PURCHASE ACCOUNT IN THE BOOK OF THE 42-44 M/S S.R. BUILDERS & DEVELOPERS ITA NO. 304/IND/2015 8 ASSESSEE FOR THE YEAR ENDED ON 31.03.2006 9 COPY OF ACCOUNT OF M/S S R TRADERS IN THE BOOK OF THE ASSESSEE FOR THE YEAR ENDED ON 31.03.2006 45-55 10 COPY OF FEW BILLS TOWARDS PURCHASE OF BUILDING M ATERIAL AS FILED BEFORE THE LD CIT[A] IN THE ORIGINAL APPEAL PROCEED ING. 56-89 11 COPY OF LETTER DT 18-03-2010 AS FILED BEFORE THE LD CIT[A] IN THE ORIGINAL APPEAL PROCEEDING 90-94 12 COPY OF ORDER OF THE LD CIT[A] DT 25-03-2010 AS FILED DURING THE ORIGINAL APPEAL PROCEEDING 95-106 13 COPY OF ORDER OF THE HONBLE ITAT DT 10-10-2011 AS PASSED IN THE CASE OF THE ABOVE ASSESSEE SETTING ASIDE THE OR DER OF THE LD CIT[A] AND RE-STORE TO THE FILE OF THE ASSESSING OF FICER 107-111 14 COPY OF BILLS AS FILED BEFORE THE HONBLE ITAT A ND ALSO BEFORE THE ASSESSING OFFICER DURING THE SET- ASIDE PROCEED ING 114-983 1.7] THAT IN VIEW OF THE ABOVE WHEN THE ASSESSEE H AS NOT PAID ANY AMOUNT IN EXCESS OF RS.20,000/-. HENCE, THE ASSESSING OFFICER WAS NOT JUSTIFIED IN MAINTAINING THE ADDITION OF RS.24,71,668/-. THE ADDITION SO MADE NO W REQUIRES TO BE DELETED IN FULL. 2] GROUND NO 2 2.1] THE ASSESSEE IN THIS GROUND OF APPEAL HAS CHA LLENGED THE NON- ALLOWANCE OF PROPER CREDIT OF TAXES AS PAID BY THE ASSESSEE. 2.2] THE ASSESSING OFFICER WHILE PASSING THE PRESE NT ASSESSMENT ORDER NOT ALLOWED PROPER CREDIT OF TAXES OF RS.3,50,000/- AS PAID BY THE ASSESSEE. COPY OF BOTH THE CHALLANS ARE ENCLOSED. 2.3] THAT IN VIEW OF THE ABOVE, THE ASSESSING OFFI CER IS HEREBY DIRECTED TO ALLOW PROPER CREDIT OF TAXES OF RS.3,50,000/- AS PAID BY THE ASSESSEE AND REDUCED THE AMOUNT OF OUTSTANDING DEMAND ACCORDINGLY. 3] GROUND NO 3 3.1] THAT IN THIS GROUND OF APPEAL, THE ASSESSEE H AS CHALLENGED THE CHARGEABILITY OF INTEREST U/S 234B OF THE ACT. 3.2] THE ASSESSING OFFICER IS HEREBY DIRECTED TO C HARGE INTEREST U/S 234B OF THE ACT ON THE AMOUNT OF INCOME THAT MAY BE FINALLY ASSESSE D. 3.3] THAT IN VIEW OF THE ABOVE IT IS SUBMITTED THA T THE ASSESSING OFFICER IS HEREBY DIRECTED TO CHARGE INTEREST U/S 234B OF THE ACT ON THE AMOUNT OF TOTAL INCOME THAT MAY BE FINALLY ASSESSED. 4. I HAVE SEEN THE ASSESSMENT ORDER, THE GROUND OF APP EAL AND THE SUBMISSION OF THE APPELLANT. 5. GR. NO.1 IS AGAINST ADDITION OF RS.24,71,668/- TO T HE INCOME OF THE APPELLANT U/S 40A(3) OF I.T. ACT MADE BY AO BY HOLD ING THAT TRANSACTIONS OF PURCHASES OF RS.1,64,77,778/- WERE MADE IN CASH FROM M/S. S.R. M/S S.R. BUILDERS & DEVELOPERS ITA NO. 304/IND/2015 9 TRADERS AND SINCE SUCH TRANSACTION WERE EXCEEDING R S.20,000/-, HENCE AO INVOKED PROVISION OF SECTION 40A(3) OF I.T. ACT AND RESTRICTED DISALLOWANCE TO RS.24,74,668/- AT THE RATE OF 15% O F TOTAL OF SUCH AMOUNT OF RS.1.64 CRORE. HOWEVER IN THE ORIGINAL ASSESSMEN T ORDER SUCH AMOUNT WAS DISALLOWED TO THE EXTENT OF RS.32,95,556/- AT T HE RATE OF 20% OF RS.1.64 CRORE AND THAT ASSESSMENT WAS SET ASIDE BY HONBLE MEMBER, ITAT, INDORE TO THE FILE OF AO WITH A DIRECTION TO EXAMINE THE CLAIM OF ASSESSEE. THE AO AFTER SUCH EXAMINATION AGAIN MADE SIMILAR ADDITION THOUGH OF LESSER AMOUNT BY OBSERVING THAT SUCH TRAN SACTION OF PURCHASES WERE IN CASH IN EXCESS OF RS.20,000/- & HE EVEN DOU BTED THE GENUINENESS OF SOME OF THESE TRANSACTION. THE APPELLANT ON THE OTHER HAND ARGUED THAT THOUGH CASH WAS GIVEN BY APPELLANT TO M/S S.R. TRAD ERS, OF RS.1.64 CRORE IN EXCESS OF RS.20,000/-, BUT THAT IS PROPRIETARY C ONCERN OF ONE OF THE PARTNERS OF APPELLANT AND SUCH AMOUNT WAS GIVEN TO THEM JUST IN ORDER TO FACILITATE PURCHASES OF CONSTRUCTION MATERIAL AND T HEY FURTHER ARGUED THAT IN FACT EACH OF SUCH MATERIAL PURCHASES MADE BY M/S S.R. TRADERS IN WELL BELOW RS.20,000/-. 5(I) BOTH THE ARGUMENTS TAKEN BY APPELLANT ARE RATHER N AVE, ILLOGICAL & REMAINED UNSUBSTANTIATED. FIRSTLY SINCE AS PER AD MITTED POSITION THE PROPRIETOR OF M/S S.R. TRADERS IS A PARTNER IN APPE LLANT FIRM AND THEREFORE AS A PARTNER OF FIRM HE IS DUTY BOUND TO OVERLOOK A NY ACTIVITY OF FIRM INCLUDING PURCHASES OF MATERIAL FOR WHICH THERE IS NO COMPULSION TO ENGAGE HIS PROPRIETARY CONCERN. IN SUCH CIRCUMSTANC ES, QUESTION ARISES AS TO WHY PROPRIETARY CONCERN OF ONE PARTNER NAMELY M/ S S.R. TRADERS WAS ENGAGED BY APPELLANT, FOR MAKING PURCHASES OF MATER IALS OF RS.3,01,20,550/- WHICH IS PAID BOTH THROUGH CHEQUE & CASH. REASON FOR THE SAME IS NOT FAR TO SEEK. IF ONE EXAMINES THE PR OFIT & LOSS A/C OF APPELLANT FOR AY 2006-07, IT CAN BE SEEN THAT ON TO TAL RECEIPTS FROM CONSTRUCTION OF RS.4,69,23,187/-, APPELLANT HAS SHO WN A VERY SMALL NET PROFIT OF RS.2,85,425/-, WHICH WAS MAINLY DUE TO CL AIM OF BUILDING M/S S.R. BUILDERS & DEVELOPERS ITA NO. 304/IND/2015 10 MATERIAL PURCHASES OF RS.3,01,20,550/- & ENTIRE OF SUCH PURCHASE IS SHOWN AS MADE FROM M/S S.R. TRADERS. OUT OF SUCH PU RCHASES OF RS.3.01 CRORES, PURCHASES OF RS.1.64 CRORES ARE CASH PURCHA SES WHERE EACH PURCHASE EXCEEDS RS.20,000/- AND IN FACT EACH PURCH ASE BILL AS SHOWN IN LEDGER A/C IS IN LAKHS OF RUPEES. ENTIRE OF THIS MO DUS OPERANDI IS ADOPTED WITH A VIEW TO OBVIATE MISCHIEF OF PROVISIONS OF SE C. 40A(3), WHICH IS BEING DESCRIBED BY AO AS VARIOUS DISCREPANCIES IN SUCH PURCHASE BILLS LIKE NO MENTION OF PHONE NOS. NO, MENTION OF TRANSPORT VEHI CLE NO., BILLS OF DIFFERENT PARTIES BEING IN SAME HANDWRITING ETC. 5(II) I HAVE SEEN THE BILLS OF MATERIAL PURCHASE SUBMITT ED BY APPELLANT AND FROM APPEARANCE OF CASH BILLS THEY APPEAR AS CR EATED BY APPELLANT AS THERE IS NO PROBABILITY IN A NORMAL BUSINESS THAT M OST OF SUCH CASH PURCHASE BILLS WILL BE IN THE RANGE OF RS.18,000/- TO RS.19,999/-, AS IN NORMAL COURSE BILLS WILL BE OF ALL AMOUNTS RANGING FROM RS.100/- TO RS.8.05 LAKH (HIGHEST AMOUNT). THE AMOUNT OF BILLS SHOW THAT THEY HAVE BEEN CREATED TO MAKE IT JUST LESS THAN RS.20,000/-. SECONDLY BILLS ARE REPEATEDLY FROM SAME 7 TO 8 PARTIES WHICH IS POSSIB LE ONLY WHEN THEY ARE CREATED BECAUSE IN REALITY PURCHASES ARE MADE FROM SEVERAL DIFFERENT PARTIES. BUT WHAT IS MOST CATCHING POINT HERE IS TH AT MOST OF THESE BILLS FROM 7 TO 8 DIFFERENT PARTIES ARE IN SAME HANDWRITI NG WHICH IS NOT POSSIBLE UNLESS THE BILLS ARE BEING CREATED. FURTHERMORE SUC H BILLS ARE CREATED JUST FOR SAKE OF PRODUCING BEFORE AO/CIT(A), WHICH IS QU ITE OBVIOUS FROM THE FACT THAT THEY ARE NOT TALLYING WITH LEDGER A/C OF M/S S.R. TRADERS. FOR EXAMPLE APPELLANT HAS FURNISHED A BILL NO.434OF RAD HEKRISHNA SAW MILL DATED 13-03-2006 OF RS.19,203/-, BUT IN LEDGER A/C OF M/S S.R. TRADERS, THERE IS NO PURCHASE BILL ON 13-03-2006, BUT THERE ARE PURCHASE BILLS OF RS.6,50,000/- ON 12-03-2006 AND OF RS.71,250/- ON 1 5-03-2006. SIMILARLY THERE IS BILL OF RS.15,365/- ON 13-03-200 6 FROM TIWARI STEEL M/S S.R. BUILDERS & DEVELOPERS ITA NO. 304/IND/2015 11 (WITHOUT ANY TIN NO. OR PHONE NO.). SAME IS PROBLEM WITH BILLS OF MISHRA BROTHERS DT. 13-03-2006 OF RS.15,700/- AND OF KUSHW AHA TRADERS OF RS.12,290/- DT. 13-03-2006. THEREFORE FOR ALL SUCH BILLS DATED 13-03- 2006, THERE IS NO CORRESPONDING ENTRY DATED 13-03-2 006 IN LEDGER A/C OF M/S S.R. TRADERS. THE APPELLANT HAS FAILED TO PROVI DE BREAKUP OF VARIOUS BILLS MENTIONED IN LEDGER A/C OF M/S S.R. TRADERS L IKE FOR EXAMPLE NO BREAKUP OF VARIOUS BILLS IS FURNISHED WHICH ARE PAR T OF PURCHASE OF RS.6,50,000/- ON 12-03-2006 ETC. CLEARLY THE INTENT ION WAS TO OVERCOME THE MISCHIEF OF PROVISIONS OF SECTION 40A(3) OF I.T . ACT BY PUTTING CONCERN OF ONES OWN PARTNER NAMELY M/S S.R. TRADERS IN BETWEE N AND BY CREATING VARIOUS CASH BILLS AS DESCRIBED ABOVE. IT IS ALSO S TRANGE TO OBSERVE THAT WITH SUCH 7-8 PARTIES APPELLANT HAS NOT MADE A SING LE CHEQUE TRANSACTION. ALL THESE ITEMS LIKE SAND/ GRIT/ CONCRETE/STEEL/WOO D ETC ARE NORMALLY PURCHASED AS TRUCKLOAD OR CARTLOAD AND NOT PURCHASE D SEVERAL TIMES IN SMALL QUANTITIES BECAUSE IN THAT CASE TRANSPORT EXP ENSE GOES UP SHARPLY & NO WHOLESELLER IS READY TO DELIVER SUCH SMALL QUA NTITIES. BESIDES NONE OF THESE PURCHASE BILL SHOWS ANY VEHICLE NO. OF TRU CK/TEMPO FOR TRANSPORTATION OF SUCH GOODS. MOST OF SUCH BILLS AL SO DO NOT HAVE TIN/SALE TAX NO./TELEPHONE NO. 5(III) THESE ARE ALL SIGNS OF MANIPULATED/CREATED BILLS WI TH PURPOSE TO CREATE A FAADE OF BILLS JUST BELOW RS.20,000/- WHE N ACTUAL CASH PURCHASES WERE MUCH HIGHER IN AMOUNTS THAN STATUTOR Y LIMITS OF RS.20,000/-. IN VIEW OF THE SAME, I AM OF THE CONSI DERED OPINION THAT APPELLANT IS HIT BY PROVISIONS OF SECTION 40A(3) OF I.T. ACT AS PURCHASES OF MATERIAL SHOWN TO HAVE BEEN MADE IN CASH THROUGH M/ S S.R. TRADERS OF A TOTAL OF RS.1,64,77,778/-, WERE MADE IN CASH WHEREI N EACH PURCHASE AS PER LEDGER A/C OF M/S S.R. TRADERS AS REPRODUCED IN ORIGINAL ASSESSMENT ORDER AT PAGE 2,3,4 WAS OF RS.20,000/- OR MORE. HEN CE ADDITION OF M/S S.R. BUILDERS & DEVELOPERS ITA NO. 304/IND/2015 12 RS.32,95,556/- AT THE RATE OF 20% OF SUCH PURCHASES MADE IN ORIGINAL ASSESSMENT WAS QUITE JUSTIFIED AND WHILE PASSING SE T ASIDE ORDER, AO MADE A MISTAKE APPARENT FROM RECORD, BY CALCULATING SUCH ADDITION U/S 40A(3) OF I.T. ACT, AT A RATE OF 15%, SINCE I.T. AC T HAS PROVIDED A FIXED RATE OF DISALLOWANCE AT 20% AND LEGISLATURE HAS NOT PROV IDED ANY DISCRETION TO AO IN THIS REGARD, TO EITHER REDUCE OR ENHANCE IT. HENCE THAT BEING MERELY A MISTAKE APPARENT FROM RECORD, IT IS BEING RECTIFI ED HERE BY USING COTERMINOUS POWERS OF CIT (A). THEREFORE ADDITION IS CONFIRMED U/S 40A(3) OF THE I.T. ACT TO THE EXTENT OF RS.32,95,55 6/-. RELIANCE IS PLACED ON THE DECISION IN CASES OF RAMESH CHAND (HU F) [2013] 217 TAXMANN 75 (P&H), RAMAN MAHAJAN (HUF) [2013] 141 IT D 485 (AMRITSAR- TRIB.), VAISHALI BUILDERS & COLONIZERS [2012] 38 IT D 227 (JODHPUR), SMT. CHANCHAL DOGRA [2013] 247 CTR 616 (H.P.) AND RAJA & CO. [2010] 335 ITR 381 (KERALA). GR. NO. 1 OF APPEAL IS DISMISSED. AGAINST THE ABOVE FINDING OF THE LEARNED CIT(A), TH E ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL. 5. BEFORE US, THE LEARNED COUNSEL FOR THE ASSESSEE REITERATED THE SUBMISSIONS MADE BEFORE THE AUTHORITIES BELOW. THE LEARNED COUNSEL FOR THE ASSESSEE FURTHER SUBMITTED THAT THE ASSESSE E HAS FILED COPIES OF ALL THE BILLS BEFORE THE AUTHORITIES BELOW BUT T HEY HAVE NOT EXAMINED THE SAME AND REACHED A CONCLUSION WITHOUT ANY BASIS. HE FURTHER SUBMITTED THAT THE LEARNED CIT(A) HAS GROSS LY ERRED IN M/S S.R. BUILDERS & DEVELOPERS ITA NO. 304/IND/2015 13 CONFIRMING THE ACTION OF THE ASSESSING OFFICER AS A LSO ENHANCING THE DISALLOWANCE TO 20% IN PLACE OF 15% AS MADE BY THE ASSESSING OFFICER. ON THE OTHER HAND, THE LEARNED DR SUPPORTE D THE ORDER OF THE LEARNED CIT(A). 6. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS OF THE PARTIES IN VIEW OF THE FACTS OBTAINING IN THIS CASE. WE FIND THAT T HE ASSESSING OFFICER HAS MADE THE DISALLOWANCE AT 15% WHEREAS THE LEARNE D CIT(A) HAS ENHANCED THE SAME TO 20%. BEFORE US, IT IS THE CON TENTION OF THE ASSESSEE THAT THE LEARNED CIT(A) WAS NOT JUSTIFIED IN CONFIRMING THE ADDITION AS ALSO IN ENHANCING THE SAME, WITHOUT BRI NGING ANY MATERIAL ON RECORD IN SUPPORT THEREOF. THE LEARNED COUNSEL FOR THE ASSESSEE CLAIMED THAT SOME OF THE PAYMENTS ARE BELO W RS. 20,000/- WHICH ARE NOT HIT BY THE PROVISIONS OF SECTION 40A( 3) OF THE ACT. WE, THEREFORE, IN THE INTEREST OF JUSTICE AND EQUITY, S ET ASIDE THE ORDERS OF THE AUTHORITIES BELOW AND RESTORE THE ISSUE TO THE FILE OF THE LEARNED CIT(A) TO DECIDE THE SAME IN VIEW OF THE SUBMISSION S FURNISHED BY THE ASSESSEE WHICH ARE ALREADY ON RECORD, AFTER PRO VIDING THE ASSESSEE REASONABLE OPPORTUNITY OF BEING HEARD. M/S S.R. BUILDERS & DEVELOPERS ITA NO. 304/IND/2015 14 7. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS A LLOWED FOR STATISTICAL PURPOSES. THIS ORDER HAS BEEN PRONOUNCED IN THE OPEN COURT ON 14 TH SEPTEMBER, 2016. SD/- (D.T.GARASIA) JUDICIAL MEMBER SD/- (O.P.MEENA) ACCOUNTANT MEMBER DATED :_14 TH SEPTEMBER, 2016. DN/- COPY FORWARDED TO:- 1. THE ASSESSEE/2. THE AO CONCERNED/3. THE LD. PCIT CONCERNED 4. THE LD. CIT(A)/5. THE LD. DR, INDORE/6. THE GUAR D FILE BY ORDER A.R. ITAT, INDORE