The Dy. Commissioner of Income Tax, Vijayawada V. Krishna Fisheries, Vijayawada

ITA 325/VIZ/2015

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 8840 (ITAT-VISAKHAPATNAM)
• Duration Of Justice: 1 year(s) 11 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-07-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2006-2007
• Appeal Filed On: 10-08-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: K DEVARATHNA KUMAR
• Keywords: Principle of natural justice
• Section: 40A(3); 143(3); 153A; 145; 132

Judgement Text

ITA NOS.325 TO 330/VIZAG/2015 M/S. KRISHNA FISHERIES, VIJAYAWADA 1 , , IN THE INCOME TAX APPELLATE TRIBUNAL, VISAKHAPATNAM BENCH, VISAKHAPATNAM . , . . , BEFORE SHRI V. DURGA RAO, JUDICIAL MEMBER & SHRI D.S. SUNDER SINGH, ACCOUNTANT MEMBER ./I.T.A.NOS.325 TO 330/VIZAG/2015 ( / ASSESSMENT YEAR: 2006-07 TO 2011-12) DCIT, CIRCLE - 2(1), VIJAYAWADA M/S. KRISHNA FISHERIES, VIJAYAWADA [PAN NO. AAGFK6267M ] ( / APPELLANT) ( / RESPONDENT) / APPELLANT BY : SHRI K. DEVA RATHNA KUMAR, DR / RESPONDENT BY : SHRI C. SUBRAHMANYAM , AR / DATE OF HEARING : 29.06.2017 / DATE OF PRONOUNCEMENT : 26.07.2017 / O R D E R PER BENCH: ALL THESE APPEALS ARE FILED BY THE REVENUE AGAINST ORDER OF THE CIT(A), VIJAYAWADA IN APPEAL NOS.206 TO 212/CIT(A)/ VJA/2014-15 DATED 15.6.2015 FOR THE ASSESSMENT YEARS 2006-07 TO 2011- 12. SINCE, THE FACTS ARE IDENTICAL AND THE ISSUES ARE COMMON, THEY ARE CLUBBED, HEARD TOGETHER AND DISPOSED-OFF BY WAY OF THIS COMMON ORD ER FOR THE SAKE OF CONVENIENCE AS UNDER: ITA NOS.325 TO 330/VIZAG/2015 M/S. KRISHNA FISHERIES, VIJAYAWADA 2 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E IS ENGAGED IN THE ACTIVITY OF AQUA CULTURE. A SEARCH U/S 132 OF THE INCOME TAX ACT, 1961 (HEREINAFTER CALLED AS 'THE ACT') WAS CARRIED OUT I N THE ASSESSEES CASE ON 18.3.2011 AND THE ASSESSMENTS WERE COMPLETED U/S 14 3(3) R.W.S. 153A OF THE ACT. THE ASSESSMENT YEARS INVOLVED WERE FRO M 2006-07 TO 2011-12. IN THE ASSESSMENTS COMPLETED U/S 143(3) R .W.S. 153A OF THE ACT, THE ASSESSING OFFICER ESTIMATED THE INCOME @ ` 22,000/- PER ACRE FOR THE ENTIRE CULTIVATED LAND OF 86.47 ACRES WITHO UT EXCLUDING THE BUND AREA. THIS ISSUE IS INVOLVED FOR ALL THE ASSESSMEN T YEARS OF 2006-07 TO 2011-12. FOR THE SAKE OF CLARITY AND CONVENIENCE W E EXTRACT THE RELEVANT PARAGRAPH NO.4 OF THE ASSESSMENT ORDER FOR THE A.Y 2006-07 AS UNDER: DURING THE YEAR UNDER CONSIDERATION THE ASSESSEE HA D DECLARED AN AMOUNT OF ` 3,43,270/- AS INCOME FROM FISH TANKS. THE ASSESSE E WAS IN POSSESSION OF AC.86.47 OF FISH TANKS AND WAS DOING PISCI CULTURE ON HIS OWN. THE NET INCOME OFFERED BY THE ASSESSEE PER AC RE COMES TO ` 3,970/-. BUT AS PER THE INFORMATION PROVIDED BY TH E FISHERIES DEPT. THE NET INCOME PER ACRE WAS AROUND ` 22,000/- FOR THE YEAR UNDER CONSIDERATION. THE FISHERIES DEPT. HAS ESTIMATED T HE INCOME BY TAKING INTO CONSIDERATION THE PURCHASE OF SEED, COOLIE EXP ENSES FOR FEEDING OF FISH, REMOVAL OF WASTAGE FROM FISH PONDS, CATCHING THE FISH, SALE OF FISH, TRANSPORT EXPENSES, SALARIES TO STAFF & OTHER ADMIN ISTRATIVE EXPENSES AND ALL OTHER CONNECTED EXPENSES. THE INCOME ARRIVED B Y THE FISHERIES DEPARTMENT WHICH IS NET OF ALL EXPENSES IS ADOPTED IN THE CASE OF THE ASSESSEE. THE INCOME OF THE ASSESSEE IS ESTIMATED @ ` 22,000/- PER ACRE AND THE TOTAL INCOME FROM AQUA BUSINESS IS ARRIVED AT ` 19,02,340/- (22,000 X AC.86.47). AS THE ASSESSEE HAD OFFERED ` 3,43,270/- AS INCOME FROM FISH TANKS, THE BALANCE AMOUNT OF ` 15,59,070/- IS NOW ADDED TO THE INCOME RETURNED. WHILE ESTIMATING THE INCOME, ACRE AGE IS TAKEN PER ACRE WHICH INCLUDES THE BUNDS ALSO TO THE WATER SPREAD A REA. ITA NOS.325 TO 330/VIZAG/2015 M/S. KRISHNA FISHERIES, VIJAYAWADA 3 3. THE ASSESSEE WENT ON APPEAL BEFORE THE CIT(A) AN D THE CIT(A) DIRECTED THE A.O. TO ESTIMATE THE INCOME @ ` 13,300/- PER ACRE FOR WATER SPREAD AREA AND DIRECTED THE A.O. TO EXCLUDE THE BUND AREA FROM THE TOTAL LAND HOLDING UNDER CULTIVATION. FOR READY REFERENCE, WE REPRODUCE THE ORDER OF THE LD. CIT(A)IN PARA -5.2 T O 5.3, WHICH READS AS UNDER: 5.2 DURING THE COURSE OF APPEAL HEARING, 'THE APPE LLANT FURNISHED A COPY OF LETTER DATED 19/10/1993 ISSUED BY THE CENTR AL BOARD OF DIRECT TAXES WHEREIN IT IS STATED THAT WHILE COMPUTING THE ACREAGE FOR FISH CULTURE 30% HAS TO BE TAKEN AS BUND AREA AND THE BA LANCE 70% SHOULD ONLY BE CONSIDERED AS WATER SPREAD. THE ABOVE LETTE R WAS FURNISHED BEFORE THE AO BUT HE HAS NOT CONSIDERED THE SAME. T HOUGH THE LETTER ISSUED BY THE CBDT IS BINDING ON ASSESSING OFFICER HE SIMPLY IGNORED IT. HAD THE BUND AREA IS EXCLUDED THE INCOME OFFERED BY THE / APPELLANT IS MORE THAN THE INCOME ESTIMATED BY THE ASSESSING OFF ICER. THE INCOME OFFERED BY THE APPELLANT TAKING 70% WATER SPREAD IS AT RS. 15900/-. IF THE ASSESSING OFFICER ALSO ACCEPTED 70% AS WATER SPREAD AREA THE INCOME ESTIMATED BY HIM WILL BE RS. 13,300/- PER ACRE (19, 000 X 70%). IN THIS REGARD, THE LEARNED AR STATED THAT THE ADDITION MAD E BY THE ASSESSING OFFICER IS IN ) CONTRAVENTION OF THE CBDT LETTER AN D THE INCOME OFFERED BY THE APPELLANT IS REASONABLE AND THE ADDITIONS MADE UNDER THIS HEAD BE DELETED'. 5.3 I HAVE CAREFULLY GONE THROUGH THE ASSESSMENT ORD ERS FOR ALL THE ASST. YEARS AS WELL AS SUBMISSIONS OF THE APPELLANT AND MATERIAL AVAILABLE ON RECORD. IT -IS OBSERVED THAT THERE IS NO DISPUTE BY THE APPELLANT WITH REGARD TO THE LAND HOLDING IN ACRES AND AMOUNT OF I NCOME PER ACRE AS OBTAINED BY THE DEPARTMENT FOR ALL THE ASST. YEAR, THE ASSESSING OFFICER BASED ON THE INFORMATION OBTAINED FROM STATE GOVERN MENT AND ALSO FROM THE AVAILABLE INCRIMINATING MATERIAL ESTIMATED THE TOTAL INCOME. SINCE THERE IS NO DISPUTE WITH REGARD TO AREA AND AMOUNT, INTERFERENCE OF MY OPINION IS NOT REQUIRED IN THIS REGARD. THE ONLY DI SPUTE RAISED BY THE APPELLANT DURING APPEAL PROCEEDINGS IS WITH REGARD TO THE BUND AREA TO BE ALLOWED. THE APPELLANT SUBMITTED THAT AS PER BOARD' S CIRCULAR VIDE DO. NO. 225/222/93-ITA.11 DATED 19/10/1993, LAND AREA HAS T O BE CONSIDERED AT 70% INSTEAD OF 100% ADOPTED BY THE ASSESSING OFFICE R WHILE ESTIMATING THE INCOME. AFTER CONSIDERING THE BOARD'S CIRCULAR, I AM OF THE OPINION THAT WHILE ESTIMATING THE INCOME PER ACRE, BUND ARE A HAS TO BE DEDUCTED FROM THE TOTAL LAND AREA. HENCE, 30% OF THE LAND AR EA HAS TO BE REDUCED AND 70% OF LAND AREA HAS TO BE CONSIDERED AS WATER SPREAD FOR ESTIMATION ITA NOS.325 TO 330/VIZAG/2015 M/S. KRISHNA FISHERIES, VIJAYAWADA 4 OF INCOME FROM FISH CULTURE. ACCORDINGLY, THE ASSES SING OFFICER IS DIRECTED TO ESTIMATE THE INCOME ON 70% OF THE TOTAL LAND ARE A FOR EACH ASST. YEAR FROM 2005-06 TO 2011-12. 4. AGGRIEVED BY THE ORDER OF THE LD. CIT(A), THE R EVENUE IS IN APPEAL BEFORE US. APPEARING FOR THE REVENUE, LD. D.R. ARG UED THAT THE CIT(A) COMMITTED AN ERROR BY ALLOWING THE BUND AREA TO BE EXCLUDED FOR ESTIMATION OF INCOME SINCE IT WAS CONSIDERED BY THE A.O. WHILE ESTIMATING THE INCOME. THE ASSESSEE IS HAVING FISH POND IN THE AREA OF 86.47 ACRES AND DECLARED THE TOTAL INCOME OF ` 3.43 LAKHS, WHICH WORKS OUT TO ` 3,970/- PER ACRE AND THE SAME IS ABYSMALLY LOW. T HE A.O. WHILE ESTIMATING THE INCOME, HAS CONSULTED THE FISHERIES DEPARTMENT, COLLECTED THE INFORMATION AND CAME TO A CONCLUSION THAT THE INCOME FROM PISCI CULTURE PER ACRE WOULD BE AROUND ` 30,000/- AND AFTER EXCLUDING THE BUND AREA, THE INCOME WORKS OUT TO ` 22,000/- PER ACRE FOR 70% OF THE WATER SPREAD AREA. THE LD. D.R. SUBMITTED THAT WHILE ESTIMATING THE INCOME, THE A.O. HAS ALREADY CONSIDERED THE WATER S PREAD AREA AND BUND AREA, HENCE, IT IS NOT NECESSARY TO EXCLUDE TH E BUND AREA FOR ESTIMATION OF INCOME. FURTHER, THE LD. D.R. ARGUED THAT A CIRCULAR WHICH WAS RELIED UPON BY THE LD. CIT(A) WAS ISSUED ON 19. 10.1993 AND IS APPLICABLE ONLY FOR THE ASSESSMENT YEAR 1993-94. H ENCE, THE LD. D.R. CONTENDED THAT THE A.O. HAS RIGHTLY ESTIMATED THE I NCOME @ ` 22,000/- PER ACRE AFTER EXCLUSION OF BUND AREA AND NO FURTH ER ADJUSTMENT IS ITA NOS.325 TO 330/VIZAG/2015 M/S. KRISHNA FISHERIES, VIJAYAWADA 5 REQUIRED AND THE CIT(A) ORDER SHOULD BE SET ASIDE A ND RESTORE THE ASSESSMENT ORDER. 5. ON THE OTHER HAND, THE LD. A.R. ARGUED THAT ESTI MATION OF INCOME @ ` 22,000/- PER ACRE FOR WATER SPREAD AREA OF 70% IS ABNORMALLY HIGH AND THE ASSESSEE IS NOT GETTING THAT MUCH INCOME. IN SOME YEARS THE ASSESSEE EVEN INCURS LOSSES DUE TO SEASONAL PRESSUR E, FAILURE OF ELECTRICITY, RAINS, ETC. THE A.O. HAS NOT GIVEN AN Y BASIS FOR ESTIMATION OF THE INCOME @ ` 22,000/- PER ACRE OR ` 30,000/- PER ACRE (INCLUDING THE BUNDS). THE INFORMATION SAID TO BE COLLECTED FROM FISHERIES DEPARTMENT WAS NOT PUT UP TO THE ASSESSEE FOR REBUTTING THE EV IDENCES, WHICH IS AGAINST THE PRINCIPLES OF NATURAL JUSTICE. THE EVI DENCES COLLECTED BEHIND THE BACK OF THE ASSESSEE SHOULD BE PLACED BEFORE TH E ASSESSEE FOR HIS REBUTTAL. EVEN IN THE CIRCULAR OF CBDT DATED 19.10 .1993 NO.222/93- ITA.11, THE CBDT HAS ALLOWED THE DEDUCTION FOR BUND S @ 30% AND ESTIMATED THE WATER SPREAD AREA @ 70% OF THE ACREAG E. THEREFORE, IT IS MANDATORY FOR THE A.O. TO ESTIMATE THE INCOME ON TH E WATER SPREAD AREA BUT NOT ON THE ENTIRE ACREAGE INCLUDING THE FISH TA NK BUNDS. SINCE THE ASSESSEE IS NOT MAINTAINING THE BOOKS OF ACCOUNTS T HE LD. A.R. ARGUED THAT THE ESTIMATION OF INCOME @ ` 22,000/- IS VERY HIGH AND THE ESTIMATION SHOULD BE MADE REASONABLE. ITA NOS.325 TO 330/VIZAG/2015 M/S. KRISHNA FISHERIES, VIJAYAWADA 6 6. WE HAVE HEARD BOTH THE PARTIES, PERUSED THE MATER IALS AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHOR ITIES BELOW. THE ASSESSEE IS CULTIVATING THE FISH PONDS IN 86.47 ACR ES AND NO BOOKS WERE MAINTAINED BY THE ASSESSEE AND HENCE THE ASSESSIN G OFFICER ESTIMATED THE INCOME @ ` 22,000/- PER ACRE ON ENTIRE 86.47 ACRES WITHOUT GI VING DEDUCTION FOR BUNDS. WHILE ESTIMATING THE INCOME, TH E ASSESSING OFFICER SAID TO HAVE COLLECTED THE INFORMATION FROM THE FIS HERIES DEPARTMENT. THE ASSESSING OFFICER HELD THAT AS PER THE INFORMAT ION COLLECTED FROM FISHERIES DEPARTMENT THE REASONABLE ESTIMATION OF I NCOME WOULD BE ` 30,000/- PER ACRE INCLUDING THE BUND AREA AND AFTER EXCLUSION OF BUNDS THE ESTIMATION OF ` 22,000/- PER ACRE IS FAIR AND REASONABLE. THOUGH THE A.O. STATED IN THE ASSESSMENT ORDER THAT HE HAS MAD E ENQUIRY WITH FISHERIES DEPARTMENT AND COLLECTED THE INFORMATION, DETAILS OF THE INFORMATION COLLECTED FROM THE FISHERIES DEPARTMENT WITH REGARD TO THE INCOME AND EXPENDITURE, YIELD PER ACRE YEAR-WISE ES TIMATED SALES AND THE SALE VALUE PER TONNE, ETC. WAS NOT DISCUSSED IN THE ASSESSMENT ORDER AND NOT MADE AVAILABLE TO THE ASSESSEE. HENCE THE R ELIANCE PLACED BY THE AO ON THE INFORMATION OF FISHERIES DEPARTMENT F OR ESTIMATION OF INCOME CANNOT BE USED AGAINST THE ASSESSEE WITHOUT GIVING OPPORTUNITY TO THE ASSESSEE AND THE SAME IS AGAINST THE PRINCIP LES OF NATURAL JUSTICE AND ACCORDINGLY REJECTED. AS PER THE BOARD CIRCULA R THE ESTIMATED ITA NOS.325 TO 330/VIZAG/2015 M/S. KRISHNA FISHERIES, VIJAYAWADA 7 INCOME PER ACRE WAS ` 4000/- ON WATER SPREAD AREA OF 70% OF THE FISH POND FOR THE YEAR 1993-94 AND THE SAME CANNOT BE S AID TO BE REASONABLE FOR THE ASSESSMENT YEAR 2006-07, WHICH I S AFTER 13 YEARS. HOWEVER, WITH REGARD TO WATER SPREAD AREA OF 70% RE MAINED UNCHANGED. THE LD. CIT(A) CONFIRMED THE ESTIMATION OF INCOME @ ` 22,000/- PER ACRE INCLUSIVE OF BUNDS AND ` 13,300/- FOR 70% OF WATER SPREAD AREA SINCE THE ASSESSEE IS NOT MAINTAINING T HE BOOKS OF ACCOUNTS. THE LD. A.R DID NOT PLACE ANY EVIDENCE TO DISPROVE THE ESTIMATION CONFIRMED BY THE LD. CIT(A). THE REVENUE ALSO DID N OT PLACE ANY EVIDENCE TO SHOW THAT THE ESTIMATION OF INCOME @ ` 13,300/- IS NOT REASONABLE. THEREFORE, IN THE ABSENCE OF BOOKS OF ACCOUNTS WE HOLD THAT ` 13,300/- PER ACRE OF WATER SPREAD AREA APPEARS TO BE REASONABLE AND ACCORDINGLY WE UPHOLD THE ORDER OF THE LD. CIT( A). THE ESTIMATION OF WATER SPREAD AREA AND THE BUND AREA IS IN ACCORD ANCE WITH THE CIRCULAR ISSUED BY THE CBDT. ACCORDINGLY, WE UPHOL D THE ORDER OF THE LD. CIT(A) AND THE REVENUES APPEAL ON THIS GROUND IS D ISMISSED. 7. FOR THE ASSESSMENT YEARS 2007-08 TO 2011-12, THE NEXT ISSUE IS THE ADDITIONS MADE U/S 40A(3) OF THE ACT. THE ASSE SSING OFFICER MADE THE ADDITION U/S 40A(3) OF THE ACT, FOR ALL THE ASS ESSMENT YEARS ON ACCOUNT OF PURCHASES MADE FOR FEED. THE FACT OF PU RCHASE OF FEEDS WAS DISCUSSED IN PARA NO.5 OF THE ASSESSMENT ORDER, WHI CH READS AS UNDER: ITA NOS.325 TO 330/VIZAG/2015 M/S. KRISHNA FISHERIES, VIJAYAWADA 8 5. DURING THE COURSE OF SEARCH & SEIZURE OPERATION CONDUCTED U/S.132 AT THE RESIDENTIAL PREMISES OF SRI V.RADHA KRISHNA ONE OF THE PARTNERS OF THE ASSESSEE FIRM, SOME OF THE DOCUMENTS/MATERIAL W ERE FOUND AND WERE SEIZED AS PER ANNEXURE NO.A/VR/01&02, WHICH CONTAIN THE DETAILS OF PURCHASES MADE FROM M/S.NICO AGRO OIL PRODUCTS PVT. LTD., A MAJOR SUPPLIER OF FISH FEED TO THE ASSESSEE FIRM. MR. V. RADHA KRISHNA, PURCHASED THE FEED ON BEHALF OF THE FIRM M/S.KRISHNA FISHERS AND ALL THE CREDIT PURCHASES WERE MADE IN THE NAME OF THE MANAGING PAR TNER I.E. SRI V. RADHA KRISHNA. ALL THE PAYMENTS WERE MADE IN CASH, WHICH EXCEEDED RS.20,000/- IN THE CASE OF EACH TRANSACTION, THUS A TTRACTING THE PROVISIONS FOR DISALLOWANCE U/S.40A(3). OUT OF THE SEIZED MATE RIAL, THE PURCHASES MADE FOR THE YEAR UNDER CONSIDERATION COME TO RS. 1 140,000/-. WHEN THE SAME WAS QUESTIONED, THE A.R. OF THE ASSESSEE REPLI ED THAT THE ASSESSEE DID NOT MAINTAIN BOOKS OF ACCOUNT AND THE INCOME WA S OFFERED ON ESTIMATED BASIS AND THE QUESTION OF DISALLOWANCE U/ S.40A(3) DOES NOT ARISE. THE MAIN ISSUE UNDER QUESTION IS THAT, WHETH ER THE ASSESSEE DID MAKE THE PURCHASES BY MAKING THE PAYMENTS OTHERWISE THEN BY AN ACCOUNT PAYEE CHEQUE OR D.D. AS THE ANSWER IS AFFIR MATIVE, AS THE ASSESSEE DID MAKE CASH PAYMENTS FOR THE PURCHASES, AS EVIDENT FROM THE MATERIAL FOUND DURING THE COURSE OF SEARCH & SEIZUR E, THE PROVISIONS OF SEC.40A(3) ARE CLEARLY ATTRACTED. THEREFORE, THE A MOUNT OF RS.11,40,000/- IS DISALLOWED AND IS ADDED TO THE INCOME RETURNED. 8. THE LD. CIT(A) DELETED THE ADDITION AS PER DISCU SSION MADE IN PARA 6 TO 6.2 WHICH READS AS UNDER: 6. WITH REGARD TO THE ISSUE OF DISALLOWANCE U/S. 4 0A(3) OF THE ACT FOR ASST. YEARS 2005-06, 2007-08 TO 2011-12, THE ASSESS ING OFFICER BASING ON THE ACCOUNT COPY FOUND IN THE NAME OF SRI V. RADHA KRISHNA, WHO IS ONE OF THE PARTNER OF THE APPELLANT FIRM DURING THE COU RSE OF SEARCH PROCEEDINGS. HE MADE THE ADDITION OF THE TOTAL CASH PAYMENTS AS EVIDENCED BY THE ACCOUNT COPY. 6.1 DURING THE COURSE OF APPEAL HEARING, THE LEARNE D AR STATED THAT WHEN THE INCOME IS ESTIMATED, NO SEPARATE ADDITION IS WARRANTED U/S. 40A(3) AND RELIED ON THE FOLLOWING CASE LAWS CIT VS BANWARI LAL BANSHIDHAR 229 ITR 229 (ALLAHABAD) CIT VS SMT.SANTOSH JAM 296 ITR 324 (P & H) CIT CENTAL (LUDHIANA) VS GOBIND RAM 229 TAXMANN 491 (P & H) CIT VS AGGARWAL ENGG CO 302 ITR 246 (P & H) AMIT AGAIWAL VS [TO 38 ITR(TRIB) 77 (RAIP UR) ITA NOS.325 TO 330/VIZAG/2015 M/S. KRISHNA FISHERIES, VIJAYAWADA 9 THE LEARNED AR FURTHER STATED THAT IT IS THE COMMON PRACTICE THAT IN ORDER TO GAIN QUANTITY DISCOUNTS NEARBY FARMERS JOIN TOGE THER TO PURCHASE RAW MATERIAL AND SHARE THEM AMONG THEMSELVES. HE ALSO S TATED THAT NO ACCOUNT IS IN THE NAME OF THE APPELLANT FIRM. 6.2 AFTER CAREFUL CONSIDERATION OF THE CASE LAWS SU BMITTED BY THE APPELLANT AND FACTS OF THE CASE, I AM OF THE OPINION THAT ONCE INCOME IS ESTIMATED, THERE IS NO QUESTION OF FURTHER ADDITION S. THEREFORE, DISALLOWANCE MADE U/S. 40A(3) FOR ASST. YEARS 2005- 06, 2007-08 TO 2011- 12 DELETED. 9. APPEARING FOR THE REVENUE, THE LD. D.R. ARGUED THAT THE ASSESSEE HAS MADE CASH PURCHASES FOR FEED ,WHICH THE A.O. HA S RIGHTLY MADE THE ADDITION AND SUPPORTED THE ORDER OF THE AO. 10. ON THE OTHER HAND, THE LD. A.R. ARGUED THAT AS SEEN FROM THE ASSESSMENT ORDER, THE PURCHASES WERE MADE BY MR. V. RADHA KRISHNA FROM M/S. NICO AGRO OIL PRODUCTS PVT. LTD. ON BEHAL F OF THE ASSESSEE. THE ASSESSEE HAS NOT MAINTAINED ANY BOOKS OF ACCOUN TS AND HENCE QUESTION OF DEBITING THE EXPENDITURE TO P&L ACCOUNT DOES NOT ARISE. THE CONDITIONS REQUIRED FOR MAKING THE DISALLOWANCE U/S 40A(3) OF THE ACT IS THE ASSESSEE SHOULD HAVE DEBITED THE EXPEND ITURE TO THE PROFIT & LOSS ACCOUNT AND THE EXPENDITURE INCURRED SHOULD HA VE BEEN PAID OTHERWISE THAN CROSSED ACCOUNT PAYEE CHEQUE. IN TH E INSTANT CASE, THERE WERE NO BOOKS OF ACCOUNTS AND THE PURCHASES W ERE MADE BY MR. RADHA KRISHNA AND THERE WAS NO EVIDENCE TO HOLD THA T THE EXPENDITURE WAS RELATED TO THE ASSESSEE AND HENCE NO ADDITION C AN BE MADE IN THE HANDS OF THE ASSESSEE. FURTHER, THE LD. A.R. ARGUE D THAT ONCE THE ITA NOS.325 TO 330/VIZAG/2015 M/S. KRISHNA FISHERIES, VIJAYAWADA 10 INCOME IS ESTIMATED, NO OTHER EXPENDITURE REQUIRED TO BE DISALLOWED SINCE THE ESTIMATION TAKES CARE OF THE ENTIRE INCOM E AND EXPENDITURE. 11. WE HAVE HEARD BOTH THE PARTIES, PERUSED THE MATE RIALS AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHOR ITIES BELOW. IN THIS CASE, THE ASSESSING OFFICER COMPLETED THE ASSESSMEN T ESTIMATING THE INCOME @ ` 22,000/- PER ACRE. THE ASSESSEE HAS NOT MAINTAINE D THE BOOKS OF ACCOUNTS WHICH FACT WAS ACCEPTED BY BOTH T HE PARTIES. THE PURCHASES WERE MADE BY SHRI RADHA KRISHNA BUT THERE IS NO EVIDENCE TO SHOW THAT THE EXPENDITURE WAS DEBITED TO THE P&L AC COUNT AND CLAIMED AS A DEDUCTION IN THE HANDS OF THE ASSESSEE. THERE FORE WE ARE OF THE VIEW THAT THE REVENUE HAS NOT PLACED SUFFICIENT EVI DENCE TO PROVE THAT THE EXPENDITURE WAS DEBITED BY THE ASSESSEE AND ATT RACT THE DISALLOWANCE U/S 40A(3) OF I.T. ACT. FURTHER, THE ASSESSMENT IN THIS CASE WAS COMPLETED BY ESTIMATION AND ONCE THE INCOME IS ESTIMATED THE ENTIRE DEDUCTIONS OR ADDITIONS FROM SECTION 30 TO 4 3D OF THE ACT DEEMED TO HAVE TAKEN CARE OF AND NO FURTHER DISALLOWANCE O R ADDITION REQUIRED TO BE MADE. THIS VIEW IS UPHELD BY HONBLE A.P. HIGH COURT DECISION IN THE CASE OF INDWELL CONSTRUCTIONS VS. CIT 232 ITR 776. FOR READY REFERENCE, WE EXTRACT THE RELEVANT PARAGRAPH OF THE HONBLE HI GH COURT ORDER AS UNDER: ITA NOS.325 TO 330/VIZAG/2015 M/S. KRISHNA FISHERIES, VIJAYAWADA 11 THE PATTERN OF ASSESSMENT UNDER THE IT ACT IS GIVE N BY S. 29 WHICH STATES THAT THE INCOME FROM PROFITS AND GAINS OF BU SINESS SHALL BE COMPUTED IN ACCORDANCE WITH THE PROVISIONS CONTAINE D IN SS. 30 TO 43D. SEC. 40 PROVIDES FOR CERTAIN DISALLOWANCES IN CERTA IN CASES NOTWITHSTANDING THAT THOSE AMOUNTS ARE ALLOWED GENERALLY UNDER OTHE R SECTIONS. THE COMPUTATION UNDER S. 29 IS TO BE MADE UNDER S. 145 ON THE BASIS OF THE BOOKS REGULARLY MAINTAINED BY THE ASSESSEE. IF THOS E BOOKS ARE NOT CORRECT OR COMPLETE, THE ITO MAY REJECT THOSE BOOKS AND EST IMATE THE INCOME TO THE BEST OF HIS JUDGMENT. WHEN SUCH AN ESTIMATE IS MADE IT IS IN SUBSTITUTION OF THE INCOME THAT IS TO BE COMPUTED U NDER S. 29. IN OTHER WORDS, ALL THE DEDUCTIONS WHICH ARE REFERRED TO UND ER S. 29 ARE DEEMED TO HAVE BEEN TAKEN INTO ACCOUNT WHILE MAKING SUCH AN E STIMATE. THIS WILL ALSO MEAN THAT THE EMBARGO PLACED IN S. 40 IS ALSO TAKEN INTO ACCOUNT. NO DOUBT THERE IS BIG DIFFERENCE BETWEEN PROFIT EARNED WITH OWN CAPITAL AND PROFIT EARNED WITH BORROWED CAPITAL AND SUCH A DIFF ERENCE COULD HAVE BEEN TAKEN INTO ACCOUNT BY THE ITO WHILE MAKING AN ESTIM ATE. IF THE CIT HAD SET ASIDE THE ESTIMATE ON THE GROUND THAT THE VITAL FACT THAT THE BUSINESS WAS CARRIED ON WITH OWN CAPITAL AND NOT WITH BORROW ED CAPITAL HAS BEEN IGNORED BY THE ITO, THERE MAY NOT HAVE BEEN ANY DIF FICULTY IN UPHOLDING THAT ORDER. BUT, WHEN HE PROPOSES TO ADD BACK AN EX ACT ITEM IN THE P&L A/C, HE WAS RELYING ON THE REJECTED BOOKS WHICH HE COULD NOT DO. THERE IS ALSO A FURTHER DIFFICULTY IF S. 40 IS TO BE TAKEN I NTO ACCOUNT EVEN AFTER MAKING AN ESTIMATE. WHEN THERE ARE CERTAIN OTHER DE DUCTIONS WHICH ARE TO BE DISALLOWED SUCH AS WEALTH-TAX PAYMENT IN S.40, C AN IT BE SAID THAT AFTER MAKING AN ESTIMATE, THE WEALTH-TAX CHARGED IN THE P &L A/C SHOULD AGAIN BE ADDED BACK TO THE PROFIT. THIS EXAMPLE ILLUSTRAT ES HOW THE CONTENTION OF THE REVENUE, THAT S. 40(B) MAKES A DIFFERENCE IN THE SITUATION, IS UNTENABLE. THEREFORE, IT IS NOT CORRECT IN LAW TO M AKE A SEPARATE ADDITION REPRESENTING THE INTEREST AND REMUNERATION PAID TO PARTNERS, TO THE INCOME ALREADY ESTIMATED AND ASSESSED FROM CONTRACT S. 12. FURTHER, HONBLE CALCUTTA HIGH COURT IN THE CAS E OF DABROS INDUSTRIAL COMPANY PRIVATE LIMITED VS. CIT (1977) 1 08 ITR 424 KOLKATA EXPRESSED THE SAME VIEW. THEREFORE, RESPECTFULLY F OLLOWING THE JUDGEMENT OF HONBLE JURISDICTIONAL HIGH COURT, WE HOLD THAT ONCE THE INCOME IS ESTIMATED, NO FURTHER DISALLOWANCE REQUIR ED TO BE MADE U/S 40A(3) OF THE ACT. ACCORDINGLY, THE ORDER OF THE L D. CIT(A) IS UPHELD AND THE APPEAL OF THE REVENUE ON THIS GROUND IS DIS MISSED. ITA NOS.325 TO 330/VIZAG/2015 M/S. KRISHNA FISHERIES, VIJAYAWADA 12 13. IN THE RESULT, THE APPEALS FILED BY THE REVENUE ARE DISMISSED. THE ABOVE ORDER WAS PRONOUNCED IN THE OPEN COURT O N 26 TH JUL17. SD/- SD/- ( . ) ( . . ) (V. DURGA RAO) (D.S. SUNDER SINGH) /JUDICIAL MEMBER /ACCOUNTANT MEMBER /VISAKHAPATNAM: /DATED : 26.07.2017 VG/SPS /COPY OF THE ORDER FORWARDED TO:- 1. / THE APPELLANT THE DCIT, CIRCLE-2(1), VIJAYAWAD A 2. / THE RESPONDENT M/S. KRISHNA FISHERIES, D.NO.36 -12-13/2A, SANTHI NAGAR, 3 RD LANE, MOGALRAJPURAM, VIJAYAWADA-520 010. 3. / THE CIT, VIJAYAWADA 4. ( ) / THE CIT (A), VIJAYAWADA 5. , , / DR, ITAT, VISAKHAPATNAM 6 . / GUARD FILE / BY ORDER // TRUE COPY // SR. PRIVATE SECRETARY ITAT, VISAKHAPATNAM