DCIT, New Delhi V. Sh. Amar Chand Gupta Prop, New Delhi

ITA 3405/DEL/2009

• Counselvise Citation: [2009] 115 COUNSELVISE.COM (IT) 1206 (ITAT-DELHI)
• Duration Of Justice: 3 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-11-2009
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: G
• Assessment Year: 2005-2006
• Appeal Filed On: 31-07-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: GAJANAND MEENA
• Assessee Lawyers: SANJAY MEHRA
• Keywords: Business income; Search and seizure
• Section: 40A(3); 133A; 153A; 145; 132; 139

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH G : NEW DELHI BEFORE SHRI A.D.JAIN, JM AND SHRI R.C.SHARMA, AM ITA NOS.3401/DEL/2009 TO 3406/DEL/2009 ASSESSMENT YEARS : 2000-01, 01-02, 02-03, 04-05, 05 -06 & 2006-07 DY.COMMISSIONER OF INCOME TAX, CIRCLE-6, NEW DELHI. VS. SHRI AMAR CHAND GUPTA, PROP. M/S TELU RAM AMAR CHAND & CO., PU-105, PITAMPURA, DELHI 110 088. PAN NO.AADPG5742Q. (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI GAJANAND MEENA, CIT-DR. RESPONDENT BY : SHRI SANJAY MEHRA, FCA. ORDER PER BENCH : THESE ARE THE APPEALS FILED BY THE REVENUE AGAINST THE ORDER OF CIT(A) FOR THE AY 2000-01, 01-02, 02-03, 04-05, 05-06 & 2006-0 7. 2. AS SIMILAR GROUNDS HAVE BEEN RAISED IN ALL THE Y EARS, ALL THE APPEALS WERE HEARD TOGETHER AND ARE BEING DECIDED BY THIS CONSOL IDATED ORDER. 3. RELEVANT GROUNDS TAKEN DURING THE AY 2000-01 REA D AS UNDER:- 1. THE ORDER OF THE LD.CIT(APPEALS) IS NOT CORRECT IN LAW AND FACTS. 2. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD.CIT(A) WAS CORRECT IN HOLDING THAT THE ASSESSEE WAS ALSO CARRYING ON THE BUSINESS OF COMMISSION AGENT AS KACHCHA ARHA TYA. 3. A) WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD.CIT(A) WAS CORRECT IN DELETING THE DIS ALLOWANCE OF ITA-3401 TO 3406/D/2009 2 RS.6,77,01,590/- MADE BY THE ASSESSING OFFICER U/S 40A(3) OF THE INCOME TAX ACT. B) WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD.CIT(A) WAS CORRECT IN DELETING THE DISALLOWANCE OF RS.6,77,01,590/- MADE BY THE ASSESSING OFFICER U/S 40A(3) BY HOLDING THAT SEC. 40A(3) HAS NO APPLICATION IN CASE OF THE ASSESSEE AS THE ASSESSEE WAS ALSO CARRYING ON THE BUSINESS OF C OMMISSION AGENT AS KACHCHA ARHATYA. C) WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD.CIT(A) WAS CORRECT IN DELETING THE DISALLOWANCE OF RS.6,77,01,590/- MADE BY THE ASSESSING OFFICER U/S 40A(3) BY HOLDING THAT WHEN INCOME OF THE BUSINESS HAS BEEN C OMPUTED BY REJECTING THE BOOKS OF ACCOUNT, SEC. 40A(3) HAS NO APPLICATION. D) WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD.CIT(A) WAS CORRECT IN DELETING THE DISALLOWANCE OF RS.6,77,01,590/- MADE BY THE ASSESSING OFFICER U/S 40A(3) BY HOLDING THAT THE CASE OF THE ASSESSEE FALLS WITHIN THE EXCEPTION OF RULE 6DD AND IS THUS EXCLUDED FROM THE PURVIEW OF S EC. 40A(3). 4. RIVAL CONTENTIONS HAVE BEEN HEARD AND RECORD PER USED. THE BRIEF FACTS OF THE CASE ARE THAT ASSESSEE SHRI AMAR CHAND GUPTA IS PROPRIETOR OF M/S TELU RAM AMAR CHAND & CO. THE NATURE OF BUSINESS OF THE ASSE SSEE IS EARNING OF COMMISSION AS ARHATIYAS BY PROCURING AGRICULTURAL C OMMODITIES FOR MILL OWNERS. THE RETURN OF INCOME FOR AY 2000-01 U/S 139 WAS FUR NISHED ON 29.6.2000 DECLARING TAXABLE INCOME OF RS.1,43,263/-. AS PER TAX AUDIT REPORT U/S 44AB, THE NATURE OF BUSINESS HAS BEEN SHOWN AS COMMISSION AGE NT. SUBSEQUENTLY, IN THIS CASE, SEARCH AND SEIZURE OPERATIONS U/S 132 WERE CO NDUCTED ON 20.12.2005. THE ASSESSMENT U/S 153A WAS COMPLETED VIDE ORDER DATED 31.12.2007 DETERMINING TAXABLE INCOME AT RS.6,80,24,140/-. THE AO HAS NOT ACCEPTED THE CLAIM OF THE ASSESSEE THAT HE WAS ACTING AS A KACHHA ARHATIYA ON COMMISSION BASIS THROUGH THIS PROPRIETARY CONCERN M/S TELU RAM AMAR CHAND & CO. AS PER THE ASSESSEE, THE CONCERN M/S TELU RAM AMAR CHAND & CO. IS ENGAGED IN DEALING ON COMMISSION BASIS FOR PROCUREMENT OF AGRICULTURE COMMODITIES MA INLY WHEAT AND CHANNA (GRAM) FROM AGRICULTURISTS/CULTIVATORS OF THE PRODUCE FROM STATE OF UP, RAJASTHAN AND ITA-3401 TO 3406/D/2009 3 HARYANA. THE MAJOR PROCUREMENT OF AGRICULTURE PROD UCE WAS MADE FOR (I) M/S SHREE BANKEY BEHARI EXPORTS LTD. (II) M/S DELUXE CO LD STORAGE AND FOOD PROCESSORS LTD. IT WAS SUBMITTED BEFORE THE AO THA T GOODS PROCURED FROM THE CULTIVATORS WERE SUPPLIED AT A PRICE AT WHICH THEY WERE PROCURED WITHOUT MAKING ANY VALUE ADDITION OR PROVISION OF PROFIT TO THE CO ST OF SUCH GOODS AND THE ASSESSEE WAS ONLY CHARGING COMMISSION @ RS.0.50 PER BAG BASI S. HOWEVER, THE AO HAS NOT ACCEPTED THE RESULT SHOWN IN THE BOOKS OF ACCOU NT HOLDING THAT NATURE OF ACTIVITIES CARRIED ON BY THE ASSESSEE WAS TRADING A CTIVITIES AND NOT PURELY AS KACHHA ARHATIYA. THE AO STATED MAINLY THE FOLLOWING REASO NS FOR REJECTING THE BOOKS OF ACCOUNT U/S 145 OF THE INCOME-TAX ACT: KEEPING IN VIEW MATTERS STATED ABOVE, BOOKS RESULT S AS DECLARED BY THE ASSESSEE CANNOT BE ACCEPTED FOR FOLLOWING REASO NS NAMELY, (A) THE SAID PROCUREMENT WAS BEING MADE TO FACILITA TE THE MANUFACTURING BUSINESS OF GROUP COMPANIES UNDER SAM E MANAGEMENT. (B) THE TAX AUDITED ACCOUNTS OF COMPANIES UTILIZING PROCURED AGRICULTURAL GOODS RELIED UPON BY THE ASSESSEE EVEN SIGNED BY THE PROPRIETOR OF SUPPLIES FIRMS ACTING KACHHA ARHATIYA S AS DIRECTORS. (C) PRINCIPAL AND AGENT BEING SAME PERSONS. (D) EXPENSES CLAIMED BY EACH OF THE GROUP FIRM CARR YING SIMILAR BUSINESS ARE DISPROPORTIONATE TO INCOME FROM COMMIS SION DISCLOSED. (E) THE OTHER CONCERNS OF THE ASSESSEE GROUP (M/S T ELURAM AARCHAND) HAVE SUO-MOTO DISCLOSED THEIR ACTIVITIES AS TRADING AND COMMISSION WHEREAS ASSESSEE HAVE CHOSEN TO DISCLOSE ONLY COMMISSION ACTIVITY AND NOT TRADING. (F) DISPROPORTIONATE NET PROFITS BY ALL FIRMS IRRES PECTIVE SIMILAR ACTIVITIES. (G) INTER COMPANY BOOKING OF EXPENSES AND DIFFERENC E IN RESULTS THAT TOO WHEN ALL THE FIRMS HAVING COMMON BUSINESS PREMISES AND INTERESTS AND MODUS OPERANDI. ITA-3401 TO 3406/D/2009 4 (H) NO EVIDENCE OF PAYMENTS MADE TO FARMERS THROUGH PARTICULARS MENTIONED IN BOOKS. (I) ASSESSEE FAILED TO PROVE HIM AS KACHHA ARHATIYA . IN VIEW OF THE ABOVE DISCREPANCIES, THE BOOKS RESUL TS DECLARED ARE REJECTED U/S 145(3) OF THE I.T.ACT, 1961. 5. THE AO AFTER REJECTING THE RESULTS AS PER ASSESS EES BOOKS OF ACCOUNT, HAS APPLIED NET PROFIT RATE @ 0.05% OF THE TURNOVER DUR ING THE YEAR UNDER CONSIDERATION AND THE BUSINESS INCOME OF THE ASSESS EE WAS COMPUTED AT RS.1,69,359/-. 6. AFTER DISCUSSING THE NATURE OF THE ASSESSEES BU SINESS, THE AO HELD THAT ASSESSEE IS TRADING CONCERN ENGAGED IN TRADING OF A GRICULTURAL PRODUCE AND NOT AS KACHCHA ARHATYA. BY OBSERVING THAT BOOKS OF ACCOUN T FAILED TO SHOW THE ACTIVITIES CARRIED OUT BY THE ASSESSEE IN TRUE AND CORRECT MAN NER, THE AO FOUND THAT THE PAYMENT MADE BY THE ASSESSEE FOR PURCHASES WAS NOT COVERED BY THE EXCEPTION OF RULE 6DD, THEREFORE DISALLOWANCE U/S 40A(3) WAS DIS ALLOWED TO THE EXTENT OF 20% OF THE PURCHASES. 7. THE AO OBSERVED THAT THE ASSESSEE FAILED TO PROD UCE THE FARMER HENCE GENUINENESS OF THE PURCHASE IS IN DOUBT. THE ASSES SEE IS NOT A KACCHA ARHTIA BUT ENGAGED IN TRADING ACTIVITY AS ALSO STATED IN STATE MENT RECORDED DURING THE COURSE OF SEARCH. SINCE THE ASSESSEE HAS MADE A PAYMENT O F RS.33,85,07,950.00 AS DECLARED BY IT IN ITS AFFIDAVIT, THEREFORE 20% OF T HE SAME ARE DISALLOWED UNDER SECTION 40(A)(3) OF THE ACT WHICH COMES TO RS.6,77, 01,590/-. WITH REGARD TO SURRENDER OF RS.51 LAKHS, THE ASSESSEE HAS FURNISHE D A LETTER WHICH READS AS UNDER:- THE REVENUE AUTHORITIES HAVE RIGHTLY POINTED OUT T HAT THE EXPENSES CLAIMED BY ARHAYEAS BUSINESS FIRMS DOES NOT COMMENS URATE WITH RESPECTIVE TURNOVER OF PROCUREMENT OF AGRICULTURAL COMMODITIES. HOWEVER NO OVERALL DISCREPANCIES IN EXPENSES OR ACC OUNTING FOR ITA-3401 TO 3406/D/2009 5 INCOME IS SEEN TILL DATE. HOWEVER, LOOKING TOWARDS THE NATURE OF BUSINESS CARRIED BY SUCH FIRMS, UNEDUCATED BACKGROU ND, BUSINESS BEING CARRIED OUT FROM A COMMON PLACE I.E. NAYA BAZ AR, THE POSSIBILITIES OF BEING CERTAIN DISCREPANCIES IN MAI NTENANCE OF SUCH BOOKS OF ACCOUNTS FROM THE VIEW POINT OF DEPARTMENT CAN BE SEEN. IN ORDER TO AVOID UNNECESSARY LITIGATION AND TO BUY PE ACE, THE GROUP INTENDS TO MADE AN ADDITIONAL DISCLOSURE OF INCOME OF RS.51 LAKHS BESIDES DISCLOSURE OF INCOME OF RS.4.5 CRORES ALREA DY MADE. 8. IN VIEW OF THE ABOVE LETTER, IT WAS CONTENDED TH AT THE SURRENDER MADE ALSO TO COVERS CASH IN THE BOOKS, DEPOSITED IN BANK ACCOUNT S AND INTRODUCED AS CAPITAL AS REFLECTED IN KACHHA ARHATIYAS FIRM, AND ACCOUNTS OF OTHER ASSESSEES/MEMBERS OF THE GROUP. FOR WHICH DUE CREDIT IS SOUGHT BY THE ASSES SEE. 9. AGGRIEVED BY THE ABOVE ORDER, THE ASSESSEE WAS I N FURTHER APPEAL BEFORE THE CIT(A) WHO UPHELD THE REJECTION OF BOOKS OF ACCOUNT BY THE AO BUT DELETED THE ADDITION MADE U/S 40(A)(3) AFTER HAVING THE FOLLOWI NG OBSERVATION:- I HAVE CAREFULLY CONSIDERED THE SUBMISSIONS OF THE APPELLANT AND FACTS OF THE CASE. THE APPELLANT IS ENGAGED IN THE BUSINESS OF PROCURING OF AGRICULTURE PRODUCTS SUCH AS WHEAT AND CHANNA IN THE GRAIN MARKETS AT LAWRENCE ROAD AND NAYA BAZAR. THE GOODS WERE PROCURED MAINLY FOR ITS ASSOCIATES, M/S SHREE BANKE Y BEHARI EXPORTS LTD. AND M/S DELUXE COLD STORAGE AND FOOD PROCESSOR S LTD. THE APPELLANT HAS RECEIVED FROM THESE TWO COMPANIES PAY MENTS THROUGH ACCOUNT PAYEE CHEQUES WHICH WERE DEPOSITED IN HIS B ANK ACCOUNTS. THE AGRICULTURE PRODUCE WERE PROCURED FROM THE AGRI CULTURISTS WHO BROUGHT THEIR GOODS IN TRACTORS AND TROLLEYS ETC. T O THE GRAIN MARKETS AT LAWRENCE ROAD OR NAYA BAZAR. THE APPELLANT HAS MADE PAYMENT AFTER WITHDRAWING THE AMOUNTS FROM BANK ACCOUNT IN CASH TO THESE FARMERS. AFTER PROCURING THE GOODS, THE APPELLANT HAS RAISED BILLS TO THESE TWO CONCERNS AFTER CHARGING A COMMISSION @ RS .0.50 PER BAG/BORI AND SHOWN NET PROFIT OF RS.90,073/- AFTER DEBITING THE EXPENSES. IT MAY, HOWEVER, BE NOTED THAT THE APPEL LANT HAS SHOWN COMMISSION EARNED ONLY FROM TWO COMPANIES M/S SHREE BANKEY BEHARI EXPORTS LTD. AND M/S DELUXE COLD STORAGE AND FOOD PROCESSORS LTD. FOR WHOM FOODGRAINS WERE STATED TO BE PROCURED BY THE APPELLANT. THE APPELLANT IS A KACHHA AHRITYA A S DISCUSSED IN DETAIL HEREINAFTER IN GROUND NOS.4 & 5. HOWEVER, I T IS NOTICED FROM ITA-3401 TO 3406/D/2009 6 THE FIELD ENQUIRIES MADE BY THE INSPECTOR AS WELL A S AO OF OTHER CONCERNS I.E. (I) SHRI SHANKAR LAL PROP. M/S VINAYA K TRADERS; (II) SHRI SANJAY KANSAL PROP. M/S SAI KRIPA TRADING CO.; (III) SHRI KRISHAN KUMAR PROP. M/S KESHAV TRADING CO.; WHO WER E ALSO ENGAGED IN THE IDENTICAL NATURE OF BUSINESS IN THES E MARKETS THAT AGRICULTURISTS WHO BROUGHT THE GOODS FOR SALE IN TH E LAWRENCE ROAD MANDI ALSO PAY SOME COMMISSION TO THE ASSESSEES WHO PROCURE THEIR GOODS, WHEREAS IN THE CASE OF THE APPELLANT, THE AP PELLANT HAS NOT SHOWN RECEIPT OF ANY COMMISSION FROM THE FARMERS. MOREOVER, IT MAY BE NOTED THAT THE APPELLANT HIMSELF HAS ACCEPTE D THAT BOOKS OF ACCOUNT MAINTAINED BY THE APPELLANT WERE NOT CORREC T AND COMPLETE IN HIS LETTER DT. 27.12.07 IN WHICH THE APPELLANT H AD SURRENDERED VOLUNTARILY AMOUNT OF RS.1,00,000/- FOR THE YEAR UN DER CONSIDERATION TO COVER THE UNACCOUNTED CASH DEPOSITS AND BANK ACC OUNT AND CAPITAL INTRODUCED IN THE BUSINESS. THE RELEVANT PORTION O F PARA 6 OF THE LETTER IS REPRODUCED AS UNDER:- THE REVENUE AUTHORITIES HAVE RIGHTLY POINTED OUT T HAT THE EXPENSES CLAIMED BY ARHTIYAS BUSINESS FIRMS DOES NOT COMMENS URATE WITH RESPECTIVE TURNOVER OF PROCUREMENT OF AGRICULTURAL COMMODITIES. HOWEVER, NO OVERALL DISCREPANCIES IN EXPENSES OR AC COUNTING FOR INCOME IS SEEN TILL DATE. HOWEVER, LOOKING TOWARDS THE NATURE OF BUSINESS CARRIED BY SUCH FIRMS, UNEDUCATED BACKGROU ND, BUSINESS BEING CARRIED OUT FROM A COMMON PLACE I.E. NAYA BAZ AR, THE POSSIBILITIES OF BEING CERTAIN DISCREPANCIES IN MAI NTENANCE OF SUCH BOOKS OF ACCOUNTS FROM THE VIEW POINT OF DEPARTMENT CAN BE SEEN. IN ORDER TO AVOID UNNECESSARY LITIGATION AND TO BUY PE ACE, THE GROUP INTENDS TO MADE AN ADDITIONAL DISCLOSURE OF INCOME OF RS.51 LAKHS BESIDES DISCLOSURE OF INCOME OF RS.4.5 CRORES ALREA DY MADE. THUS, KEEPING IN VIEW THE FACTS AND CIRCUMSTANCES OF THE CASE, IT IS CLEAR THAT BOOKS OF ACCOUNT MAINTAINED BY THE APPELLANT WERE NOT CORRECT AND COMPLETE AND THE AO WAS JUSTIFIED IN RE JECTING THE RESULTS SHOWN IN THE BOOKS OF ACCOUNT BY INVOKING THE PROVI SIONS OF SECTION 145 OF THE INCOME-TAX ACT. THEREFORE, THE ACTION O F THE AO REGARDING REJECTION OF BOOKS OF ACCOUNT IS UPHELD. 4.5 ACCORDING TO RESULTS DECLARED THE ASSESSEE HAS SHOWN COMMISSION OF RS.2,09,635/- FROM ARHAT BUSINESS. A FTER DEBITING TOTAL EXPENSES OF RS.1,19,562/- A BUSINESS PROFIT O F RS.90,073/- IS WORKED OUT. AFTER REJECTING THE BOOKS OF ACCOUNTS THE AO HAD APPLIED NP RATE OF 0.05%. HOWEVER THERE IS WIDE VA RIATION IN THE RATE OF COMMISSION SHOWN TO BE RECEIVED FOR DIFFERE NT YEARS WHICH INDICATES THAT RESULTS OF THE COMMISSION BUSINESS A RE NOT CORRECT AND ITA-3401 TO 3406/D/2009 7 VERIFIABLE. THE APPELLANTS ARGUMENT THAT COMMISSI ON WAS RECEIVED PER BAG BASIS DOES NOT APPEAR TO BE LOGICAL AS IN T HE ARHAT PURCHASE ORDER RECEIVED BY APPELLANT FROM TWO COMPANIES, THE RATE OF COMMISSION WAS STATED TO BE NEGOTIABLE. MOREOVER A S DISCUSSED EARLIER, NO COMMISSION IS SHOWN FROM THE SELLER OF GOODS I.E. FARMERS. THEREFORE CORRECT PROFIT FROM ARHATIYA AC TIVITY HAS TO BE ESTIMATED ON SOME REASONABLE BASIS IN VIEW OF REJEC TION OF BOOKS. THE AO HAS APPLIED NP RATE BUT IT IS MORE APPROPRIA TE TO APPLY GP RATE RATHER THAN NP RATE TO WORK OUT INCOME FROM AR HATIYA BUSINESS. THE DETAILS OF GROSS COMMISSION EARNED ON THE PROCU REMENT OF AGRICULTURE PRODUCE, AS FURNISHED BY THE APPELLANT IN THE FORM OF A CHART SHOWING RESULTS FOR SEVEN YEARS, MAY BE SUMMA RIZED AS UNDER: AY PROCUREMENT COMMISSION PERCENTAGE 2000-01 33,85,07,950 2,09,635 0.06 2001-02 50,06,81,629 3,37,119 0.07 2002-03 37,19,94,763 10,67,279 0.29 2003-04 32,39,743 54,371 1.68 2004-05 20,06,58,223 96,108 0.05 2005-06 49,65,57,222 1,30,215 0.03 2006-07 26,79,02,632 4,99,726 0.19 FROM THE ABOVE CHART, IT IS FOUND THAT RATE OF COMM ISSION TO PROCUREMENT IN ARHAT BUSINESS VARIES FROM 0.03% IN AY 05-06 TO 0.29% IN AY 02-03. THE RATE OF 1.68% SHOWN IN AY 0 3-04 IS ABNORMAL DUE TO THE FACT THAT PROCUREMENT IN THAT Y EAR WAS NEGLIGIBLE (ABOUT RS.32 LACS) AS COMPARED TO BETWEEN 20 TO 50 CRORES IN OTHER YEARS. IT WAS SUBMITTED BY THE AR THAT DUE TO LESS PROCUREMENT HIGHER COMMISSION WAS CHARGED TO COVER UP EXPENSES. IN VIEW OF THIS I ADOPT THE MAXIMUM RATE OF 0.30% AS THE GP RA TE TO ESTIMATE GROSS INCOME FROM ARHATIYA BUSINESS OF THE APPELLAN T FOR ALL YEARS EXCEPT FOR AY 03-04 (ABNORMAL YEAR) FOR WHICH GP RA TE OF 2% WILL BE APPLIED. THEREFORE THE ARHAT COMMISSION INCOME FOR AY 2000-01 WORKS OUT TO RS.10,15,523/- AS AGAINST RS.2,09,635/ - SHOWN BY THE APPELLANT. THEREFORE, AN ADDITION OF RS.8,05,888 ( RS.10,15,523 RS.2,09,635) IS TO BE MADE TO THE NET BUSINESS PROF IT DECLARED BY THE APPELLANT. THIS WILL RESULT IN ASSESSMENT OF BUSIN ESS PROFIT OF RS.8,95,961 (RS.90,073 DECLARED BY THE APPELLANT + ADDITION OF RS.8,05,888), IN PLACE OF RS.1,69,359 ASSESSED BY T HE AO. GROUND NO.3 IS THEREFORE REJECTED. ITA-3401 TO 3406/D/2009 8 10. BY THE IMPUGNED ORDER, THE CIT(A) DELETED THE A DDITION MADE U/S 40(A)(3) AFTER HAVING THE FOLLOWING OBSERVATION:- 5.4 I HAVE CAREFULLY CONSIDERED THE SUBMISSION OF THE APPELLANT AND THE REASONS RECORDED BY THE AO FOR MAKING DISAL LOWANCE U/S 40A(3). SECTION 40A(3) WHICH WAS ON THE STATUTE IN THE RELEVANT PERIOD WAS AS UNDER:- (3) WHERE THE ASSESSEE INCURS ANY EXPENDITURE IN R ESPECT OF WHICH PAYMENT IS MADE, AFTER SUCH DATE (NOT BEING L ATER THAN THE 31 ST DAY OF MARCH, 1969) AS MAY BE SPECIFIED IN THIS BEH ALF BY THE CENTRAL GOVERNMENT BY NOTIFICATION IN THE OFFICIAL GAZETTE, IN A SUM EXCEEDING TWENTY THOUSAND RUPEES OTHERWISE THAN BY AN ACCOUNT PAYEE CHEQUE DRAWN ON A BANK OR ACCOUNT PAYEE BANK DRAFT, TWENTY PER CENT OF SUCH EXPENDITURE SHALL NOT BE ALLOWED A S A DEDUCTION: PROVIDED THAT .. PROVIDED FURTHER THAT NO DISALLOWANCE UNDER THIS SU B-SECTION SHALL BE MADE WHERE ANY PAYMENT IN A SUM EXCEEDING TWENTY TH OUSAND RUPEES IS MADE OTHERWISE THAN BY AN ACCOUNT PAYEE C HEQUE DRAWN ON A BANK OR ACCOUNT PAYEE BANK DRAFT, IN SUCH CASES A ND UNDER SUCH CIRCUMSTANCES AS MAY BE PRESCRIBED HAVING REGARD TO THE NATURE AND EXTENT OF BANKING FACILITIES AVAILABLE, CONSIDERATI ONS OF BUSINESS EXPEDIENCY AND OTHER RELEVANT FACTORS. IN VIEW OF THE SECOND PROVISO TO SECTION 40A(3), RU LE 6DD HAS BEEN PRESCRIBED. THUS, FROM THE ABOVE PROVISIONS, IT IS CLEAR THAT IN ORDER TO ATTRACT PROVISIONS OF SECTION 40A(3) FOR MAKING DISALLOWANCE, FOLLOWING CONDITIONS ARE REQUIRED TO BE FULFILLED: (I) THAT AN ASSESSEE HAS INCURRED/CLAIMED EXPENDIT URE FOR HIS BUSINESS; (II) THE PAYMENT FOR A SUM EXCEEDING RS.20,000/- HA S BEEN MADE OTHERWISE THAN BY AN ACCOUNT PAYEE CHEQUE OR ACCOUN T PAYEE BANK DRAFT; AND (III) THE ASSESSEES CASE DOES NOT FALL WITHIN THE CIRCUMSTANCES (EXCEPTIONS) AS PRESCRIBED UNDER RULE 6DD OF THE I. T.RULES 1962. THUS, IN ORDER TO MAKE DISALLOWANCE U/S 40A(3), ALL THE ABOVE THREE CONDITIONS SHOULD BE CUMULATIVELY FULFILLED. 5.4.1 IN THE INSTANT CASE, TO EXAMINE THE APPLICABI LITY OF SECTION 40A(3), IT IS TO BE ASCERTAINED WHETHER ALL THE ABO VE CONDITIONS ARE ITA-3401 TO 3406/D/2009 9 PRESENT IN THE CASE. THE FIRST ISSUE INVOLVED IS W HETHER THE APPELLANT IS A KACHHA ARHTIYA; SECOND ISSUE IS THAT EVEN IF T HE APPELLANT IS PACCA ARHTIYA, WHETHER THE APPELLANTS CASE WAS COVERED U NDER EXCEPTIONS PROVIDED IN RULE 6DD AND THIRD IS WHETHER THE AO CA N MAKE DISALLOWANCE U/S 40A(3) WHERE HE REJECTS THE BOOKS OF ACCOUNT AND DETERMINE INCOME ON NET PROFIT BASIS. 5.5 FIRST, AS STATED EARLIER, THE APPELLANT IS ENGA GED IN THE BUSINESS OF PROCUREMENT OF AGRICULTURE PRODUCE I.E. WHEAT AN D CHANNA ETC. IN THE GRAIN MARKETS SITUATED AT THE LAWRENCE ROAD AND NAYA BAZAR. THESE AGRICULTURE PRODUCE WERE PROCURED FOR HIS TWO SISTER CONCERNS I.E. M/S SHREE BANKEY BEHARI EXPORTS LTD. AND M/S D ELUXE COLD STORAGE AND FOOD PROCESSORS LTD. FOR PROCUREMENT O F FOOD GRAINS I.E. WHEAT, CHANNA ETC. THESE COMPANIES MAKE THE PA YMENT IN ADVANCE TO THE APPELLANT THROUGH CHEQUE AND THE AMO UNTS ARE CREDITED TO THE BANK ACCOUNT OF THE APPELLANT. THE APPELLANT PURCHASED THE AGRICULTURE PRODUCE AFTER WITHDRAWING THE CASH FROM THE BANK ACCOUNT AND MAKING PAYMENT TO THE AGRICULT URISTS WHO BRING THE GOODS TO THE GRAIN MARKETS SITUATED AT TH E LAWRENCE ROAD AND NAYA BAZAR. THE APPELLANT SUPPLIES THE AGRICUL TURE PRODUCE DIRECTLY TO M/S SHREE BANKEY BEHARI EXPORTS LTD. AN D M/S DELUXE COLD STORAGE AND FOOD PROCESSORS LTD. AFTER CHARGIN G A COMMISSION @ RS.0.50 PER BAG/BORI. THUS, THE ACTIVITY OF THE APPELLANT IS OF KACHHA ARHTIYA WHO CHARGED COMMISSION FROM THE ULTI MATE PURCHASER FOR WHOM HE IS MAKING PROCUREMENT IN THE GRAIN MARK ET. IT MAY BE RELEVANT TO REFER TO THE CIRCULAR NO.452 DT. 17.3.1 986 ISSUED BY THE BOARD WHEREIN THE NATURE OF KACHHA ARHTIYA WAS EXPL AINED. THE CIRCULAR OUTLINED THE FOLLOWING DISTINCTIONS BETWEE N KACHHA ARHTIYA AND PACCA ARHTIYA: IN THE CASES OF AGENTS WHOSE POSITION IS SIMILAR T O THAT OF KACHHA ARHATIA, THE TURNOVER IS ONLY THE COMMISSION AND DO ES NOT INCLUDE THE SALES ON BEHALF OF THE PRINCIPALS. IN THE CASE OF AGENTS OF THE TYPE OF PACCA ARHATIA, ON THE OTHER HAND, THE TOTAL SALES/T URNOVER OF THE BUSINESS SHOULD BE TAKEN INTO CONSIDERATION FOR DET ERMINING THE APPLICABILITY OF THE PROVISIONS OF SECTION 44AB. (1) A KACHHA ARHATIA ACTS ONLY AS AN AGENT OF HIS C ONSTITUENT AND NEVER ACTS AS A PRINCIPAL. A PACCA ARHATIA, ON THE OTHER HAND, IS ENTITLED TO SUBSTITUTE HIS OWN GOODS TOWARDS THE CO NTRACT MADE FOR THE CONSTITUENT AND BUY THE CONSTITUENTS GOODS ON HIS PERSONAL ACCOUNT AND THUS HE ACTS AS REGARDS HIS CONSTITUENT . ITA-3401 TO 3406/D/2009 10 (2) A KACHHA ARHATIA BRINGS A PRIVITY CONTRACT BETW EEN HIS CONSTITUENT AND THE THIRD PARTY SO THAT EACH BECOME S LIABLE TO THE OTHER. THE PACCA ARHATIA, ON THE OTHER HAND, MAKES HIMSELF LIABLE UPON THE CONTRACT NOT ONLY TO THE THIRD PARTY BUT A LSO TO HIS CONSTITUENT. (3) THOUGH THE KACHHA ARHATIA DOES NOT COMMUNICATE THE NAME OF HIS CONSTITUENT TO THE THIRD PARTY, HE DOES COMMUNI CATE THE NAME OF THE THIRD PARTY TO THE CONSTITUENT. IN OTHER WORDS , HE IS AN AGENT FOR AN UNNAMED PRINCIPAL. THE PACCA ARHATIA, ON THE OT HER HAND, DOES NOT INFORM HIS CONSTITUENT AS TO THE THIRD PARTY WI TH WHOM HE HAS ENTERED INTO A CONTRACT ON HIS BEHALF. (4) THE REMUNERATION OF A KACHHA ARHATIA CONSISTS S OLELY OF COMMISSION AND HE IS NOT INTERESTED IN THE PROFITS AND LOSSES MADE BY HIS CONSTITUENT AS IS NOT THE CASE WITH THE PACCA A RHATIA. (5) THE KACHHA ARHATIA, UNLIKE THE PACCA ARHATIA, D OES NOT HAVE ANY DOMINION OVER THE GOODS. (6) THE KACHHA ARHATIA HAS NO PERSONAL INTEREST OF HIS OWN WHEN HE ENTERS INTO A TRANSACTION AND HIS INTEREST IS LI MITED TO THE COMMISSION AGENTS CHARGES AND CERTAIN OUT OF POCKE T EXPENSES WHEREAS A PACCA ARHATIA HAS A PERSONAL INTEREST OF HIS OWN WHEN HE ENTERS INTO A TRANSACTION. (7) IN THE EVENT OF ANY LOSS, THE KACHHA ARHATIA IS ENTITLED TO BE INDEMNIFIED BY HIS PRINCIPAL AS IS NOT THE CASE WIT H PACCA ARHATIA. IF THE APPELLANTS CASE IS EXAMINED IN THE LIGHT OF THE ABOVE CIRCULAR, IT IS NOTICED THAT THE APPELLANTS NATURE OF BUSINE SS FALLS UNDER THE AMBIT OF KACHHA ARHATIA. THE APPELLANT HAS NOT PRO CURED THE AGRICULTURE PRODUCE FOR EARNING PROFIT BY MAKING SA LE OF GOODS. THE APPELLANT HAS EARNED ONLY COMMISSION ON THE TRANSAC TION OF PROCUREMENT. THE APPELLANTS RESPONSIBILITY WAS ON LY TO REPRESENT FOR THE MILL OWNERS BEFORE THE AGRICULTURISTS AT TH E TIME OF PROCUREMENT OF GOODS FOR THE THIRD PARTY. THE APPE LLANT DOES NOT HAVE ANY DOMINION OVER THE GOODS AND WAS ENTITLED S OLELY FOR COMMISSION AND NOT INTERESTED IN THE PROFITS/LOSS I N THE TRANSACTIONS. THUS IT CAN BE SAID THAT THE APPELLANT WAS ENGAGED IN THE BUSINESS AS KACHHA ARHATIA. IT MAY ALSO NOT BE IRRELEVANT TO M ENTION HERE THAT SURVEY U/S 133A WAS ALSO CONDUCTED BY THE INVESTIGA TION WING IN THREE CASES ON 19.10.05 WHO WERE DOING IDENTICAL BU SINESS IN THE ITA-3401 TO 3406/D/2009 11 FOOD GRAINS MARKET IN LAWRENCE ROAD INDUSTRIAL AREA , DELHI AND NAYA BAZAR GRAIN MARKET. THESE CASES ARE : (I) SHRI SHANKAR LAL PROP. M/S VINAYAK TRADERS; (II) SHRI SANJAY KANSAL PROP. M/S SAI KRIPA TRADING CO.; AND (III) SHRI KRISHAN KUMAR PROP. M/S KESHAV TRADING C O. IN THESE CASES, THE ENQUIRIES WERE MADE BY THE INSP ECTOR WHO VISITED THE GRAIN MARKET ON 13.11.07. AS PER HIS REPORT, H E FOUND ONE OF THE AGRICULTURISTS OF CHEEMI ROHTAK, HARYANA WHO HAS BR OUGHT THE WHEAT GRAIN AND MOONG FOR SALE TO THE COMMISSION AG ENT/DALAL IN THE GRAIN MARKET. THE AO OF THESE PERSONS ALSO VISITED THE MARKET ON 18.07.07, AND MADE ENQUIRIES FROM SH. RAJVEER ARYA, RESIDENT OF VILLAGE BAGHPUR, DISTRICT JHAJJAR, HARYANA WHO HAD COME TO SELL HIS WHEAT IN TRACTORS. HE WAS HAVING THREE TROLLEYS. THE AGRICULTURISTS STATED THAT THEY GOT ALL THE SALE PAYMENT IN CASH A ND CLARIFIED THAT THEY MAKE SALE OF THEIR AGRICULTURE PRODUCE THROUGH DALALS IN THE MARKET WHO CHARGES RS.2 TO 4 PER QUINTAL. THUS, TH ESE FACTS ALSO SUBSTANTIATE THE FACT THAT THE APPELLANT WAS ENGAGE D IN THE BUSINESS OF KACHHA ARHATIA. IT MAY ALSO BE NOTED THAT IN TAX A UDIT REPORT U/S 44AB FURNISHED WITH THE ORIGINAL RETURN U/S 139, TH E NATURE OF BUSINESS WAS STATED AS COMMISSION AGENT. SINCE T HE APPELLANT WAS ACTING AS A KACHHA ARHATIA, HIS TURNOVER WAS ONLY G ROSS COMMISSION CHARGED BY HIM IN VIEW OF THE BOARDS CIRCULAR NO.4 52 DT. 17.03.1986. THE TURNOVER OF THE APPELLANT IS ONLY THE COMMISSION AND, THEREFORE, THE PROCUREMENT OF AGRICULTURE PROD UCE IS NOT PURCHASE OF THE APPELLANT AND ARE NOT PER SE EXPENS ES OF THE APPELLANT. SINCE THE APPELLANT HAS NOT MADE ANY CL AIM OF EXPENSES FOR THE PROCUREMENT OF AGRICULTURE PRODUCE, NO DISA LLOWANCE U/S 40A(3) CAN BE MADE IN THE CASE OF APPELLANT. THE R ELEVANT PORTION OF QUESTION NO.3 AND ANSWER THEREOF OF PRESS NOTE DATE D 29.12.1969 CLARIFYING THE PROVISIONS OF SECTION 40A(3), AT THE COST OF REPETITION, IS REPRODUCED AS UNDER:- QUESTION NO.3 DOES THE REQUIREMENT APPLY TO PAYM ENTS MADE BY COMMISSION AGENTS (ARHATIYAS) FOR GOODS RECEIVED BY THEM FOR SALE ON COMMISSION OR CONSIGNMENT BASIS? ANSWER NO. THIS IS BECAUSE SUCH A PAYMENT IS NOT AN EXPENDITURE DEDUCTIBLE IN COMPUTING THE TAXABLE INCOME OF THE C OMMISSION AGENT (ARHATIYA). FOR THE SAME REASON, THE REQUIREMENT D OES NOT ALSO APPLY TO ADVANCE PAYMENTS MADE BY THE COMMISSION AGENT TO THE PARTY CONCERNED AGAINST SUPPLY OF GOODS. ITA-3401 TO 3406/D/2009 12 THUS, IN THIS CASE BEING COMMISSION AGENT, PROVISIO NS OF SECTION 40A(3) ARE NOT APPLICABLE ON PAYMENTS MADE FOR PROC UREMENT OF FOOD GRAINS AND HENCE, NO DISALLOWANCE U/S 40A(3) C AN BE MADE. 5.6 SECOND, EVEN IF FOR THE SAKE OF ARGUMENT, IT IS ASSUMED THAT APPELLANT IS A PUCCA ARHTIYA AND ENGAGED IN THE BUS INESS OF PURCHASE AND SALE OF AGRICULTURE PRODUCE FOR EARNING PROFIT AND NOT ON PURELY COMMISSION AGENT BASIS, EVEN THEN NO DISALLOWANCE U /S 40A(3) CAN BE MADE IN THE CASE OF THE APPELLANT, BECAUSE THE A PPELLANT HAS MADE THE PROCUREMENT OF AGRICULTURE PRODUCE FROM THE FAR MERS/CULTIVATORS BY MAKING PAYMENTS IN CASH. THE APPELLANT HAS PROD UCED BOOKS OF ACCOUNT BEFORE THE AO AND IT WAS SUBMITTED THAT AGR ICULTURAL PRODUCES WERE PROCURED FROM THE FARMERS/CULTIVATORS . THE APPELLANT HAD FILED AN AFFIDAVIT BEFORE THE ASSESSING OFFICER DEPOSING THAT THE APPELLANT HAD PROCURED AGRICULTURAL PRODUCES SUCH A S CHANNA AND WHEAT FROM AGRICULTURISTS OR CULTIVATORS FROM STATE S OF U.P., HARYANA AND RAJASTHAN. THERE IS NO MATERIAL ON RECORD WHIC H SUGGESTS THAT THE SUBMISSION OF THE APPELLANT THAT AGRICULTURAL P RODUCE WAS PROCURED FROM FARMERS IS NOT CORRECT. ON EXAMINATI ON OF THE NAKAL BAHI ON TEST BASIS, IT WAS NOTICED THAT THE APPELLA NT HAS SHOWN PROCUREMENT OF AGRICULTURE PRODUCE FROM THE FARMERS AND AFTER CHARGING COMMISSION PER BAG THE AGRICULTURAL GOODS WERE SENT TO THE CONCERNS M/S SHREE BANKE BIHARI EXPORTS LTD. AND M/ S DELUXE COLD STORAGE & FOOD PROCESSORS LTD. FOR WHOM THE AGRICUL TURAL PRODUCES WERE PROCURED. THIS CLEARLY SHOWS THAT APPELLANT H AS PROCURED THE FOOD GRAINS I.E. WHEAT, CHANNA ETC. FROM THE FARMER S/CULTIVATORS. THIS VIEW ALSO GETS SUPPORT FROM THE ENQUIRIES MADE BY T HE INSPECTOR AND ASSESSING OFFICER IN OTHER CASES, SUCH AS, SHRI SHA NKAR LAL, PROP. M/S VINAYAK TRADERS; SHRI SANJAY KANSAL, PROP. M/S SAI KRIPA TRADING CO. AND SHRI KRISHAN KUMAR, PROP. M/S KESHA V TRADING CO; WHEREIN ON SPOT ENQUIRIES CONDUCTED AT THE GRAIN MA RKET, THEY FOUND THAT AGRICULTURAL PRODUCE; WHEAT, CHANNA ETC., TO T HE GRAIN MARKET AT LAWRENCE ROAD WAS BROUGHT BY FARMERS FOR SALE. THE RELEVANT RULE 6DD PROVIDES AS UNDER: 6DD. CASES AND CIRCUMSTANCES IN WHICH PAYMENT IN A SUM EXCEEDING TWENTY THOUSAND RUPEES MAY BE MADE OTHERW ISE THAN BY AN ACCOUNT PAYEE CHEQUE DRAWN ON A BANK OR ACCOUNT PAYEE BANK DRAFT.- NO DISALLOWANCE UNDER CLAUSE (A) OF SUB-SECTION (3) OF SECTION 40A SHALL BE MADE AND NO PAYMENT SHALL BE DEEMED TO BE THE PROFITS AND GAINS OF BUSINESS OR PROFESSION UNDER CLAUSE (B) OF SUB-SECTION (3) OF SECTION 40A WHERE ANY PAYMENT IN A SUM EXCEEDING TW ENTY THOUSAND ITA-3401 TO 3406/D/2009 13 RUPEES IS MADE OTHERWISE THAN BY AN ACCOUNT PAYEE C HEQUE DRAWN ON A BANK OR ACCOUNT PAYEE BANK DRAFT IN THE CASES AND CIRCUMSTANCES SPECIFIED HEREUNDER, NAMELY :- (A) : (F) WHERE THE PAYMENT IS MADE FOR THE PURCHASE OF - (I) AGRICULTURAL OR FOREST PRODUCE; OR (II) THE PRODUCE OF ANIMAL HUSBANDRY (INCLUDING HID ES AND SKINS) OR DAIRY OR POULTRY FARMING; OR (III) FISH OR FISH PRODUCTS; OR (IV) THE PRODUCTS OF HORTICULTURE OR APICULTURE, TO THE CULTIVATOR, GROWER OR PRODUCER OF SUCH ARTIC LES, PRODUCE OR PRODUCTS; THE ABOVE CLAUSE (F) OF RULES 6DD CLEARLY PROVIDES THAT WHERE THE PAYMENT WAS MADE TO THE CULTIVATORS OR GROWERS OF A GRICULTURE PRODUCE OTHERWISE THAN ACCOUNT PAYEE CHEQUE OR ACCO UNT PAYEE DRAFT, THE SAME IS SPECIFICALLY EXCLUDED FROM THE P URVIEW OF SECTION 40A(3) OF THE INCOME-TAX ACT. SINCE, IN THE CASE O F THE APPELLANT, THE AGRICULTURE PRODUCE OF WHEAT AND CHANNA WAS PRO CURED BY THE APPELLANT BY MAKING PAYMENT TO THE CULTIVATORS/GROW ERS OF THE AGRICULTURE PRODUCE, THE APPELLANT FALLS WITHIN THE EXCEPTION OF RULE 6DD AND IS, THUS, EXCLUDED FROM THE PURVIEW OF SECT ION 40A(3). HENCE, NO DISALLOWANCE U/S 40A(3) CAN BE MADE IN TH E CASE OF THE APPELLANT. 11. WE HAVE CONSIDERED THE RIVAL CONTENTIONS, GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW AND THE RELEVANT PROVISIONS OF SE CTION 40A(3) OF THE IT ACT. UNDER SECTION 40A(3), NO DISALLOWANCE IS REQUIRED T O BE MADE IF THE PAYMENT HAS BEEN MADE IN CASH WITHIN THE CIRCUMSTANCES PRESCRIB ED UNDER RULE 6DD OF THE IT RULES, 1962. AS PER THE FINDINGS RECORDED BY THE C IT(A), THE ASSESSEE WAS ENGAGED IN THE BUSINESS OF PROCUREMENT OF AGRICULTU RAL PRODUCE FOR ITS TWO SISTER CONCERNS. FOR PROCUREMENT OF FOOD GRAINS, THE SIST ER CONCERN USED TO MAKE PAYMENT IN ADVANCE TO THE ASSESSEE THROUGH CHEQUE A ND THE AMOUNT WAS CREDITED IN THE BANK ACCOUNT OF THE ASSESSEE. THE ASSESSEE WAS MAKING PAYMENT FOR SUCH AGRICULTURAL PRODUCE BY WITHDRAWING THE AMOUNT IN C ASH FROM ITS BANK ACCOUNT. AFTER PROCUREMENT, THE SAME WERE SUPPLIED TO THE SI STER CONCERN. THUS, THE ITA-3401 TO 3406/D/2009 14 ACTIVITY OF THE ASSESSEE WAS FOUND TO BE OF KACHHA ARHATIA WHO CHARGED COMMISSION FROM THE ULTIMATE PURCHASER FOR WHOM HE IS MAKING PROCUREMENT. AFTER REFERRING TO CIRCULAR NO.452 DATED 17.3.1986, THE CIT(A) HAS EXAMINED THE ASSESSEE IN THE CONTEXT OF REQUIREMENT OF KACHHA AR HATIA AND FOUND THAT ASSESSEES NATURE OF BUSINESS FALLS UNDER THE AMBIT OF KACHHA ARHATIA SINCE ASSESSEE HAS NOT PROCURED THE AGRICULTURAL PRODUCE FOR EARNING PROFI T FROM THE SALE OF THE GOODS AND HAS EARNED ONLY COMMISSION INCOME ON THE TRANSACTIO N OF PROCUREMENT OF AGRICULTURAL PRODUCE. AFTER EXAMINING ALL THESE CO NDITIONS OF THE CIRCULAR, CIT(A) FOUND THAT PROVISIONS OF SECTION 40A(3) ARE NOT APP LICABLE FOR THE PAYMENTS MADE FOR PROCUREMENT OF FOOD GRAINS. SINCE THE ASSESSEE WAS PROCURING THE FOOD GRAINS DIRECTLY FROM THE FARMERS/CULTIVATORS BY MAKING PAY MENT IN CASH, EVEN IF IT IS FOUND THAT ASSESSEE IS NOT KACHHA ARHATIA, NO DISAL LOWANCE CAN BE MADE U/S 40A(3). THE CIT(A) HAS ALSO REFERRED TO THE ENQUIRIES MADE BY THE INSPECTOR AND THE AO IN CASE OF OTHER TRADERS ENGAGED IN THE SIMILAR TRADE, WHEREIN ON SPOT ENQUIRIES IT WAS FOUND THAT AGRICULTURAL PRODUCE WAS BROUGHT TO THE GRAIN MARKET AT LAWRENCE ROAD BY FARMERS FOR SALE. THE DETAILED FINDING RECORDED BY THE CIT(A) AT PARAGRAPHS 5.4, 5.5 & 5.6 HAS NOT BEEN CONTROVERTED BY THE LEA RNED DR, WE THEREFORE DO NOT FIND ANY INFIRMITY IN THE ORDER OF CIT(A) FOR DELET ING THE DISALLOWANCE MADE ON ACCOUNT OF SECTION 40A(3). 12. IN THE RESULT, ALL THE APPEALS OF THE REVENUE A RE DISMISSED. DECISION PRONOUNCED IN THE OPEN COURT ON 27 TH NOVEMBER, 2009. SD/- SD/- (A.D.JAIN) (R.C.SHARMA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 27.11.2009. VK. ITA-3401 TO 3406/D/2009 15 COPY FORWARDED TO: - 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT DEPUTY REGISTRAR