AMIT BHANDARI, Jaipur V. ITO, Jaipur

ITA 350/JPR/2015

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 2192 (ITAT-JAIPUR)
• Duration Of Justice: 1 year(s) 11 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-04-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Assessment Year: 2008-2009
• Appeal Filed On: 09-04-2015
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: RAJ MEHRA CIT DHK
• Assessee Lawyers: B P MOONDRA
• Keywords: Bogus purchase; Rejection of books of accounts; Corroborative evidences; Reassessment proceedings
• Section: 40A(3); 148

Judgement Text

+VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES (SMC), JAIPUR JH HKKXPAN] YS[KK LNL; ] DS LE{K BEFORE: SHRI BHAGCHAND, ACCOUNTANT MEMBER VK;DJ VIHY LA-@ ITA NOS. 350 & 351/JP/2015 FU/KZKJ.K O'K Z@ ASSESSMENT YEARS : 2006-07 & 2008-09 AMIT BHANDARI, 80, USHA COLONY, MALVIYA NAGAR, JAIPUR. CUKE VS. INCOME TAX OFFICER, WARD-6(1), JAIPUR. LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO.: ACGPB 3125 P VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT FU/KZKFJRH DH VKSJ LS@ ASSESSEE BY : SHRI B.P. MOONDRA (CA) JKTLO DH VKSJ LS@ REVENUE BY : SHRI RAJ MEHRA (ADDL.CIT) LQUOKBZ DH RKJH[K@ DATE OF HEARING : 05/04/2017 MN?KKS'K.KK DH RKJH[K @ DATE OF PRONOUNCEMENT : 06/04/2017 VKNS'K@ ORDER PER: BHAGCHAND, A.M. BOTH THE APPEALS HAVE BEEN FILED BY THE ASSESSEE E MANATES FROM THE TWO SEPARATE ORDERS OF THE LD. CIT(A)-2, JAIPUR DATED 12/03/2015 PERTAINING TO THE A.Y. 2006-07 & 2008-09, WHEREIN TH E ASSESSEE HAS TAKEN FOLLOWING EFFECTIVE GROUNDS OF APPEAL IN BOTH THE YEARS: GROUNDS OF ITA NO. 350/JP/2015 1. INITIATIONS OF REASSESSMENT PROCEEDINGS U/S 148 IS BAD IN LAW AND FACTS AS THE ASSESSEE NEVER RECEIVED NOTI CE U/S 148 OF INCOME TAX ACT, 1961. ITA 350 & 351/JP/2015_ AMIT BHANDARI VS ITO 2 2. REJECTION OF BOOKS OF ACCOUNTS U/S 145(3) IS BAD IN LAW AND FACTS. 3. ADDITION OF RS. 20,00,000/- U/S 40A(3) OF THE IN COME TAX ACT, 1961 IS BAD IN LAW AND FACTS. GROUNDS OF ITA NO. 351/JP/2015 1. INITIATIONS OF REASSESSMENT PROCEEDINGS U/S 148 IS BAD IN LAW AND FACTS AS THE ASSESSEE NEVER RECEIVED NOTI CE U/S 148 OF INCOME TAX ACT, 1961. 2. REJECTION OF BOOKS OF ACCOUNTS U/S 145(3) OF THE INCOME TAX ACT, 1961 IS BAD IN LAW AND FACTS. 3. ADDITION OF RS. 6,50,000/- CONSIDERING THAT NO PAYMENT HAS BEEN MADE IS BAD IN LAW AND FACTS. 2. BOTH THE APPEALS WERE HEARD TOGETHER AND FOR THE SAKE OF CONVENIENCE AND BREVITY, A COMMON ORDER IS BEING PA SSED. 3. GROUND NO. 1 OF BOTH THE APPEALS IS AGAINST INIT IATION OF REASSESSMENT PROCEEDINGS U/S 148 OF THE INCOME TAX A CT, 1961 (HEREINAFTER REFERRED AS THE ACT). THE BRIEF FACTS O F THE CASE ARE THAT THE ASSESSEE IS ENGAGED IN THE BUSINESS OF MANUFACTURIN G AND TRADING OF EXPORT OF ALL TYPES OF READYMADE GARMENTS AND MADE UPS. THE ASSESSEE IS PROPRIETOR OF M/S PAS INTERNATIONAL. IN THE ASSE SSMENT PROCEEDINGS FOR THE ASSESSMENT YEAR 2007-08, THE ASSESSING OFFICER COLLECTED THE DETAILS THAT THE ASSESSEE HAS MADE PAYMENT AGAINST THE PURC HASES AND OTHER EXPENSES THROUGH CHEQUES BUT THE CASH HAD BEEN WITHD RAWN FROM THE ITA 350 & 351/JP/2015_ AMIT BHANDARI VS ITO 3 BANK AS THESE WERE NOT ACCOUNT PAYEE CHEQUES. THE AS SESSING OFFICER HELD THAT THE PAYMENTS WERE NOT PAID TO THE PARTIES IN WHOSE NAMES THE CHEQUES WERE ISSUED AND ON THAT BASIS NOTICE U/S 148 OF THE ACT WAS ISSUED, THEREFORE, THE ASSESSING OFFICER MADE ADDIT ION. THE ASSESSEE HAS CHALLENGED THAT THE NOTICE WAS NEVER RECEIVED BY THE ASSESSEE, HOWEVER, THE RECORD SHOWS THAT THE NOTICE WAS SERVED TO MS. AA SHNA, WHO IS DAUGHTER OF THE ASSESSEE. 4. I HAVE HEARD BOTH THE SIDES ON THIS ISSUE. IN T HE ASSESSMENT PROCEEDINGS FOR THE ASSESSMENT YEAR 2007-08, THE IN FORMATION WAS GATHERED THAT ASSESSEE HAD MADE PAYMENT BY ISSUING CHEQUES BUT CASH HAS BEEN WITHDRAWN FROM THE ACCOUNT. THE CASH PAYMENTS WERE MORE THAN PERMISSIBLE LIMIT. THEREAFTER THE ASSESSING OFF ICER WAS HAVING SUFFICIENT INFORMATION TO RECORD REASONS FOR ISSUAN CE OF NOTICE U/S 148 OF THE ACT. THE NOTICE WAS SERVED ON THE DAUGHTER OF TH E ASSESSEE, THEREFORE, I FIND NO MERIT IN THE GROUND OF THE ASS ESSEES APPEALS. ACCORDINGLY, GROUND NO. 1 OF BOTH THE APPEALS OF TH E ASSESSEE IS DISMISSED. 5. GROUND NO. 2 OF BOTH THE APPEALS IS AGAINST SUST AINING THE REJECTION OF BOOKS OF ACCOUNT U/S 145(3) OF THE ACT AND IN GROUND NO. 3 OF BOTH THE APPEALS, THE ISSUE INVOLVED IS AGAINST MAKING THE ADDITIONS BY ITA 350 & 351/JP/2015_ AMIT BHANDARI VS ITO 4 INVOKING THE PROVISIONS OF SECTION 40A(3) OF THE AC T BY THE CIT(A). THE ASSESSING OFFICER NOTED THE FOLLOWING DEFECTS IN THE BOOKS OF ACCOUNT OF THE ASSESSEE, WHICH IS AS UNDER:- (I) THE ASSESSEE HAS NOT PRODUCED QUANTITATIVE DETA ILS SO AS TO VERIFY THE CORRECTNESS OF THE TRADING RESULTS DECLARED. (II) MERELY FURNISHING PURCHASE AND SALE BILLS DO N OT PROVE THE ASSESSEE'S CONTENTION OF MAINTAINING PROPER BOOKS OF ACCOUNTS. (III) IN THE AUDIT REPORT IT IS MENTIONED THAT THE QUANTITATIVE DETAILS HAVE BEEN MAINTAINED FOR OPENING AND CLOSING STOCK BUT IN THE ABSENCE OF DAY-TO-DAY STOCK REGISTER IT IS NOT VERIFIABLE AS SUCH THE QUA NTITATIVE DETAILS OF THE STOCK AS REPORTED IN THE AUDIT REPORT ARE NOT VERIF IABLE. (IV) THE ASSESSEE HAS NOT FURNISHED ANY DETAILS AS TO HOW THE VERIFICATION OF THE CLOSING STOCK HAS BEEN MADE AND THE BASIS FOR T HE COST ASSIGNED IS ALSO NOT FURNISHED. (V) IN THE ABSENCE OF STOCK RECORDS IT IS NOT VERIF IABLE WHETHER THE PURCHASE BILLS INTRODUCED ARE IN RESPECT OF THE ACTUAL GOODS PURCHASED OR JUST TO INFLATE THE EXPENSES CLAIMED. (VI) FROM THE PAST HISTORY OF THE ASSESSEE'S CASE I T IS VERY MUCH CLEAR THAT THE ASSESSEE IS IN THE HABIT OF INTRODUCING PURCHASES W ITHOUT ACTUAL PURCHASE OF GOODS AND THE BEARER CHEQUES ARE ISSUED FOR WHIC H PAYMENT DRAWN BY THE ASSESSEE OR HIS CLOSE PERSON FROM BANK AND IN T HE BOOKS OF ACCOUNTS THE PAYMENTS ARE SHOWN IN THE NAME OF THE PARTIES F ROM WHOM SO CALLED PURCHASE BILL HAVE BEEN OBTAINED. THEREFORE, THE ASSESSING OFFICER HAD REJECTED THE BO OKS OF ACCOUNT. 5.1 THE LD. CIT(A) HAS UPHELD THE REJECTION OF BOOKS OF ACCOUNT BY HOLDING AS UNDER:- (A) THE ASSESSEE HAD NOT MAINTAINED QUANTITATIVE DE TAILS OR A DAY TO DAY STOCK REGISTER. ITA 350 & 351/JP/2015_ AMIT BHANDARI VS ITO 5 (B) THE COMPUTATION OF CLOSING STOCK GIVEN BY THE A SSESSEE IS NOT VERIFIABLE. (C) THE ASSESSEE HAS MADE PAYMENT BY BEARER CHEQUES FOR PURCHASES AND EXPENSES TO SEVEN CONCERNS OF AMOUNTS, RANGING FROM RS. 1,00,000/- TO RS. 3,00,000/- TOTALING RS. 20,00,000/-. THE BANK S TATEMENTS CLEARLY INDICATE THAT BEARER CHEQUES HAD BEEN ISSUED AGAINS T WHICH CASH HAS BEEN WITHDRAWN. 5.2 THE LD AR FURTHER SUBMITTED THAT THE ASSESSING O FFICERS OBSERVATION THAT THE ASSESSEE IS NOT MAINTAINING QU ANTITATIVE DETAILS ON DAY TO DAY BASIS IS A GENERAL OBSERVATION. THE ASSES SING OFFICER TOOK THE PHOTOCOPIES OF MORE THAN THOUSAND BILLS AND VOUCHER S AND FOR MORE THAN FIVE DAYS, THE INSPECTOR WAS DEPUTED TO VERIFY THE P URCHASE AND OTHER EXPENSES AND HE COULD NOT FIND EVEN A SINGLE MISTAK E IN THE BOOKS OF ACCOUNT PRODUCED. THE ORIGINAL BOOKS OF ACCOUNT WERE PRODUCED. THE ASSESSING OFFICER OBSERVED THAT THE ASSESSEE IS IN HABIT OF INTRODUCING PURCHASES WITHOUT ACTUAL PURCHASE OF GOODS AND THE B EARER CHEQUES ARE ISSUED FOR WHICH PAYMENT DRAWN BY THE ASSESSEE OR HIS CLOSE PERSON FROM BANK AND IN THE BOOKS OF ACCOUNT THE PAYMENTS ARE SHOWN IN THE NAME OF THE PARTIES FROM WHOM SO CALLED PURCHASE BIL L HAVE BEEN OBTAINED. BUT NO ADDITION WAS MADE IN THE PAST ON TH E BASIS OF BOGUS PURCHASES IN ASSESSEES CASE. LD. AR RELIED ON THE FOLLOWING CASE LAWS:- (I) YOUR HONOR KIND ATTENTION IS INVITED IN HARIDAS PARIKH V ITO [2009] 29 SOT 13 (JODH.)(URO) CASE IN WHICH YOUR HO NOR IT WAS HELD THAT UNLESS THE ASSESSING OFFICER IS ABLE TO P OINT OUT CERTAIN ITA 350 & 351/JP/2015_ AMIT BHANDARI VS ITO 6 TRANSACTIONS WHICH HAVE BEEN LEFT TO BE ENTERED IN THE BOOKS OF ACCOUNT OR THAT THE ASSESSEE HAS SOLD SOME OF THE I TEMS AT A PRICE HIGHER THAN WHAT IS DISCLOSED IN THE BOOKS OF ACCOUNT OR IF PROPER PARTICULARS, BILLS, VOUCHERS, ARE NOT FORTHC OMING ETC., THE BOOKS OF ACCOUNT CANNOT BE REJECTED WITHOUT ASSIGNI NG SPECIFIC REASONS. IN THE INSTANT CASE MERELY BECAUSE DIFFERE NT RANGE AND NATURE OF ITEMS ARE BEING DEALT WITH BY THE ASSESSE E AND THE MAINTENANCE OF QUANTITATIVE STOCK OF EACH AND EVERY ITEM IS NOT PRACTICALLY POSSIBLE, THE BOOKS OF ACCOUNT MAINTAIN ED BY THE ASSESSEE WHICH ARE FREE FROM ANY DEFECT CANNOT BE R EJECTED MERELY BECAUSE THE AVERAGE GP RATE WAS SLIGHTLY LOW ER THAN THE AVERAGE GP RATE OF THE EARLIER YEAR. (II) FURTHER, IT WAS HELD THAT ABSENCE OF VOUCHERS OR THE SUPPORTING EVIDENCE IN RESPECT OF A PARTICULAR ITEM OF EXPENDI TURE CANNOT BY ITSELF EMPOWER AN ASSESSING OFFICER TO INVOKE PROVI SION OF SECTION 145(3) IN REJECTING THE BOOKS OF ACCOUNT. AMRITSAR BENCH OF THE HONBLE TRIBUNAL IN ASHOK KUMAR & CO. V. ITO [2004] 2 SOT 518 (ASR.) (SMC) HELD THAT REJECTION OF BOOKS CANNOT BE RESTORED TO SIMPLY ON THE BASIS OF ABSENCE OF SOME VOUCHERS AND FAILURE TO PRODUCE THE SAME BY THE ASSESSEE. (III) FURTHER, THE KERALA HIGH COURT IN THE CASE OF CM. FRANCIS & CO. (P.) LTD. V. CIT HELD THAT WHERE PURCHASE VOUCHERS FOR AGRICULTURAL PRODUCE PURCHASED FROM AGRICULTURISTS COULD NOT BE PRODUCED, BOOKS OF ACCOUNT CANNOT BE REJECTED IN TOTAL ON THE BASIS OF SUCH FINDING. (IV) FURTHER, IT WAS HELD BY THE MADHYA PRADESH HIG H COURT IN THE CASE OF HEMRAJ NEBHOMAL & SONS V. CIT [2005] 146 TA XMAN 345 (M.P.) THAT THE ASSESSEE IS NOT UNDER OBLIGATION TO SATISF Y THE ITA 350 & 351/JP/2015_ AMIT BHANDARI VS ITO 7 ASSESSING OFFICER AS TO THE LEGITIMACY AND NECESSIT Y OF EXPENDITURE. (V) FURTHER, ASSTT. CIT V. L.M.P. TRACTORS (P.) LTD . [2005] 148 TAXMAN 52 (MAG.) THE AHMADABAD BENCH OF THE ITAT HELD THAT NON MAINTENANCE OF QUANTITATIVE DETAILS OF SPARE PARTS COULD NOT BE A GROUND FOR REJECTION OF BOOKS OF ACCOUNT AND THE AS SESSING OFFICER IS NOT JUSTIFIED IN REJECTING THE BOOKS OF ACCOUNT WITHOUT PINPOINTING SPECIFIC DEFECTS AND THEREBY MAKING AN AD HOC ADDITION WHEN DISCREPANCIES WERE DULY RECONCILED BE FORE LOWER AUTHORITIES. (VI) THE ASSESSEE REQUEST THAT ONLY ONE IRREGULARIT Y OF NOT KEEPING STOCK REGISTER CANNOT JUSTIFY THE REJECTION OF ENTI RE BOOKS OF ACCOUNTS IN VIEW OF ACIT V/S MEWAR POLYTEE (P) LTD. 51 TTJ 698 (JP) XIII TAX WORLD 64 AND (2) CIT V/S GEO TECH CON STRUCTION CORPORATION (1996) 221 ITR (KER.). [PANDIT BROS. V. CIT, (1954) 26 ITR 159, 166-7 (PUNJ). ALSO, CST V. KHERA SHOE C O., (1975) 36 STC 220 (ALL); LALLOORAM RAM SWARUP V. CST, (1978) TAX LR (NOC) 152 (ALL); ASST. CTO V. KAPUR TRUNK FACTORY, (1990) 79 STC, 334 (RAJ); STATE OF ORISSA V. GAURAV ENTERPRISE S, (1992) 106 TAXATION 428, 432 (ORI); K. RAMALINGA MUDDALIAR & C O. V. STATE, (1992) 86 STC 475, 479 (MAD)]. ON THE ISSUE OF SUSTAINING THE ADDITION U/S 40A(3) OF THE ACT, THE LD AR OF THE ASSESSEE HAS SUBMITTED AS UNDER:- (A) THE LD.CIT APPEAL CONFIRMED THAT THERE ARE NO F ACTS ON RECORD WHICH WOULD SHOW THAT THESE PURCHASES ARE UNVERIFIA BLE. ITA 350 & 351/JP/2015_ AMIT BHANDARI VS ITO 8 (B) THE LD.CIT APPEAL FURTHER CONFIRMED THAT THE CO NTENTION OF THE APPELLANT THAT THE ASSESSING OFFICER HAS NOT DOUBTE D THE GENUINENESS OF THE SALE AND EXPORT IS CORRECT. (C) THE LD.CIT APPEAL ALSO CONFIRMED THAT THERE IS NO MATERIAL ON RECORD TO SHOW THAT CASH AGAINST BEARER CHEQUES HAS BEEN WITHDRAWN BY THE ASSESSEE, HIMSELF BUT IT IS UNDISP UTED THAT BEARER CHEQUES WERE ISSUED AGAINST WHICH CASH HAS B EEN WITHDRAWN ALL THESE BEARER CHEQUES ARE OF AN AMOUNT OF RS. 1,00,000/- AND ABOVE. (D) THE LD.CIT APPEAL THEREFORE HELD THAT THERE IS NO MATERIAL ON RECORD TO DISPUTE THE GENUINENESS OF THESE PURCHASE S AND EXPENSES, DEBITED IN THE BOOKS OF ACCOUNT. IT IS AL SO NOT DISPUTED THAT THE APPELLANT HAS INCURRED EXPENDITURE IN EXCE SS OF RS. 20,000/-, BY BEARER CHEQUES I.E. OTHERWISE THAN BY AN ACCOUNT PAYEE CHEQUE DRAWN ON BANK OR AN ACCOUNT PAYEE DRAF T. THEREFORE, THE APPELLANT HAS VIOLATED THE PROVISION S OF SECTION 40A (3) OF THE IT. ACT. AND NO DEDUCTION CAN BE ALL OWED ON THE ABOVE EXPENDITURE OF RS. 20,00,000/-. THEREFORE, EX PENDITURE OF RS. 20,00,000/- IS DISALLOWED U/S. 4OA(3) OF THE IT . ACT.... (E) IT IS ADMITTED FACT THAT ALL SUNDRY CREDITORS W ERE ON ACCOUNT OF GOODS SUPPLIED AND SERVICES RENDERED BY THEM IN THE BONA FIDE MANNER FOR THE GOODS EXPORTED BY THE APPELLANT AND THE AO IN THE ASSESSMENT ORDER HITS NOT RECORDED ANY FINDINGS THAT THESE PURCHASES WERE BOGUS. (F) THERE IS NO EVIDENCE TO SHOW THAT AMOUNT GIVEN BY ASSESSEE IN FAVOUR OF THE SUPPLIER BY CHEQUES HAS COME BACK TO THE ASSESSEE IN ANY FORM. ITA 350 & 351/JP/2015_ AMIT BHANDARI VS ITO 9 (G) YOUR HONOUR IN THE CASE OF THE ASSESSEE FOR THE AY 2007-08 VIDE APPEAL NO. ITA NO. 869/JP/2010 AY 2007-08 AND CO NO . 88/JP/2010 (ARISING OUT OF ITA NO. 869/JP/2010 AY 2 007-08), THE HONOURABLE ITAT ALLOWED THE APPEAL BY RELYING UPON RAJASTHAN HIGH COURT JUDGMENTS IN THE CASE OF SMT. HARSHIL CH ORADIA V/S ITO 298 ITR 349 WHERE IN IT WAS HELD THAT RULE 6DD( J) HAS TO BE LIBERALLY CONSTRUED AND ORDINARILY WHERE THE GENUIN ENESS OF THE TRANSACTIONS AND THE PAYMENT AND IDENTITY OF THE RE CEIVER IS ESTABLISHED THE REQUIREMENT OF RULE 6DD (J) SHOULD BE DEEMED TO HAVE BEEN SATISFIED. THE AR IN THIS RESPECT CONSIDE RING THE SATISFACTION OF AFORESAID CONDITIONS REQUESTED TO D ELETE THE ENTIRE ADDITION OF RS. 20,00,000/-. (H) THE APPELLANT HAS SHOWN BETTER GP RATE OF 8.93% AS COMPARED TO LAST YEAR'S GP RATE OF 8.85% EVEN THOUGH THERE WAS INCREASE IN THE TURNOVER. S. NO. ASSESSMENT YEAR TURNOVER GROSS PROFIT G .P. RATE 1 2006 - 07 47122121 4209689 8.93% 2 2005 - 06 40247710 3563541 8.85% 3 2004 - 05 17796721 1051392 5.91% (I) YOUR HONOUR, AT THE MOST THIS IS THE CASE THAT CERTAIN PARTIES FROM WHOM PURCHASES WERE SHOWN TO HAVE BEEN MADE WERE RE MAINED UNVERIFIABLE AND LOOKING TO THE QUANTUM OF PURCHASE S, THE TRADING ADDITION OF RS. 50,000/- MAY BE MADE BY REJECTING T HE BOOKS OF ACCOUNT. FOR YOUR KIND ATTENTION THIS IS A CASE OF GARMENT MANUFACTURER WHO WAS ENGAGED IN EXPORT ACTIVITY OF THE GARMENTS MANUFACTURED. IT CAN BE VERIFIED THROUGH THE ASSESS MENT ORDER THAT THE EXPORT SHOWN BY THE APPELLANT AND GENUINEN ESS OF THE SAME IS NOT QUESTIONED DOUBTED BY THE LD. AO. THE A SSESSEE HAD A TURNOVER OF RS, 4,71,22,121/- THE APPELLANT HAS S HOWN GP RATE ITA 350 & 351/JP/2015_ AMIT BHANDARI VS ITO 10 OF 8.93% IN A. Y.2006- 07 ON INCREASED TURNOVER OF RS. 4,02,47,710/- THE APPELLANT HAS SHOWN BETTER GP 8.8 3%. J) THE AR REQUEST THAT ONCE INCOME IS ESTIMATED, PR OVISIONS OF SECTION 40A (3) CANNOT BE INVOKED. YOUR HONOUR, THE RE IS JUSTIFICATION IN ASSESSEE'S CLAIM. THE HON'BLE MADH YA PRADESH HIGH COURT IN THE CASE OF CIT-II VS. HINDUSTAN EQUIP MENT P. LTD., 30 TAXMANN.COM 295 (MP.) CONSIDERED THE PROVISIONS OF SECTION 4OA(3) AND HELD THAT WHERE PROFIT WAS ESTIMATED BY APPLYING NET PROFIT RATE, THERE WAS NO SCOPE OF FURTHER DISALLOW ANCE UNDER SECTION 4OA(3) IN RESPECT OF SUCH PROJECTS. SINCE B OOKS OF ACCOUNTS ARE REJECTED AND TURNOVER ITSELF IS ESTIMA TED AND NET PROFIT WAS DETERMINED ITA.N0.1125/HYD/2014 MR. P. R AMASWAMY & SONS, R.R. DISTRICT AT 5%, PROVISIONS OF SECTION 4 O A(3) CANNOT BE INVOKED IN THIS CASE. THE ARGUMENT IS SUPPORTED BY THE FOLLOWING JUDGMENTS/DECISIONS:- (I) ARMOUR CHEMICALS LTD. VS. JCIT17 SOT 467 (MUM ) (ITAT). (II) CIT VS. AGARWAL ENG. CO. 156 TAXMAN 40 (P & H ) (HC) (III) CIT VS. SMT. SANTOSH JAIN 159 TAXMAN 392 (P & H) (HC) (IV) CIT VS. PURUSAHOTHAMLAL TAMARKAR 270 ITR 314 (MP). (V) INDWELL CONSTRUCTIONS VS. CIT 232 ITR 776 (AP ) (VI) SINGHAL BUILDERS CONTRACTORS VS. ADDL. CIT 4 6 SOT 5.1. 6. ON THE OTHER HAND, THE LD. SR. DR HAS RELIED ON THE ORDERS OF THE AUTHORITIES BELOW. 7. AFTER HEARING BOTH THE SIDES, I HOLD THAT THE AS SESSING OFFICER REJECTED THE BOOKS OF ACCOUNT AND MADE THE ADDITION BY ESTIMATING THE GROSS PROFIT AND ALSO BY INVOKING THE PROVISIONS OF SECTION 40A(3) OF THE ACT. IT HAS BEEN HELD IN VARIOUS CASES THAT NO DISA LLOWANCE U/S 40A(3) OF ITA 350 & 351/JP/2015_ AMIT BHANDARI VS ITO 11 THE ACT CAN BE MADE WHERE PROFIT HAS BEEN ESTIMATED BY APPLYING NP RATE. IN THIS REGARD, RELIANCE IS PLACED ON THE DEC ISION OF THE HONBLE M.P. HIGH COURT IN THE CASE OF CIT-II VS. HINDUSTAN EQUI PMENT P. LTD. 30 TAXMANN.COM 295 (M.P.) WHEREIN THE HON'BLE HIGH COUR T HAS CLEARLY HELD THAT WHERE PROFIT WAS ESTIMATED BY APPLYING NET PROFI T RATE, THERE WAS NO SCOPE OF FURTHER DISALLOWANCE U/S 40A(3) OF THE ACT. IN THE ASSESSEES CASES, BOOKS OF ACCOUNT WERE REJECTED AND INCOME WAS ESTIMATED AND THE ADDITIONS WERE MADE. THE ASSESSING OFFICER DOUBTE D THE GENUINENESS OF THE PURCHASES AND EXPENSES DEBITED IN THE BOOKS OF ACCOUNT. HOWEVER, THE LD. CIT(A) HAS HELD THAT THERE IS NO MA TERIAL ON THE RECORD TO DISPUTE THE GENUINENESS OF THESE PURCHASES AND E XPENSES. HE INVOKED THE PROVISIONS OF SECTION 40A(3) OF THE ACT. IN VIE W OF THE DECISION OF THE HONBLE M.P. HIGH COURT IN THE CASE OF CIT-II VS. H INDUSTAN EQUIPMENT P. LTD. (SUPRA) AND FOR THE FACT THAT THE INITIAL ADDI TION OF ASSESSING OFFICER HOLDING BOGUS PURCHASES AND SUBSEQUENTLY SUSTAINING THE ADDITION BY THE LD. CIT(A) BY INVOKING THE PROVISIONS OF SECTION 40A (3) OF THE ACT WERE COMPLETELY UNJUSTIFIED. MOREOVER, THE LD. CIT(A) HAS NOT ISSUED ANY SHOW CAUSE NOTICE IN VIEW OF THE PROVISIONS OF SECTION 2 51(2) OF THE ACT FOR INVOKING SECTION 40A(3) OF THE ACT. FURTHER THERE I S NOTHING ON THE RECORD AGAINST THE ASSESSEE, WHICH CAN DOUBT THE GENUINENES S OF THE EXPORT MADE BY THE ASSESSEE OR ANY INFLATION OF EXPORT TUR NOVER. IN THE VARIOUS ITA 350 & 351/JP/2015_ AMIT BHANDARI VS ITO 12 CASE LAWS, AS CONSISTENTLY HELD THAT WHENEVER INCOME HAS ESTIMATED BY INVOKING THE PROVISIONS OF SECTION 145(3) OF THE AC T THEN THERE IS NOT FURTHER SCOPE TO DISALLOW U/S 40A(3) OF THE ACT. BY RELYING ON THE VARIOUS CASE LAWS I.E.: (I) ARMOUR CHEMICALS LTD. VS. JCIT17 SOT 467 (MUM) (ITAT). (II) CIT VS. AGARWAL ENG. CO. 156 TAXMAN 40 (P & H ) (HC) (III) CIT VS. SMT. SANTOSH JAIN 159 TAXMAN 392 (P & H) (HC) (IV) CIT VS. PURUSAHOTHAMLAL TAMARKAR 270 ITR 314 (MP). (V) INDWELL CONSTRUCTIONS VS. CIT 232 ITR 776 (AP ) (VI) SINGHAL BUILDERS CONTRACTORS VS. ADDL. CIT 4 6 SOT 5.1. AND CONSIDERING ALL THESE FACTS AND CIRCUMSTANCES O F THE CASE, I PARTLY ALLOW THE APPEALS OF THE ASSESSEE IN BOTH THE YEARS AND SUSTAIN THE ADDITION OF RS. 50,000/- FOR WANT OF VERIFICATION OF CERTAIN PURCHASES. 8. IN THE RESULT, BOTH THE APPEALS OF THE ASSESSEE ARE PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 06/04/2017. SD/- HKKXPAN (BHAGCHAND) YS[KK LNL;@ ACCOUNTANT MEMBER TK;IQJ@ JAIPUR FNUKAD@ DATED:- 06 TH APRIL, 2017 *RANJAN VKNS'K DH IZFRFYFI VXZSFKR @ COPY OF THE ORDER FORWARDED TO: 1. VIHYKFKHZ @ THE APPELLANT- SHRI AMIT BHANDARI, JAIPUR. 2. IZR;FKHZ @ THE RESPONDENT- THE ITO, WARD-6(1), JAIPUR. 3. VK;DJ VK;QDR @ CIT ITA 350 & 351/JP/2015_ AMIT BHANDARI VS ITO 13 4. VK;DJ VK;QDRVIHY @ THE CIT(A) 5. FOHKKXH; IZFRFUF/K] VK;DJ VIHYH; VF/KDJ.K] T;IQJ @ DR, ITAT, JAIPUR 6. XKMZ QKBZY @ GUARD FILE (ITA NO. 350 & 351/JP/2015) VKNS'KKUQLKJ @ BY ORDER, LGK;D IATHDKJ @ ASST. REGISTRAR