Sh. Inder Paul Singh, Jammu V. The Income-tax Officer, Jammu

ITA 474/ASR/2012

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 2243 (ITAT-AMRITSAR)
• Duration Of Justice: 3 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-04-2013
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 14-03-2013
• Assessment Year: 2009-2010
• Appeal Filed On: 26-12-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: R L CHHANALIA
• Assessee Lawyers: P N ARORA
• Keywords: Additional evidence
• Section: 40A(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AMRITSAR BENCH; AMRITSAR. BEFORE SH. H.S. SIDHU, JUDICIAL MEMBER AND SH. B.P.JAIN, ACCOUNTANT MEMBER I.T.A. NO. 474(ASR)/2012 ASSESSMENT YEAR:2009-10 PAN :AVSPS7851A SH. INDER PAUL SINGH, VS. INCOME TAX OFFICER, NANAK NAGAR, WARD 1(2), JAMMU. JAMMU. (APPELLANT) (RESPONDENT) I.T.A. NO. 481(ASR)/2012 ASSESSMENT YEAR:2009-10 PAN :AVSPS7851A INCOME TAX OFFICER, VS. SH.INDER PAUL SINGH WARD-1(2), JAMMU. JAMMU. (APPELLANT) (RESPONDENT) ASSESSEE BY: SH.P.N.ARORA, ADVOCATE RESPONDENT BY:SH.R.L.CHHANALIA, DR DATE OF HEARING: 11/04/2013 DATE OF PRONOUNCEMENT:12/04/2013 ORDER PER BENCH ; THESE CROSS APPEALS OF THE ASSESSEE AND THE REVENU E ARISE FROM THE ORDER OF THE CIT(A), JAMMU, DATED 19.10.2012 FOR TH E ASSESSMENT YEAR 2009- 10. THE ASSESSEE HAS RAISED FOLLOWING GROUNDS OF A PPEAL: 1. THAT THE IMPUGNED ORDER IS AGAINST LAW & FACTS OF THE CASE. ITA NO.474 & 481 (ASR)/2012 2 2. THAT THE IMPUGNED ORDER OF LD. CIT(A) IS NOT SUSTAI NABLE IN LAW AS THE LD. CIT(A) HAS NOT BEEN CORRECT IN LAW I N DISPOSING OF THE APPEAL OF THE APPELLANT WITHOUT INDEPENDENTL Y EXAMINING THE FACTS OF THE CASE REGARDING WAGES AND REJECTING THE APPEAL OF THE APPELLANT WITH REGARD TO THE CREDITORS VIZ WAG ES PAYABLE. 3. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE, LD . CIT(A) HAS ERRED IN UPHOLDING THE DISALLOWANCE OF CREDITORS SO FAR AS REGARD TO WAGES PAYABLE. 4. THAT WITHOUT VERIFYING THE FACTS WITH REGARD TO THE WAGES PAYABLE AND WITHOUT AFFORDING THE PROPER OPPORTUNI TY TO THE APPELLANT TO PROVE THE SAID CREDITORS GENUINENESS, THE LD. CIT(A) HAS ERRED IN SUSTAINING THE DISALLOWANCE OF RS.18,25,689/- OUT OF ADDITION OF RS.20,43,586/- MA DE BY THE LD. A.O. 5. THAT DISALLOWANCE OF WAGES PAYABLE IS ARBITRARY A ND UNJUSTIFIED. 6. THAT THE DEMAND OF RS.7,45,969/- RAISED AGAINST THE APPELLANT DISALLOWING THE WAGES PAYABLE BY THE LD. ITO WARD 1(1), JAMMU IN LIEU OF THE APPEAL EFFECT ORDER IS ALSO CO NTESTED. THE SAME BEING WRONG AND ILLEGAL, IS ALSO LIABLE TO BE DELETED. 7. THAT CHARGING OF INTEREST U/S 234 B IS BAD IN LAW. 8. ANY OTHER GROUND WHICH MAY BE URGED AND ALLOWED AT THE TIME OF HEARING. 2. THE REVENUE HAS RAISED FOLLOWING GROUNDS OF APPEAL: 1. ON THE FACTS AND CIRCUMSTANCES WHETHER THE LD. CIT(A) WAS RIGHT IN DELETING THE DISALLOWANCE MADE ON EXPENDI TURE UNDER VARIOUS HEADS WHEN THE ASSESSEE HAD FAILED TO PRODUCE BOOK S OF ACCOUNT AND VOUCHERS INSPITE OF SUFFICIENT OPPORTUNITIES PROVI DED TO THE ASSESSEE DURING THE ASSESSMENT PROCEEDINGS. 2. ON THE FACTS AND CIRCUMSTANCES WHETHER THE LD. CIT(A) WAS RIGHT IN DELETING THE DISALLOWANCE MADE ON EXPENDI TURE UNDER VARIOUS ITA NO.474 & 481 (ASR)/2012 3 HEADS WHEN IN THE ABSENCE OF ANY RECORD MADE AVAIL ABLE BY THE ASSESSEE, NO ENQUIRY WAS POSSIBLE TO ESTABLISH THE GENUINENESS OF THE EXPENSES. 3. ON THE FACTS AND CIRCUMSTANCES WHETHER THE LD. CIT(A) WAS RIGHT IN ADMITTING THE ADDITION EVIDENCES FILED B Y THE ASSESSEE DURING APPELLATE PROCEEDINGS WHEN THE ASSESSEE HAD FAILED TO FILE THE DETAILS IN RESPECT OF CASH PAYMENTS MADE EXCEEDING RS.20,0 00/- AND IN RESPECT OF SUNDRY CREDITORS INSPITE OF SUFFICIENT OPPORTUNITIES PROVIDED TO THE ASSESSEE DURING THE ASSESSMENT PROCEEDINGS. 4. ON THE FACTS AND CIRCUMSTANCES WHETHER THE LD. CIT( A) WAS RIGHT IN ADMITTING THE ADDITION EVIDENCES FILED BY THE ASSESSEE DURING APPELLATE PROCEEDINGS WITHOUT AFFORDING OPPORTUNITY TO THE ASSESSING OFFICER UNDER RULE 46A OF THE INCOME TAX RULES, 196 2 WHEN THE ASSESSEE HAD FAILED TO FILE THE DETAILS IN RESPECT OF CASH PAYMENTS MADE EXCEEDING RS.20,000/- AND IN RESPECT OF SUNDRY CRE DITORS INSPITE OF SUFFICIENT OPPORTUNITIES PROVIDED TO THE ASSESSEE DURING THE ASSESSMENT PROCEEDINGS. 5. THAT THE APPELLANT CRAVES TO AMEND OR ADD ANY ON E OR MORE GROUNDS OF APPEAL. 3. THE BRIEF FACTS IN THE APPEALS OF THE ASSESSEE A ND THE REVENUE ARE THAT THE ASSESSEE IS A MES CONTRACTOR. DURING THE YEAR, THE ASSESSEE HAS DECLARED TOTAL RECEIPTS OF RS.69,80,712/-. THE ASSESSEE WAS REQUIRED TO SUBMIT DETAILS WHICH WERE NOT SUBMITTED EVEN AFTER ISSUE OF SHOW C AUSE NOTICE. THE ASSESSEE SUBMITTED THAT THE ADDITION PROPOSED BY TH E AO CANNOT BE MADE IN VIEW OF THE DECISION OF ITAT, AMRITSAR BENCH, IN TH E CASE OF SHIVAM CONSTRUCTIONS, WHICH HAS BEEN AFFIRMED BY THE HONB LE PUNJAB & HARYANA HIGH COURT. THE AO AFTER CONSIDERING THE EXPLANATIO N OF THE ASSESSEE ITA NO.474 & 481 (ASR)/2012 4 OBSERVED (IN RELEVANT PARAS), WHICH FOR THE SAKE OF CLARITY IS REPRODUCED AS UNDER: AGAINST THE GROSS RECEIPTS OF RS. 69.80 LACS, TH E ASSESSEE HAS SHOWN CREDITORS AT RS. 20.43 LACS. THE ASSESSEE HA S NOT BEEN ABLE TO FILE ANY LIST OR PROVIDE ANY ADDRESS OF THESE CRED ITORS. HE HAS NOT BEEN ABLE TO SHOW THAT THE CREDITORS WERE SUBSEQUENTLY PAID IN THE FOLLOWING YEAR OR YEARS. THIS CLEARLY SHOWS THAT T HE CREDITORS NEVER EXISTED OR EVEN IF THEY EXISTED THE CREDIT BALANCE S SHOWN AGAINST THEM WAS GENUINE. FURTHERMORE, THERE HAS BEEN A STEEP R ISE IN THE AMOUNTS SHOWN PAYABLE AGAINST THE CREDITORS AS COMPARED TO THE LAST YEAR. AS AGAINST TOTAL CREDITORS OF RS. 2.22 LACS AS ON 31. 03.2008, THE CREDITORS HAVE RISEN TO RS. 20.59 LACS EVEN THOUGH THE GROSS RECEIPTS HAVE RISEN FROM RS. 34.09 LACS TO RS. 69.81 ONLY. FURTHERMORE IN THE INSTANT CASE IT IS ALSO SEEN THAT THE ASSESSEE HAS MADE PAYMENT S OF MORE THAN RS. 10,00,000/- OTHERWISE THAN BY CROSSED BANK CHEQUE WHICH ARE COVERED UNDER THE SPECIFIC PROVISIONS OF SECTION 40A(3) OF THE I.T. ACT, 1961. NO SUCH CIRCUMSTANCES EXISTED IN THE CASE OF M/S SHIVAM CONSTRUCTIONS. THUS, THERE ARE SPECIAL CIRCUMSTANC ES IN THE CASE OF THE ASSESSEE WHICH DIFFERENTIATES THE FACTS OF THE CAS E FROM THAT IN THE CASE OF M/S SHIVAM CONSTRUCTION. ACCORDINGLY, THE OBJEC TIONS OF THE ASSESSEE ARE REJECTED AND INCOME OF THE ASSESSEE I S ASSESSED AS UNDER:- 4.1.1 AS STATED ABOVE, AS PER THE P/L ACCOUNT ATT ACHED WITH THE RETURN OF INCOME, IT IS OBSERVED THAT THE ASSESSEE HAS DE BITED FOLLOWING EXPENSES:- S. NO. PARTICULARS AMOUNT (RS.) 1. MATERIALS PURCHASED, INCLUDING FREIGHT AND OTHER DIRECT EXPENSES 7286584/- 2. SALARIES TO STAFF 172000/- 3. MESS EXPENSED 80984/- 4. TRAVELLING & CONVEYANCE 79658/- 5. MISC. EXPENSES 16958/- 6. TELEPHONE 30558/- 4.1.2 IN ABSENCE OF ANY BOOKS OF ACCOUNTS AND VOUC HERS 10% OF THE ABOVE EXPENSES ARE DISALLOWED AND ADDED BACK TO IN COME OF THE ASSESSEE. THIS WILL RESULT IN ADDITION OF RS. 7,49 ,474/- TO THE INCOME OF THE ASSESSEE. PENALTY PROCEEDINGS U/S 271(1)(C) OF THE I.T. ACT, 1961 ARE ALSO INITIATED FOR FURNISHING INACCURATE PART ICULARS OF INCOME. ITA NO.474 & 481 (ASR)/2012 5 4.2.1 A PERUSAL OF THE BANK ACCOUNT OF THE ASSESS EE FLOWING PAYMENTS EXCEEDING RS. 20,000/- HAVE BEEN MADE OTHERWISE TH AN BY CROSSED BANK CHEQUE:- NAME OF THE PERSON AMOUNT (RS.) DATE OF PAYMENT OM PRAKASH 46000/- 07.06.2008 RANDHAVA MARBLES 32500/- 09.07.2008 RAMAN GUPTA 157000/- 19.09.2008 PAWANDEEP SINGH 83000/- 03.11.2008 S.M. SANITARY 50000/- 03.11.2008 NEELAM KUMAR 28000/- 04.11.2008 SANITARY ZONE 50000/- 27.11.2008 AMARDEEP 330000/- 15.01.2009 DWARKA KUMAR 250000/- 16.02.2008 4.2.3 THE ASSESSEE WAS ASKED TO EXPLAIN AS TO WHY THE ABOVE PAYMENTS MAY NOT BE DISALLOWED U/S 40A(3) OF THE I .T. ACT, 1961. THE ASSESSEE DID NOT FURNISH ANY EXPLANATION WITH REGA RD TO THE ABOVE. ACCORDINGLY, IN VIEW OF THE PROVISIONS OF SECTION 40A(3) OF THE I.T. ACT, 1961, THE ABOVE PAYMENTS MADE BY THE ASSESSEE OTHERWISE THAN BY CROSSED BANK CHEQUE/DRAFT ARE DISALLOWED AND AD DED BACK TO THE INCOME OF THE ASSESSEE. THIS WILL RESULT IN ADDITI ON OF RS. 10,26,500/- TO THE INCOME OF THE ASSESSEE. IN THE AUDIT REPORT TO AUDITOR HAS MENTIONED THAT THE ASSESSEE HAS FURNISHED A CERTIF ICATE THAT PAYMENTS ABOVE RS. 20,000/- HAVE BEEN MADE BY WAY OF CROSS ED CHEQUE. IN VIEW OF THE PENALTY PROCEEDINGS U/S 271(1)(C) OF T HE I.T. ACT, 1961 ARE ALSO INITIATED FOR FURNISHING INACCURATE PARTICULA RS OF INCOME. 5.3.1 FURTHER, IT IS OBSERVED THAT AS PER THE BALA NCE SHEET, THE ASSESSEE HAS SHOWN CREDITORS OF RS. 20,43,586/-. THE ASSESS EE HAS NOT PRODUCED ANY BOOKS OF ACCOUNTS OR HAS NOT FURNISHED THE NAM ES AND ADDRESSES OF THESE CREDITORS. IN ABSENCE OF THESE DETAILS THE A SSESSEE WAS ASKED TO AS TO WHY THE OUTSTANDING CREDITORS SHOWN AT RS. 2 0,43,586/- MAY NOT ADDED IN HIS INCOME. 5.3.2 THE ASSESSEE FAILED TO ESTABLISH THAT THE C REDITORS SHOWN BY HIM WERE ACTUALLY GENUINE. NOR TO TALK OF ADDRESSES, H E COULD NOT EVEN FILE A LIST OF THESE CREDITORS. NO DETAILS OF PAYMENTS SUBSEQUENTLY MADE TO THEN COULD BE FURNISHED BY HIM. THIS CLEARLY PROV ES THAT NO SUCH CREDITORS ACTUALLY EXISTED AND THE AMOUNT OF RS. 2 0,43,586/- SHOWN IN ITA NO.474 & 481 (ASR)/2012 6 THE BALANCE SHEET WAS A BOGUS ENTRY AND THAT THIS LIABILITY NEVER EXISTED. ACCORDINGLY, BOGUS LIABILITY OF RS. 20,43 ,586/- SHOWN BY THE ASSESSEE IN THE BALANCE SHEET IN THE NAME OF CREDI TORS IS DEEMED TO BE THE INCOME OF THE ASSESSEE AND ADDED TO HIS INCOME . PENALTY PROCEEDINGS U/S 271(1)(C) OF THE I.T. ACT, 1961 AR E ALSO INITIATED BY FURNISHING INACCURATE PARTICULARS OF INCOME. 4. THE LD. CIT(A) DELETED THE DISALLOWANCE OF RS.10 ,26,500/- UNDER SECTION 40A(3) OF THE ACT SINCE THE PAYMENTS HAD BE EN MADE THROUGH ACCOUNT PAYEE CHEQUES AS PER CERTIFICATE OF THE PUN JAB & SIND BANK. THE LD. CIT(A) OBSERVED THAT THE A.O. HAD MADE THE DISALLO WANCE WITHOUT MAKING ANY ENQUIRY FROM THE BANK AND THEREFORE, THE DISALL OWANCE SO MADE WAS NOT SUSTAINABLE AND ACCORDINGLY, HE DELETED THE SAID DI SALLOWANCE. 5. THE LD. CIT(A) ALSO DELETED THE DISALLOWANCE OF RS.7,49,474/- MADE BY THE AO ON AD-HOC BASIS. THE LD. CIT(A) OBSERVED THAT ANY COGENT FINDING HAS NOT BEEN GIVEN BY THE A.O. AND THE A.O. HAS NOT ELABORATED AND ESTABLISHED WITH AN INDEPENDENT ENQUIRY THAT THESE EXPENSES ARE FALSE OR BOGUS SINCE IT IS AN AUDITED CASE AND THE AUDITOR H AS NOT GIVEN ANY INDICATION THAT SUCH EXPENDITURE ARE NOT VOUCHED FOR. THE LD. CIT(A), ACCORDINGLY DELETED THE AD-HOC DISALLOWANCE OF RS.7,49,474/-. 6. AS REGARDS CREDITORS OF RS.20,43,586/- ON ACCOUN T OF SUNDRY CREDITORS AMOUNTING TO RS.2,17,897/- AND WAGES PAYABLE OF R S.18,25,689/-, WHICH ADDITIONS HAVE BEEN MADE BY THE A.O., THE LD. CIT(A ) OBSERVED THAT RS.2,17,897/- PERTAINS TO PURCHASES OF CEMENT, IRON AND PAINTS ETC. AND SUCH ITA NO.474 & 481 (ASR)/2012 7 EXPENSES ARE NORMAL EXPENDITURE AND THEREFORE, ACCE PTED THE SAME AS GENUINE. BUT AT THE SAME TIME, THE LD. CIT(A) DID N OT ACCEPT THE OUTSTANDING WAGES PAYABLE AT RS.18,25,689/- FOR THE REASON THAT THE CASUAL LABOUR CANNOT LEAVE HIS WAGES FOR MONTHS TOGETHER AND OBSERVED TH AT HUGE WAGES OF RS.18,25,689/- WHICH ARE ENTIRE WAGES ARE SHOWN AS PAYABLE AND ACCORDINGLY, HE CONFIRMED THE ADDITION OF RS.18,25 ,689/- BY DELETING THE ADDITION OF RS.2,17,897/- BEING SUNDRY CREDITORS, A S MENTIONED HEREINABOVE. 7. THE LD. COUNSEL FOR THE ASSESSEE, MR. P.N. ARORA , ARGUED THAT THE ASSESSEE IS A MES CONTRACTOR, WHO HAD LEFT THE JOB AFTER DOING CONTRACT BUSINESS I.E. AFTER THE IMPUGNED YEAR AND JOINED GO VT. SERVICE. THEREFORE, THE ASSESSEE COULD NOT PRODUCE BOOKS OF ACCOUNT BEFORE THE ASSESSING OFFICER. MR. P.N.ARORA, ADVOCATE, ARGUED THAT EVEN IF BOOKS OF ACCOUNT ARE NOT PRODUCED THEN THE AO CANNOT MAKE WILD ESTIMATE SPEC IFICALLY WHEN THE BOOKS OF ACCOUNT ARE AUDITED AND AUDITED ACCOUNTS A RE ON RECORD, WHICH IS UNDISPUTED. THE AO HAS TO MAKE ASSESSMENT U/S 143(3 )/144 OF THE ACT ON THE BASIS OF SUCH EVIDENCE WHICH THE ASSESSEE MAY P RODUCE OR THE A.O. GATHERS FOR THE PURPOSE OF HIS ASSESSMENT. IN THE PRESENT CASE, THE A.O. HAS IGNORED AUDITED ACCOUNTS OF THE IMPUGNED YEAR AND T HE NET PROFIT RATE AND GROSS RECEIPTS DECLARED DURING THE YEAR AS COMPARED TO THE PRECEDING YEAR. THE A.O. HAS IGNORED THAT GROSS RECEIPTS DURING TH E YEAR ARE DECLARED BY THE ASSESSEE ARE AT RS.69,80,712/- AS COMPARED 34,08,51 6/- IN THE PRECEDING YEAR ITA NO.474 & 481 (ASR)/2012 8 AND RS.27,09,436/- IN THE YEAR BEFORE PRECEDING YEA R. THE NET PROFIT DECLARED DURING THE YEAR WAS 8.85% AS COMPARED TO 6.52% DECL ARED IN THE IMMEDIATE PRECEDING YEAR AND 8% BEFORE THE IMMEDIATE PRECEDI NG YEAR. 7.1. IT WAS ARGUED BY MR. P.N. ARORA, ADVOCATE THA T IT IS WRONG TO OBSERVE BY THE AO AND THE LD. CIT(A) THAT THE WAGES PAYABLE HAVE NOT BEEN PAID DURING THE FOLLOWING YEAR. THE AUDITED ACCOUNTS WER E BEFORE THE A.O. AND THE LD. CIT(A) FOR THE FOLLOWING YEARS AS WELL AS F OR THE PRECEDING YEAR IN WHICH SUNDRY CREDITORS INCLUDING WAGES PAYABLE FOR THE YEAR ENDING 31 ST MARCH, 2007, 31 ST MARCH, 2008, 31 ST MARCH 2009 AND 31 ST MARCH, 2010 WERE SHOWN PAYABLE AT RS.9,55,312/- RS.1,96,542, RS.20,4 3,586/- AND RS.8,73,740/-. THEREFORE, THE FINDINGS OF THE LD. C IT(A) PRIMA FACIE CANNOT BE ACCEPTED IN VIEW OF THE AUDITED ACCOUNTS WHERE S UNDRY CREDITORS AMOUNTING TO RS.8,73,740/- WERE OUTSTANDING IN THE FOLLOWING YEAR AS COMPARED TO RS. 20,43,586/- INCLUDING WAGES PAYABLE AT RS.18,25,689/- IN THE IMPUGNED YEAR. HE FURTHER ARGUED IN CASE ADDIT IONS MADE ARE TAKEN INTO ACCOUNT AND NET PROFIT RATE IS CALCULATED, IT COMES TO 35% OF THE GROSS RECEIPTS, WHICH IS NOT POSSIBLE IN CONTRACTOR BUSI NESS AS THE ASSESSEE IS DOING AND NO SUCH POSSIBILITY OR COMPARABLE CASE HAS BEEN BROUGHT ON RECORD BY ANY OF THE AUTHORITIES BELOW. THE A.O. IS NOT JUSTI FIED IN MAKING DISALLOWANCE OF VARIOUS EXPENSES ON AD-HOC BASIS AN D THE LD. CIT(A) HAS RIGHTLY DELETED THE ADDITION. AS A MATTER OF FACT, IT IS NOT A CASE OF NON- ITA NO.474 & 481 (ASR)/2012 9 MAINTENANCE BUT THAT OF NON-PRODUCTION OF BOOKS OF ACCOUNT FOR THE REASONS MENTIONED HEREINABOVE AND THEREFORE, THE A.O. SHOUL D HAVE APPLIED THE NET PROFIT RATE WHICH IN FACT IS BETTER THAN AS COMPARE D TO THE PRECEDING YEAR. MR. P.N.ARORA, ADVOCATE, THEREFORE, PRAYED TO ALLOW THE APPEAL OF THE ASSESSEE AND DISMISSED THE APPEAL OF THE REVENUE. 8. MR. R.L.CHHANALIA, ADDL CIT (DR), ON THE OTHER H AND, RELIED UPON THE ORDER OF THE ASSESSING OFFICER. 9. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE FACTS OF THE CASE. WE ARE CONVINCED WITH THE ARGUMENTS MADE BY MR. P.N .ARORA, ADVOCATE, THAT THE A.O. COULD HAVE MADE THE ENQUIRY FROM THE BANK WHETHER SUCH CHEQUES ISSUED ARE BEARER CHEQUES OR ACCOUNT PAYEE CHEQUES BEFORE MAKING DISALLOWANCE U/S 40A(3) OF THE ACT., WHICH WAS NOT DONE BY THE AO. IN THE FACTS AND CIRCUMSTANCES, THE AO IS NOT JUSTIFIED IN MAKING SUCH DISALLOWANCE. THE LD. CIT(A), THEREFORE, HAS RIGHT LY DELETED SUCH DISALLOWANCE. 9.1. AS REGARDS THE OBJECTION OF THE REVENUE THAT T HE CERTIFICATE FROM THE BANK SHOULD NOT HAVE BEEN ACCEPTED BY THE LD. CIT(A ) AS AN ADDITIONAL EVIDENCE, IN THIS REGARD, WE ARE OF THE VIEW THAT T HE AO HAS NOT MADE ANY ENQUIRY BEFORE MAKING ANY DISALLOWANCE I.E. BEFORE ARRIVING AT THE CONCLUSION THAT THE PAYMENTS AT ALL HAVE BEEN MADE IN CASH. SUCH APPROACH OF THE A.O. IS INCORRECT APPROACH AND CANNOT BE ACC EPTED. ACCORDINGLY, WE ITA NO.474 & 481 (ASR)/2012 10 FIND NO INFIRMITY IN THE ORDER OF THE LD. CIT(A), W HO HAS RIGHTLY DELETED THE DISALLOWANCE MADE BY THE A.O. EVEN IF THE CERTIFICA TE FROM THE BANK WOULD NOT HAVE BEEN ACCEPTED BY THE LD. CIT(A). 9.2. AS REGARDS THE DISALLOWANCE MADE OF AN EXPEND ITURE OF 7,49,474/-, THE SAID DISALLOWANCE IS TOTALLY ON THE WHIMS AND F ANCIES OF THE A.O. AND IS ON AD-HOC BASIS WITHOUT GIVING ANY REASON BEFORE MA KING ANY DISALLOWANCE. THEREFORE, THE LD. CIT(A) HAS RIGHTLY DELETED TH E SAME. 9.3. AS REGARDS THE SUNDRY CREDITORS AMOUNTING TO R S.20,43,586/-, THE LD. CIT(A) CANNOT BLOW HOT AND COLD IN SAME BREATH BY A CCEPTING RS.2,17,897/- BEING CREDITORS FOR THE PURCHASE OF CEMENT, IRON AN D PAINTS AND REJECTING THE WAGES PAYABLE OF RS.18,25,689/-. AS A MATTER OF F ACT, THE OBSERVATIONS OF THE LD. CIT(A) AND THAT OF A.O. ARE NOT CORRECT OBS ERVATIONS FOR THE REASONS THAT THE ASSESSEE HAD MADE THE PAYMENTS OF THE WAGE S PAYABLE IN THE FOLLOWING YEARS IN VIEW OF THE ARGUMENTS MADE BY TH E LD. COUNSEL FOR THE ASSESSEE, HEREINABOVE. THE AO OR THE LD. CIT(A) HAS NOT POINTED OUT ANY OF THE WAGES WHICH ARE PAYABLE AS AT THE END OF THE IM PUGNED YEAR AS BOGUS OR SHAM. IN SUCH FACTS AND CIRCUMSTANCES, SUCH WAGES PAYABLE CANNOT BE DISALLOWED. MOREOVER, THE ASSESSEE HAS DECLARED GRO SS RECEIPTS OF RS.69,80,712/- AS COMPARED TO 34,08,516/- IN THE IM MEDIATE PRECEDING YEAR AND RS.27,09,436/- IN THE YEAR IMMEDIATE BEFORE TH E PRECEDING YEAR AND DECLARED NET PROFIT OF 8.85% WHICH IS BETTER AS COM PARED TO 6.52% DECLARED ITA NO.474 & 481 (ASR)/2012 11 IN THE IMMEDIATELY PRECEDING YEAR AND 8% IN THE YE AR BEFORE THE IMMEDIATE PRECEDING YEAR. IN SUCH FACTS AND CIRCUMSTANCES, H AVING DECLARED BETTER RESULTS NEITHER THE AO NOR THE LD. CIT(A) HAS TAKEN INTO CONSIDERATION THIS ASPECT AND HAS WRONGLY PROCEEDED TO MAKE OR CONFIRM ADDITION, WHICH IF CALCULATED MAKES NET PROFIT RATE OF 3.5% WHICH DO ES NOT APPEAR TO BE A POSSIBILITY IN A BUSINESS LIKE THAT OF THE ASSESSE E. IN SUCH FACTS AND CIRCUMSTANCES, THE ADDITIONS SO SUSTAINED BY THE LD . CIT(A) ARE DIRECTED TO BE DELETED AND DISALLOWANCE DELETED BY THE LD. CIT (A) HAS RIGHTLY BEEN DELETED. ACCORDINGLY, THE APPEAL OF THE ASSESSEE I N ITA NO.474(ASR)/2012 IS ALLOWED AND THE APPEAL OF THE REVENUE IN ITA NO. 481(ASR)/2012 IS DISMISSED. 10. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS AL LOWED AND THE APPEAL OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 12TH APRIL, 2013. SD/- SD/- (H.S. SIDHU) (B.P. JAIN) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 12TH APRIL, 2013 /SKR/ COPY OF THE ORDER FORWARDED TO: 1. THE ASSESSEE:SH.INDER PAUL SINGH, JAMMU. 2. THE ITO WARD 1(1), JAMMU 3. THE CIT(A), JAMMU. 4. THE CIT, JAMMU. 5. THE SR DR, ITAT, AMRITSAR.