Sri. Mallanagouda S. Sankagoudshani, Hubli V. DCIT, Hubli

ITA 904/BANG/2015

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 95366 (ITAT-BANGALORE)
• Duration Of Justice: 5 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-11-2015
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Assessment Year: 2006-2007
• Appeal Filed On: 10-06-2015
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: DR P K SRIHARI
• Assessee Lawyers: ASHOK KULKARNI
• Keywords: Depreciation; Income from undisclosed sources; Rectification of order; Opportunity of being heard; Reason to believe
• Section: 40A(3); 133A; 234B; 148; 154

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH : BANGALORE BEFORE SMT. ASHA VIJAYARAGHAVAN, JUDICIAL MEMBER AND SHRI JASON P. BOAZ, ACCOUNTANT MEMBER , ITA NO.904/BANG/2015 ASSESSMENT YEAR : 2006-07 SRI MALLANAGOUDA S. SANKAGOUDSHANI, NO.222, 2 ND FLOOR, BHAVANI ARCADE, NEAR BASAV VANA, N.C.M., HUBLI 580 029. PAN: AEUPS 7783Q VS. THE DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE 1(1), HUBLI. APPELLANT RESPONDENT APPELLANT BY : SHRI ASHOK KULKARNI, ADVOCATE RESPONDENT BY : DR. P.K. SRIHARI, ADDL. CIT(DR) DATE OF HEARING : 28.10.2015 DATE OF PRONOUNCEMENT : 30.11.2015 O R D E R PER ASHA VIJAYARAGHAVAN, JUDICIAL MEMBER THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST T HE ORDER DATED 27.02.2015 OF THE CIT(APPEALS), HUBLI FOR THE ASSE SSMENT YEAR 2006-07. 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESS EE IS A CONTRACTOR. DURING THE COURSE OF SURVEY U/S. 133A CONDUCTED ON 01.03.2011, CERTAIN INCRIMINATING DOCUMENTS, DIARIES WERE FOUND AND IMP OUNDED AS PER THE ITA NO.904/BANG/2015 PAGE 2 OF 13 INVENTORY OF BOOKS OF ACCOUNT/DOCUMENTS DRAWN DURIN G THE SURVEY ON 01/03/2011. ON VERIFICATION OF THE ENTRIES MADE IN THE IMPOUNDED DIARIES, THE ASSESSING OFFICER OBSERVED THAT RECEIPTS AND PA YMENTS AS RECORDED IN THE IMPOUNDED DIARY FOR THE MONTHS OF JANUARY 2006, FEBRUARY 2006 AND MARCH 2006 AGGREGATES TO RS. 1,40,62,868/- AND RS. 1,16,17,157/-. WHEREAS IN THE RETURN OF INCOME FOR THE WHOLE YEAR, THE RECEIPTS ARE SHOWN AT RS. 2,00,94,368/- AND PAYMENTS AT RS.1,75,08,014 /- (AFTER EXCLUDING DEPRECIATION). SUBSEQUENTLY, A NOTICE U/S. 148 DATE D 1.3.2013 WAS SERVED ON THE ASSESSEE AND THE AO ASSUMED JURISDICTION U/. S 147 OF THE ACT. THE AO HAS MADE CERTAIN ADDITIONS/DISALLOWANCE UNDER TH E HEADS MENTIONED BELOW :- 1. ADDITION OF RS.37,84,597/- AS RECEIPTS IS IMPROP ER AND UNJUSTIFIED. 2. ADDITION OF A SUM OF RS.14,420/- AS UNEXPLAINED CASH RECEIPTS. 3. ADDITION OF A SUM OF RS. 10,006/- AS UNEXPLAINE D RECEIPT. 4. ADDITION UNDER SECTION 40A(3) BRINGING TO TAX A SUM OF RS.6,16,351/- AS PER RECTIFICATION ORDER U/S 154 DA TED 21.02.2014. 5. DISALLOWANCE OF RS.2,227/- BEING CONTRIBUTION T O BENEVOLENT FUND. 3. AGGRIEVED BY THE ADDITIONS/DISALLOWANCES MADE BY THE AO, THE ASSESSEE PREFERRED AN APPEAL BEFORE THE CIT(APPEALS ). ITA NO.904/BANG/2015 PAGE 3 OF 13 4. BEFORE THE CIT(APPEALS), WITH RESPECT TO ASSUMPT ION OF JURISDICTION U/.S 147 AND ISSUE OF NOTICE U/S. 148 OF THE ACT, T HE ASSESSEE IN ITS WRITTEN SUBMISSIONS SUBMITTED THAT IT WAS NOT IN ACCORDANCE WITH LAW FOR THE REASON THAT THE IMPOUNDED DIARY WAS A PERSONAL DIARY TO AI D HIS MEMORY AND REITERATED THE SUBMISSIONS MADE FOR THE A.Y. 2007-0 8. IT WAS SUBMITTED THAT THE ASSESSMENT ORDER IS INVALID IN VIEW OF THE FIRST PROVISO TO SECTION 147 R/W. EXPLANATION 3 AS DETAILED IN THE SUBMISSIO NS FOR A.Y. 2007-08. 5. THE CIT(APPEALS) OBSERVED THAT THE RETURN WAS PR OCESSED U/S 143(1) AND IT WAS CONVERTED INTO SCRUTINY ASSESSMEN T BY ISSUING NOTICE U/S 143(2). IN THE MEANWHILE SURVEY U/S 133A OF THE IT ACT WAS CONDUCTED ON 01.03.2011. DURING THE SURVEY AO FOUND DIARY WHICH CONTAINED THE TRANSACTIONS OF THE ASSESSEE'S BUSINESS AND SOME OF THE TRANSACTIONS WERE NOT RECORDED AND REFLECTED IN THE REGULAR BOOKS OF ACCOUNTS. HENCE THE AO HAD THE REASON TO BELIEVE THAT INCOME HAS ESCAPED A ND ON THIS BELIEF AND BY RECORDING THE REASONS, NOTICE WAS ISSUED U/S 148 OF THE IT ACT. 6. THE CIT(APPEALS) FURTHER OBSERVED THAT REOPENING OF THE ASSESSMENT WAS TO BRING TO THE TAX NET ESCAPED INCO ME BASED ON THE DIARY ENTRIES WHICH WAS FOUND AT THE TIME OF SURVEY U/S. 133A OF THE ACT. HE WAS OF THE VIEW THAT BUT FOR THE SURVEY, THE ESCAPED IN COME OR THE TRANSACTIONS WHICH WERE NOT WRITTEN IN THE BOOKS OF ACCOUNTS WOU LD NOT HAVE SURFACED. RELYING ON THE DECISION OF THE HONBLE SUPREME COUR T IN THE CASE OF RAYMOND WOOLLEN MILLS LTD. V. ITO, 236 ITR 4 (SC) , HE UPHELD THE ACTION OF ITA NO.904/BANG/2015 PAGE 4 OF 13 THE AO IN REOPENING THE ASSESSMENT U/S. 147 OF THE ACT. AGGRIEVED, THE ASSESSEE IS IN APPEAL BEFORE US. 7. WE HAVE HEARD BOTH THE PARTIES. DURING THE SURV EY, THE AO HAS FOUND THAT THE DIARY WHICH CONTAINED TRANSACTIONS O F ASSESSEES BUSINESS AND SOME OF THE TRANSACTIONS WERE NOT RECORDED AND REFLECTED IN THE REGULAR BOOKS OF ACCOUNT. WE ARE THEREFORE OF THE OPINION THAT CONFIRMATION OF THE AOS ORDER WITH RESPECT TO REOPENING OF THE ASSESSM ENT IS VALID. 8. THE NEXT GROUND OF APPEAL IS RELATING TO ADDITIO N OF RS.37,84,597 AS INCOME FROM UNDISCLOSED SOURCES. THE AO OBSERVED THAT THE RECEIPTS RECORDED IN THE DIARY ARE NOT REFLECTED IN THE REGU LAR BOOKS OF ACCOUNTS. THE ASSESSEE WAS CALLED FOR TO EXPLAIN THE NATURE A ND SOURCE OF THE SUCH RECEIPTS AND COMPLETE ADDRESSES OF THE PERSONS FROM WHOM THE RECEIPTS WERE RECEIVED. THE ASSESSEE VIDE LETTER DATED 24/ 01/2014, STATED AS FOLLOWS:- REGARDING RECEIPTS AS PER THE ANNEXURE-A, WHICH AR E RECORDED IN THE DIARY RELATES TO THE AMOUNT RECEIVED AGAINST SALE OF MATERIALS OF RS.37,84,597/-, RECEIPTS FROM SALE OF AGRICULTURE PRODUCES OF RS.14,420, ENCASHMENT OF NSC OF RS.9,50 6/- AND CASH DRAWN FROM ATM OF RS.500/- RESPECTIVELY. A DET AILED STATEMENT IS SEPARATELY ENCLOSED. 9. REGARDING SALE OF MATERIALS, THE ASSESSEE ALSO S UBMITTED VIDE LETTER DATED 24.1.2014 AS FOLLOWS:- ITA NO.904/BANG/2015 PAGE 5 OF 13 REGARDING SALE OF MATERIALS IT IS FURTHER SUBMITT ED THAT I USED TO SELL THE SURPLUS MATERIALS WHICH IS PURCHASED ON BU LK QUANTITY AT A CONCESSIONAL RATE DIRECTLY FROM THE FACTORY TO THE FRIENDS AND RELATIVES WHO ARE CONSTRUCTING THE RESIDENTIAL BUIL DINGS AND ALSO TO THE FELLOW PETTY CONTRACTORS. NORMALLY I AM GETT ING THE BULK MATERIALS LIKE STEEL, CEMENT, JELLY ETC., AT A CONC ESSIONAL RATE WITHOUT DEALERS MARGIN DIRECTLY FROM THE MANUFACTUR ERS / WHOLE SALE DEALERS. DURING THE COURSE OF THIS SALE OF MAT ERIALS TO VARIOUS PARTIES, I USED TO GET A NOMINAL PROFIT MARGIN. 10. THE FACTS OF THE CASE ARE THAT WHEN THE AO CALL ED THE ASSESSEE TO FURNISH THE DETAILS AND EVIDENCE IN SUPPORT OF THE ASSESSEES CLAIM, THE ASSESSEE REITERATED THE SUBMISSIONS MADE VIDE ITS L ETTER DATED 24.01.2014. IT WAS FURTHER SUBMITTED THAT THE CIT(APPEALS) FOR THE A.YS. 2007-08 TO 2011-12 CONSIDER A PROFIT OF 9% ON THE SALE OF MATE RIALS INSTEAD OF WHOLE AMOUNT AND REQUESTED THAT THE SAME HAS TO BE CONSID ERED THOUGH IT IS ON MUCH HIGHER SIDE. THE AO FOUND FROM THE AUDIT REPO RT THE NATURE OF BUSINESS OF THE ASSESSEE IS INDICATED AS CIVIL ENG G. & PWD/GOVT. CONTRACTOR. IN THE ABSENCE OF DETAILS AND EVIDENC E FOR PURCHASE OF MATERIALS AS WELL AS VAT RETURN IN SUPPORT OF THE A SSESSEES CLAIM, THE AO ASSESSED THE RECEIPTS OF RS.37,84,597 TO TAX. 11. BEFORE THE CIT(APPEALS), THE ASSESSEE RELIED ON THE ORDER OF THE CIT(APPEALS) FOR THE A.YS. 2007-08 TO 2011-12 AND C ONTENDED THAT A SUITABLE RATE OF PROFIT TOWARDS SALE OF MATERIAL HA S TO BE CONSIDERED AND NOT WHOLE OF THE RECEIPTS. THE ASSESSEE FURNISHED GP DETAILS FROM THE LOCAL MARKET WHICH IS AS FOLLOWS:- ITA NO.904/BANG/2015 PAGE 6 OF 13 12. AVERAGE GROSS PROFIT FOR STEEL WAS GIVEN AT (6. 08 TO 7.56%), FOR CEMENT THE AVERAGE GROSS PROFIT WAS GIVEN AT (3.33 TO 5.09%) AND FOR JELLY NO AVERAGE GROSS PROFIT WAS GIVEN. THE CIT(A) DIREC TED THE AO TO TAKE AVERAGE GROSS PROFIT AT 9% ON TOTAL SALE OF MATERIA LS INCLUDING JELLY AND COMPUTE INCOME ACCORDINGLY. THUS, THIS ISSUE WAS PA RTLY ALLOWED BY THE CIT(A). 13. AGGRIEVED, THE ASSESSEE IS IN APPEAL BEFORE US. 14. WE HAVE HEARD BOTH THE PARTIES. WE FIND FROM T HE GP DETAILS FROM THE LOCAL MARKET FURNISHED BEFORE THE CIT(APPEALS) THAT AVERAGE GP IS 5.5% APPROXIMATELY AND HENCE WE ARE OF THE OPINION THAT THE CIT(A) WAS NOT JUSTIFIED IN ADOPTING GP AT 9% ON TOTAL SALE OF MATERIALS INCLUDING JELLY. HENCE, THE AO IS DIRECTED TO WORK OUT THE GP RATE A T 5.5% ON SALE OF MATERIALS INSTEAD OF 9% DIRECTED BY THE CIT(A). ITA NO.904/BANG/2015 PAGE 7 OF 13 15. THE NEXT GROUND OF APPEAL IS REGARDING ADDITION OF RS.14,420 AS UNEXPLAINED CASH RECEIPTS. THE ASSESSEE VIDE HIS L ETTER DATED 24.1.2014 CLAIMED THAT THE DIARY ENTRIES REPRESENT AGRICULTUR AL RECEIPTS BEING CASH RECEIVED BY BANANA SALE. THE AO WAS OF THE OPINION THAT NO EVIDENCE WAS FURNISHED TO INDICATE THAT SUCH RECEIPTS REPRESENT AGRICULTURAL RECEIPTS. THE AO OBSERVED THAT FROM THE RETURNS FILED FOR THE YEA R UNDER CONSIDERATION AND SUBSEQUENT YEARS, THE ASSESSEE HAS NOT DECLARED ANY AGRICULTURAL INCOME. HE WAS OF THE VIEW THAT MERELY BECAUSE THE ASSESSEE IS HOLDING AGRICULTURAL LANDS, IT COULD NOT BE PRESUMED THAT T HE ASSESSEE HAS DERIVED INCOME FROM AGRICULTURAL ACTIVITY. THE AO THEREFOR E ASSESSED THE UNEXPLAINED RECEIPTS OF RS.14,420 AS INCOME OF THE ASSESSEE FROM UNDISCLOSED SOURCES. 16. BEFORE THE CIT(APPEALS), THE ASSESSEE STATED TH AT HE HAD SUBSTANTIAL AGRICULTURAL LAND HOLDINGS AND CONCERNE D COPIES OF THE PROPERTY EXTRACTS WERE FURNISHED TO THE AO, THUS THE SOURCE IS FROM AGRICULTURAL INCOME. THE CIT(APPEALS) HELD AS FOLLOWS:- AS PER THE DIARY THAT WAS FOUND AT THE TIME OF SUR VEY, IT WAS MENTIONED THAT THE ASSESSEE HAS RECEIVED RS. 14,420 /- ON AGRICULTURAL INCOME BUT HAS NOT FILED ANY DETAILS S UCH AS AGRICULTURAL INCOME, EXPENDITURE, AND THE DETAILS S UCH AS USE OF MANURE, FERTILIZERS AND PESTICIDES ETC. MERE POSITI ON OF THE AGRICULTURAL LAND CANNOT BE ACCEPTABLE WITHOUT CORR ESPONDING AGRICULTURAL EXPENDITURE AND AGRICULTURAL RECEIPTS DETAILS. THOUGH THE REASONABLE OPPORTUNITY HAS GIVEN TO THE ASSESSE E, TO SUBSTANTIATE HIS CLAIM OF AGRICULTURAL INCOME, ASSE SSEE HAS NOT FILED THE DETAILS IN SUPPORT OF HIS CLAIM FOR AGRIC ULTURAL INCOME. HENCE, IN THE ABSENCE OF DETAILS, I DONT HAVE ANY OPTION OTHER ITA NO.904/BANG/2015 PAGE 8 OF 13 THAN UPHOLDING THE ADDITION MADE BY THE AO. SO, THE ADDITION MADE BY THE AO IS UPHELD . . 17. WE HAVE HEARD BOTH THE PARTIES. WE ARE OF THE OPINION THAT ONE MORE OPPORTUNITY IS TO BE AFFORDED TO THE ASSESSEE TO PRODUCE DETAILS OF AGRICULTURAL LAND HOLDING TO ESTABLISH THAT HE HAD AGRICULTURAL INCOME WHICH IS NET OF AGRICULTURAL EXPENDITURE. WE THEREFORE R ESTORE THIS ISSUE TO THE FILE OF THE ASSESSING OFFICER TO EXAMINE THE GOVERNMENT RECORDS AS TO WHICH CROPS ARE GROWN AND THE PRICE IT WOULD FETCH IN THE MARKET SO AS TO ARRIVE AT THE AGRICULTURAL INCOME AS CLAIMED BY THE ASSESSEE. 18. THE NEXT GROUND OF APPEAL IS RELATING TO ADDITI ON OF RS.10,006 AS UNEXPLAINED RECEIPT. THE AO NOTICED FROM THE STATE MENT ENCLOSED TO THE ASSESSEES LETTER DATED 24/01/2014, IT WAS CLAIMED THAT THE FOLLOWING DIARY ENTRIES REPRESENT NSC ENCASHMENT AND CASH DRAWN FRO M BANK:- 19. IN RESPONSE TO DETAILS AND EVIDENCE CALLED FOR BY THE AO, THE ASSESSEE STATED THAT FOR THE PURPOSE OF TENDER THE NSC OF RS.9,506 WAS PURCHASED AND LATER THE SAME WAS ENCASHED AS THE SA ME WAS NO MORE REQUIRED FOR THE TENDER WORKS. RS.500/- IS DRAWN F ROM THE ATM OF ICICI ITA NO.904/BANG/2015 PAGE 9 OF 13 BANK. IT WAS ARGUED THAT THERE WAS ALREADY SUFFICIE NT WITHDRAWAL IN THE ASSESSEES CAPITAL ACCOUNT, THEREFORE, THE SOURCE I S DULY EXPLAINED. 20. THE AO WAS OF THE VIEW THAT THE ASSESSEE HAS NO T FURNISHED THE DETAILS OF NSC AND HOW THE SAID INVESTMENT IS REFLE CTED IN THE BOOKS, ALSO THE SAID ENCASHMENT OF NSC HAS NOT BEEN REFLECTED A S RECEIPTS IN THE REGULAR BOOKS OF ACCOUNT. AS REGARDS WITHDRAWAL OF CASH FROM ATM, THE AO OBSERVED THAT THE ASSESSEE HAS NOT EXPLAINED HOW TH E SAID CASH IS REFLECTED IN THE BOOKS. ACCORDING TO THE AO, THE AS SESSEES EXPLANATION THAT THERE ARE SUFFICIENT WITHDRAWALS WAS NOT CONVI NCING. HENCE THE AO ASSESSED THE SAID RECEIPTS OF RS. 10,006 AS INCOME FROM UNEXPLAINED RECEIPTS. 21. BEFORE THE CIT(APPEALS), THE ASSESSEE REITERATE D THE SUBMISSIONS MADE BEFORE THE AO. 22. THE CIT(APPEALS) HELD THAT THE ASSESSEE HAS NOT FILED ANY DETAILS IN SUPPORT OF HIS CLAIM OF NSC AND DEPENDED ONLY ON AT M DRAWINGS AND HENCE IN THE ABSENCE OF DETAILS, HE UPHELD THE ADDI TION MADE BY THE AO. 23. WE HAVE HEARD BOTH THE PARTIES. WE ARE OF THE OPINION THAT ONE MORE OPPORTUNITY IS TO BE AFFORDED TO THE ASSESSEE TO EXPLAIN HIS CASE BEFORE THE AO AS IT IS STATED THAT THE ASSESSEE HAS SUFFICIENT WITHDRAWALS FROM HIS CAPITAL ACCOUNT AND THE SOURCE IS EXPLAINE D. WE THEREFORE RESTORE ITA NO.904/BANG/2015 PAGE 10 OF 13 THIS ISSUE TO THE FILE OF THE ASSESSING OFFICER FOR FRESH EXAMINATION AFTER GIVING AN OPPORTUNITY OF BEING HEARD TO THE ASSESSE E. 24. THE NEXT GROUND OF APPEAL IS REGARDING THE ADDI TION OF A SUM OF RS.6,16,351 U/S. 40A(3). THE AO OBSERVED FROM THE DETAILS OF EXPENSES AND PARTY PAYMENT TOWARDS MATERIALS THAT ASSESSEE M ADE CASH PAYMENTS TO VARIOUS PARTIES EXCEEDING RS.20,000 IN CONTRAVEN TION OF THE PROVISIONS OF SECTION 40A(3). THE AGGREGATE OF SUCH PAYMENTS WOR KED OUT TO RS.30,81,756. THE AO WAS OF THE VIEW THAT THE SAI D PAYMENTS ARE ALLOWED TO BE SET OFF AGAINST UNEXPLAINED RECEIPTS AND HENC E THE SAME ARE REQUIRED TO BE DISALLOWED U/S. 40A(3). HENCE DISALLOWANCE OF RS.30,81,756 WAS MADE BY THE AO U/S. 40A(3). BY THE RECTIFICATION O RDER U/S. 154 DATED 21.2.14, DISALLOWANCE U/S. 40A(3) OF RS.30,81,756 W AS RESTRICTED TO RS.6,16,351 BEING 20% OF THE PAYMENT MADE IN CONTRA VENTION OF PROVISIONS OF SECTION 40A(3). 25. THE CIT(A) UPHELD THE ADDITION MADE BY THE AO I N THE ABSENCE OF DETAILS OF CASH PAYMENTS TO DIFFERENT PARTIES AND T HE CIRCUMSTANCES UNDER WHICH THE ASSESSEE MADE THE CASH PAYMENT IN SUPPORT OF THE ASSESSEES CLAIM. 26. THE LD. COUNSEL FOR THE ASSESSEE REITERATED THE SUBMISSIONS MADE BEFORE THE LOWER AUTHORITIES THAT INVOKING OF THE P ROVISIONS OF SECTION 40A(3) AND THE ADDITION OF RS.6,16,351 IS UNJUSTIFIED SINC E IT HAS NOT BEEN SHOWN THAT ANY PART OF THE PAYMENTS AS REFLECTED IN THE D IARY REPRESENTS ITA NO.904/BANG/2015 PAGE 11 OF 13 EXPENDITURE CLAIMED AS A DEDUCTION IN COMPUTING INC OME UNDER THE HEAD OF BUSINESS OR OTHER SOURCES. IT WAS SUBMITTED TH AT EVERY PAYMENT PER SE IS NOT LIABLE TO ACTION U/S. 40A(3) UNLESS IT FALLS WITHIN THE REALM OF CLAIMED EXPENDITURE WITH RESPECT TO THE ABOVE TWO HEADS. 27. THE LD. COUNSEL FOR THE ASSESSEE RELIED ON THE DECISION OF THE HONBLE ALLAHABAD HIGH COURT IN THE CASE OF CIT V. BANWARI LAL BANSHIDHAR, 229 ITR 229 (ALL) AT PAGE 232. HE ALSO RELIED ON THE DECISION OF THE HONBLE ANDHRA PRADESH HIGH COURT IN THE CAS E OF INDWELL CONSTRUCTIONS V. CIT, 232 ITR 776 (AP) WHEREIN IT WAS HELD AS UNDER:- . . . THE QUESTION ARISES WHETHER IN SUCH A CASE ANY DEDUCTION ON ACCOUNT OF PURCHASES IS AT ALL ALLOWED TO THE AS SESSEE, THOUGH IT MAY BE TRUE THAT A GROSS PROFIT RATE OF 15 PER CENT WAS FIXED KEEPING IN VIEW ALL RELEVANT FACTS INCLUDING THE PU RCHASES MADE BY THE ASSESSEE. INASMUCH AS WE ARE OF THE VIEW THA T NO DEDUCTION AS SUCH HAVING BEEN ALLOWED TO THE ASSESSEE ON ACCO UNT OF PURCHASES, WE HOLD THAT NO QUESTION OF ANY DISALLOW ANCE ON ACCOUNT OF PURCHASE CAN BE MADE IN THIS CASE UNDER SECTION 40A(3). 28. THE LD. DR OBJECTED TO THE SUBMISSION OF THE AS SESSEE STATING THAT WITH RESPECT TO BOTH CONTRACT AND TRADING, ESTIMATE WAS U/S. 40A(3) AND ASSESSEES CLAIM THAT SEC. 40A(3) WOULD BE INAPPLIC ABLE CAN BE RESTRICTED ONLY TO THE TRADING PORTION, WHOSE GP WAS DETERMINE D AT 9%, CANNOT BE ACCEPTED. HE ARGUED THAT SECTION 40A(3) WOULD APPL Y TO THE CONTRACT AND TRADING RECEIPTS. ITA NO.904/BANG/2015 PAGE 12 OF 13 29. WE HAVE HEARD BOTH THE PARTIES. WE AGREE WITH THE CLAIM OF ASSESSEE THAT ONCE THERE HAS BEEN AN ESTIMATE, ALL THE DEDUCTIONS ARE DEEMED TO HAVE BEEN TAKEN INTO ACCOUNT WHILE MAKING SUCH ESTIMATE AND HENCE NO SEPARATE ADDITION CAN BE MADE. HOWEVER, W HETHER THE ESTIMATE IS ONLY FOR TRADING PART OF THE ASSESSEES BUSINESS OR IT IS ALSO TOWARDS CONTRACT PART OF THE BUSINESS IS TO BE VERIFIED BY THE AO. IN THESE CIRCUMSTANCES, WE DEEM IT FIT TO SET ASIDE THE ISSU E TO THE FILE OF THE ASSESSING OFFICER WITH A DIRECTION TO REDO THE ASSE SSMENT FOLLOWING THE DECISION IN THE CASE OF INDWELL CONSTRUCTIONS (SUPRA) . 30. LEVY OF INTEREST U/S. 234B IS CONSEQUENTIAL IN NATURE AND THE AO IS DIRECTED TO GIVE CONSEQUENTIAL EFFECT. 31. IN THE RESULT, THE APPEAL BY THE ASSESSEE IS PA RTLY ALLOWED. PRONOUNCED IN THE OPEN COURT ON THIS 30 TH DAY OF NOVEMBER, 2015. SD/- SD/- ( JASON P. BOAZ ) (ASHA VIJAYARAGHAVAN ) ACCOUNTANT MEMBER JUDICIAL ME MBER BANGALORE, DATED, THE 30 TH NOVEMBER, 2015. /D S/ ITA NO.904/BANG/2015 PAGE 13 OF 13 COPY TO: 1. APPELLANT 2. RESPONDENTS 3. CIT 4. CIT(A) 5. DR, ITAT, BANGALORE. 6. GUARD FILE BY ORDER ASSISTANT REGISTRAR, ITAT, BANGALORE.