The ACIT, Central Circle-1(1), Ahmedabad V. M/s. Miloni Enterprise, Ahmedabad

ITSSA 795/AHD/2010

• Counselvise Citation: [2014] 122 COUNSELVISE.COM (IT) 0031 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 4 month(s) 1 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 24-03-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 25-02-2014
• Assessment Year: 2004-2005
• Appeal Filed On: 22-11-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: VIJAY RANJAN
• Keywords: Business expenditure
• Section: 40A(3)

Judgement Text

, , , , , , , , IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH A BENCH, AHMEDABAD .., ! ! ! ! ' #$, BEFORE SHRI N.S. SAINI, ACCOUNTANT MEMBER AND SHRI KUL BHARAT, JUDICIAL MEMBER 1. !./ I.T(SS)A. NO.795/AHD/2010 A.Y. 2004-05 2. !./ I.T(SS)A. NO.810/AHD/2010 A.Y. 2004-05 1. ACIT CENTRAL CIRCLE-1(1) AHMEDABAD 2. M/S.MILONI ENTERPRISE DEVNANDAN PALACE NR.J.P.FARM AMBLI-BOPAL ROAD AHMEDABAD / VS. 1. M/S.MILONI ENTERPRISE AHMEDABAD 2. THE ACIT CENTRAL CIRCLE-1(1) AHMEDABAD & !./'( !./ PAN/GIR NO. : AAKFM 4340 D ( &) / // / APPELLANTS ) .. ( *+&) / RESPONDENTS ) REVENUE BY : SHRI SUBHASH BAINS, CIT-DR ASSESSEE BY: SHRI VIJAY RANJAN, A.R. ' , - $. / / / / DATE OF HEARING : 25/02/2014 /01 - $. / DATE OF PRONOUNCEMENT : 24/03/2014 2 / O R D E R PER SHRI KUL BHARAT, JUDICIAL MEMBER : THESE CROSS-APPEALS BY THE REVENUE AND THE ASSES SEE ARE DIRECTED AGAINST THE ORDER OF THE LD.COMMISSIONER OF INCOME TAX(APPEALS)-III, AHMEDABAD (CIT(A) FOR SHORT) DATED 28/09/2010 PE RTAINING TO ASSESSMENT YEAR (AY) 2004-05. THESE APPEALS WERE HEARD TOGETHER AND IT(SS)A NOS.795 & 810/AHD/ 2010 ACIT VS. M/S.MILONI ENTERPRISE (CROSS-APPEALS) ASST.YEAR 2004-05 - 2 - ARE BEING DISPOSED OF BY WAY OF THIS CONSOLIDATED O RDER FOR THE SAKE OF CONVENIENCE. 2. FIRST, WE TAKE UP THE REVENUES APPEAL IN IT(SS) A NO.795/AHD/2010 FOR AY 2004-05. THE REVENUE HAS R AISED THE FOLLOWING GROUNDS OF APPEAL:- 1. THE LD.CIT(A) HAS ERRED IN AW AND ON FACTS IN D ELETING THE ADDITION OF RS.18,30,000/- OUT OF TOTAL ADDITION OF RS.54,90 ,000/- MADE ON ACCOUNT OF DISALLOWANCE OF SUM CLEARANCE EXPENSES. 2. THE LD.CIT(A) HAS ERRED IN LAW AND ON FACTS IN OUGHT TO HAVE UPHELD THE ENTIRE ADDITION OF RS.54,90,000/- MADE ON ACCOU NT OF DISALLOWANCE OF 30% OF THE SLUM CLEARANCE EXPENSES. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE CIT(A) OUGHT TO HAVE UPHELD THE ADDITION OF RS.14,0 8,000/-. 4. IT IS, THEREFORE, PRAYED THAT THE ORDER OF THE CIT(A) BE SET ASIDE AND THAT OF THE A.O. BE RESTORED TO THE ABOVE EXTENT. 2. BRIEFLY STATED FACTS ARE THAT A SEARCH U/S.132 OF THE IT ACT WAS CARRIED OUT AT THE OFFICE PREMISE OF THE DHARAMDEV BUILDERS GROUP CASES. DURING THE COURSE OF SEARCH PROCEEDINGS, CERTAIN DO CUMENTS BELONGING TO THE ASSESSEE-FIRM WERE FOUND AND SEIZED. CONSEQUEN TLY, PROCEEDINGS UNDER CHAPTER-XIV WERE INITIATED AND NOTICE U/S.153 C OF THE ACT WAS ISSUED ON 28/10/2005. SUBSEQUENTLY, THE ASSESSMENT U/S.143A(B) OF THE I.T.ACT WAS FRAMED, THEREBY THE ASSESSING OFFICER(A O) MADE ADDITION OF RS.54,90,000/- ON ACCOUNT OF DISALLOWANCE OF PAYMEN T TO SLUM DWELLERS. AGAINST THIS, THE ASSESSEE PREFERRED AN APPEAL BEFO RE THE LD.CIT(A), WHO AFTER CONSIDERING THE SUBMISSIONS, PARTY ALLOWED TH E APPEAL THEREBY THE ADDITION OF RS.54,90,000/- WAS FURTHER REDUCED TO R S.36,60,000/-. IT(SS)A NOS.795 & 810/AHD/ 2010 ACIT VS. M/S.MILONI ENTERPRISE (CROSS-APPEALS) ASST.YEAR 2004-05 - 3 - AGAINST THIS ORDER OF THE LD.CIT(A), ASSESSEE AND R EVENUE HAVE PREFERRED APPEALS BEFORE US. 3. THE ONLY EFFECTIVE GROUND IN REVENUES APPEAL IS AGAINST DELETION OF ADDITION OF RS.18,30,000/- OUT OF TOTAL ADDITIO N OF RS.54,90,000/-. 3.1. THE LD.CIT-DR SHRI SUBHASH BAINS STRONGLY SUPP ORTED THE ORDER OF THE AO AND SUBMITTED THAT BEFORE THE AO THE ASSESSE E FAILED TO PRODUCE THE PERSONS WHO WERE VACATED FROM THE SO-CALLED SIT E. HE SUBMITTED THAT THE ASSESSEE DIRECTED ITS BANKER TO CONVERT THE AC COUNT PAYEE CHEQUES INTO THE PAY-ORDERS. 4. ON THE CONTRARY, LD.COUNSEL FOR THE ASSESSEE SHR I VIJAY RANJAN SUBMITTED THAT THE AUTHORITIES BELOW WERE NOT JUSTI FIED. IT IS NOT DISPUTED THAT THE ASSESSEE-FIRM IS ENGAGED IN THE BUSINESS O F LAND VACATING, CLEANING AND SURFACING. HE SUBMITTED THAT THE AUTH ORITIES HAVE NOT DOUBTED THE WORK OF CLEARANCE CARRIED OUT BY THE AS SESSEE. HE SUBMITTED THAT INTERESTINGLY THE AO INVOKED THE PROVISIONS OF SECTION 40A(3) OF THE ACT, DESPITE THE FACT THAT THE PAYMENT WAS MADE THR OUGH BANKING CHANNEL. HE SUBMITTED THAT THE AO OBSERVED THAT TH E ENTIRE PAYMENT OF RS.183 LACS PAID TO THE SLUM-DWELLERS ARE NOT GENUI NE. THE LD.COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE AO WRONGLY CAME TO SUCH CONCLUSION THAT THE PAYMENT OF RS.183 LACS WAS NOT GENUINE AND INVO KED THE PROVISIONS OF SECTION 40A(3) OF THE ACT AND DISALLOWED THE 30% OF THE EXPENSES BEING UNVERIFIABLE NATURE. HE SUBMITTED THAT ALTHO UGH THE LD.CIT(A) HAS GIVEN A FINDING THAT THE PROVISIONS OF SECTION 40A( 3) OF THE ACT WOULD NOT IT(SS)A NOS.795 & 810/AHD/ 2010 ACIT VS. M/S.MILONI ENTERPRISE (CROSS-APPEALS) ASST.YEAR 2004-05 - 4 - APPLY YET HE CONFIRMED THE DISALLOWANCE OF EXPENDIT URE @ 20%. HE SUBMITTED THAT SUCH ACTION OF THE LD.CIT(A) IS NOT JUSTIFIED. 4. WE HAVE HEARD THE RIVAL SUBMISSIONS, PERUSED THE MATERIAL AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. THE OBJECTION OF THE AO AS RECORDED IN PARA-3.5 OF HIS ORDER IS REPRODUCED HEREINBELOW FOR THE SAKE OF CLARITY. 3.5. THE SUBMISSION OF THE ASSESSEE HAS BEEN CAREF ULLY CONSIDERED, BUT THE EXPLANATION GIVEN ON EACH OF THE ISSUES RAISED IN T HE SHOW-CAUSE NOTICE IS NOT FOUND CONVINCING BECAUSE OF THE FOLLOWING REASONS:- (A) THE ASSESSEE HAS FURNISHED COPIES OF AGREEMENT ENTERED INTO BETWEEN ALL THE SLUM DWELLERS AND THE ASSESSES, BUT IT HAS NOT FURNISHED THE PRESENT WHEREABOUTS AND THE PRESENT ADDRESSES OF THEM. IT H AS EVEN FAILED TO PRODUCE RESIDENCE PROOF AND PHOTO ID OF EACH OF THE PAYEES. THE ADDRESS MENTIONED IN THE AGREEMENTS IS JUST THE OLD ADDRESS OF THE PLOT IN QUESTION, WHICH WAS GOT VACATED BY THE ASSESSEE FIRM. (B) ON PERUSAL OF ALL 51 AGREEMENTS IT IS NOTICED T HAT THE AMOUNT PAID TO EACH OF THE SLUM DWELLERS VARIES FROM RS.1,70,000/- TO R S.6,25,000/-. E.G., THE ASSESSEE HAD MADE PAYMENT OF RS.1,70,000/- ONLY TO SHRI JAGABHAI M. SOLANKI ON 25.02.2004 AND IT HAS MADE PAYMENT OF RS.6,25,00 0/- EACH TO SHRI DEVA PUJA KANJI AND SHRI KHIMJI RAVJI PARMAR ON 9.3.2004 . THE ASSESSEE COULD NOT PRODUCE ANY DOCUMENTARY EVIDENCE FOR THE VARIATION IN THE AMOUNTS SO PAID. IT HAS NOT FURNISHED ANY EVIDENCE REGARDING THE AREA O CCUPIED BY THE OCCUPANT, THE DATE AND PERIOD OF NEGOTIATION WITH THE PARTICU LAR OCCUPANT, THE NAME OF THE BROKER WHO HAS NEGOTIATED AND CONVINCED ANY PAR TICULAR OCCUPANT ETC. (C) DURING THE COURSE OF ASSESSMENT PROCEEDINGS, NE CESSARY ENQUIRIES WERE CARRIED OUT FROM THE ISSUING BANK AND COPIES OF THE CHEQUE ISSUED TO EACH OF THE PAYEES / OCCUPANTS WERE OBTAINED. ON PERUSAL OF THESE INSTRUMENTS IT IS NOTICED THAT EACH OF THE PAYEES HAD DISCOUNTED THE PAY-ORDER / BANKER'S CHEQUE FROM A COMMON SHROFF, I.E. MARUTI TRADERS. O N THE REVERSE SIDE OF THE INSTRUMENT, THE PAYEE HAS MADE ENDORSEMENT IN FAVOU R OF MARUTI TRADERS. THE SIGNATURE MADE BY THE PAYEE FOR MAKING THE ENDORSEM ENT DOES NOT TALLY WITH THE SIGNATURE OF THE PAYEE AS FOUND IN THE COPY OF AGREEMENT MADE BETWEEN THE ASSESSEE AND THE PAYEE/ OCCUPANT. ON ANALYSIS O F THESE INSTRUMENTS AND COMPARISON THEREOF WITH THE COPIES OF AGREEMENT FUR NISHED BY THE ASSESSEE, IT IS SEEN THAT ONLY IN 11 CASES AS POINTED OUT IN THE SHOW-CAUSE NOTICE, IT(SS)A NOS.795 & 810/AHD/ 2010 ACIT VS. M/S.MILONI ENTERPRISE (CROSS-APPEALS) ASST.YEAR 2004-05 - 5 - REPRODUCED HEREIN ABOVE, THE SIGNATURE OF THE PAYEE S AS APPEARING IN ENDORSEMENT MATCHES WITH THEIR SIGNATURE IN THE AGR EEMENT. IN OTHER WORDS, OUT OF TOTAL PAYMENT OF RS.1,83,00,000/-, ONLY IN R ESPECT OF RS.52 LACS THE SIGNATURE OF THE PAYEES/OCCUPANTS MATCHES IN BANK I NSTRUMENTS AND THE AGREEMENTS. THEREFORE, THE SIGNATURE OF 40 PAYEES APPEARING IN THE ENDORSEMENT DOES NOT MATCH WITH THEIR SIGNATURES IN THE AGREEMENTS. THIS PROVES THAT THE OCCUPANTS AS PER THE AGREEMENTS FILED ARE DIFFERENT THAN THAT OF THE PAYEES WHO HAD FINALLY RECEIVED THE PAYMENTS. THEREFORE, THE PAYEE S ARE NOT GENUINE. (D) AS MENTIONED HEREIN ABOVE, DURING THE COURSE OF ASSESSMENT PROCEEDINGS, NECESSARY ENQUIRIES WERE CONDUCTED AND INFORMATION WERE CALLED FOR FROM THE ISSUING BANK, I.E. MAHILA VIKAS CO-OP. BANK LTD,, V ASNA, AHMEDABAD. THE COPIES OF THE PAY-ORDERS/BANKER'S CHEQUES WERE OBTA INED. ON PERUSAL OF THESE INSTRUMENTS IT IS NOTICED THAT THOUGH THE BANK HAD ISSUED THESE PAY-ORDERS AS CROSSED AND MADE THEM AS PAYEE'S A/C ONLY, BUT SUBS EQUENTLY, THE A/C PAYEE CROSSING WAS CANCELLED INVARIABLY IN RESPECT OF EAC H OF THE INSTRUMENT AND, THEREFORE, FINALLY THE PAY-ORDERS WERE MADE BEARER. ONCE THE PAY-ORDERS OR DRAFTS ARE ISSUED AND CROSSED BY SPECIAL REMARKS AS 'PAYEES A/C ONLY', THE ISSUING BANK HAS GOT NO AUTHORITY TO CANCEL THE CRO SSING ON ITS OWN. THE SPECIAL CROSSING HAS TO BE CANCELLED ONLY ON THE IN STRUCTION OF THE PURCHASER OF THE PAY-ORDER. IT IS, THEREFORE, APPARENT THAT A FTER PURCHASING THE PAY- ORDERS, THE ASSESSEE FIRM HAS INSTRUCTED THE ISSUIN G BANK TO CANCEL THE CROSSING MARKED AS 'PAYEE'S A/C ONLY'. THIS CLEARLY PROVES THE MOTO OF THE ASSESSEE FIRM THAT IT JUST WANTED A PAY-ORDER WITH CERTAIN NUMBERS JUST TO SHOW IN THE RECORDS THAT THE ALLEGED PAYMENT WAS MA DE THROUGH BANKING CHANNEL AND THAT TOO BY CROSSED CHEQUE/DD. IN FACT THE ULTIMATE PAYEE HAS BEEN PAID IN CASH ONLY. THE PAY-ORDER/BANKER'S CHEQ UE ISSUED IN RESPECT OF EACH OF THE PAYEE WAS NEVER CREDITED IN THE BANK A/ C OF THE PAYEE CONCERNED. THIS ALSO PROVES THAT THE PAYEES WERE NOT MAINTAINI NG ANY BANK A/C WHICH AGAIN PROVES THAT THEY WERE NOT GENUINE. HAD THERE BEEN PAYMENTS THROUGH A/C PAYEE CHEQUES, THE PAYEES WOULD HAVE BEEN LOCAT ED THROUGH MONEY TRAIL AND THEIR IDENTITY AND GENUINENESS WOULD HAVE BEEN PROVED. BUT IN THIS CASE THE ASSESSEE HAS RESORTED TO MAKE THE PAYMENT THRO UGH BEARER CHEQUES WITH THE ONLY MOTIVE THAT THEIR IDENTITY AND GENUINENESS CANNOT BE PROVED FURTHER. 4.1. IT IS EVIDENT FROM THE ABOVE FINDINGS OF THE A O THAT THE OBJECTION OF THE AO WAS THAT THE ASSESSEE FAILED TO FURNISH T HE CURRENT ADDRESSES OF THE SLUM-DWELLERS. ANOTHER OBJECTION OF THE AO BEI NG THAT THE SIGNATURE ON THE CHEQUES, I.E. RECEIVERS OF THE PAYMENT DID N OT MATCH. WE FIND THAT THE LD.CIT(A) HAS GIVEN A FINDING THAT, IN THIS CAS E, CASH PAYMENT HAS NOT IT(SS)A NOS.795 & 810/AHD/ 2010 ACIT VS. M/S.MILONI ENTERPRISE (CROSS-APPEALS) ASST.YEAR 2004-05 - 6 - BEEN MADE BY THE APPELLANT TO ANY OF THE SLUM-DWELL ERS, PROVISIONS OF SECTION 40A(3) WOULD NOT APPLY BECAUSE EVEN AFTER D ELETING THE MARKING OF ACCOUNT PAYEE, THE PAY-ORDER STILL REMAINS AS CROSSED, FOR THE PURPOSE OF ESTIMATION OF NON-GENUINE EXPENSES, THE RECOURSE TO THE SECTION CAN BE TAKEN. UNDER THE FACTS OF THE PRESE NT CASE, THE LD.CIT(A) PROCEEDED TO MAKE A FAIR ESTIMATION TOWARDS NON-GEN UINE EXPENSES. WE FIND THAT THE ASSESSING OFFICER HAS DOUBTED THE GEN UINENESS OF THE EXPENSES. THE BASIS OF SUCH DOUBT, FIRSTLY IS THAT THE ACCOUNT PAYEE CHEQUES WERE CONVERTED INTO BEARER CHEQUES AND SEC ONDLY, THE SIGNATURE DID NOT MATCH WITH THE RECEIVERS SIGNATURE. WE D O NOT FIND ANY INFIRMITY IN THE ORDER OF THE LD.CIT(A) SO FAR IN G IVING THE FINDING THAT THE PROVISIONS OF SECTION 40A(3) OF THE ACT WOULD NOT A PPLY IN VIEW OF THE FACT THAT HE HAS GIVEN ON A FINDING ON FACT AND ALS O OBSERVED BY THE AO THAT PAYMENT HAS BEEN MADE BY PAY-ORDER OF MAHILA V IKAS CO-OP.BANK LTD. THE CONDITION FOR INVOKING THE SECTION 40A(3) OF THE ACT IS THAT WHERE THE ASSESSEE INCURS ANY EXPENDITURE IN RESPEC T OF WHICH PAYMENT IS MADE, AFTER SUCH DATE (NOT BEING LATER THAN THE 31 ST DAY OF MARCH, 1969) AS MAY BE SPECIFIED IN THIS BEHALF BY THE CENTRAL G OVERNMENT BY NOTIFICATION IN THE OFFICIAL GAZETTE, IN A SUM EXCE EDING TWENTY THOUSAND RUPEES OTHERWISE THAN BY A CROSSED CHEQUES DRAWN ON A BANK OR BY A CROSSED BANK DRAFT, TWENTY PER CENT OF SUCH EXPENDI TURE SHALL NOT BE ALLOWED AS A DEDUCTION. IN THIS CASE, THE PAYMENT HAS BEEN MADE BY WAY OF PAY-ORDER OF THE BANK, I.E. BANK DRAFT. 4.2. THE AO HAS GIVEN A FINDING THAT OUT OF TOTAL P AYMENT OF RS.183 LACS ONLY IN RESPECT OF RS.52 LACS THE SIGNATURE O F THE PAYEES/OCCUPANT IT(SS)A NOS.795 & 810/AHD/ 2010 ACIT VS. M/S.MILONI ENTERPRISE (CROSS-APPEALS) ASST.YEAR 2004-05 - 7 - MATCHES IN BANK INSTRUMENTS AND THE AGREEMENTS. T HEREFORE, THE SIGNATURE OF PAYEES APPEARING IN THE ENDORSEMENT DO ES NOT MATCH WITH THEIR SIGNATURE IN THE AGREEMENTS. THEREFORE THE A O CAME TO THE CONCLUSION THAT THE OCCUPANTS AS PER THE AGREEMENTS FILED ARE DIFFERENT THAN THAT OF THE PAYEES WHO HAD FINALLY RECEIVED TH E PAYMENTS. THEREFORE, THE PAYEES ARE NOT GENUINE. WE FIND TH AT THE AO HAS NOT CARRIED OUT ANY ENQUIRY FROM THE BANK WHETHER SUCH PERSONS WERE HOLDING BANK ACCOUNTS AND WHAT WAS THE ADDRESSES GIVEN IN T HE BANK ACCOUNTS. THE ASSESSEE ALSO DID NOT FURNISH THE CURRENT ADDRE SSES OF THE SLUM- DWELLERS. 5. AFTER CONSIDERING THE TOTALITY OF THE FACTS OF T HE CASE, WE ARE OF THE CONSIDERED VIEW THAT SUFFICIENT ENQUIRY HAS NOT BEE N MADE BY THE AO SINCE THE ASSESSEE HAD FURNISHED THE DETAILS WITH R EGARD TO THE LAND AND THE PARTY ON WHOSE INSTRUCTION THE LAND WAS CLEARE D FROM UNAUTHORIZED HUTMENTS AND ILLEGAL STRUCTURES. THE AO MADE NO EN QUIRY FROM THE PARTY TO VERIFY WHETHER SUCH WORK WAS ASSIGNED TO T HE ASSESSEE AND WHO WERE OCCUPANTS WERE REQUIRED TO BE CLEARED. IF THE ASSESSEE HAS CARRIED OUT CERTAIN WORKS, NATURALLY IT WOULD HAVE INCURRED THE EXPENDITURE. THE AO SHOULD HAVE GIVEN A CLEAR FINDING AFTER MAKING I NQUIRY FROM THE CONCERNED PARTY AS TO HOW MUCH EXPENDITURE WAS INCU RRED. THEREFORE, THE ESTIMATION OF UNVERIFIABLE EXPENSES OF SUCH CLEARAN CE @ 30% MADE BY THE AO AND 20% BY THE LD.CIT(A) IS NOT JUSTIFIED. HENCE, WE DO NOT FIND ANY MERIT IN THE GROUNDS OF APPEAL OF THE REVENUE, THE SAME ARE HEREBY REJECTED. 6. AS A RESULT, THE APPEAL OF THE REVENUE IN IT(SS) A NO.795/AHD/2010 FOR AY 2004-05 IS DISMISSED. IT(SS)A NOS.795 & 810/AHD/ 2010 ACIT VS. M/S.MILONI ENTERPRISE (CROSS-APPEALS) ASST.YEAR 2004-05 - 8 - 7. NOW, WE TAKE UP THE ASSESSEES APPEAL IN IT(SS)A NO.810/AHD/2010 FOR AY 2004-05. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL:- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E, THE CIT(A) SHOULD HAVE REALIZED THAT THE PROVISIONS OF SECTION 153C WERE NOT AT AL APPLICABLE TO THIS CASE AND THIS ASPECT HAS BEEN EM PHASIZED BY THE ASSESSEE RIGHT FROM THE BEGINNING INSOFAR AS DETAIL ED REASONS WERE GIVEN FOR OBJECTING TO THE APPLICATION OF SECTION 1 53C IN THE NOTES APPENDED TO THE RETURN OF INCOME FILED IN RESPONSE TO NOTICE U/S.153C. 2. WITHOUT PREJUDICE, ON THE FACTS AND IN THE CI RCUMSTANCES OF THE CASE, THE CIT(A) SHOULD HAVE FURTHER REALIZED THAT THE ASSESSING OFFICER WAS NOT JUSTIFIED IN EMBARKING UPON THE PROCESSING AND SCRUTINY OF THE ASSESSMENT IN A FASHION WHICH WAS PERMISSIBLE U/S.1 43(3) BUT NOT IN ASSESSMENT MADE U/S.153C. 3. WITHOUT PREJUDICE, ON THE FACTS AND IN THE CI RCUMSTANCES OF THE CASE THE CIT(A) ERRED IN REGARDING THIS CASE AS OF NON-G ENUINE BUSINESS EXPENDITURE AND ALSO ERRED IN HOLDING IT AS A CASE WARRANTING DISALLOWANCE U/S.40A(3) AND FURTHER ERRED IN QUANTI FYING THE DISALLOWANCE IN A SUM OF RS.36,60,000. 4. THE ASSESSEE CRAVES EAVE TO ADD, ALTER, AMEND A ND/OR WITHDRAW ANY GROUND OR GROUNDS OF APPEAL EITHER BEFORE OR DURING THE COURSE OF HEARING OF THE APPEAL. 8. IN THIS CASE, FACTS ARE IDENTICAL TO THE FACTS O F THE REVENUES APPEAL(SUPRA). CONSIDERING THE TOTALITY OF THE FAC TS AS WELL AS ARGUMENTS ADVANCED BY BOTH THE PARTIES, WE HAVE DECIDED THE R EVENUES APPEAL(SUPRA), BY OBSERVING AS UNDER:- 4.1. IT IS EVIDENT FROM THE ABOVE FINDINGS OF THE AO THAT THE OBJECTION OF THE AO WAS THAT THE ASSESSEE FAILED TO FURNISH THE CURR ENT ADDRESSES OF THE SLUM- DWELLERS. ANOTHER OBJECTION OF THE AO BEING THAT T HE SIGNATURE ON THE CHEQUES, I.E. RECEIVERS OF THE PAYMENT DID NOT MATC H. WE FIND THAT THE LD.CIT(A) HAS GIVEN A FINDING THAT, IN THIS CASE, C ASH PAYMENT HAS NOT BEEN MADE BY THE APPELLANT TO ANY OF THE SLUM-DWELLERS, PROVISIONS OF SECTION 40A(3) WOULD NOT APPLY BECAUSE EVEN AFTER DELETING THE MARKING OF ACCOUNT PAYEE, THE PAY-ORDER STILL REMAINS AS CROSSED, FOR THE PURPOSE OF ESTIMATION OF NON-GENUINE EXPENSES, THE RECOURSE TO THE SECTIO N CAN BE TAKEN. UNDER THE IT(SS)A NOS.795 & 810/AHD/ 2010 ACIT VS. M/S.MILONI ENTERPRISE (CROSS-APPEALS) ASST.YEAR 2004-05 - 9 - FACTS OF THE PRESENT CASE, THE LD.CIT(A) PROCEEDED TO MAKE A FAIR ESTIMATION TOWARDS NON-GENUINE EXPENSES. WE FIND THAT THE ASS ESSING OFFICER HAS DOUBTED THE GENUINENESS OF THE EXPENSES. THE BASIS OF SUCH DOUBT, FIRSTLY IS THAT THE ACCOUNT PAYEE CHEQUES WERE CONVERTED INTO BEARER CHEQUES AND SECONDLY, THE SIGNATURE DID NOT MATCH WITH THE RECE IVERS SIGNATURE. WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE LD.CIT(A) SO FAR IN GIVING THE FINDING THAT THE PROVISIONS OF SECTION 40A(3) OF THE ACT WOULD N OT APPLY IN VIEW OF THE FACT THAT HE HAS GIVEN ON A FINDING ON FACT AND ALSO OBS ERVED BY THE AO THAT PAYMENT HAS BEEN MADE BY PAY-ORDER OF MAHILA VIKAS CO-OP.BANK LTD. THE CONDITION FOR INVOKING THE SECTION 40A(3) OF THE AC T IS THAT WHERE THE ASSESSEE INCURS ANY EXPENDITURE IN RESPECT OF WHICH PAYMENT IS MADE, AFTER SUCH DATE (NOT BEING LATER THAN THE 31 ST DAY OF MARCH, 1969) AS MAY BE SPECIFIED IN THIS BEHALF BY THE CENTRAL GOVERNMENT BY NOTIFICATION IN THE OFFICIAL GAZETTE, IN A SUM EXCEEDING TWENTY THOUSAND RUPEES OTHERWISE THAN BY A CROSSED CHEQUES DRAWN ON A BANK OR BY A CROSSED BANK DRAFT, TWENTY PER CENT OF SUCH EXPENDITURE SHALL NOT BE ALLOWED AS A DEDUCTION. I N THIS CASE, THE PAYMENT HAS BEEN MADE BY WAY OF PAY-ORDER OF THE BANK, I.E. BAN K DRAFT. 4.2. THE AO HAS GIVEN A FINDING THAT OUT OF TOTAL P AYMENT OF RS.183 LACS ONLY IN RESPECT OF RS.52 LACS THE SIGNATURE OF THE PAYEES/OCCUPANT MATCHES IN BANK INSTRUMENTS AND THE AGREEMENTS. THEREFORE, T HE SIGNATURE OF PAYEES APPEARING IN THE ENDORSEMENT DOES NOT MATCH WITH TH EIR SIGNATURE IN THE AGREEMENTS. THEREFORE THE AO CAME TO THE CONCLUSIO N THAT THE OCCUPANTS AS PER THE AGREEMENTS FILED ARE DIFFERENT THAN THAT OF THE PAYEES WHO HAD FINALLY RECEIVED THE PAYMENTS. THEREFORE, THE PAYEES ARE N OT GENUINE. WE FIND THAT THE AO HAS NOT CARRIED OUT ANY ENQUIRY FROM THE BAN K WHETHER SUCH PERSONS WERE HOLDING BANK ACCOUNTS AND WHAT WAS THE ADDRESS ES GIVEN IN THE BANK ACCOUNTS. THE ASSESSEE ALSO DID NOT FURNISH THE CU RRENT ADDRESSES OF THE SLUM- DWELLERS. 5. AFTER CONSIDERING THE TOTALITY OF THE FACTS OF T HE CASE, WE ARE OF THE CONSIDERED VIEW THAT SUFFICIENT ENQUIRY HAS NOT BEE N MADE BY THE AO SINCE THE ASSESSEE HAD FURNISHED THE DETAILS WITH REGARD TO T HE LAND AND THE PARTY ON WHOSE INSTRUCTION THE LAND WAS CLEARED FROM UNAUTH ORIZED HUTMENTS AND ILLEGAL STRUCTURES. THE AO MADE NO ENQUIRY FROM T HE PARTY TO VERIFY WHETHER SUCH WORK WAS ASSIGNED TO THE ASSESSEE AND WHO WERE OCCUPANTS WERE REQUIRED TO BE CLEARED. IF THE ASSESSEE HAS CARRIED OUT CERTAIN WORKS, NATURALLY IT WOULD HAVE INCURRED THE EXPENDITURE. THE AO SHO ULD HAVE GIVEN A CLEAR FINDING AFTER MAKING INQUIRY FROM THE CONCERNED PAR TY AS TO HOW MUCH EXPENDITURE WAS INCURRED. THEREFORE, THE ESTIMATION OF UNVERIFIABLE EXPENSES OF SUCH CLEARANCE @ 30% MADE BY THE AO AND 20% BY T HE LD.CIT(A) IS NOT JUSTIFIED. HENCE, WE DO NOT FIND ANY MERIT IN THE GROUNDS OF APPEAL OF THE REVENUE, THE SAME ARE HEREBY REJECTED. IT(SS)A NOS.795 & 810/AHD/ 2010 ACIT VS. M/S.MILONI ENTERPRISE (CROSS-APPEALS) ASST.YEAR 2004-05 - 10 - 9. IN LIGHT OF THE AFORESAID OBSERVATION, WE ARE OF THE CONSIDERED VIEW THAT THE ESTIMATION OF DISALLOWANCE HAS BEEN MADE B Y THE AUTHORITIES BELOW IS AT THE HIGHER SIDE. MOREOVER, THE ASSESSE E IS ALSO NEITHER IN A POSITION TO GET THE CONFIRMATION FROM THE ENCROACHE RS NOR TO PRODUCE BEFORE THE AO EVEN AT THIS STAGE. THEREFORE, TO ME ET THE ENDS OF JUSTICE, WE RESTRICT THE ESTIMATION TO THE EXTENT OF 7% OF T HE TOTAL EXPENSES CLAIMED BY THE ASSESSEE. THUS, GROUNDS RAISED BY T HE ASSESSEE ARE PARTLY ALLOWED AS NARRATED ABOVE. 10. IN THE COMBINED RESULT, REVENUES APPEAL IS DIS MISSED, WHEREAS ASSESSEES APPEAL IS PARTLY ALLOWED AS DISCUSSED HE REINABOVE. ORDER PRONOUNCED IN COURT ON THE DATE MENTIONED HER EINABOVE AT CAPTION PAGE SD/- SD/- ( .. ) (' #$) ( N.S. SAINI ) ( KUL BHARAT ) ACCOUNTANT MEMBER JUDICIAL MEMBER AHMEDABAD; DATED 24/ 03 /2014 5..., .../ T.C. NAIR, SR. PS 2 - *$6 761$ 2 - *$6 761$ 2 - *$6 761$ 2 - *$6 761$/ COPY OF THE ORDER FORWARDED TO : 1. &) / THE APPELLANT 2. *+&) / THE RESPONDENT. 3. !! $ '8 / CONCERNED CIT 4. '8() / THE CIT(A)-III, AHMEDABAD 5. 6 #9 *$ , , / DR, ITAT, AHMEDABAD 6. 9:; <, / GUARD FILE. 2' 2' 2' 2' / BY ORDER, +6$ *$ //TRUE COPY// = == =/ // / !' !' !' !' ( DY./ASSTT.REGISTRAR) , , , , / ITAT, AHMEDABAD