2010 (12) TMI 953

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....; Deepak Gupta:   This appeal was admitted on the following substantial question of law:-   1. Whether the Tribunal was correct in upholding the disallowance made under Section 40-A (3) even when the appellant had produced receipt on record to prove that each payment constituted a different transaction. That further the Tribunal has been right in holding that the receipts issued....

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....d the amount paid in cash in violation of Section 40-A (3) cannot be added back to ascertain the gross profits.   Sh. Vinay Kuthiala, learned counsel for the respondent raised a preliminary submission that such an objection cannot be permitted to be raised since this objection was not raised before any of the authorities below. He relied upon the judgment in Chanana Associates vs. Commissi....

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....e find from the order of the Assessing Authority that after rejecting the books of accounts, he dealt with each item in which the assessee deals in and came to a conclusion that the rate of profit for each item should be a particular percentage and thereby computed the profit. Once he computed the profit on the basis of percentage then he could not have added back the amounts paid in cash because ....

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....sessee was computed applying the gross profit rate and when no deduction was allowed in regard to the purchases of the assessee, there was no need to look into the provisions of section 40A(3) and rule 6DD(j). No disallowance could have been made in view of the provisions of Section 40A(3) read with rule 6DD(j) as no deduction was allowed to and claimed by the assessee in respect of the purchases.....