AI Drafter 
TaxTMI 
TaxTMI 
TaxTMI 
2016 (5) TMI 752
X X X X Extracts X X X X
X X X X Extracts X X X X
....d is therefore liable to be quashed. " 3. We find that the admission of said additional ground would be of paramount importance as it goes to the root of the matter and would also be relevant for adjudication of other regular grounds of appeal as raised by the assessee before us. We also find that for admission of said additional ground does not require any fresh investigation of facts. Hence, in the light of the judgment of the Hon'ble Supreme Court in the case of NTPC Ltd Vs. CIT reported in 229 ITR 383(SC), we admit the additional ground as raised by the assessee before us. 4. The assessee has raised the following regular grounds of appeal :- I. The ld. CIT(A) XXXIII Kolkata is wholly wrong to act and decide the issue being difference in running accounts of regular supplier without confronting both the parties as to the correctness of the respective figures in accounts as per provision of Section 1432(3) of the Act; II. The ld. CIT(A) is wrong to uphold the presumption that the figures in question constituted unexplained expenditure made and paid to the regular supplier of goods without identifying the same with evidences; III. The ld. CIT(A) is ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... "3. Rejection of Accounts u/ s 145(3) : 3.1 In course of assessment proceedings the following discrepancies in accounts of the assessee were observed:- i) It was observed that there was difference in ledger accounts received under section 133(6) from M/s. V.T.R. Marketing Ltd and M/s. United enterprises, (creditors of assessee) about the transaction with assessee and the Ledger accounts submitted by the assessee about transaction with the said parties. ii) Further there was difference in opening balance as on 01.04.05 as per bank statement and the assessee's accounts. The assessee was unable to reconcile the said difference in the course of assessment proceedings. iii) Fixed deposits with United Bank of India, Garkamalpur Branch, were not disclosed in Books of Accounts. iv) There was difference in interest actually paid to the said bank and interest claimed to be paid in books of accounts. v) The cash payments made to different per-ties for purchase were not recorded in books of accounts correctly." 8. This addition was also upheld by the ld. CIT(A) on 1st appeal. Aggrieved, the assessee is in appeal before us. 9. T....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ons. The computation under section 29 is to be made under section 145 on the basis of the books regularly maintained by the assessee. If those books are not correct or complete, the Income-tax Officer may reject those books and estimate the income to the best of his judgment. When such an estimate is made, it is in substitution of the income that is to be computed under section 29. In other words all the deductions which are referred to under section 29 are deemed to have been taken into account while making such an estimate. This will also mean that the embargo placed in section 40 is also taken into account. " 11. We also find that the ld.AO has made separate addition u/s. 40A(3) of the Act amounting to Rs. 5,18,163/-. 12. Brief facts of this issue are that the ld.AO observed that the assessee has made payment in excess of Rs. 20,000/- otherwise than by way of account payee cheque or account payee bank draft to the following parties;- 1) M/s United Enterprise Rs.19,73,812/- 2) M/sVTR Marketing Rs. 1,67,000/- 3) M/s. Contai F.L Trade Rs. 4,10,000/- 4) M/s Jharkhand Liquor.(P) Ltd Rs. 40,000/- Total : Rs.25,90,812/-  ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 40A(3) has no application and no disallowance can be made. The Allahabad High Court has also held that when the gross profit rate is applied that would take care of everything and there was no need for the AO to make scrutiny of the amount incurred on the purchases by the assessee. Further the ld. ITAT, Kolkata has held in the case of M/s. Koh Sinn Tannery and M/s. Chien Hsing Tannery (supra) that no disallowance u/s.40A(3) can be made in a case where the books of accounts are rejected and the assessment is made ex-parte by estimating the profit. The ld. Tribunal has also relied upon the decisions of Allahabad High Court in the case of Banwarilal Bansidhar ( supra) and A.P High Court in the case of Indwell Construction -vs- CIT (232 ITR 776) in this regard. The reason as given by the ld. ITAT in the case of M/s. Chien Hsing Tannery is reproduced below: ... ... In our opinion, while exercising one option i.e. estimating the ideal profit by the Assessing Officer and rejecting the books of accounts, the Assessing Officer, ipso factor renounces the other alternative of modifying the book results so accepted in the light of various provisions. With rejection of books of accoun....
X X X X Extracts X X X X
X X X X Extracts X X X X
....nd and building for Rs. 5,25,000/-. The ld.AO observed that the assessee has incurred a sum of Rs. 31,500/- towards stamp duty and Rs. 2,500/- towards other incidental expenditure for registration of the said property. These two payments were admittedly not recorded in the books of account of the assessee and the ld. AO brought the same to tax as unexplained investment. 19. Similarly, the ld.AO found that the assessee has made investment in reinvestment deposits and recurring deposits with the bank for a sum of Rs. 53,000/-, which was also brought to tax as unexplained investment by the ld.AO. On 1st appeal, the assessee argued that these payments were made out of withdrawals from the bank and investment in deposits were made out of cash credit facility availed from the bank, which were even retained as security by the bank for granting the loan. He further argued that after rejecting the books of account the ld.AO cannot make separate addition towards transactions that are not recorded in the rejected books of account. The ld. CIT(A) not being convinced with the arguments of the ld.AR upheld the order of the ld.AO on this issue. Aggrieved, the assessee is in appeal before us by....