TaxTMI 
TaxTMI 
2017 (10) TMI 632
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....ntentions of the ld. DR, both the appeals are being disposed off on merits. ITA No. 434/JP/16 (Grounds of Assessee's appeal):- "1. That the Ld. CIT(A) grossly erred on law & facts in not adjudicating the ground No. 1 to 4 raised before him. The grounds are as under: 1. That on the facts and in the circumstances the assessment order of the learned Assessing Officer is against the law and facts of the case. 2. That on the facts and in the circumstances of the case the learned Assessing officer grossly erred appointing the special auditor u/s 142(2A) of the Income Tax Act, 1961. 3. That the special audit report as submitted by the special auditor is not as per law on the facts and in the circumstances of the case. 4. That on the facts and in the circumstances of the case the learned Assessing Officer grossly erred in follow up the unjustified/unlawful special audit report without keeping proper attention on the records, submission of the appellant and facts of the case. (2) That the Ld. CIT(A) grossly erred on law & facts in not allowing relief on the addition made by the Ld. A.O by estimating the N.P @ 12.5% and thereby making additi....
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.... 3. The position as it stands today vis-à-vis various additions made by the AO is as under: Particulars Amount (Rs) Remarks 1. Addition after application of N.P. rate 2,77,049 Confirmed by the ld CIT(A) 2. Capital Introduced by the Proprietor during the year 6,97,919/- Confirmed by the ld CIT(A) 3. Capital Expenditure Claimed as Revenue Expenditure 16,225/- Confirmed by the ld CIT(A) 4. Unexplained Investment u/s 69 12,94,873/- Partly Confirmed by the ld CIT(A) to the extent of Rs. 59,873 and the balance deleted 5. Violation of section 40A(3)- (Cash payments above Rs. 20,000/-) 1,41,34,476/- Deleted by the ld CIT(A) 6. Unexplained Expenditure u/s 69C 1,18,34,723/- Deleted by the ld CIT(A) 7. Unaccounted Income (Unverified Bank deposits/DD) 23,04,667/- Partly deleted by the ld CIT(A) to the extent of Rs. 14,72,000 8. Undisclosed Income 4,51,513/- Confirmed by the ld CIT(A) Now, the assessee is in appeal against various additions sustained by the ld CIT(A) and the Revenue is in appeal against the additions so deleted by the ld CIT(A). ITA ....
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....ests of the revenue, is of the opinion that it is necessary so to do, he may, with the previous approval of the Chief Commissioner or Commissioner, direct the assessee to get the accounts audited by an accountant, as defined in the Explanation below subsection (2) of section 288, nominated by the Chief Commissioner or Commissioner in this behalf and to furnish a report of such audit in the prescribed form duly signed and verified by such accountant and setting forth such particulars as may be prescribed and such other particulars as the Assessing Officer may require: Provide that the Assessing Officer shall not direct the assessee to get the accounts so audited unless the assessee has been given a reasonable opportunity of being heard." ....In the present case, the Assessing Officer had issued notices to the assessee under section 142(1) of the Act. When there was no compliance, notice for appointment of special auditor came to be issued. Petitioner's objections were considered, approval from the Commissioner was sought. On the strength of such approval so granted by the Commissioner, the Assessing Officer on the basis of his opinion that the accounts of the asses....
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....me and complexity of transactions and the fact that the assessee himself failed to reconcile the documents found during the course of survey with the books of accounts and basis that, he has confirmed the action of the AO to recommending the appointment of the special auditor after taking appropriate permissions from the ld CIT after providing reasonable opportunity to the assessee. Further, it is noted that based on documents impounded during the course of survey and the fact that the assessee failed to reconcile the same with the books of accounts, the special auditor has come to specific findings which are contained in his special audit report. In the result, ground no. 1 of the assessee's appeal is dismissed. 7. Regarding ground no. 2 of the assessee's appeal relating to estimation of net profit rate pursuant to rejection of books of accounts, the relevant findings of the ld. CIT(A) are as under:- "As regards Ground No. 5, pertaining to rejection of books and estimation of Net Profit rate, the AO in the entire gamut of the lack of proper presentation of the books of accounts by the Assessee before the Special Auditor and later before him, reached a conclusion that t....
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....on 145(3) the assessment is required to be in the manner under Section 144 of the Act only. However, it is well known that in the case of Best Judgment where resort is taken to Section 144, the Assessing Officer exercising his jurisdiction cannot act arbitrarily or capriciously. The assessment must proceed on judicial considerations in the light of relevant material that may be brought on record. The Hon'ble Allahabad High Court in the case of CIT vs. Surjeetsingh Maheskumar (1994) 210 ITR 83 has held that in every case of best judgment, the element of guess work cannot be eliminated so long as best judgment has a nexus with material on record and discretion in that behalf has not been exercised arbitrarily or capriciously. Hon'ble Supreme Court in the case of CIT vs. H.M Esufali, H.M. Abdulali reported at 90 ITR 271 (SC) mentioned that- The AO is not duty bound the state precisely the account of suppressed turnover where it is obvious that the assessee is maintaining false accounts. The assessee cannot plead that it is the duty of the AO to prove conclusively the amount of suppressed turnover, as this fact is in his personal knowledge; ....The burden of ....
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....st and Depreciation on the estimated Net Profit. Under the above circumstances, I am in agreement with the estimation done by the AO especially considering the facts highlighted related to incompleteness of books of accounts, unverifiable expenses and the comparable cases cited. The Net profit rate @ 12.5% subject to the above mentioned deductions is accordingly held to be proper and fair and the addition of Rs. 2,77,049/- made on this account is upheld. The Ground of appeal is accordingly dismissed." 8. We have heard the ld DR and gone through the findings of the ld CIT(A) and the AO, and the assessee's submissions made before both the authorities as reproduced in the appellate and assessment order. Admittedly, the assessee is a civil contractor and for drawing up and determining his business and financial results, labour/employee expenses and material expenses forms a critical component of his costs and where so required by the AO, he has to demonstrate the incurrence of these expenses through verifiable evidence/documentation. In the instant case, the AO has specifically asked the assessee to produce labour/wages register and other related details i....
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....d the same is hereby confirmed. The ground no. 2 of the assessee's appeal is thus dismissed. 10. Regarding ground No. 3 of the assessee's appeal, briefly the facts of the case are that in the assessment order, the AO has held that the Annexure-12 of the Audit report of Special Auditor points to fresh capital introduced by the proprietor during the year amounting to Rs. 6,97,919/- as per details below: PARETA ASSOCIATES Annexure 12 CAPITAL INTRDOUCED BY PROPRIETOR DURING THE YEAR S. No. Date Particulars Amount (As per Tally) 1. 4/8/2010 Cash from S. Pareta 180,919.00 2. 4/18/2010 Cash from Subhashji 10,000.00 3. 6/18/2010 Cash received from House 5,000.00 4. 6/12/2010 Cash from old Saving 2,000.00 5. 1/7/2011 Cash from old Saving 300,000.00 6. 1/7/2011 Cash from old Saving 50,000.00 7. 1/28/2011 From Bank (car sold to Navratanji Dangal 150,000.00 Total Rs. 697,919.00 As per Assessing officer, the above amount is fresh capital introduced by the assessee in t....
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....Ann. No. Page No. Date Particulars Amount Claimed As 1. A-2 3 30.04.2010 Cooler Purchased 8200 Site Expenses 2. A-4 119 31.08.2010 Fan Purchased 1725 Site Expenses 3. A-7 14 23.06.2010 Fan Purchased 2400 Site Expenses 4. A-10 27 23.06.2010 Fan Purchased 2400 Site Expenses 5. A-22 29.06.2010 Mobile Purchased 1500 Material Exp Total Rs. 16225 The assessee has debited capital expenses of Rs. 16,225/- as revenue expenditure. The assessee has, vide order sheet entry no. (ix) dated 09.10.2014, surrendered Rs. 16,225/- as addition in the total income of the assessee. 14. In this regard, the relevant findings of the ld. CIT(A) are reproduced as under:- " I have gone through assessee's submission and AO's findings. Alth....
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....5 44 08.12. 2010 LIC Premium 29873.46 Deposited in HDFC Bank, explained as paid out of withdrawals 4 A-8 164 29.10 2010 NSC 1235000 The letter from PWD Jhalawar to Post Master Kota for release of NSCs in favour of Subhash Pareta, earlier pledged with the department of Rs. 12,35,000/-. The letter is dated 29.10.10 but it is noticed that no such investment is available in audited financial statement of the assessee. After considering the submissions of the assessee, the AO made an addition of Rs. 12,94,873 out of above. 17. The relevant findings of the ld. CIT(A) are reproduced as under:- " I have gone through assessee's submission and AO's findings. As regards to entry no. 1 of Annexure-6, there is no evidence that the amount of Rs. 30,000/- pertains to recirculation of investment and to consider it as a technical mistake as per the assessee's explanation is not possible as there is no evidence in favour of the same. Accordingly, this amount of Rs. 30,000/- is held to be unexplained investment as worked out by the AO and is accordingly confirmed. As regards entry no. 3, related to the LIC premium of Rs. 29,873/- mentioned t....
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....ugh assessee's submission and AO's findings. Regarding bank deposits/DD as per Annexure A-15 of the Auditor's report, the entry for Rs. 1472000/- vide DD No. 530784 shown in Bank of Baroda Jhalawar Road a/c dt. 10.11.2010 has already been considered explained while discussing the addition u/s 69C in ground No. 10. The AO should not have added the same amount at two places. In any case since I have discussed that the said entry is linked to the disclosed account, it cannot be said to be unaccounted Income. This amount requires to be excluded from the addition made in this regard and is directed to be deleted. As regards the other entries, the AO has made out a case that these DDs etc were made out of unaccounted receipts and made the addition on the ground that these were not entered in the books of accounts and were to be considered unverified deposits for lack of supporting evidence produced before AO. Since there is no direct linkage of these payments found with the Bank accounts, the AO's argument cannot be totally discounted. Hence, except for the amount of Rs. 14,72,000/- mentioned above, the remaining amount is to be considered as unexplained deposits for wh....
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.... ITA No. 617/JP/2016 23. We now come to the Revenue's grounds of appeal other than ground no. 1 & 4 which we have already dealt with along with assessee's ground of appeal no. 5 & 6 as above. 24. In ground no. 2 of the Revenue's appeal, the Revenue has challenged the action of the ld CIT(A) in deleting addition of Rs. 1,41,34,476/- made u/s 40A(3) of the Act. Briefly the facts of the case are that as per Annexure-A of the Audit report of special auditor, 251 entries violated the provisions of section 40A(3) of I.T. Act, 1961 as assessee has made cash payments which are more than Rs. 20,000/- in a day. During the course of assessment proceedings, explanation were sought from the assessee from time to time and a final show cause was issued on 10.10.2014 to furnish evidence in support of his claim. In reply, the assessee vide his reply dated 15.10.2014 submitted as under: "1. Cash payment exceeding Rs. 20000/- u/s 40A(3): As we have mentioned earlier that the Assessee is a contractor and works on so many sites in the state of Rajasthan and Madhya Pradesh, there was responsibility to execute the work within prescribed time period. To running smoothly work on s....
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....f accounts. Therefore, submissions of A/R, were just an afterthought to cover up the inadequacies in his books of accounts. However, during the assessment proceedings it was found that out of 251 entries in others, payments that were made in cheque and certain entries were in the nature of drawings by the assessee. It may be noted that the loan entries have been considered in Annexures-1,2 & 5 of audit report are being referred for penal proceedings under section 269 SS and 269T to the Additional/Joint CIT separately. Therefore, the 73 entries have been dropped for purpose of addition as they do not violate the provisions of section 40A(3) of the I.T. Act, 1961. The remaining 178 entries were not satisfactorily explained by the assessee and no evidence was provided to substantiate the claim that earlier the payments have been made below Rs. 20,000/- or they have not been debited from the profit and loss account of the assessee. It also may be noted that there are certain violations against which asessee has given explanation that these cash payments above Rs. 20,000/- pertain to earlier years but have been incurred in the relevant assessment year. The explanation of the asses....
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....memo books maintained at site where lump sum amounts given to site incharge for onward distribution & entries made in regular books based on a/c given by the person incharge at site. As examples of the shortcomings in the version of the AO he has mentioned that Entry nos 44-76 pertain to AY 09-10 on the basis of diary considered by AO. Entry no. 2 to 8 direct site labour/payment-made to each labour below Rs. 20000/- & that in the Assessment proceedings he had already highlighted the fact that amounts were paid on various dates but the same has been ignored by the AO. Certain points which emerge out of the discussion made in the Assessment order as well as the assessee's submissions are- 1) The AO has not made out a case of unaccounted receipts having been found against which additional out of books expenses could have matched. 2) There is no evidence in the Auditor's note or the Assessment order whether any effort to reconcile the cash expenses of sites with any regular bills or expenses vouchers was made so as to reach a logical conclusion that the expenses claimed at site were much higher than the total expenses against works executed so as to then add ....
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....is well within the receipts shown by the assessee. The AO has already formed an opinion on the net profit and if he still had bouts on these expenses, no one stopped him from adopting a higher than normally acceptable net profit rate based on the discrepancies pointed out in the other grounds of appeal. He cannot have an addition on account of estimation of profit separately & then make other additions to the expenses which would disturb the Net Profit on a basis to the verge of perversity of business results as happened in this case. 7) While passing the assessment order, the AO has given a thorough description of the various discrepancies found in the books of accounts and rejected the books of accounts at pages 4 to 11 of the assessment order and then gone on to apply maximum NP rate @ 12.5% citing various judgments of the courts in support of the view adopted by him. 8) Net profit in a contractor's case is the ultimate figure of profit which has been estimated by the AO as per his best judgment and the legal precedents he has thought relevant to this case. There remains no further items of expenditure to be examined once that exercise is completed. It is a bes....
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.... application of independent judgment, rather the AO has relied mostly on the discrepancies mentioned in the special auditor's report without himself carrying out post survey enquiries even when he had sufficient time to do so to reinforce the findings he brought out in the order passed by him. It is settled law that where the income of the assessee for a captioned year is estimated by applying net profit rate after rejecting the books of accounts, in view of the provisions of section 145(3) of the Act, no further addition can be made in the hands of the assessee on account of various disallowances by relying on the aforesaid entries in the books of account, which have been rejected. Reliance can be placed on the following decisions: In the case of Brahamanand Agarwal, Thekhedar Vs. DCIT Jaipur Bench of ITAT have held that when net profit is estimated by AO by rejecting the book result U/s 145(3) of the Act, no separate addition can be made on account of cash creditor. ITAT relied upon the decision of Rajasthan High Court in the case of CIT vs. G.K. Contractor 19 DTR 305 (Raj) wherein the Hon'ble Jurisdictional High Court held that when net profit is estim....
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.... 40A(3). In support of this contention he has relied upon the decision of Hon'ble Allahabad High Court in the case of Banwarilal Bansidhar (supra) in which their Lordships held as under:- "affirming the decision of the Tribunal, that no disallowance could be made in view of the provisions of section 40A(3) read with rule 6DD(j) of the Income-tax Rules, 1962, as no deduction was allowed to and claimed by the assessee. When the gross profit rate was applied, that would take care of everything and there was no need for the Assessing Officer to make scrutiny of the amount incurred on the purchased made by the assessee." The above decision of Hon'ble Allahabad High Court would be squarely applicable to the case of the assessee. When a net profit rate is applied, there remains no scope for further disallowance of any expenditure. In view of the above, we respectfully following the above decision of Hon'ble Allahabad High Court hold that the CIT(A) was justified in deleting the disallowance under section 40A(3) made by the Assessing Officer. Accordingly, we uphold the order of the CIT(A) and dismiss the revenue's appeal." In CIT Vs. Smt. Santosh Jain 159 Taxman ....
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....ection 29. All the deductions which are referred to under section 29 are deemed to have been taken into account while making such an estimate. In the instant case, this will also mean that the embargo placed in section 40A(3) is also taken into account and there cannot be a separate disallowance under 40A(3) of the Act. 27. Further, we also refer to the Special Bench of Tribunal in case of Income-tax Officer, Ward-I, Murshidabad vs. Kenaram Saha & Subhash Saha [2009] 116 ITD 1 (Kolkata) (SB) has held as under: "24. Now coming to departmental appeal in the case of Sri Shyamal Kr. Dey (supra), the Assessing Officer has determined the income by applying a net profit rate of the turnover. The Assessing Officer in addition to the determination of net profit as a percentage of turnover, made further disallowance under section 40A(3). The CIT(A) deleted the disallowance made under section 40A(3). Revenue aggrieved with the order of the CIT(A) is in appeal before us. It is contended by the learned counsel that once a net profit rate is applied, no further addition/disallowance can be made under section 40A(3). In support of this contention he has relied upon the decision of Hon....
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.... of the assessee was insatisfactory & incomplete, the assessee was given final show cause dated 10.10.2014 regarding unexplained expenditure under section 69C, which is as follows:- "Please refer to Annexure-4 of the special auditor's report which pertains to unexplained/not accounted for expenditure including illegal payment and point no. 5 of showcause dated 22.09.2014. In your reply dated 25.09.2014, you have submitted following reply."Once there are seized and cashbook of the assessee, there was no such entry and no any expenditure debited in profit and loss account. No such contact work received and executed by the assessee on that prescribed sites." Further, in explanation enclosed in sheet No. 5 of your reply, it is noted that: i) For entries numbered 1, 2, 3,4,5,6,7,8,9,10,11,12,13,14,23,20,24,28,30,31,33,35,36,45,49,50,60,6 5,66,67,75,76,79,80,81,93, the Assessee has given no reply or explanation. ii) For entries numbered 68,69,70,71,72,73,74,85,86,87,88 which pertain to illegal payments made by the assessee during the relevant assessment year, the assessee has submitted that the pool expenses are only discussion points and estimations. However t....
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....year. No any payment. As not mentioned in the seized hand cash also. Only a simple paper whereas nowhere is mentioned about payment. How can we take dream that the assessee has made the pool amount during the year. * There are no any work order and execution of work from RIICO ltd. During the year of that amount. * In respect of DD of Rs. 14,72,000/- It was part of amount to take tender and entered during the year in E.M & S.D. Account but that amount has been refund back in next year -WE are enclosing copy of Bank statement and vouchers for your' kind reference. Once your' good self estimating on certain grounds but special auditor has not taken any grounds to mentioned in audit report. In this way a simple person can mention on each and every paper without keeping proper attention on the records and validity of transaction. * On this grounds we have produced the evidence of refund of that amount so how can we estimate that this pool amount is related to assessee and he has paid that amount. We have mentioned the execution of the work during the year amount is refund back how can we say that .....untenable. Please consider the facts and justification of ....
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....ales detail: Rs. 15000 on 13.5, Rs. 16000 on 14.05, Rs. 17000 on 15.05, Rs. 18000 on 16.05, Rs. 19000 on 17.05 Rs. 14000 on 18.05, Rs. 15000 on 19.05, Rs. 18000 on 20.05, Rs. 19000 on 21.05, Rs. 17000 on 22.05, Rs. 18000 on 23.05, Rs. 19000 on 24.05, Rs. 18000 25.05 & Rs. Rs. 17000 on 26.05. (We are enclosing copy of account) A- 24 21 & 22 Pool Paym ent 2,935,000.00 Pool payment for obtaining from RIICO Rs. 7.35 Cr. A-24 There is no any date on paper. No where is mentioned Pool as mentioned in above Paid @ 4% to 22 persons of Rs. 29,35,000/- @ Rs. 1,33,409/- per person Also showing name of the person to whom payment were made. mentioned paper. How can the auditor has mentioned POOL PAYMENT. May be part of discussion to give the work on sub contract or estimation or discussion. No where recorded in seized documents-(as recorded in s.no. 84-88 and consider illegal expe.) It is unjustified to mention Pool payment. Or to consider illegal expenses. A- 24 40 & 41 Pool Expen ses 1,000,000.00 A-24 Please keep attention on that paper - No any date .....Vijay-Galav, Khatri and ....
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....ontract by the RIICO. Therefore, assessee cannot claim that no work from RIICO was awarded to the assessee and the pool payments made are just estimations and not actual payments. ii) The assessee's explanation regarding DD of Rs. 14,72,000/- is incorrect because as per submission made by the assessee the RIICO has adjusted the said amount while making work contract payments to the assessee. iii) The A/R, of the assessee has given no documentary evidence to prove that any particular entry was debited in books of account or not, despite giving enough opportunity to provide the required evidence to support assessee's claim. iv) Further, the special auditor made observations regarding illegal payment as well as unexplained expenditure are on the basis of documents impounded during the survey. On the other hand, the A/R of the assessee had no other explanation to offer other than "there was no such entry and no any expenditure debited in profit and loss account." The unexplained expenditure including illegal payment of Rs. 1,18,34,723/- as pointed out in Annexure-4 of the audit report (except for entries no. 27 and 4 which do not pertain to ....
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.... focus was on expenses claimed and lack of supporting evidences, which he had already covered by estimating a best judgment net profit rate. All the other things in between the P & L a/c get accommodated in the end result estimated by the AO. The HIGH COURT OF PUNJAB AND HARYANA in Commissioner of Income-tax Patiala v. Dulla Ram, Labour Contractor, Kothapura reported in 42 taxmann.com 349 (Punjab & Haryana) has held clearly that- "An Assessing Officer may, while considering a return of income, inspect the account books and, if satisfied, that account books do not reflect the true income of an assessee, reject the same. Account books once rejected, are ruled out of consideration and cannot be pressed into service whether by the assessee or the revenue. Thus, when account books are rejected, it would follow, as a necessary corollary, those entries in the account books whether suspicious or not cannot be relied by the revenue or the assessee. To hold otherwise, would, in essence, render account books valid for certain purposes and invalid for others, a course impermissible in law. The Assessing Officer rejected the account books in their entirety and thereaf....
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....& then make other additions to the expenses which would disturb the Net Profit to give absurd business results as happened in this case. As a result I am unable to sustain the addition made u/s 69C. The addition of Rs. 1, 18, 34,723/- is accordingly directed to be deleted. This ground of appeal is treated as allowed. 35. We have heard the ld DR and pursued the orders of the ld CIT(A) and the AO as well as the assessee's submissions before both the authorities. The AO has invoked the provisions of section 69C of the Act which reads as under: "69C. Where in any financial year an assessee has incurred any expenditure and he offers no explanation about the source of such expenditure or part thereof, or the explanation, if any, offered by him is not, in the opinion of the Assessing Officer, satisfactory, the amount covered by such expenditure or part thereof, as the case may be, may be deemed to be the income of the assessee for such financial year : Provided that, notwithstanding anything contained in any other provision of this Act, such unexplained expenditure which is deemed to be the income of the assessee shall not be allowed as a deduction under any head of i....
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....ditional CIT is not vitiated merely on the ground that the books of accounts have been rejected and net profit has been estimated by the AO provided it can be proved that these are independent transactions not connected with the transactions in respect of which the net profit has been estimated by the AO. In support, useful reference can be drawn to the legal proposition laid down by the Hon'ble Supreme Court decision in case of Kale Khan Mohammad Hanif vs CIT reported in 50 ITR 1 and which has been followed by the Hon'ble Supreme Court in its subsequent decision in case of CIT vs Devi Prasad Vishwanath reported in 72 ITR 194 wherein it was held as under: " there is nothing in law which prevents the ITO in an appropriate case in taxing both the cash credit, the source and nature of which is not satisfactorily explained and the business income estimated by him under section 13 after rejecting the books of accounts of the assessee as unreliable. Whether in a given case, the ITO may tax the cash credit entered in the books of account of the business and at the same time, estimate the profit must however depend upon the facts of each case." 38. Further, from a computation s....
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.... expenses, telephone expenses, petrol and fuel expenses, tender expenses, hire and rent expenses, misc expenses, wages and labour charges, plant and machinery hire expenses, material expenses, water & electricity expenses. Similarly, entry at item no. 77, 89 & 91 relates to plant and machinery hire charges and debited to plant and machinery hire charges. These expenses have therefore been debited in the various expense heads and thus considered for drawing up the profit/loss account by the assessee. Given that the net results so declared in the profit/loss account has been rejected by the AO, the said transactions cannot again be disallowed as the AO has already estimated the net profit rate. Hence, the additions on account of these transactions are hereby deleted. 41. In respect of transactions reported at item no. 40, 41, 42, 84 & 92, as per the assessee's explanation, the same have been debited to various site advances account. No explanation has been offered as to whether during the year, the expenditure has been incurred out of such advances and transferred/debited to the profit/loss account. Given that these are site advances and not necessarily resulted in an expenditure ....
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.... has admitted these payments have been entered in his own handwriting in assessee's cash book as impounded during the course of survey. The assessee has also admitted that where the amounts are mentioned in the debtors accounts, these are recoverable amount and hence, not debited in the profit/loss account. In light of above explanation, it is clear that the subject payments have been made during the financial year and are not debited to the profit/loss account. Where the amount is not debited in the profit/loss account so prepared by the assessee, there is no basis to hold that since the AO has rejected the results as declared in the profit/loss account, the AO would be precluded in examining these transactions and bringing it to tax under section 69C of the Act. 47. As far as assessee's contention that these are trade advances which are recoverable, no credible verifiable evidence has been furnished which supports such contentions of the assessee. In any case, these are the payments which the special auditor has stated to be made to various functionaries of RIICO and we don't understand the basis of assessee's explanation that these are recoverable and no work order has been s....
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....e who has incurred the expenditure at first place and it is he who has to demonstrate that the expenditure has been incurred from known sources of his income. Where he fails to demonstrate, the consequences of section 69C will follow. Even going by the assessee's contentions, we find that the ld CIT(A) has himself confirmed the addition on account of undisclosed income of Rs. 4,51,513 and to that extent, the findings of the ld CIT(A) are self-contradictory. 48. In light of above discussions, in respect of transactions reported at item no. 85, 86, 87 and 88 of Annexure 4 of the special audit report, the addition made by the AO u/s 69C amounting to Rs. 14 lacs is hereby confirmed. 49. Now coming to transactions reported at item no. 68, 69,70,71,72, 73 and 74 based on Annexure A-24 impounded during the course of survey and as reported as part of Annexure 4 of the special audit report, the special auditor has stated that these are pool payments and in the nature of illegal payments made to functionaries of RIICO by the assessee. Only distinction that we observe here is that unlike entries at transactions reported at item no. 85, 86, 87 and 88 of Annexure 4 of the special audit re....
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