2018 (6) TMI 53

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....er dated 25.02.2015 for assessment year 2012-13. Assessee has raised following ground:- "1. That on the facts and in the circumstances of the fact, the action of the Ld. CIT(A) in upholding the addition of Rs. 54,32,333/- u/s 40A(3) of the Act made by the AO is erroneous and bad in law. 2. That on the fats and in respect to the circumstances of the case the action of the Ld. CIT(A) in upholding the action of the AO to hold the payments of Rs. 54,32,333/- made by the appellant to M/s Neosa Electronic Pvt. Ltd. by way of adjustment against liability attracts the provision of Section 40A(3) of the Act is arbitrary, excessive and bad in law. 3. That the additions made by the AO and upheld by the Ld. CIT(A) is arbitrar....

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.... However, the AO was of the view that the adjustment by way of book entry has violated the provision of Section 40A(3) of the Act. As such the adjustment by way of book entry also does not fall in any of exception provided under Rule 6DD of the Income Tax Rules, 1962. Therefore, the AO disallowed the sum by holding that there is a violation of provision of Section 40A(3) of the Act and added to the total income of assessee. 4. Aggrieved, assessee preferred an appeal before Ld. CIT(A) who confirmed the order of AO by observing as under:- "Decision: It has been submitted by the A/R of the assessee that the issue is covered by the decision of my predecessor in A. No.51/CIT(A)-VIII/2014-15, dated 24.07.2014 wherein it has been obser....

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....the Tribunal was right in law in holding that the word "expenditure" used in section 40A(3) does not cover expenditure on purchases of goods. 2. Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in holding that the prohibition in section 40A(3) was attracted even in cases of payments by book adjustments and where the book adjustments were not made by the assessee directly in the accounts of the party who supplied the goods or services to the assessee. It was held that section 40A(3) covers expenditure on purchase of goods and in respect of question no. 2 it was held that In view of our answer to question No.1 and because of Clause (e) of Rule 6DD, which reads, 'where the pay....

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....f this Tribunal in assessee's own case in ITA No.1593/Kol/2014 pertaining to AY 2011-12 vide order date 04.08.2016 involving identical facts decided the issue in favour of assessee. On the order hand, Ld. DR vehemently relied on the order of Authorities Below. 6. We have heard the rival contentions of both the parties and perused the materials available on record. At the outset, we find that the Co-ordinate Bench of this Tribunal in assessee's own case in ITA No.1593/Kol/2014 having identical facts and circumstances has decided the issue in favour of assessee. The relevant extract of the order is reproduced below:- "4.4 We have heard both the parties and perused the material available on record, we are of the view that there ....