TaxTMI 
TaxTMI 
2020 (8) TMI 45
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....essee. Therefore this amount is double addition and deserves to be deleted. 3. Because disallowance of Rs. 52,12,392 under section 40A(3) of the Income tax Act to the one supplier of Grit Shri Kishan Singh of Juhu, Kanpur made through bearer cheques is wholly illegal and bad in law. He is a big supplier and assessed in Income tax Department at Kanpur. The learned CIT Appeal was not justified in not appreciating these facts and circumstances of the case and has erred in confirming the disallowance of Rs. 52,12,392.00 to the Income of the assessee under section 40A(3) of the Income tax Act. 4. Because assessee is a contractor and supplier of grit to the main contractor and he has to purchase the goods from the renowned suppliers who purchase the grit from manufacturing units of the grit situated in the distant areas by crushing the stones, where no bank facilities are available and the suppliers insist for cash payment on account of their business necessity for making further payment to grit manufacturing units. The payment is mainly made by the assessee employees and agents to these grit manufacturing units on behalf of the main supplier in cash. The payment to sup....
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....ng on last date the Sr. DR had sought time to file the Cross objection along with approval of PCIT on record. Today during the hearing it was submitted that the approval had been granted but the CO is required to be filed by AO . He had shared the copy of letter dated 22.7.2020 of the Add. CIT in this regard and sought further time to file the CO. 4. Per contra, ld. AR had submitted that there is no cross objection on record till date and only a document of approval was shown by the ld. DR during the virtual hearing on 23.07.2020 whereby the Addl. CIT has principally approved the filing of cross objection on 22.07.2020. It was further submitted that the grounds raised in the cross objection as shown by the ld DR cannot be entertained and are required to be rejected. It was submitted that the ground of this nature can not be entertained by the bench, as it would amount to directing CIT to invoke his power of enhancement of addition, when AO himself had not made the addition. IF Assessing Officer was convinced that the additions should be made, then it should have been done during the assessment proceedings. Now having missed the opportunity during the assessment stage, AO cannot ....
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.... CIT(A) or before the tribunal, then in our view the Revenue cannot be permitted to raise any ground which is incompatible or contrary to the case of AO. For this purpose we may fruitfully rely upon the decision of special bench of Tribunal in the matter of Mahindra and Mahindra vs. DCIT, 30 SOT 374. Hence no time can be granted to the revenue for filling the CO. 6. Addressing to the disallowance u/s. 40A(3), the ld. AR has drawn our attention to paragraph No. 11 & 12 of the assessment order to the following effect : "11. On perusal of the answer given by the assessee above, it is clear that he made payments in sum exceeding Rs. 20,000/- otherwise than by an account payee cheque drawn on a bank or account payee bank draft and thus admitted that payments made through bearer cheques/in cash to the suppliers against supply of grits during the year relevant to AY 2008-09. According to the facts and circumstances of the case, it is evident that the assessee had made payments through bearer cheques/in cash of Rs. 2,60,61,960/- to one grit supplier to Shri Kishan Singh in contravention to provisions of section 40A(3) of the Income Tax Act, 1961. 12. Therefore, there a....
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....en given to the supplier and those are encashed by him. It may not be out of place to note that in its written submission before me, the appellant has tried to add incorrect facts to the issue by stating that "Further, it is submitted that assessee has to collect these grits through his employees / agents from different suppliers of far distant places and villages where these crushing machines are located by the suppliers on account of dust pollution industry and from that places their agents load the goods in assessee trucks and others trucks and sent to the places of the main contractor where they are required by the contractor from the assessee being sub-contractor, therefore the cash down payment of these material becomes necessary. In most of the supplies the assessee depute his agents / employees for collection and procurement of material from these crushers and this is a nature of this trade, otherwise assessee cannot do the business it is time bound business of purchase and supply of material to main contractor in time. The procurement of raw material from distant places and supply of the same to the place of purchaser on very nominal margin of profit. This timely ....
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.... 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 assesses. When the gross profit rate was applied, that would take care of everything and there was no need for the A.O. to make scrutiny of the amount incurred on the purchases made by the assessee. Contrary to the facts in that case, the appellant has claimed deduction of purchases valuing Rs. 8,39,35,174/- . Out of these, purchases of Rs. 2,60,61,960/- have been found by the A.O. as to be made in contravention of the provisions of section 40A(3) of the Act. Further, the disallowance of Rs. 52,12,392/- made under section 40A(3) in the instant case, far exceeds the addition of Rs. 11,58,316/- made by the A.O. to the appellant's returned income by way of estimating its GP Rate @ 5%. Hence, unlike in the case before the Hon'ble High Court of Allahabad, in the instant case, the addition made by the A.O. by rejecting the appellant's books of account did not take care of everything. In this context, relevant extract of the judgment of Hon'ble High Court is reproduced b....
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....d upon the decisions of Hon'ble Madras High Court, Delhi High Court and judgment of Hon'ble Supreme Court. He has also referred to the recent decision of Hon'ble Supreme Court in the matter of Shiv Raj Gupta vs. CIT. 11. We have heard the rival submissions and have gone through the material available on record. In paragraph No. 5 of the Assessment order, the AO has mentioned as under : "5. The books of account and copies of ledger accounts of the assessee were examined. I is seen that most of the sales & purchases were made through bearer cheques (in cash), this s why the assessee was failed to substantiate the genuineness of actual transaction made towards purchases and sales of grits. In absence of adequate evidences and proper explanations, the purchases and sales are not verifiable and thus the gross profit rates shown by the assessee are also not reliable. In the given circumstances and looking to the facts of the case, the gross profit rate shown by the assessee are not acceptable and hence rejected. After examination of books of accounts, relevant details of purchases and sale shown in the profit & loss account, the gross profit rates are being applied a....