TaxTMI 
TaxTMI 
2022 (4) TMI 800
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....in both these appeals ITA Nos. 730 & 731/Hyd/2016 challenges correctness of the lower authorities' action making addition(s) of Rs. 10 crores and Rs. 14 crores; assessment year-wise respectively based on the alleged search declaration. He further states at the bar that the assessee is not pressing for its pleadings challenging inducement element in the search statement any more. 3. The Revenue has also chosen to prefer its cross-objections C.O. Nos. 8 & 9/Hyd/2021 involving identical delay of 1855 days stated to be attributable to various reasons beyond its control. The fact remains that a significant position of the impugned delay pertains to calendar years 2020 and 2021 hit by out-break of Covid-19 pandemic. Case law Collector, Land Acquisition Vs. Mst. Katiji & Ors [167 ITR 471] (SC) and University of Delhi Vs. Union of India, Civil Appeal Nos. 9488 & 9489/2019, dt. 17-12-2019 hold that such a delay; if supported by the cogent reasons must make way for the cause of substantial justice. This is coupled with the fact that the Revenue's sole substantive issue raised of Section 40A(3) is already an inter connected one only. We thus accept the Revenue's averments expla....
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....yatri Projects Ltd., M/s. IL&FS, etc and assessee for not being in position to explain such withdrawals with reasons and also unable to produce books to explain the same, as such the company declared undisclosed income of Rs. 10.00 crores for A.Y. 2011-12 and Rs. 14.00 crores for A.Y. 2012-13, to cover up all these deficiencies/short comings. The essence of statement by Mr. MML Narsimham, Managing Director of the company was brought on record to indicate the basis of declaring. the additional/undisclosed income for A.Y. 2011-12 and 2012-13. Since the assessee did not honor the declarations, based on the changed stand that the cash withdrawals are meant for meeting the expenses at work. sites and such payments are covered by Rule 600, with the vouchers for expenses, which could not be produced at the time of search, are verified later and such information support the stand taken by assessee, the AO analysed the said explanation and rebutted the same on following lines: - Disclosure was made by the assessee after verifying the books/vouchers and availability of bank accounts at work sites and the assessee changed it's mind subsequently to treat the expenses as genuine an....
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....t certain purchases, therefore, the self vouchers are bound to occur and very common in this lines of business and therefore, an acceptable phenomena. 3. The assessee is executing works at remote areas at Mizoram and Nagaland and the Banking facility from the works site is far away, therefore, the assessee is protected by the clause-(g) of Rules 6DD of the IT Rules. 4. The only addition to the income returned u/s. 153A is made u/s. 40A(3) of the IT Act at Rs. 10,00,00,000/-, with an assumption that the cash payments are made in violation of section 40A(3) r.w.r. Rule 6DD on account of cash expenditure not supported by the supporting evidence and in this regard, it is respectfully submitted that the assessee produced books of accounts and supporting vouchers at the time of assessment proceedings. Without rejecting the books of accounts no addition can be made u/s. 40A(3) and disallowance may be limited to specific amount which is paid in violation of the said section and it is pertinent to mention here that the learned Assessing Officer has not identified any specific items from the books produced to attract the provisions of section 40A(3) of the IT Act. ....
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....oners, as such cash could not be transferred through the bank accounts maintained at Kohima and Mekarkong etc. However, this theory of the assessee falls flat, for the reason that the assessee already found to be paying huge amounts as extortion money and having paid such money, there could not have been any trouble to the assessee. Further, the amounts could have easily transferred through the bank account in the nearby places of work sites, in small amounts, on daily or weekly basis, from the head office. Further as per the information brought on record, equally good amounts were routed through the bank accounts located at Kohima and Mekarkong in some of the years, notably during A.Y. 2012-13. This may prove the assessee's theory that extortionist attacks bank accounts, on the accumulated balances, if maintained at place like Kohima and other nearby places. 5.3.1 In this context, it may be relevant to refer to the amounts paid as extortion money which was quantified at Rs. 68,87,500/- and offered as additional income for A.Y. 2011-12 and A.Y. 2012-13, based on the entries found in seized/impounded material/books. It was also a fact that no books/vouchers were produce....
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....ney. The relevant portion (part) of the head note of the decision referred runs as under: "Sec. 40A(3) only empowers the Assessing Office to disallow the deduction claimed as expenditure in respect of which payment is not -made by crossed Cheque or cross bank draft. The payment by cross cheque or crossed bank draft is insisted on to enable authority to ascertain whether the payment was genuine or whether it was out of the income from disclosed sources. The terms of s. 40A(3) are not absolute. Consideration of business expediency and other relevant factors are not excluded. The genuine and bona fide transactions are not taken out of the sweep of the section. It is open to the assessee to furnish to the satisfaction of the Assessing Officer the circumstances under which the payment in the manner prescribed in s. 40A(3) was not practicable or would have caused genuine difficulty to the payee. It is also open to the assessee to identify the person who has received the cash payment. It will be clear from the provisions of s. 40A(3) and r. 6DD that they are intended to regulate the business transactions and to prevent the use of unaccounted money or reduce the chances to use bla....
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.... 0 110 ICICI Bank, Kohima 696 696 Canara Bank, Meronkong 768 768 370 1570 1114 1464 4518 Less: Cash Deposits 185 5 0 0 190 Utilization Asst. Year 2010-11 2011-12 2012-13 2012-13 Total Deposit 0 0 0 100 100 Advance/Creditors 105 415 110 367 996 Staff Advance 58 41 0 41 140 Labour Charges 0 984 1004 813 2801 Other than Labour Charges 22 126 140 288 185 1565 1114 1461 4325 As could be seen from the chart, the amount of Rs. 28.01 crores represent the labour charges paid in cash for two years, with Rs. 10.00 cr. for A.Y. 2011-12 and Rs. 18.01 cr. during A.Y. 2012-13. The AO applied the provisions of Sec. 40A(3) and disallowed the amounts for the two respective years holding that the expenses were not explained and without bringing the reasons on record, Rule 6DD, cannot be applied in the case of the appellant. Hence, the disallowance made u/s. 40A(3) by the AO. However, the fact remain....
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.... 5.4.1 Having accepted and confirmed the disclosures at two different times, on the same set of facts that to reconfirmed through affidavit, there was no reasons for the assessee too retract the same and there Is no material change between the date of search and furnishing return of income, for doing so. In this regard, It may be relevant to mention that neither the affidavit nor the declaration was Withdrawn, In Writing, except the expression through which the incomes disclosed u/s. 132(4) were not admitted in return of income. In this Context, It may be relevant to refer to the judicial decisions on the issue of the validity and reliability of an affidavit. In it's judgment, in the case of Sri Krishna Vs. err, Hon'ble High Court of Allahabad, held that "It is neither a rule of prudence nor a rule of law that the statements made in an affidavit which remains uncontroverted, must invariably be accepted as true and reliable. Ordinarily, in the absence of denial, the statements may be accepted as true but if there are circumstances which Suggest that the statements on affidavit should not be accepted as true, the absence of denial by the other side, would not by itsel....
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.... to be justified and confirmed. Thus, the grounds related to this issue are treated as Dismissed". 5. Both parties reiterate their respective stands before us. We note from a perusal of the assessment findings that although the Assessing Officer had taken into consideration the assessee's alleged search statement making the corresponding disclosures (supra), he only proceeded to invoke Section 40A(3) business expenditure disallowance paid at various project sites in cash mode. We make it clear that neither of the assessment orders before us has made any undisclosed income addition despite the fact that there has been a long discussion on identical lines to this effect. Learned CIT-DR could hardly rebut the fact that Section 40A(1) itself makes it clear that this statutory provision carries overriding effect on all other provisions of the Act since containing non-obstante clause i.e. "this section shall effect notwithstanding anything to the contrary contained in any other provision of this Act". Hon'ble apex court's landmark decision in Shri Sajjan Mills Ltd., Vs. CIT [ (1985) 156 ITR 585] (SC) has settled the law long back that Section 40A is an overriding provision....