TaxTMI 
TaxTMI 
2023 (4) TMI 271
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....appeal proceedings void and liable to be quashed. 3. On facts and circumstances of the case and in law, the learned AO and CIT (A) has erred in interpretation and it's application w.r.t. section 40A (3) and section 68. 4. On facts and circumstances of the case and in law, the learned AO and CIT (A) has erred in relying on third party statement without offering cross-examination. 5. On facts and in the circumstances of the case and in law, the learned CIT (A) has erred in enhancing income by wrongly applying treatment tax in relation to genuine transactions. 6. On facts and circumstances of the case and in law, the learned AO and CIT (A) has narrated modus operandi of transactions thereby based his order on assumptions and surmises rendering the order as null and void. The Appellant craves leave to add, amend, alter vary and / or withdraw any or all the above grounds of Appeal. PRAYER: The Appellant prays that the addition made to income as : a. Disallowance in respect of cash payments of Rs.9,98,000/- be deleted. b. Taxed as income in respect of Cash deposit of Rs. 5,25,000/- be deleted. c. Taxed a....
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....i. Of Rs.2,87,26,562/- unproved purchases under Section 37 of the Act. iii. Disallowance under Section 40A(3) of the Act of Rs.9,98,000/- out of purchases. iv. Unproved hiring charges disallowed under Section 37 and under Section 40 (a)(ia) of the Act of Rs.63,02,742/-. v. Addition under Section 68 of the Act on account of cash deposit of Rs.10,50,000/-. vi. Undisclosed income from Lodha Dwellers Pvt. Ltd. of Rs.1,44,76,220/- vii. Undisclosed income under Section 68 of the Act from Luster Engineering Company of Rs.92,400/. 05. Thus the learned assessing officer has made the following addition to the total income of the assessee:- serial number Nature of addition on disallowance Amount rupees 1 Transportation charges under section 37 Rs. 4,435,916 2 Hiring charges under section 37 Rs. 6,302,742 3 Unproved purchases under section 37 2,87,26,562 4 Disallowance under section 40 (3) 9,98,000 5 Cash deposit under section 68 Rs. 1,050,000 6 Undisclosed income from Lodha dwellers private limited Rs. 14,476,200 7 Undisclosed income from Luster engineering under section 68 ....
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....ubmission. The learned Departmental Representative supported the orders of the learned Assessing Officer with respect to the additions/ disallowances made by the learned Assessing Officer and supported the order of the learned CIT (A), where these additions are confirmed. The learned Departmental Representative also vehemently supported the order of the learned CIT (A), where he enhanced the income of the assessee. He submitted that the learned CIT (A) has properly assumed jurisdiction under Section 251 of the Act and after giving, an opportunity for hearing, enhanced the income. 010. The learned Authorized Representative vehemently submitted that the learned CIT (A) has made two types of enhancements. He submitted that the first set up enhancements are with respect to the examination of the details at the time of dealing with various disallowance by the learned Assessing Officer and second type of enhancements are by finding altogether a new source of income which were not considered and decided by the ld AO . He submitted that both these type of enhancements are not permitted. On the issue of new source of income, he submitted that it is beyond the power of the learned CIT (A)....
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....anced the addition by invoking the provision of Section 40A(3) of the Act amounting to Rs.54,33,800/-. We found that as per Para 9.3, the learned CIT (A) noted that though the purchases are genuine, however, the payments for such purchases have been made in violation of Section 40A (3) of the Act. We find that even in the genuine purchase if it violates the Provisions of Section 40A (3) of the Act, separate disallowance can be made despite allowing the deduction of purchase. In view of this, we do not find any infirmity in the order of the learned CIT (A) in invoking the provision of Section 40A (3) of the Act despite deleting the disallowance with respect to unverified purchases. Accordingly, ground no.1.3 of the appeal is dismissed. 016. In the appeal of the learned Assessing Officer, there are no other grounds. Accordingly, appeal of the learned Assessing Officer is dismissed. 017. Now we come to the appeal of the assessee. 018. The first ground of appeal is with respect to service of notice. No arguments were advanced; hence, it is dismissed. 019. Ground no.2 is with respect to challenge the assessment proceedings. No arguments were advanced; hence, this ground of a....
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.... the handwriting is similar though the names of the persons are different. Therefore, he disallowed 25% of such expenses of RS. 14,70,327/- calling for addition and enhancement. 023. Therefore, the original disallowance made by the learned assessing officer was with respect to Rs. 4,435,916/- on account of transportation charges. The learned CIT - A deleted the above disallowance. He found that assessee has made a cash payment of transportation expenditure amounting to Rs. 291,330/- which is disallowable under section 40 A (3). He further found that cash payment of Rs.14,70,327/- made by the assessee though the same is not disallowable under section 40 A (3) of the act but in view of inadequate details mentioned in the vouchers, he disallowed 25% of such expenditure. 024. The learned authorized representative submitted that enhancement is not proper as the learned CIT - A has made the disallowance under section 40 A (3) of the act which was not made by the learned assessing officer and further disallowed 25% of the expenditure which were not crossing the threshold provided under that section, for reason that the vouchers did not contain the signature, quantity etc. It was fur....
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....e he invoked such provision. This was not seen by the ld AO. Therefore, he merely corrected an error. Therefore, we do not find any infirmity in the action of the learned CIT - A in invoking the provisions of enhancement of income. 028. Now we come to the enhancement of income of Rs. 291,330/- under section 40 A (3) of the act. We find that the learned CIT - A has noted that on 12 instances the assessee has made payment more than Rs. 20,000 for transportation expenditure in the month of January 2011 itself. The assessee before the learned CIT - A has also stated that assessee has made payment of amount more than Rs. 20,000/- in cash for the various drivers for diesel expenses, which was required to pay at the petrol pump filling fuel and other consumables. We find that there is no such exception given under the provisions of section 40 (A) (3) of the act and respective rules 6DD of IT Rules 1962. Accordingly we confirm disallowance of Rs. 291,313/- made under section 40 A (3) of the act. 029. Coming to the addition of Rs. 367,581/- for cash payment in transportation expenditure which is not in violation of the provisions of section 40 A (3) of the act but the payment are made....
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....s in the Ledger accounts submitted before the assessing officer and submitted before him. Otherwise how could the learned assessing officer would have noted the disallowance of Rs. 998,000/- only when the total cash payment made is amounting to Rs. 6,431,800/- with respect to these two parties. 033. Assessee submitted before him that cash was paid to the employees of the assessee for purchase of the material. Those employees have in turn paid to the various parties for purchase of Morum. With respect to the difference between the Ledger account produced before the learned assessing officer and the learned CIT - A, it was explained before the first appellate authority that assessee has given the tally back up to his consultant and in what format he has printed the Ledger is not known. It was further stated that the Ledger produced before the learned CIT - A are also the same. 034. Based on this the learned CIT - A made an enhancement noting that actual cash payment is of Rs. 6,431,800 which is in violation of the provisions of section 40 A (3) whereas the learned assessing officer has made disallowance of Rs. 998,000/- only under that section. Therefore, he issued notice by th....
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.... those instances, the bill and the cash payment both are not in excess of Rs. 20,000. He submitted that the learned CIT - A the learned assessing officer is merely looked at the Ledger account and did not see the amount of the bills given by those parties. He further referred to the Ledger account stating that against the amount paid by the assessee the name of the employees have been mentioned. Some of The entries are journal entries and ld CIT (A) has considered it as cash payments. He further referred that in case of lucky enterprises the name of the assessee himself is written with respect to Rs. 10 lakhs that is journal entry. He submitted that no such cash payments have been made in violation of the provisions of section 40 A (3) of the act. 039. The learned departmental representative vehemently supported the order of the learned CIT - M submitted that assessee has recorded cash payment in the cashbook with respect to the two parties. Therefore, the disallowance has been correctly made. 040. We have carefully considered the rival contention and perused the orders of the lower authorities. We find that assessee has purchased material from M/s lucky enterprises and M/s G....
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....h payments needs to be verified on examination of cashbook. In view of all these facts we set aside the whole issue back to the file of the learned assessing officer with a direction to the assessee to substantiate the payment with respect to the purchases whether they are in any violation of the provisions of section 40 A (3) of the act or not. Assessee is also directed to categorically show the amount of journal entries in the ledger considered by the ld CIT (A) are not cash payments. Accordingly, with respect to the addition of Rs. 5,433,800/- under section 40 A (3) of the act is remitted back to the file of the learned assessing officer for fresh verification and examination. The ld may decide applicability of section 40 A (3) and consequent disallowance thereafter. Needless to say the onus lies on the assessee to demonstrate that there is no disallowance called for u/s 40A 93) of the Act. 041. With respect to the disallowance made by the learned CIT - A by making an enhancement by disallowing 25% of the expenditure of Rs. 4,164,720/- which does not have the proper description for purchases made by the assessee, we find that it is not the new source of income which has been ....
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....f the purchases, disallowance made by the learned assessing officer of Rs. 998,000/- and enhancement of Rs. 5,433,800/- made by the learned CIT - A is restored back to the file of the learned AO for fresh verification. Further disallowance made by the learned CIT appeal of Rs. 1,041,180 is deleted. 044. The next addition is with respect to the hiring charges of Rs. 63,02,742/-. The learned CIT appeal deleted the above disallowance holding that the expenditure incurred by the assessee on hiring charges is genuine. However he invoked the provisions of section 251 (2) of the act with respect to the amount of hiring charges holding that assessee has made a cash payment of Rs. 85,000 out of those sum in violation of the provisions of section 40 (A) (3) of the act. 045. This issue is identical to the amount of the purchases where the learned CIT - A has made disallowance by invoking the provisions of section 251 (2) of the act. The disallowance contested here by the assessee is of Rs. 85,000 only wherein in case of one party the name of the employees of the assessee were mentioned. On 1/10/2010 a sum of Rs. 25,000 were alleged to be paid by the assessee's employee in cash and furth....
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....ssion of the assessee. The assessee contested that assessee has incurred expenditure of Rs. 10,919,000/- for removing encroachments on the above land by paying to various persons who encroached the land. Therefore, the above sum does not comprise the income of the assessee. The assessee submitted that above sum is not on unaccounted income but is disclosed in the personal Audited profit and loss account and personal balance sheet. The assessee has also submitted the copy of same. It was found that assessee has received a sum of Rs 122,65,461/- encroachments settlement of land from Lodha dwellers private limited against which the assessee has incurred the direct expenditure of settlement of Rs. 10,919,000/-. The assessee submitted the affidavit of 19 persons to whom the payment for compensation of settlement was made on behalf of the Lodha dwellers. All of them have confirmed on affidavit that they have received the above payment from the assessee. On the remand report, the assessee once again submitted the affidavit of 19 persons where Rs. 8,919,000 were paid to those farmers who have confirmed the receipt of the payment from the assessee. This was the additional evidences submitte....
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....eceived the above payment. Those persons also submitted nature of occupation, and their entitlement to receive such compensation, land area, survey number of land evicted from, amount of compensation received, who paid the compensation, how they were enjoying occupation of the land. 052. However the learned CIT - A rejected all the statement of those persons finding out some infirmities in those statements. It was noted by him that when the payments are made to three or four persons of one family, only one person of that family knows the details about the transaction. All other persons have confirmed the statement of the one family member. Further, the other family members are either illiterate or ignorant about the transaction. All the persons are very poor and do not have any bank account. The money is split into small amounts in various names so that appears that there were large number of persons to whom compensation was paid for surrendering their rights. The stamp papers on which these affidavits are made are brought by one person, all these stamp papers are having running serial number. The subject matter was also typed similarly. The statements were signed either in the ....
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....e claim of the amount received, the learned assessing officer received the independent confirmation from the developer. For justification of the payment, assessee produced the affidavit of all 19 parties before the assessing officer. All the 19 parties were produced before the AO for verification; all these parties confirmed having encroachment over the land and receiving the sum as stated in their affidavit. It was further stated that affidavit was made to give the evidence of the sum received by all these parties for vacation of the land. It was further stated that this was the work given to the assessee by the developer for the reason that assessee was having very good relationship with all those persons. The assessee was also engaged, as proper compensation to those persons for the encroachment was also to be given without any disturbances in development of the project and to avoid any litigation. In this regard, the affidavits were prepared those affidavits cannot be ignored. Further, when the persons who made the affidavit in person have also confirmed the fact of receiving the above money because of releasing the encroachment, the fact of affidavit has been proved. Naturally....
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....en paid to the assessee and not to its proprietary concern and therefore he made the addition of the above sum. When the matter reached before the learned CIT - A, assessee submitted a separate balance sheet with the profit and loss account and disclosed net profit of Rs. 2,416,230/- which was an undisclosed income. In the profit and loss account the payment for settlement of the land was shown at Rs. 12,265,460 whereas the Lodha dwellers has confirmed having paid a sum of Rs. 14,476,220/-. Against this receipt, the assessee has claimed the expenses of Rs. 10,919,000/- paid for settlement to various persons. The assessee produced the affidavits of all those parties to whom the amount was paid. Assessee submitted that as the above amount was accounted in the personal profit and loss account and personal balance sheet, which was audited, filed before the learned CIT - A. It was also stated that at the time of filing of the return, the assessee forgot to add the net profit of Rs. 24,16,230/-. Assessee submitted name of 19 persons to whom a sum of Rs. 8,919,000 was paid. Assessee also explained that for vacating land, assessee received a sum of Rs. 12,265,460 and the balance sum of Rs.....
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....ounting to Rs. 14,476,220/-. The above company also submitted the bank statement where all these cheques were cleared. It was stated that that company is engaged in the business of construction of residential building and total payment was made through banking channel. From the above facts, it was clear that there was some land, which was acquired by above company, and to get the clear title over the property because of encroachment it paid the above sum to the assessee. Out of the above sum of Rs. 14,476,220/-, the assessee has admitted that the sum of Rs. 12,265,460/- was received from the above company and the balance was received because of sale of Morum. It was further stated that some of the cheques have not been received by the assessee. In this case, there was an encroachment is confirmed by Lodha dwellers private limited. The assessee has paid amount to various persons; those persons have confirmed that they have received the payment for clearing the encroachment on the above land. The affidavits and signed stamp receipt were also produced. In examination, those parties have also accepted receiving the above sum. Therefore, it cannot be said that that there was no encroach....
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....tion to the extent of Rs. 2,416,230 because of the above transaction. Accordingly, the learned assessing officer is directed to retain the above addition to the extent of Rs 24,16,230/- and delete the balance amount added by the learned CIT - A. 058. The next item of addition is with respect to the addition of Rs. 1,050,000 made by the learned assessing officer under section 68 of the income tax act. The learned AO mentioned that assessee has deposited as cash amount of the above sum with Union Bank of India and Federal Bank and the source of which is not explained. During the course of assessment the assessee could not produced any detail. However, at the time of appellate proceedings assessee submitted that he does not have any bank account with the federal bank. The learned assessing officer has also not given any information about the figure of deposit of the above sum in that bank account. Assessee submitted the statement of the bank account with Union Bank of India wherein there is a cash deposit of only Rs. 525,000/- was made. 059. learned CIT - A, on examination of the above detail, retained the addition of Rs. 525,000 and granted relief of the balance sum. The assess....
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....as undisclosed receipt from luster engineering company. 064. The next addition relates to the enhancement made by the learned CIT - A based on the personal balance sheet and profit and loss account filed during the course of appellate proceedings. Based on this the learned CIT - A issued a notice under section 251 (2) of the act on 7/3/2016 which is reproduced at page number 57 of the appellate order. The learned CIT - A noted that in the above balance sheet and amount of Rs. 97,83,899/- is shown to have been received by the assessee in the bank account which has not been disclosed in the original return of income. After discussion, the above sum was added to the total income of the assessee. 065. The learned authorized representative basically objected the provisions of section 251 (2) of the act stating that the learned CIT - A is empowered to issue the notice for enhancement only to the income which was subject matter of consideration for the purpose of assessment by the income tax officer. He submitted that the above sum was not subject to consideration for the purpose of assessment by the learned assessing officer and therefore the learned CIT - A could not have made enh....