TaxTMI 
TaxTMI 
TaxTMI 
2023 (4) TMI 271
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....acts 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 as income in respect of receipts from Lodha Dwellers PL of Rs. 1,33,87,820/- be deleted. d. Taxed as income in respect of....
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....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 Rs. 92,400 Total 5,60,81,840 06. Assessee aggrieved with the order of the learned Assessing Officer preferred appeal before the learned CIT (A), who passed an order on 28th March, 2016 partly allowing the appeal of the assessee and also enhancing the assessment by making certain fresh additions/disallowances as....
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....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). 011. We have carefully considered the rival contentions and perused he orders of the lower authorities. We have also carefully perused written submissions and paper books filed by both the parties. We have also carefully gone through various decisions cited by both parties. 012. First, we come to the appeal of the learned Assessing Officer. As per ground no. 1.1, the learned Assessing Officer is aggrieved where the learned CIT (A) ....
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....ing 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 appeal is also dismissed. 020. Ground no. 3 to 6 relates to various additions combined in these three grounds. Assessee has also challenged the enhancements made by the learned CIT (A).We deal with each of the issues. 021. The first addition relates to a sum of Rs 2, 91,330/- made under section 40A (3) and Rs. 367,581 for cash transportation expenses. Fact of the issue shows that the learned assessing officer has disallowed the transportation charges o....
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....mounting 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 further stated that the disallowance at the rate of 25% of the expenditure is unwarranted. This proves that the learned CIT - A has also accepted 75% of the expenditure as genuine. Accordingly, it was stated that the addition made by the learned CIT - A is not correct 025. The learned departmental representative vehemently supported the orders of the lower authorities. It was further stated that it is the power of the learned CIT - A to enhance the addition. It was....
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....ure 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 in cash and the learned CIT - A has disallowed 25% of such expenses. We find that when learned CIT - A dealing with the addition made by the learned assessing officer has categorically deleted the complete disallowance of Rs. 4,435,916/- on account of transportation charges holding it to be completely genuine, he does not have any authority to disallow 25% of the part of such expenditure holding that it lacks the genuineness. Such finding of the learned CIT - A is contrar....
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.... 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 the order sheet entry only for enhancement of income. Accordingly the total sum of Rs. 6,431,800 he applied the provisions of section 40 (A) (3) of the act. The total addition made by the learned assessing officer of Rs. 998,000/- he made an enhancement of Rs. 5,433,800 u/s 40 A (3) of the act. 035. He further verified the purchase expenditure of the assessee. He found that assessee has also made a cash purchases of Rs. 4,164,720 and therefore the provisions of section 40 A (3) of th....
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....rther 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 Geetesh & Co. The learned assessing officer found that with respect to these two parties the assessee has made cash payment of Rs.998,000 which is in violation of the provisions of section 40 A (3) of the act for purchase of goods. Therefore, he disallowed the same. With respect to the learned CIT - A he found that Ledger account of the above parties shows cash payment with respect to first party of a sum of Rs. 47,50,000/- and in case of second party a sum of Rs. 1,651,800/- . Further, the clai....
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....ngly, 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 found by the learned CIT - A, therefore, the addition as such does arise from the assessment order and the details available before the learned assessing officer. Therefore, objection of Assessee against enhancement of income on this item is rejected. 042. Learned CIT - A has made an ad hoc disallowance of 25% of such expenditure where he did not find that the vouchers contain the proper details about the purchase of the goods. The learned CIT appeal found that a sum of Rs. 4,164,720 is a cash p....
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....es 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 further on 11/2/2011 a sum of Rs. 60,000 is paid by the employee of the assessee in cash, which resulted into the addition of Rs. 85,000/- under section 40 A (3) of the act. 046. The argument of both the parties on this issue were similar to the arguments made while contesting disallowance under section 40 A (3) of the act with respect to the purchases of the material. The assessee's claim is that there is no cash payment made by the assessee which is in violation of the provisions of section 40 A (3) of the....
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....eceived 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 submitted before the AO in remand proceedings. The statement of several persons was also recorded under section 131 of the act. The assessee also explained that out of the sum claimed of Rs.1 44,76,220, the assessee has not received a sum of Rs. 1,122,360 and further sum of Rs. 1,088,400 was not received on account of land settlement work but was received on account of sale of Morum which is already been disclosed in the books of accounts of the assessee in his proprietary concern. Thus, the claim of the assessee verifi....
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....tion. 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 office of the assessee or at the residence of these persons. In the statement all, these persons are stated that their family was growing crop on this land. However, there were no details of agricultural expenditure incurred by those people and agricultural income earned by those persons. None of the persons was aware about the exact owner of the land. All those persons who received the sum did not show where they have invested the above sum. Therefore, the learned CIT - A was of the view that had the persons actually received the money, they would have invested the....
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.... 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, not all those persons could have invested the sum because of the smallness of the amount. Those persons did not receive any substantial sum by which any investment could have been made. All those persons were of the small means. It was therefore submitted that the allegations of the learned CIT appeal are clearly unfounded. He therefore submitted that assessee has offered income out of the above sum which is already taxed by the learned assessing officer and therefore the addition confirmed by the learned CIT - A is devoid of any merit. 056. The learned departmental re....
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....or 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. 2,210,760/- was received on sale of Morum. Assessee further submitted that out of the above sum of Rs. 144 lakhs assessee did not receive a sum of Rs. 1,122,360. The respective cheque number of the amount not received by the assessee was also explained. Assessee also submitted the affidavit of those persons and those persons were produced. All of these persons were also examined on oath and they have confirmed that they have received the above sum. The learned CIT - A also enquired about whether the above sum has been shown by these parties in their return of income. The per....
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....eceived 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 encroachment. Further, had there not been any encouragement on the land acquired by Lodha dwellers private limited, there is no reason for making payment of the above sum to the assessee. Merely because the affidavit are prepared identically, on stamp papers purchased serially, notarized by one notary cannot be given credence over the statement made by those persons in person produced before the lower authorities. Further, all these parties are in the statements submitted that they are persons of small means, therefore, they did not file the return of income or did not make any inves....
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....he 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 assessee is in appeal before us. 060. The learned authorized representative referred to the statement of the Union Bank of India account number 50161 from 1 April 2010 to 31 of March 2011 and submitted that prior to the cash deposit of Rs. 525,000 on 1/1/2011 the assessee has withdrawn a sum of Rs. 16 lakhs from the same bank account in cash. This cash was available with the assessee for redepositing the above sum. It was submitted that assessee has withdrawn a sum of Rs. 5 to lakhs on for 16 April 2010, Rs. 3 lakhs on 17 April 2010, Rs. 3 lakhs on 19 April 2010 and a further sum of R....
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....he 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 enhancement of the above sum. For this proposition he relied upon the decision of the honorable Supreme Court in case of Commissioner of income tax versus Shapporji Pallonji Mistry 44 ITR 891. It was further stated that the right course of action that could have been taken by the learned CIT - A was to direct the learned assessing officer to issue notice under section 147 of the act or invoking the revisionary powers under section 263 of the income tax act. 066. The learned departmental representative supported the order of the ld CIT (A). 067. We have carefully considered the rival contentio....