Income Tax Appellate Tribunal - Chandigarh
Narendra Kumar Gupta, Chandigarh vs Acit, Chandigarh on 31 October, 2017
pIN THE INCOME TAX APPELLATE TRIBUNAL
DIVISION BENCH 'B', CHANDIGARH
BEFORE MS.DIVA SINGH, JUDICIAL MEMBER
AND MS. ANNAPURNA GUPTA, ACCOUNTANT MEMBER
ITA No. 1135/Chd/2012
(Assessment Year : 2009-10)
Narendra Kumar Gupta, Vs. The A.C.I.T.,
H.No.38, Sector 27-A, Circle 5(1),
Chandigarh. Chandigarh.
PAN: AAVPG8691E
(Appellant) (Respondent)
Appellant by : Shri Rohit Goel, CA
Respondent by : Shri Manjit Singh, DR
Date of hearing : 01.08.2017
Date of Pronouncement : 31.10.2017
O RDE R
PER ANNAPURNA GUPTA, A.M.:
Th i s a p p e a l f i l e d b y t h e a s s e s se e h a s b e e n p r ef e r r e d against the o r de r p a s se d by th e Ld. C o m mi ss i o n e r of I n co m e - t a x ( A p pe a l s ) , C h a nd i g a rh ( h e r e i n a ft e r r e fe r r e d t o as ' L d . CI T( A p p e a l s) d a t e d 1 2 . 0 9 . 2 01 2 r e l a t i n g t o a s s e s s m e nt y e a r 2 0 0 9- 1 0 .
2. B r i e f l y s t at e d , th e a s s e s s e e i s a c o n t r a c t o r e n gag e d i n t h e w o r k of c on s t r u c t i on o f ro a d s i n t he n am e o f M / s Harsoria C o n s tru c t i o n Co m p a ny . D u r i ng the i m p u g n ed a s s e s s m e nt y ea r r e t u r n s h o w i n g i n c o m e o f R s . 44 , 8 9 , 0 3 0 /- was filed by t he a s s e s s e e. Th e r e a f t e r a s s e s sm e n t u/s 1 4 3 ( 3 ) of t h e I n co m e Ta x A c t , 1 96 1 ( i n s h o r t ' t h e A c t ' ) w a s f r a m e d m a ki n g an a d d i t i o n t o t h e i n c o m e o f th e as s e s s e e o n a c c o u n t of f o l l o wi n g :
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a) U/s 40(a)(ia) for non deduction
of tax at source on freight and
cartage expenses - Rs.3,59,424/-
b) Addition of purchases made on
account of the following:
i)U/s 40A(3) on account of cash
payment made exceeding
Rs.20,000/- - Rs.6,88,326/-
ii)On account of discrepancies
in bills -Rs.15,87,181/-
iii)Bogus and non-existent
parties of purchases -Rs.18,12,777/-
c) 50% of machinery repair and
maintenance expenses being
unsubstantiated - Rs.1,98,900/-
d) Unexplained expenditure on
hiring of machines u/s 69C - Rs.5,00,000/-
Total -Rs.35,59,427/-
3. Th e matter was carried in appeal b e f o re the
L d . CI T( A p p e a l s ) w h o d e l e t e d th e a d d i t i o n m a de u / s 4 0 A ( 3) o f t h e A ct t o th e e x t e n t o f R s . 1 ,6 3, 7 5 2 / - a nd u / s 69 C o f t h e A c t o f Rs . 5 l a c s w h i l e c o n f i rm e d t h e r es t o f t h e a d d i t i o n s. A n a p p e a l a g ai n st t h e o r d e r o f t he L d . CI T( A p p e a l s) w a s f i l ed b y t h e a s s e s s e e b e f o r e t h e I . T. A . T. w h o v i d e t h e i r o r d er d a t e d 2 3. 1 . 2 0 1 3 d e l e t e d a l l th e ad d i t i o n s m a d e di r e c t i n g i n turn a p p l i c a ti o n o f n e t p r o f i t r a te o f 6 % t o t h e t u r n o v e r of t h e a s s e ss e e t o d e t e r m i n e t h e t a x a b l e i n co m e . Ag a i n s t t he s a i d o rd e r of t he I . T. A . T. , t h e Re v e n u e f i l e d a p pe a l b e fo r e t h e H o n ' b l e H i g h C o u r t r a i si n g su b s t a n t i al q u e s ti o n o f l a w v i s - à - v i s t h e I TAT n o t d e c i d i n g t he i s s u e o f b o g u s p u r c h a s e s a n d u n s u bs t a n t i a t e d e x pe n s e s , d i s a l l o w an c e u/s 4 0 ( a ) ( i a ) a n d d i sa l l o w an ce o f m a c h i ne r y r e p a i r & m a i nt e n a n c e o n merits, bu t r a th e r d i r e c ti n g th e Assessing Officer to d e t e r m i n e th e n et p r o f i t r a t e at 6 % . Th e H o n ' b l e H i g h C o u rt 3 h e l d t h a t t h e Tr i b u n a l h a d i g no r e d r e l e v a nt f ac t s w h i l e p a s s i n g i t s o r d er . I t w a s p o i n te d o u t t h a t t h e e v i d e nc e relied upon by the Assessing Officer p a r t i cu l a r l y w i th r e f e r e n c e t o d i sc r e p a n c i es i n t h e v o u c h e r s a nd b i l l s o f p a r t i e s f r o m w ho m p u r c ha s e s h a d b e e n m a d e a n d wi th r e s p e c t t o n on e x i s t e n c e o f t h e pa r t i e s a n d a bs e nc e o f t h e i r s a l e s - t a x r e g i st ra t i o n n u mb e r e tc . h a d n ot b e e n d e a l t wi th b y t h e I . T. A . T. , n o r a n y o p i n i o n r e c o r d ed o n t h e s a m e bu t t h a t i t h a d a b rup t l y d i r e c te d t h e A s s e s s i n g O ff i c er t o a p p l y a n e t p r o f i t r a te o f 6 % w i t h o u t a s s i g n i n g a n y o s t e n s i b l e reason. Th e H on ' b l e H i g h C o u rt , t h e r e fo r e h e l d t h a t t he Tr i b u n a l h a d e rr e d i n a p p l y i n g a n e t p r o f i t r at e w i t h o u t c o n s i d e r i n g th e m a t e r i a l c o l l e c t ed b y t h e As s e s s i n g O f f i c er a n d i g n o ri n g t he r e l e v a nt f a c t s a n d f a c t or s r e fe r r e d t o by t h e A s s e s s i ng O ff i c e r a n d , t h er e fo r e , s e t a s i d e t he o r d e r a n d r e s t o r e d t h e a p pe a l o f t h e Tr i b u n a l f o r a d j u d i c ati o n a f r e s h i n a c c o r d an c e w i t h l a w . I n pu r s u a n c e to t h e a f o r e s a i d d i r e c t i o n o f t h e H i g h C o u r t t h e p r e s e n t a p p e al c a m e u p f o r h e a r i n g be f o r e us .
4. Th e g r o u n d s o f ap p e a l r e l e v a n t for a d j u d i c at i o n as p e r t h e d i r e ct i o n ar e a s u n d e r:
"1. That the order of the Learned CIT(A) is bad, against the facts & Law.
2. That the Learned CIT(A) has erred in sustaining the addition made by Invoking the provisions of section 194C on freight & cartage Rs.3,59,424/.
3. That the Learned CIT(A) has erred in sustaining the disallowed Rs.3,59,424/- u/s 40(a)(ia) for the expense which has already been paid without appreciating the fact that no payment is due as on 31 st March 2009.4
4. That the Learned CIT(A) has erred in sustaining addition Rs.5,24,574/- made on the basis of payment exceeding Rs.20,000/- to one party in a single day and without appreciating the fact that no payment of Rs. 20,000/- has been made on a single day to a single party.
5. That the Learned CIT(A) has erred in sustaining addition of Rs.15,87,181/- for non production of bills whereas the appellant had produced complete books of accounts and bills.
6. That the Learned CIT(A) has erred in sustaining addition of Rs.18,12,777/- by declaring these aggregate purchases as bogus and without any material evidence on record.
7. That the Learned CIT(A) has erred in sustaining addition of 50% of Machinery Repair and Maintenance amounting to Rs.1,98,900/- whereas all the records and books were produced before the Learned Assessing Officer.
8. That the appellant creaves leave to add, alter, amend or withdraw any grounds of appeal before the final hearing."
5. G r o u n d N os . 2 an d 3 r a i s ed b y t h e a s s e ss e e a r e w i th r e g a r d to t h e di s a l l o w a nc e m ade o f f re i g h t a nd c a r t a ge e x p e n s e s o n ac co u n t o f n o n d e du c t i o n o f t a x at s o u r c e o n t h e s a me a s p e r t h e pr o v i s i o n s o f s e c ti o n 40 ( a ) ( i a ) o f t he Act.
6. Briefly s t a t e d, the a s s es s e e ha d made p a y m en t of R s . 3 , 5 9 , 42 4 / - o n a c c o u n t of f r e i gh t a n d c a rt a g e to M / s V . R . E n t e r p r i se s o n va r i o u s d a t es o n w h i c h t h e A s se s si n g O f f i c er found that no tax had been deducted at s ou r c e and, t h e r e f o r e, h e d i sa l l o w e d t he e n t i r e a m o u n t b y a pp l y i n g t h e p r o v i s i o ns o f se ct i o n 4 0 ( a) ( i a ) o f th e A c t .
7. Th e L d . C I T( A p p ea l s ) upheld the d i s a l l o w a nc e m a d e. B e f o r e t h e L d . CI T( A p p e a l s ) t h e as s e s s e e c o n te n de d t h a t t h e g o o d s t r a n sp o r t a g e n c y h a d i ss ue d G R s a n d p a ym e n t s h a d b e e n m a d e t o d i f f e r e n t t r u ck o w n e r s w i t h w h o m t h e r e w a s 5 n o w r i tt e n or o r al a g r e em e n t a n d s i n c e th e p a y m en t m a d e to t h e i n d i v i du a l o w n e r d i d n o t e xce e d t h e l i m i t pr es c r i b e d u / s 1 9 4 C o f t h e A ct , n o t a x w a s r e q ui r e d t o b e d e d uct e d o n t h e same. I t w a s al s o c o n t e n de d th a t s i n c e n o am o u n t w a s p a y a b l e a s on 31 . 3 . 2 0 0 9 , t h e r e fo r e , a l s o th e p ro v i s i o n s of section 4 0( a ) ( i a) of the Act we r e not a p p l i c ab l e . Th e L d . CI T( A p p e a l s ) f o r w a rd e d cop y of e x p l a n ati o n of the a s s e s s e e t o th e A s s e s s i n g O ff i c e r w h o s t a t ed t h a t t h e p a y m e n t i n qu e st i o n h a d b e en ma d e t o M / s V . R. E n t e r p r i se s only and no t the i n d i v i du a l truck o wn e r . Th e L d . CI T( A p p e a l s ) a f t e r co n s i d er i ng t h e c o n t e nt i on s o f b o t h t h e a s s e ss e e a n d t h e r e p o rt o f t he A s s e s s i n g O f f i ce r u p h e l d t h e d i s a l l o w a n c e s o m a d e r e j ec t i n g b o t h t h e co n te n t i o n s o f t h e a s s e ss e e .
8. B e f o r e us , t h e Ld . c o u n se l f o r as s e s s e e r e i t e ra t ed t h e c o n t e n t i on s m a de b e f o r e t h e Ld .C I T( A p p e al s ) wh i l e t h e Ld . D R r e l i e d u p o n th e o r d e r o f t h e Ld . CI T( A p p e a l s ) .
9. H a v i n g he a r d bot h t h e pa r t i e s, we f i n d no i n fi r m i t y i n t h e o r d e r o f t h e L d . C I T( A p p ea l s ) . As pointed out by the Assessing O f f i ce r and rightly appreciated by t he L d . CI T( A p p e a l s ) a l s o , a l l t h e p a ym e n t s i n qu e s t i on h a d b e e n m a d e t o t h e goo d s t r a ns p o r t ag e n c y o nl y i .e . M / s V .R . E n t e r p r i se s . Th i s f a c t h a s n o t b e e n c o nt r o v e rte d b y t h e L d . C o u n s el f o r th e a s s e s se e . Th e r e f o r e , w e a r e a g r e e m e n t with the L d .CI T( A p p e a l s ) that th e r e is no m eri t in the c o n t e n t i on o f t h e L d . c o u n s e l f o r a s s e s s e e t h a t no TD S w a s deductible s i n ce the p a y me n t s were m ad e to i n d i v i d ua l 6 truck o w n er s . Further we also agree with t he L d . CI T( A p p e a l s ) t h a t t h e f a c t tha t t h e a f o r e sa i d a m o u n t s were not payable as at the end of the year i.e. on 31.3.2009 m a k e n o d i f f e r e nc e t o t h e a p p l i ca b i l i t y o f t h e p ro v i s i o n s of s e c t i o n 4 0 ( a ) ( i a ) o f t h e A c t o n t he s a m e , w h i c h p os i t i o n h a s b e e n u p h el d b y th e H o n ' b l e A p e x C o u r t i n t h e c a se o f P a l am G a s S e r vi c e Vs . C I T i n C i v i l A p pe a l N o . 55 1 2 of 20 1 7 d a t ed 0 3 . 0 5 . 2 0 17 .
10. In view of the above, w e u ph o l d t h e o r d e r o f the L d . CI T( A p p e a l s ) d i s a l l o wi n g f r e i gh t a n d c a r t a g e e x p e n s es a m o u n t i n g t o R s. 3 , 5 9 , 4 2 4/ - o n ac c o u n t o f n o n d ed u c t i o n of t a x a t s o u rc e o n t h e s a m e a s p er t h e p r o v i s i o n s o f s e c t i o n 4 0 ( a ) ( i a) o f th e Ac t .
Ground N os . 2 and 3 raised by the a ss e s s ee a r e, t h e r e f o r e, d i s mi ss e d .
11. Ground No.5 ra i s e d by the assessee r el a t es to d i s a l l o w an c e made on p ur c h a s e s a m o un t i n g to R s . 1 5 , 8 7 ,1 8 1 / - fo r n o n p ro d u c t i on o f b i l l s .
12. B r i e f f a c t s re l e va n t t o t h e i s s u e a r e t h a t t h e A s se s s i ng Officer asked th e a s s e ss e e to f u r n i sh c o mp l e t e bills of p u r c h a s e s. Th e a s s e s s ee s u bm i t t e d th e s a me , but the A s s e s s i n g O f f i ce r f o u n d t h at t h e bi l l s w e r e n o t c o mp l e t e a n d in some c as e s only the pa ym e n t v o u c he r had been produced. Th e assessee ha d not f u r n i sh e d bills for p u r c h a s e s o f Rs. 1 5 , 8 7 , 1 81 / - as p e r d et a i l s m en t i o n e d a t p a g e 4 a n d 5 o f t h e a ss e s s m en t o r d e r . Th e A s s e s s i ng 7 O f f i c e r g a ve a n o th e r o p p o r t un i t y t o t h e a s s e s se e to p r o d u c e copies of bi l l s and the a s s es s e e p r o d uc e d the s a m e. Th e r e a f t e r the Assessing Officer noticed t he following d i s c r e p a nc i e s i n t h e b i l l s :
(i) V a r i a t i o n i n nam e o f p ar t y on v o u c h e r a n d on c o r r e s p o nd i n g bi l l .
(ii) V a r i a t i o n i n d e sc r i p t i o n o f p u r ch a s e o n v o u c he r a n d c o r r es p o n d i n g b i l l .
(iii) V a r i a t i o n i n r a te o f s a m e i te m o f p u r c h a s e i n t h e s a m e m o n th .
(iv) D i s c r e p a nc y i n l o a d i n g a nd u n l oa d i n g c h ar g e s .
After an a l y z i ng and d i s cu s s i n g the above d i s c r e p a nc i e s , th e A s s e s si n g O ff i c e r d i s a l l o we d t h e e n ti r e amount of R s . 15 , 8 7 , 1 8 1 /- p e r ta i n i n g to these bills by t r e a t i n g t h e s ame a s u n v ou c h e d p u r c h a s e s.
13. B e f o r e t h e L d . CI T( A p p e a l s ) t h e as s e s s e e f i l e d d e ta i l ed r e p l y o n t h e i ss u e c o n t e s ti n g t h e a f o r e sa i d ad d i t i o n o n various g ro u n ds which h a ve been s u m m ar i ze d in the C I T( A p p e al s ) ' s order at para 6.2. B ri e f l y stated, the assessee c on t en d e d that t he r e were a c tu a l l y no d i s c r e p a nc i e s as s u c h i n t h e bi l l s , w h i c h w a s ev i d e n t f r o m t h e f a c t t h a t t h e t a x a u d i t r e p o r t c e r t i f i ed t h e c o r re c t n e s s o f t h e b o o k s of a cc o u n t a n d fu r t he r t h a t t h e d i s cr e p a n c y , i f a n y , w e re n o t m at e r i a l en o u g h t o d e n y d e d uc t i o n of t h e sa i d e x p e n s e s . Th e Ld . CI T( A p p e a l s ) af t e r c on s i d e ri n g a s s e s s e e 's s u b m i s s i on s uph e l d t he o rd e r of th e As s e s si n g O f fi c e r c o n f i r m i ng t h e ad d i t i o n m a de r e je c t i n g a l l t he c on t e n t i o n s r a i s e d b y t h e as se s s e e a s u n d e r :
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6.3 I have considered the submission of the Ld. Counsel. At the outset, it may be mentioned that though the appellant had claimed that bills, produced were complete, the Assessing Officer on verification found that bills pertaining to the total amount of Rs.15,87,181/- had not been furnished. The appellant had subsequently submitted copies of bills. The Assessing Officer had noticed a number of discrepancies in the form of variation in narration on vouchers and corresponding bills. The plea of the appellant that the discrepancies were not confronted to him cannot be accepted since the appellant had initially not submitted the proper bills and the bills submitted later were not according to the narration on the vouchers.
6.3.1 The plea of the appellant that it was not possible to maintain bills, and vouchers for all the petty expenses, but the Assessing Officer has not disallowed each and every petty expense and has disallowed only the amounts for which bills were not produced or the narration of the bills produced were not as per the vouchers.
6.3.2 The argument of the Ld. Counsel that tax audit report is a proof of proper maintenance of books of accounts is not acceptable, as it appears that the auditors had not gone through the bills and vouchers properly, otherwise the discrepancies pointed out by the Assessing Officer would have been pointed out by the auditors.
6.3.3 The plea of the appellant that due to practical difficulties, section 44AD was enacted, but the case of the appellant is not covered by the provisions of section 44AD of the Act.
6.3.4 The appellant has tried to explain the discrepancies pointed out by the Assessing Officer, but the factual position is that the discrepancies exist and also that there is difference in narration on the vouchers and on the bills.
6.3.5 The Assessing Officer has very specifically mentioned about the discrepancies in her order, but the appellant has not explained the specific discrepancies pointed out by the Assessing Officer.
6.3.6 The Assessing Officer had pointed out that truck No. HR-
68-5180 and CH-034-5180 had been used as per the vouchers, but it was highly unlikely that the same registration No. was borne on two trucks. The appellant has produced registrationcertificateofonlytruckNo.HR-68-5180 and not of CH-034-5180.
6.3.7 In view of the above discussion and the fact that bills pertaining to the total amount of Rs.15,87,181/- had not been produced initially and the bills produced subsequently were not in accordance with the vouchers, the addition made by the Assessing Officer of Rs.15,87,181/- is confirmed. Ground of appeal No. 6 is dismissed."
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14. B e f o r e u s , t he L d . c o u n s e l f or a s s e s s e e r e i t e r a t ed t he s u b m i s s i on s m ad e b e f o r e t h e L d.C I T( A p p e al s ) r e pr o d u c e d i n t h e w r i tt e n su bm i s s i o n s f i l e d be f o r e t he L d .CI T( A p p e a l s ) a t p a g e N o s . 1 1 t o 1 5 o f t h e P a p e r B o o k a s un d e r :
"The Learned Assessing Officer has made an addition of Rs.15,87,181/- on account of bills not produced. We had submitted all the bills mentioned in assessment order to the Assessing Officer. The assessing officer has also narrated various reasons like Variation in name of party on voucher and corresponding bill, variation in description of purchase on voucher and corresponding bill etc by the assessing officer to declare these bills as bogus were never pointed out or discussed with the counsel & moreover these are not material enough to deny the deduction of direct expenses actually incurred during the course of business. Further the assessee is civil construction contractor & complete books of accounts along with vouchers were maintained and produced before your goodself during assessment proceedings.
The assessee has attached Tax Audit report along with the return which clearly shows that the assessee has maintained proper books of accounts which gives true & fair view in respect of profit as per profit & loss account. The nature of business carried by assessee is such that it is not possible to get each & every bill in respect of petty expenses incurred in ordinary course of business. The suppliers of material are very small retail traders & normally trolley & tractor owner delivered the Raita, Bajri, sand etc & payments are made to such tractor trolley owners . Due to these practical difficulties Provisions of Section 44AD were enacted. The learned AO during the course of assessment proceedings had made certain additions after finding technical faults in the bills & vouchers without appreciating the nature of business carried on by the appellant.
The Learned Assessing Officer has pointed some specific vouchers wherein discrepancies are notice. Like in Voucher No 645 & 653 the bill states the purchase description as 20-40mm thick stone and 20 mm stone aggregate. But in the corresponding vouchers the detail is 25mm stone and 40mm respectively. All the material between 20 - 40mm size are procured for wet mix macadam and the same are taken on stock as such as there is no difference between the material of size 20 to 40 mm. Thus the discrepancy mentioned is incorrect. Further the Learned Assessing Officer has pointed out some variations in rates of GSB purchased. GSB(Granular Sub Base Material) is purchased from various sources in natural form and other required materials are mixed in desired proportion so as to meet the requirement of specification. The rate of GSB depends on the percentage of course and fine aggregate which further varies from location to location of the quarry. Higher 10 the percentage of the course aggregate higher is the rate of GSB. Also the bills in date mentioned are not only for GSB but also for washed sand/ washed aggregate and hence rate comparison is incorrect.
The difference in loading and unloading charges is due to the reason that mechanical means like loader or JCB has to be used to load/ unload the material. Sometime these are readily available at site and at other times they have to be hired from distant places which lead to higher loading/ unloading charges. At times the machines are not available at all then due to urgency, the materials are manually loaded in trucks which further increase the charges paid. The copy of RC's of the trucks used for loading/unloading as mentioned by the Learned Assessing Officer are attached at A n n e x u r e 2 .
The learned assessing officer made addition on suspicion & surmises. Suspicion howsoever strong cannot take part of proof 37 ITR 271 (SC) Uma Charan Shaw Vs CIT 37 ITR 271.Mere doubt is not enough. The AO must bring positive material on record to p rove the falsity: Kasat Paper & Pulp Ltd. Vs ACIT Pune 74 ITD 455 Pune, Page 466, para 11. In the case of Charan Singh Vs State of UP ATR 1976 SC 520, the SC has observed that the Court must guard against the danger of allowing conjecture or suspicion to take place of legal proof. If two views are possible on any evidence, on proving guilt, another proving innocence, the view favorable to the accused be adopted. Harendra Narain Singh Vs. State f Bihar, 1991 SC 184 at page 184."
15. Th e L d . D R , o n t h e o t h e r h a n d , r e l i e d u p o n t h e o r d e r o f t h e L d. CI T( A pp e a l s ) .
16. W e h a v e h e ar d th e c o n te n t i o ns of b o t h t h e p a r ti es . We find that d i sa l l o w a n c e of purchases am ou n t i n g to R s . 1 5 , 8 7 ,1 8 1 / - h a s b e e n m a d e p r i m a r i l y o n a c co u n t o f t h e d i s c r e p a nc i e s f ou n d i n t h e b i l l s o f pu r c h a s es an d f o r t he r e a s o n t h a t t h e b i l l s w e r e no t i n i t i a l l y pr o d uc e d b y t h e a s s e s s e e i n t he a s s e s s m e nt p r o ce e d i n g s . Th e f a c t t h a t t he bills were su bs e q u e n t l y pr o du c e d during as s e s s m e n t p r o c e e d i ng s i s no t d e n i e d. Th e r e f o r e , d i s a l l o wa nc e f o r t h e r e a s o n t h a t t h e b i l l s w e r e n o t p ro d u c e d c a n n o t be u p h e l d . A s f o r t h e d i s c re p a n c i e s p oi n t e d o u t i n t h e b i l l s , w e f i nd 11 t h a t t h e s a m e we r e a d e q u a t el y ad d r e s s e d b y t he a s s e s s e e . Th e v a r i a t i o n i n t h e d i sc r e p a n c y i n t h e i t e m s i n t h e b i l l s and c o r r e s p on d i n g vouchers wa s pointed out as being i r r e l e v a nt s i n c e t h e r e w a s n o t mu c h d i f f e r en c e be t w e e n 20 t o 4 0 m m s t o n es , s u c h i t e ms be i n g p r o c u re d f or w e t m i x macadam. S i mi l a r l y d i ff e r e n ce i n t h e ra t e of G SB o f s am e s i z e w a s e x p l a i ne d a s b e i n g o n a c c o u n t o f v a r i at i o n i n t he p e r c e n t a ge o f c oa r s e a n d f i n e a gg r e g a t e i n t h e GS B w h i c h v a r i e d fr o m qu a rr y t o qu a r r y w i th t h e hi g h e r p e rc e n t a g e o f coarse in GSB the higher the rate of GSB. It was also p o i n t e d ou t t h at t h e c o mp a r i s on w a s i n co r r e c t s i n c e t he b i l l s c om p a r e d w a s n o t on l y o f G S B b u t a l s o o f w a s h ed s a n d / w a s he d a gg r e g a t e . Th e d i f f e r e n ce in l oa d i n g and unloading c h a r ge s was also explained d e p e nd i n g u p on a v a i l a b i l i t y o f JC B o r l o a d e r a t s i t e o r b e i n g h i r e d f r o m d i s t a n t p l a c es l ea d i n g to h i g h e r c h a r g e s . Th e d i s c r e p a n c y v i s - à - v i s a l l e g e d l y s a m e r e g i s t r a ti o n N o . o f t w o t r u c k s w as e x p l a i n e d b y p ro d u c i n g t h e i r R C ' s . N o i n f i r mi t y i n t h e explanation of the assessee with respect to each d i s c r e p a nc y h as b e e n p o i nt e d ou t b y t h e L d. CI T( A p p e a l s ) , n o r b y t h e L d . DR b e f o r e u s . W e , t h e r e f o r e, c a nn o t a g r e e w i t h t h e L d . CI T( A p p e a l s ) t h a t the a s s e s s ee f a i l e d t o a d d r es s d i s c r e p a nc y . I n v i e w o f t he a b ov e , w e h o l d t h a t s i n c e a l l t h e b i l l s w er e pr o d u c e d b y t he a s s e s s e e a nd d i s c r e p a n c i e s a d e q u a t e l y e x p l a i n e d w h i c h w ere n o t c o n t r o v er te d b y t h e R e v e n u e , t h e d i sa l l o w a n c e m a de c o u l d at b e st b e s a i d t o b e o n t h e b as i s of su r m i s e s an d c o nje c t u r e s w h i c h c an n o t f o r m t h e b a s i s o f a n y d i s a l l o w a n c e. W e t h e r e f o r e d i r e ct t h a t t h e 12 d i s a l l o w an c e of p u r c h a s e s t o the e x t e n t o f R s. 15 , 8 7 , 1 8 1 /- b e d e l e t ed .
17. G r o u n d No . 6 r ai s e d b y t h e as se s s e e i s a g a i ns t t h e d i s a l l o w an c e o f p u r c h a s e s ag gr e g a t i n g to R s .1 8 , 1 2 , 7 7 7/ - u p h o l d i n g t h e sam e t o b e b o g u s .
18. Th e f a c t r e l e va nt t o t h e i s s u e ar e t h a t t h e a ss es s e e had made p u r ch a s e of m a t e r i al of R s . 1 8 , 1 2 , 77 7 / - f r om f o l l o w i ng p a r ti e s:
(i) M / s V . K . C o n t r ac t o r s
(ii) M / s S h a m sh e r Si n g h G r i t S u p p l i e r ( i i i ) M / s S a n g am S t on e D u s t Su p p l i er ( i v ) M / s D a h i ya S t o ne C r u s h e r Th e A s s e s s i n g Of f i c e r n o ti c e d t ha t t h e b i l l s o f ab o v e p a r t i e s w e r e pr i m a - f a c i e b o g u s b e c a u s e t h e y had n o S a l e s Ta x R e g i s t r a ti on No., no Serial N u m be r , bi l l s were on computer p r i n t ou t s in th e s am e f o r m at , h ad i d e n t i c al handwriting a nd s i g n a tu r e s an d the dates had been m e n t i o n e d i n c or re c t l y . Th e A ss e s si n g O f fi c e r m a d e e n q u i r i e s f r o m H ar y a n a Po l l u t i o n C o n tr o l B o a r d t o as c e rt a i n a s t o w h e t h e r t h e s e s to n e c r u s he r s w er e i s s u e d P o l l u t i o n C o n t r ol C e r t i f i ca t e s , r e qu i r e d u n de r t he law and the Regional O f f i c e r , Ha r y a n a S t a t e P o l l u ti o n C o n t r o l B o a rd c o n v e y ed t h a t n o n e o f t h e a f o r e s a i d p a r t i e s h a d b e e n i s s u e d P o l l u t i on C o n t r o l Ce r t i f i ca t e s . Th e A s s e ss i n g O f f i c e r a l so e n q u i r e d f r o m t h e Sa l e s Ta x O f f i c e , P a nc h k u l a , a s t o wh e t h e r t h e a f o r e s a i d p ar t i e s w e r e i s s u e d S al e s Ta x N u m b e r s a n d t h e c o n c e r n e d a u th or i t y c o n v e y e d th a t n o n e o f t h e s e p a r t i e s p o s s e s s e d S a l e s Ta x N u m b e r . Th e A s s e s s i n g O f f i c e r a l s o 13 d i r e c t e d h e r I n sp e c t o r t o m a k e en q u i r y a b o u t t he a f o r e s a i d f o u r p a r t i es a n d t h e I ns p e c t o r m a d e o n t h e s po t e n q u i r i es f r o m o w n er s a nd e m p l o y e es o f v a r i o u s s to n e cr u s h e r s o f t h a t a r e a w h o c o n v e y e d th a t th e n a m e s of t he s e p a r t i e s w e r e n e v er h e a r d o f . Th e A s s e s s i ng O f f i c e r f i n a l l y a s k e d t he a s s e s s e e t o p r od u c e t h e co n c e rn e d p e r s o ns o f t h e a b o ve p a r t i e s a nd t h e a s s e s s e e e x p r e ss e d h i s i n ab i l i t y t o d o so s t a t i n g th a t t he m a t e r i a l w a s pu r c h a s e d on cash basis f r o m t h e s u p p l i e r o p e r a t i ng a t t h e c o n s t r u ct i o n s i t e a n d t h u s h i s w h e r e ab o u t s w e r e u n kn o w n t o h i m . I t w a s a l so s u b m i t t e d t h at h e h a d n o t p u r ch a s e d m at e r i al fr o m t h es e p a r t i e s s i n c e l o ng s o h e w a s no t i n a p o s i t i o n to pr o v i d e th e i n f o r m a ti o n e x c ep t w h a t w a s g i ve n o n t h e b i l l s . R e g a r d i n g P A N / V A T o f t h es e p a r ti e s , i t wa s c o n ve y e d t h at t h e s a m e w a s n o t r ea d i l y a v a i l a b l e. Th e A s s e s s i n g O f f i c er a l s o w r o te letters to the aforesaid p a r t i es to furnish t he copy of a c c o u n t of M / s H a r s o r i a C o n st r u c t i o n C o . ( na m e u n d e r w h i c h t h e a s s e ss e e i s c a rr y i n g on h i s b u s i n e s s ) , b u t t h e s e letters were r ec e i v e d back u nd e l i v e r e d. Th e Assessing O f f i c e r f i na l l y t re a t e d e n t i re p u rc h a s e s f r o m t he a f o r e s a i d p a r t i e s o f Rs . 1 8 ,1 2 , 7 7 7 / - a s b o gu s a n d a d d e d the s a m e t o t h e t o t a l i n c o me o f t h e a ss e s s e e.
19. D u r i n g t h e a p pe l l a t e p ro c e e d i ng s , t h e a s se s s ee f i l ed d e t a i l e d w r i tt e n s u b m i s s i on s w hi c h a r e r e p r o du ce d i n p a r a 7 . 2 o f t h e L d . CI T( A p p e a l s ) ' s o rd e r . Th e L d . C I T( A p p e a l s) a f t e r c o n s i d e r i ng t h e s u b m i s si on s o f t h e a s s e ss e e u p h e l d the d i s a l l o w a n ce made by r e j ec t i n g all the co n t e n t i o ns r a i s e d b y t h e as se s s e e a s u n d e r :
14
7.3 I have considered the submission of the Ld. Counsel.
The Ld. Counsel has submitted that total of the disallowance u/s 40A(3), payment for which no bills were produced and payment to bogus parties works out to about 32.10% of the total purchases. It may be mentioned that disallowance u/s 40A(3) is made for payment in cash and not because the expenses debited are bogus and so the disallowance will be about 26% and not 32% as mentioned by the appellant 7.3.1 The contention of the appellant that the material purchased by the appellant was as per requirement on the basis of work done is not acceptable in view of the specific finding of the Assessing Officer that the debit of Rs. 18,12,777/- to the purchase account was bogus. 7.3.2 The comparison of the NP rate and percentage of purchases to receipts with those of earlier years is not relevant, since the appellant may have shown bogus purchases in the earlier years also, assessments of which were not under scrutiny. Moreover, the percentage profit which a contractor may earn may differ from contract to contract and one should not assume that the profit in each contract will bear the same ratio to the value of the contract. 7.3.3 The Assessing Officer asked the appellant vide order sheet entry dated 13.12.2011 to, inter-alia, produce the following persons/information:
"(i) PAN No.; (ii) Soles Tax No.; (iii) Pollution Control Certificate No. of suppliers, mainly, M/s V.K. Contractors, M/s Ddhiya Stone Crusher, M/s Sangam Stone Dust Supplier and M/s Shamsher Singh Grit Supplier. In the absence of proof of the above, please explain why purchases made from these parties be not treated as unexplained/ bogus purchases and be not disavowed to the amount of Rs.18,12,777/-"
7.3.4 In response to the above query, the appellant had submitted as under:
"Kindly refer to your query for PAN/Sales Tax No/Pollution Control Certificates in respect of the various suppliers of the material We respectfully submit that the assessee has purchased the material from supplier operating at the construction site during the financial year 2008-09-on the cash basis. The copies of the bills have already been produced material since long from these parties. Therefore we are not in. position to provide the information except that given in the bills vouchers."
7.3.5 Thus, the appellant had in a way admitted that the aforesaid four concerns did not possess any certificate from Pollution Control Board, did not have the Sales Tax No. or any PAN No./VAT No. The contention of the appellant now that the results of inquires were never confronted to the appellant is not correct. The fact of the matter is that the very existence of these parties, from whom the purchases are claimed to have been made and payment is supposed to 15 have been affected, is highly doubtful. The onus to prove that these parties existed was on the appellant and he failed to discharge that onus. The evidence brought on record by the Assessing Officer in regard to there being no Sales Tax No., Pollution Control Certificate, bills not having serial number and handwriting 85 signatures on the bills being identical further strengthens the case of nonexistence of these parties. It may be pertinent to point out that the appellant has not produced any evidence even in appellate proceedings to prove his case. Hence, it has to be concluded that aforesaid four parties do not exist and the claim of purchases having been made from these parties is bogus ipso-facto. The addition made by the Assessing Officer is accordingly upheld and ground of appeal No. 7 is dismissed."
20. B e f o r e u s , t h e Ld . c o u n s e l f o r a ss e s s e e r e l i ed u po n t h e w r i t t e n su b m i s si o n s f i l e d b e f o r e t h e L d . CI T( A p p ea l s ) . Th e L d . c o u n s e l f or a s s e s s e e i n p a rt i cu l a r d r e w o u r a tt e n t i o n to t h e f a ct t h at t he f i n d i n g s f o r do u b t i n g t h e g e nu i n e n e s s of t h e p u rc h a s e s ma d e h a d b e e n a de q u a t e l y a d d re s se d b e f or e t h e L d . CI T( A p p eal s ) a s u nd e r :
"The learned officer has doubted on the genuineness of the vouchers of V.K.Contractors, Shamsher Singh Grit Suppliers, Sangam Stone Dust Suppliers, Dhaiya Stone Crusher on the following findings:
i) The Bills had no Sales Tax No. It is submitted that all these were the suppliers of Sand, Bazri and are unregistered dealers.
ii) The Bills had no serial Number.
We have no control on fixing serial numbers by the suppliers.
iii) The Bills were computer print outs in the same format We cannot dictate terms to supplier as they are mostly illiterate persons and could have taken help from some computer operator for print out of bills to avoid cost of press printing.
iv) Handwriting and signatures on the bills were identical No such report was made available to us. It is only an allegation which is not supported by any evidence.
v) Dates on the bills have been mentioned incorrectly. No specific instance has been quoted.16
vi) All stone crushers are required to have a Pollution control Board Certificate and Haryana State Pollution Control board has informed that these parties were not having any pollution control board certificate.
All these parties are suppliers and are not having their own stone crusher. We are sure that a supplier of material does not require any Pollution Control registration. Moreovoer, the copy of enquiry if any was never made available to us.
vii) Non availability of Sales Tax Number All these parties are suppliers and are mostly truck and trolley drivers and not having Sales Tax number. Moreover, the copy of enquiry if any was never made available to us.
viii) On the Spot enquiry conducted by the Inspector Any enquiry conducted by Inspector was never made available. As gathered from the assessment order, it is noticed that Inspector has made this enquiry on 9/12/2011 and it is relevant to mention that "Burj Kotian Stone Crushing Zone (around Gaggar River used to be one of the biggest quarry/source of material in the Northern Zone has been made defunct by the Punjab & Haryana Court and Supreme Court since February 2010. All such suppliers which' used to operate at such places have already left this place. As such when Inspector had visited such area after closure of business after 2 years the same could not be located. "
21. Th e Ld. c o u n se l for as s e s s ee f u r t h er drew o ur a t t e n t i o n t o th e f a c t t h a t i t w as p o i n t e d o u t th a t e n t i r e d i s a l l o w an c e r el a t e d t o p ur c h a se o f s a n d , m i t t i , g a t k a a d bazri. Th e r e q ui r e m e n t o f t he sa m e h a d b e e n an a l y z e d o n t h e b a s i s o f t he w o r k d o ne d u r i n g t h e y ea r a n d c o m p a r e d w i t h t h e a c t u al m a t e r i a l p u r c h ase d a n d i t w a s d em o n s t r a t ed b e f o r e t h e Ld . CI T( A p p e a l s ) t h a t w h i l e t h e r eq u i r em e n t o f t he a f o r e s a i d ma t e r i a l w a s 1 3 , 3 3 , 856 . 7 9 c f t . , t he a ss e s s e e h a d a c t u a l l y c o ns u me d 1 3 , 4 0 , 7 6 4 c ft o f m a t e r i a l . Th e r e f o r e , t he c o n s u m p t i o n o f s a n d , m i t t i , b a zr i a n d g a t k a c ou l d n o t b e d o u b t e d o n ac c ou n t o f t h e w o r k c a r r i e d o u t b y t he a s s e ss e e d u r i n g t h e y ea r a n d t h u s t h e p ur c h a s e o f t h e s ai d m a t e r i al also. Th e Ld. counsel for as s e s s e e f u r th e r drew our 17 a t t e n t i o n t o t he f a c t t h a t t h e as s e s s e e h a d s h o w n b e t t e r r e s u l t s i n t h e i mp u g n e d y e ar s h o w i n g n e t pr o f i t of 5 . 4 8 % a s a g a i n s t n e t p r o fi t o f 5 . 4 1 % s h o w n i n t h e p r e c ed i n g y ear d e s p i t e t h e f ac t t h a t t h e p r i c e of t h e b u i l d i n g m at e r i a l h a d i n c r e a s e d d u ri n g t h e y e a r w h i c h w a s d e m o n s t r at e d b e f o r e t h e L d . CI T( A p p ea l s ) a l s o by w a y o f s h o w i n g t h e i n c r e a s e i n t h e p r i c e o f b i t um e n i n d i f f e r e nt m o n t h s f o r t h e i m p u g n e d y e a r . I t w a s a l so p o i n t e d o u t t h at r e s t r i c t i o n ha d a l s o b e e n imposed on mining of r i ve r be d sand, b az r i and gatka b e c a u s e o f w h i ch a l s o t h e p r i c e h a d i n c r e a s e d a n d d e s p i t e s u c h o d d s , t h e as s e s s e e h a d m a na g e d t o s h o w b e tt e r r e s u l t s i n t h e i m p u g ne d y e a r . Th e L d . c o u n s e l f o r a sse s s e e a l s o d r e w o ur a tt e n ti o n t o t h e c i r cu m s t a n c e s a n d m a n n e r i n w h i c h i t c a r r i ed o n i t s b us i n e s s st a t i n g t ha t b i tum e n , s a n d, b a z r i an d g at k a w e r e t h e ma j o r i t e m s p u r c ha s ed f o r t h e c o n s t r u c ti o n w or k c a r r i ed out and e n t i re b i t um e n w e re p u r c h a s e d f r om t h e G o v e r n m e n t o w n e d c o r p o r a ti on t o w h o m p a y m e n t s w e re m a d e b y c h e q u e a n d i t w a s o n l y s a n d , b a z ri a n d g a t k a w h i c h w a s p r o cu r e d fr o m l o c a l s u p p l i e r s w h i c h w a s m a n a g e d by t h e s i t e s u p er v i s o r / a ge n t s / tru c k / t r o l l e y owners. Th e L d . c o u n s e l f o r a s se s s e e p o i n te d o ut t h a t t he s u p p l i e r s o f t h es e m a t e r i a l w e re j o i n t l y o w n e r s o f t r u c ks a n d t r o l l e y s who p r o c u re d m a ter i a l f r om s t o ne c r u s h e r o r s c r e e n i n g p l an t s a n d s u p p l i e d i t t o v a r i o u s s i t e s w h e r e w o r k w a s c a r r i e d o u t b y t h e as s e s s ee a n d t h at n o rm a l l y s i te s u p e r v i s or o n re c e i p t of b i l l s f r o m t h es e v end o r s m a de p a y m e n t o f t h e s a m e o n t h e s i te t o t h e d r i v e rs. It was p o i n t e d o u t t ha t o n a c c ou n t o f p e c u l i a r c i r c um st a n c e s i n 18 w h i c h t h e w o rk w a s c a r r i e d o ut a n d s i n c e t h e c on s t r u c t i on l a b o u r , s i t e s u pe r v i s o r a nd d r i ve r s o f t h e tr u c ks t o w h om p a y m e n t s we r e m a d e w e r e no t l i t e r a t e , i t w a s no t p o s s i b l e to m a i n t ai n 1 00 % v o u c h e rs bu t the a s se s s e e had s t i ll m a n a g e d t h e sam e . Th e L d . c o u n s e l f o r a s s es s e e, t h e r e f o re , s t a t e d t h at t h e re w a s n o r e a s on f o r h o l d i n g t h e p u r c h a s e m a d e f r o m t h e pa r t i e s a s b o g u s.
22. Th e L d . D R , on t h e o t h er h a n d, r e l i e d up o n t he o r d e r o f t h e L d. CI T( A pp e a l s ) .
23. W e h a v e h ea r d th e c o n t e n ti o n s of b o t h t h e p a r t i es . We f i n d t ha t t he as s e s s e e h a d a d eq u a t e l y a d d r e sse d a l l t h e d i s c r e p a nc i e s p oi n t e d o u t b y t h e R e v e n u e b y p o i n t i n g o ut t h a t t h e p a r t i es f r o m w ho m p ur c h a s e s we r e ma d e , b e i ng u n r e g i s t er e d d e al e r ' s s a l e s ta x nu m b e r w a s n o t re q u i r e d . I t w a s a l s o p o i n te d o u t t h a t t h e P ol l u t i o n C e rt i f i c ate w a s n o t r e q u i r e d b y t h ese p a r t i e s s i n c e t h e y w e r e n o t mi n e r s a n d t h a t t h e s a i d p ar t i e s c ou l d no t b e l o c a te d b y t he I n s p e ct o r s i n c e t h e y h a d l e f t t h e pl a c e o n a c c o u n t of t h e Hi g h C o u r t d i r e c t i o n. No infirmity in t h es e e x p l a n at i o n s has b e en pointed o ut by the R e v e n ue except for r e p ea t i n g the c o n t e n t i on o f t h e A s s e s s i n g O f f i c e r t h a t t h e s a i d p a r t i es w e r e b o gu s s i nce t h e y ha d n o sa l e s - t a x n u m b e r, P o l l u ti o n C e r t i f i ca t e o r cou l d n o t b e f o u n d b y t h e I n sp e c t o r. M o r e o v er w e f i n d t h at t he a s s e ss e e ha d d e m o n st r a t e d b e f o r e t h e L d . CI T( A p p e a l s ) , b y w a y o f a q u a n t i t a t i ve a n a l y s i s , t h a t t h e w o r k e x ec u t e d by t h e a s s e s s ee du r i n g t he y e ar , w h i c h h as n o t b e e n d i s pu te d b y th e R e ven u e , c o ul d n ot h a v e b e en 19 d o n e w i t h ou t t he q u a n t i t y pu r ch a s e d f r o m th e i m p u g n e d party. Th e a s s e s s e e a l s o d e m on s t r a t e d t h a t no s u r p l u s p u r c h a s e w a s ma d e b y i t a s p e r t h e w or k e x ec ut e d . Th e q u a n t i t y an a l y s i s s u b m i t t ed b y t h e a s s e s se e h as n o t b e en c o n t r o v e rt e d by the Revenue. Undisputedly also, the a s s e s s e e h as s ho w n b e t t e r p ro f i ts i n t h e i m p u g ne d y e a r a s c o m p a r e d t o t h e p r e v i o u s y e a r as b o g u s . C o n s i d e r i n g t he t o t a l i t y o f t h e f ac t s a n d c i r c u m s ta n c e s o f t h e c a s e w e s e e n o r e a s o n t o h o l d th e i m p u g n ed p ur c h a s e a s b o g u s a n d t h us d i r e c t t ha t t h e sa m e b e d el e t e d .
G r o u n d N o . 6 r a i s e d b y t h e a s s es s e e t h e r e f or e st a n d s allowed.
24. G r o u n d o f a p pe al N o . 4 r a i s e d by t h e a s s e s s ee i s vi s - à - v i s t h e d i s al l o wa n c e o f p u r ch a se m a d e o n a c c ou n t o f c a sh payments made with r e s p ec t to th e su m e x c e e di n g R s . 2 0 , 0 0 0/ - i n vi o l a t i o n o f t h e pr o v i s i o n s o f s ec ti o n 4 0 A ( 3 ) o f t h e A ct .
25. B r i e f f ac t s a r e th a t t h e As s e s s i n g O f f i c er f o u nd t h a t the assessee ha d made p a y me n t s in cash exceeding R s . 2 0 , 0 0 0/ - i n on e d a y t o o n e p ar t y i n c o nt r a v e nti o n o f t h e p r o v i s i o ns o f s ec t i o n 4 0 A ( 3) o f t h e A c t t o t h e e x t e n t o f R s . 6 , 8 8 , 32 6 / - . He f u r th e r fo un d that the s ai d a m o u nt i n c l u d e d a n a m ou n t o f R s. 5 , 2 4 ,57 4 / - w h i ch h a d b e e n p a i d t o c o n c e r n s w h i ch d i d n o t e x i s t a n d w h i c h w e r e d i s a l l o we d a s b o g u s i n l a t er p a r t o f t h e A s se s s i n g O f f i c e r ' s o r d e r . He, t h e r e f o r e, m a de d i s a l l o w an c e of entire am o u n t of R s . 6 , 8 8 , 32 6 / - u / s 4 0 A( 3 ) o f th e A c t a n d t h e a m o u n t of 20 R s . 5 , 2 4 , 57 4 / - wa s a l s o h e l d t o b e d i s a l l o wa b l e a s b og u s p u r c h a s e s.
26. Before the L d . CI T( A p p e a l s ) , the assessee c o n t en d ed t h a t t h e p r o vi s i o n s o f s e c t i on 40 A ( 3 ) o f t h e A c t h a d b ee n v i o l a t e d o n l y o n a c c o u n t o f p a ym e n t m a de t o t he e x t e n t o f R s . 1 , 5 6 , 59 5 / - an d supported hi s c o n t e n t i on by filing a c h a r t sh o w i n g a l l t h e i m p u gn e d p a y m e n t s r e f l e c ti n g d a te o f t h e b i l l s a nd d a te o n w h i c h t h e p a y m e n t s w er e m a d e . Th e a s s e s s e e al t e r n at i v e l y c o nt e n d e d t h a t s i n c e t h e re w a s no banking f a ci l i t y at the c o n s tr u c t i o n s i te s where the p a y m e n t s w e re m a d e , t h e s a m e w e r e p r o t e c te d by c l a u s e ( g ) o f R u l e 6 D D o f th e I n c om e Ta x Ru l e , 1 96 2 an d f ur t h e r si n ce t h e m a t er i a l w a s p r o c u r ed t h ro u gh a g e n t s w h o a re r e q u i re d t o m a k e p a y m e nt i n c a s h , t h e r e for e , t h e p a y m e nt s w e r e a l s o p r o t e c t e d b y c l au s e ( k ) o f R u l e 6 D D o f I n co m e Ta x R u l e s . Th e L d . C I T( A p p ea l s ) a f t e r c o n si d e r i n g s u b m i s s i o n s o f t h e assessee f o u nd that the chart r e f l e c t i ng date of the impugned p a y me n t s had not been c o n t r ov e r te d by the A s s e s s i n g O ff i c e r i n h i s R e m a n d R e p o r t a n d s o h e t o o k t h e m t o b e c o r r ec t . Th e r e a f t e r h e h e l d t h a t t h e p a y me n t m a de t o o n e M r . D e s R a j w a s n o t c o ve r e d u n d e r s e c ti o n 4 0A ( 3 ) o f t h e Act a n d, t he r e fo r e , d el e t e d t he d i s a l l o w a n ce made on a c c o u n t o f t h e sa m e . F o r t h e r es t , h e f o u n d t h at t h e s a m e w e r e m ad e t o p ar t i e s wh o w er e he l d t o b e no n - e x i s t e n t al so b y t h e A s s es s i n g O f f i c e r . H e a l so r e j e c t e d t h e c o nt e n t i o n of t h e a s s e s s e e t ha t i t w a s s a v e d f r o m t h e r i g o r s o f s e c t i o n 4 0 A ( 3 ) o f t h e A ct b y R u l e 6 D D ( G ) & ( k ) i n t h e a b s e n c e of 21 a n y d e t a i l s a n d p a r t i c u l ar s t o s ub s t a n t i a te i t s c l a i m h a v i ng b e e n f i l e d b ef o re i t . Th e L d . C I T( A p p e a l s ) , t h e re f o r e , h e l d t h a t t h e p a y m e nt m a d e t o f o u r p a r t i e s b e i n g i n a n y c a s e d i s a l l o w ab l e o n a c c o u n t o f b og us p u r c h a s e s, h e c o n f i r m e d t h e d i s a l l o w a n ce m a d e o n a c c o u nt o f t h e s a m e .
27. B e f o r e us , t h e Ld . c o u n se l f o r as s e s s e e r e i t e ra t ed t h e c o n t e n t i on m ad e b e f o r e t h e l o w er a u t h or i t i e s w hi l e t h e L d . D R r e l i e d u p o n th e o r d e r o f t h e Ld . CI T( A p p e a l s ) .
28. We have h e a rd both th e pa r t i e s . Out of the d i s a l l o w an c e u ph e l d b y t h e L d .C I T( A p p e al s ) a mo u n t i n g t o R s . 5 , 2 4 , 57 4 / - we find t h at th e a s s e s s ee himself had admitted d i s al l o w a n c e of R s . 1 ,5 6 , 5 9 5 / - . D i sa l l o w a n c e to t h i s e x t en t i s , the r e f o r e , u p h e l d . A s f o r t h e b a l a nc e a m o u n t t h e R e v e nu e h as n o t d i sp u t e d t h e f a c t t h a t t he p a y m e n t m a d e i n t h e se ca s e s d i d n o t e x ce e d R s .2 0 , 0 0 0 /- i n a si n g l e day to a single party. E v e n t h e L d . CI T( A p p e a l s ) , w e f i n d, h a s u p h e l d t h e d i s a l l o w an c e m er e l y f o r t h e re a so n t h a t t he p u r c h a s e s ma d e f r o m t h e s e pa r t i e s w e r e f o u nd t o b e b o g u s a n d n o t o n a c cou n t o f t h e f ac t th a t t h e p a y me n ts m a d e w e r e i n c o n t r a v e nt i o n o f t h e p r o v i s i on s o f s e c t i o n 4 0A ( 3 ) o f t h e Act. Since we have d el e t e d t he d i s a l l o w a n ce made on a c c o u n t o f bo g u s p u r c h a s e s fr o m t h e s e p a r ti e s i n p a r a 2 3 o f o u r o r d er , we f i n d n o r e a s o n t o u p h o l d th e di s a l l o w a n c e of the same u/s 40A(3) of the Act. In view of the above, we h o l d t h a t t h e di s a l l o w a n ce m a d e u / s 4 0 A ( 3 ) o f th e A c t b e r e s t r i c te d to R s . 1 , 56 , 5 9 5 /- while the balance of R s . 3 , 6 7 , 97 9 / - i s d i r e c t e d t o b e d el e t e d .
22G r o u n d o f ap p ea l N o . 4 i s , t h er ef o r e , p a r t l y a l l o w e d i n t h e a b o v e t e rm s .
29. Ground N o .7 ra i s e d by t he assessee is v i s- à - v i s d i s a l l o w an c e o f 5 0 % o f m a c h i ner y r e p a i r a n d ma i n t e n a n ce e x p e n s e s a m o u nt i n g t o R s . 1 , 98 ,9 0 0 / - i n t h e ab s e n c e o f s u p p o r t i ng d o cum e n t s / b i l l s w i t h r e g a r d t o th e s a m e a n d which for t he same reason was upheld by the L d . CI T( A p p e a l s ) . Even before us, the said expenses remained u ns ub s t a n t i a te d . W e, t h e r e f o re , up h o l d the d i s a l l o w an c e m ad e . G r o u n d o f ap p e a l N o .7 r a i se d b y t he a s s e s s e e i s , t he re f o r e , di s m i s s ed .
30. I n t h e r e s u l t , th e a p p ea l o f t he a s s e ss e e i s pa r t l y allowed.
O r d e r p r on o u n c ed i n t h e o p e n cou r t .
Sd/- Sd/-
(DIVA SINGH) (ANNAPURNA GUPTA)
JUDICIAL MEMBER ACCOUNTANT MEMBER
Dated : 31 s t October, 2017
*Rati*
Copy to:
1. The Appellant
2. The Respondent
3. The CIT(A)s
4. The CIT
5. The DR
Assistant Registrar,
ITAT, Chandigarh