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TMI Blog2012 (7) TMI 681X X X X Extracts X X X X X X X X Extracts X X X X ..... or and thus decided accordingly. Addition u/s. 68 - Held that:- The assessee has stated per his written submissions of having rendered the affidavits complete before the ld. CIT(A), who, though, has ignored the same - the fact remains that the incompleteness of the affidavits are stated by the assessee to have been removed and as such, the same constitutes a valid material on record, i.e., something more than a bald assertion - restore the matter back to the file of the ld. CIT(A) for carrying out the required verification - The addition is consequently deleted. Disallowance u/s. 40A(3) - Held that:- AO only from its reporting per the auditor’s report in Form 3CD disallowed the claim whereas assessee though has rendered an explanatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncluding the written submissions submitted by the assessee. 5. The first ground is in respect of confirmation of an addition for Rs. 30,000/- by the Assessing Officer (AO) upon rejection of the assessee's books of accounts u/s. 145 of the Act, at Rs. 15,000/-. The brief facts of the case are that the assessee, a trader dealing in Electrodes and Welding Accessories, was found to be not maintaining any stock register in respect of the items traded in. No inventory of stock as at the close of the year, which was stated to be valued on estimate basis, was prepared. Also, the purchase vouchers in respect of the purchases from the state of U.P. were found to be defective inasmuch as no rate had been mentioned; the AO detailing two such bills fr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , the Revenue is justified in applying the provision of section 145(3) of the Act, which empowers the AO to frame the assessment in a manner provided u/s. 144, i.e., to the best of his judgment, taking all the relevant material into account. However, even as clarified by the hon'ble jurisdictional high court, as well as by other high courts, the estimate of escaped income has yet to be made on a reasonable basis, and not arbitrarily. In the present case, we find no basis for the estimate as made by the two authorities below; the ld. CIT(A) merely reducing the addition as made by the AO by half. The assessee has disclosed a much higher gross profit than that for the earlier two years. No other comparable case has been again cited by the Reve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sequently, its acceptance or otherwise u/s. 68 of the Act by the AO is to be on the basis of the materials on record as well as the explanation/s furnished in support; the said materials rather only forming part of the assessee s explanation, and cannot on the basis of the affidavits. This is as questions of fact, the invocation of s. 68 being essentially a matter of factual finding, need to be proved on the basis of materials and not on the basis of affidavits and counter-affidavits. That is, sec. 68 of the Act is itself a rule of evidence, the scope and parameters of which stand duly elucidated by the higher courts of law, and form part of the well settled law on the subject (refer, inter alia, CIT vs. P. Mohanakala Others, (2007) 291 IT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of appeal by the assessee. Nevertheless, the fact remains that the incompleteness of the affidavits are stated by the assessee to have been removed. As such, the same constitutes a valid material on record, i.e., something more than a bald assertion. Considering the nominality of the amount involved, and without prejudice to our foregoing observations qua the law in the matter, we are therefore disinclined to restore the matter back to the file of the ld. CIT(A) for carrying out the required verification in the matter by him or, at his instance, by the AO, which may lead to a satisfaction by the said authority. The addition is consequently deleted. We decide accordingly. 9. The third ground by the assessee is in respect of a disallowance ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ense which is otherwise allowable in the computation of business income. The same, it is to be appreciated, is only toward contravention of the prescribed mode of payment, which stands admittedly breached. The supplier s bank, it is to be appreciated, is only acting as its agent in accepting the cash for and on behalf of its constituent. The payment is without doubt in cash, even as stated in the assessee's tax audit report itself and, in any case, other than by account payee cheque or bank draft, so that the rigor of the section is attracted, which being a deeming provision is to strictly applied (refer: ITO v. Kenaram Saha Subhash Saha, 116 TTJ (Kol)(SB) 289). So, however, we do not think that any disallowance u/s. 40A(3) in the insta ..... X X X X Extracts X X X X X X X X Extracts X X X X
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