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TMI Blog2013 (10) TMI 424X X X X Extracts X X X X X X X X Extracts X X X X ..... estimated after rejection of books of accounts, other provisions of the Act have become redundant - Certain disallowances like 40A(3) and 40(a)(ia) have been incorporated in the Act to curb the menace of bogus expenditure through the instrument of banking transactions and TDS provisions respectively. The addition for violation of these provisions are treated as deemed income which is by fiction of law are not ordinarily the real income. When it has come to notice that the appellant has not complied with the provisions of section 40A(3) and 40(a)(ia) then it is liable for additional income irrespective of the fact that what is total quantum of receipt and what should have been the reasonable profit out of it. - Decided against the assessee. - I.T.A. No. 38(Asr)/2013 - - - Dated:- 7-10-2013 - Sh. H. S. Sidhu And Sh. B. P. Jain,JJ. For the Petitioner : None For the Respondent : Sh. Mahavir Singh, DR ORDER Per Bench : These cross appeals of the assessee and the Revenue arise from the order of the CIT(A), Jammu dated 09.11.2012 for the assessment year 2009-10. The assessee has raised following grounds of appeal: "1. The order of the ld. CIT(A), J K confirming the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng the year. Vouchers have not been produced completely and only self made vouchers were produced. The assessee has not produced any bills and muster rolls for labour payments. Also no labour payments have been debited in January February inspite of the fact that heavy purchases of material in these months have been made. Many other mistakes were found by the A.O. The AO issued a show cause notice by pointing out the various irregularities noticed by the AO and as to why the provisions of section 145(3) of the Act, may not be applied and rate of 10% of Net Profit is not applied in view of the decision of ITAT, Amritsar Bench, in the case of Assessing Officer vs. Pooja Construction Company in ITA No.750(Asr)/1992 [69 ITD 147]. The AO also observed that the assessee had given advance to M/s. Siam Engineering Consultants at Rs.14,01,217/- and the assessee was given show cause why the advance has been given since no working has been done by this party. Similarly, Rs.20,30,000/- were given to Smt. Anjali Dhar against purchase of land and no agreement in this regard was produced and it was show caused as to why notional interest may not be added to assessee's income. Hire charges of ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld. CIT(A), the assessee made the submissions that the estimation should be reasonable. Though the AO can adopt his own method to arrive at the income relying upon the decision in the case of British Paints India Ltd. (1991) 188 ITR 44/54 (SC). He also submitted before the ld. CIT(A) that the assessee was given sub-contract by M/s. Harish Chandra (India) Ltd. New Delhi who had obtained contract from Economic Reconstruction Agency, J K Government, who was to retain 9% on gross value of receipts after deducting the statutory taxes at source and therefore, the assessee requested the Ld. CIT(A) to apply N.P. rate of 8%. 8. As regards the disallowance u/s 40A(3), the assessee relied upon the decision of ITAT, Jodhpur Bench in the case of CIT vs. Padam Chand Bhansali (2004) 85 TTJ (Jodh) 215 that no deduction can be made u/s 40A(3) of the Act, where the income has been computed by applying a N.P. rate. Accordingly, no disallowance can be made u/s 40(a)(ia) of the Act on the same lines as section 40A(3). The Ld. CIT(A) on submissions of the assessee deleted the addition on account of cash credit amounting to Rs. 8 lakhs and accepted the submission of the assessee that the AO should a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ance u/s 40(a)(ia) amounting to Rs.13,30,500/-, the assessee has not submitted any explanation and there is no dispute on this account. The Ld. CIT(A) has confirmed the action of the A.O. by observing vide para 4.4 of his order, which is reproduced for the sake of convenience as under: "4.4. The AO has made addition for violation of section 40A(3) for Rs.4,77,187/- and for violation of section 40(a)(ia) Rs.13,30,500/- respectively. The appellant has argued that when the A.O. estimated the profit, then the additions discernible from the books of accounts should not have been made because the books were rejected by the A.O. The appellant in his submission has cited the case law of CIT vs. Padam Chand Bhansali (2004) 85-TTG(Jodh) 215, where it has been cited that no addition u/s 40A(3) could be made because no deduction for various expenses incurred as such has been allowed. I do not agree with the contention of the appellant that since the profit has been estimated after rejection of books of accounts, other provisions of the Act have become redundant. Certain disallowances like 40A(3) and 40(a)(ia) have been incorporated in the Act to curb the menace of bogus expenditure through t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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