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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 ..... o law & facts of case. 2. On the facts brought on record and documents furnished, the ld. CIT(A) ought to have deleted the above referred additions of Rs.1807687/-. 3. The appellant craves leave to add or amend any grounds of appeal." 2. The Revenue has raised following grounds of appeal: "1. On the facts and circumstances whether the Ld. CIT(A) was right in directing the A.O. to adopt net profit rate of 8% of the total receipts instead of 10% applied by the A.O. when the complete books of account & vouchers were not produced and rejected u/s 145(3) of the Income Tax Act, 1961. 2. On the facts and circumstances whether the Ld. CIT(A) was right in directing the A.O. to adopt net profit rate of 8% of the total receipts which is in line w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... plete vouchers/bills etc. as observed earlier, which was show caused to the assessee as well and therefore, no true profit can be derived without production of complete bills/vouchers and by debiting prior expenses during the year. Accordingly, the A.O. invoked the provisions of section 145(3) of the Act and applied N.P. rate of 10% in view of the decision of ITAT, Amritsar Bench, in the case of Assessing Officer vs. Pooja Construction Co. in ITA No.750(Asr)/1992 [69 ITD 147]. The assessee did not submit any explanation to this and the A.O. Accordingly disallowed 100% of the payment made in violation of provisions of section 40A(3) of the Act amounting to Rs.4,77,187/-. The A.O. disallowed Rs.13,30,500/- on account of hire charges of machin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cordingly, 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 apply 8% on N.P. rate. The Ld. CIT(A) also accepted the submission of the assessee that no addition can be made u/s 40A(3) and 40(a)(ia) of the Act, once N.P. rate is applied and accordingly allowed the relief to the assessee. 9. None appeared on behalf of the assessee. Therefore, we are deciding the appeal after hearing the Ld. DR and on perusal of material available on record. 10. We have heard the ld. DR and perused the material available on record. There is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ate of 10% to 8%. Thus, the order of the A.O. is restored and the decision of the ld. CIT(A) is reversed. Accordingly, grounds No. 1 & 2 of the Revenue are allowed. 11. As regards the payment in violation of provisions of section 40A(3) of the Act, amounting to Rs.4,77,187/- and non deduction of TDS at source under sections 194C & 194J with regard to hire charges of machinery and legal expenses and with regard to the disallowance 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 f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . We concur with the views of the ld. CIT(A) with regard to the findings in para 4.4 of his order. Moreover, section 40 starts with non- obstante clause as "notwithstanding anything to the contrary in sections 30 to 38, the following amounts shall not be deducted in computing the income chargeable under the head "Profits and Gains of Business or Profession". In other words, section 40 has the effect 'notwithstanding anything contained in sections 30 to 38 of the Act. Therefore, this proposition has been affirmed by the Hon'ble Allahabad High Court in the case of CIT vs. Pradeshiya Industrial And Investment Corpn. of U.P. Ltd. (2010) 325 ITR 583 (All). The Hon'ble Allahabad High Court has followed the decision in the case of Shree Sajjan Mil ..... X X X X Extracts X X X X X X X X Extracts X X X X
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