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TMI Blog2022 (4) TMI 800X X X X Extracts X X X X X X X X Extracts X X X X ..... 016 challenges correctness of the lower authorities' action making addition(s) of Rs. 10 crores and Rs. 14 crores; assessment year-wise respectively based on the alleged search declaration. He further states at the bar that the assessee is not pressing for its pleadings challenging inducement element in the search statement any more. 3. The Revenue has also chosen to prefer its cross-objections C.O. Nos. 8 & 9/Hyd/2021 involving identical delay of 1855 days stated to be attributable to various reasons beyond its control. The fact remains that a significant position of the impugned delay pertains to calendar years 2020 and 2021 hit by out-break of Covid-19 pandemic. Case law Collector, Land Acquisition Vs. Mst. Katiji & Ors [167 ITR 471] (SC) and University of Delhi Vs. Union of India, Civil Appeal Nos. 9488 & 9489/2019, dt. 17-12-2019 hold that such a delay; if supported by the cogent reasons must make way for the cause of substantial justice. This is coupled with the fact that the Revenue's sole substantive issue raised of Section 40A(3) is already an inter connected one only. We thus accept the Revenue's averments explaining the foregoing delay(s). 4. We now proceed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wals with reasons and also unable to produce books to explain the same, as such the company declared undisclosed income of Rs. 10.00 crores for A.Y. 2011-12 and Rs. 14.00 crores for A.Y. 2012-13, to cover up all these deficiencies/short comings. The essence of statement by Mr. MML Narsimham, Managing Director of the company was brought on record to indicate the basis of declaring. the additional/undisclosed income for A.Y. 2011-12 and 2012-13. Since the assessee did not honor the declarations, based on the changed stand that the cash withdrawals are meant for meeting the expenses at work. sites and such payments are covered by Rule 600, with the vouchers for expenses, which could not be produced at the time of search, are verified later and such information support the stand taken by assessee, the AO analysed the said explanation and rebutted the same on following lines: - Disclosure was made by the assessee after verifying the books/vouchers and availability of bank accounts at work sites and the assessee changed it's mind subsequently to treat the expenses as genuine and allowable. - Disclosure was made after considering the fact that entire receipts were withdrawn in cas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee is executing works at remote areas at Mizoram and Nagaland and the Banking facility from the works site is far away, therefore, the assessee is protected by the clause-(g) of Rules 6DD of the IT Rules. 4. The only addition to the income returned u/s. 153A is made u/s. 40A(3) of the IT Act at Rs. 10,00,00,000/-, with an assumption that the cash payments are made in violation of section 40A(3) r.w.r. Rule 6DD on account of cash expenditure not supported by the supporting evidence and in this regard, it is respectfully submitted that the assessee produced books of accounts and supporting vouchers at the time of assessment proceedings. Without rejecting the books of accounts no addition can be made u/s. 40A(3) and disallowance may be limited to specific amount which is paid in violation of the said section and it is pertinent to mention here that the learned Assessing Officer has not identified any specific items from the books produced to attract the provisions of section 40A(3) of the IT Act. 5. The company has executed works awarded by various departments and works taken on sub-contracts executed by the company directly by the men and machinery of the company and partly t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch money, there could not have been any trouble to the assessee. Further, the amounts could have easily transferred through the bank account in the nearby places of work sites, in small amounts, on daily or weekly basis, from the head office. Further as per the information brought on record, equally good amounts were routed through the bank accounts located at Kohima and Mekarkong in some of the years, notably during A.Y. 2012-13. This may prove the assessee's theory that extortionist attacks bank accounts, on the accumulated balances, if maintained at place like Kohima and other nearby places. 5.3.1 In this context, it may be relevant to refer to the amounts paid as extortion money which was quantified at Rs. 68,87,500/- and offered as additional income for A.Y. 2011-12 and A.Y. 2012-13, based on the entries found in seized/impounded material/books. It was also a fact that no books/vouchers were produced by the assessee at the time of search and production of the same at the stage of assessment was certainly an afterthought. The payment of extortion money and non-maintenance of vouchers and books as evidenced at the time of survey/search in this case prove clearly that books ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cross cheque or crossed bank draft is insisted on to enable authority to ascertain whether the payment was genuine or whether it was out of the income from disclosed sources. The terms of s. 40A(3) are not absolute. Consideration of business expediency and other relevant factors are not excluded. The genuine and bona fide transactions are not taken out of the sweep of the section. It is open to the assessee to furnish to the satisfaction of the Assessing Officer the circumstances under which the payment in the manner prescribed in s. 40A(3) was not practicable or would have caused genuine difficulty to the payee. It is also open to the assessee to identify the person who has received the cash payment. It will be clear from the provisions of s. 40A(3) and r. 6DD that they are intended to regulate the business transactions and to prevent the use of unaccounted money or reduce the chances to use black money for business transactions." 5.3.3 This is very crucial factor in this regard for which the assessee could not establish that Rule 6DD clearly applicable to him. It is also a fact that the amounts assessee tried to explain through the cash payments/transfers, are mainly related to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 367 996 Staff Advance 58 41 0 41 140 Labour Charges 0 984 1004 813 2801 Other than Labour Charges 22 126 140 288 185 1565 1114 1461 4325 As could be seen from the chart, the amount of Rs. 28.01 crores represent the labour charges paid in cash for two years, with Rs. 10.00 cr. for A.Y. 2011-12 and Rs. 18.01 cr. during A.Y. 2012-13. The AO applied the provisions of Sec. 40A(3) and disallowed the amounts for the two respective years holding that the expenses were not explained and without bringing the reasons on record, Rule 6DD, cannot be applied in the case of the appellant. Hence, the disallowance made u/s. 40A(3) by the AO. However, the fact remains that based on the facts of the case books are deemed to be unreliable, as such the disallowance could not have been made u/s. 40A(3) and such disallowance could not be made, without specifying the amounts paid in cash. This proposition is held by Judicial decisions, as relied on by the assessee. Accordingly, it is held that the disallowance could not have been made by the AO as such the disallowance of Rs. 4.01 cr. made separately, as per provisions of Sec. 40A(3), are held to be unsustainable ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in return of income. In this Context, It may be relevant to refer to the judicial decisions on the issue of the validity and reliability of an affidavit. In it's judgment, in the case of Sri Krishna Vs. err, Hon'ble High Court of Allahabad, held that "It is neither a rule of prudence nor a rule of law that the statements made in an affidavit which remains uncontroverted, must invariably be accepted as true and reliable. Ordinarily, in the absence of denial, the statements may be accepted as true but if there are circumstances which Suggest that the statements on affidavit should not be accepted as true, the absence of denial by the other side, would not by itself be sufficient to Clothe the statements on affidavit with truthfulness and reliability." 5.4.2 Reverting to the facts of the case, the assessee While, explaining the reasons for making the disclosure and confirming the amounts of disclosure in affidavit dtd. 28-05-2012, could not be altered, with no change in facts. As such the declarations made were held to be not controverted with reasonable explanation or the change in evidence or facts. 5.5 In this context, it is also relevant to refer to the submission of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... orders before us has made any undisclosed income addition despite the fact that there has been a long discussion on identical lines to this effect. Learned CIT-DR could hardly rebut the fact that Section 40A(1) itself makes it clear that this statutory provision carries overriding effect on all other provisions of the Act since containing non-obstante clause i.e. "this section shall effect notwithstanding anything to the contrary contained in any other provision of this Act". Hon'ble apex court's landmark decision in Shri Sajjan Mills Ltd., Vs. CIT [ (1985) 156 ITR 585] (SC) has settled the law long back that Section 40A is an overriding provision in very terms. 6. Mr. Sai next vehemently argued during the course of hearing that the assessee's search statement through its authorised person had duly admitted un-disclosed income (supra). He quoted (2014) 362 ITR 13 (AP) Kernex Micro Systems (India) Ltd., Vs. DCIT, that such an addition based on law search statement ought to be confirmed only. He next cited A.K.K. Nambiar Vs. Union of India (1970) AIR 652 (SC) that the assessee had also filed an affidavit with due verification before the learned lower authorities during t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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