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TMI Blog2013 (12) TMI 1731X X X X Extracts X X X X X X X X Extracts X X X X ..... r in the return of income during the assessment proceedings or in the grounds of appeal filed before the ITAT?" (B) "Whether on the facts and circumstances of the cases and in law, the ITAT has erred in deleting the addition of Rs. 3,52,44,338/- made by the Assessing Officer under Section 40A(3) of the Act without appreciating the fact that the assessee had effected cash payments in excess of Rs. 20,000/-, in contravention of the provisions of Section 40A(3) of the Act and also failed to discharge the onus cast on him to prove that such transactions are less than Rs. 20,000/- each as claimed by him?" (C) "Whether on the facts and circumstances of the cases and in law, the ITAT has erred in deleting the addition of Rs. 52,840/- made out of office expenses without appreciating the fact that the assessee failed to prove the genuineness and necessity of the expenses by providing supporting evidences?" (D) "Whether on the facts and circumstances of the cases and in law, the ITAT has erred in deleting the addition of Rs. 91,000/- made on account of rent expenses without appreciating the fact that the assessee failed to prove the genuineness and necessi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not allowable as per the provisions of Section 37 of the IT Act?" (D) "Whether on the facts and circumstances of the cases and in law, the ITAT has erred in deleting the addition of Rs. 3,89,356/- made under Section 40(ia) without appreciating the fact that the assessee failed to furnish the proof in respect of the payment of TDS either with the return or during assessment proceedings?" (E) "Whether on the facts and law, the ITAT was correct in deciding the case on merits without deciding the specific ground taken on acceptance of fresh evidence by the CIT(A) without an opportunity to the A.O.?" 3. For the sake of convenience, the facts of Tax Appeal No. 969/2013 for the Assessment Year 2005-06 are narrated. 3.1 The assessee filed the return of income for the Assessment Year 2005-06 declaring the total income at Rs. 1,51,204/-. The return of income was accompanied by the balance sheet, capital account etc. A survey under Section 133A of the Income-tax Act was conducted on 22/09/2006 (after the return of income was filed by the assessee) at the Mumbai office. The survey was conducted in consequence to the information received from the Economic Offence ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (a) Audited books of account and supporting evidence of cash payment made for A.Y. 2004-05 & 2006-07 i.e. F.Y. 2004-05 & 2005-06. (b) Copy of the statement recorded under Section 133A of the Act during the course of survey proceedings. (c) Copy of statement recorded before Police authority. 3.2 It appears that prior to issuance of the notice dated 24/12/2008 and on the basis of the impounded books of account it was found by the Assessing Officer that a total sum of Rs. 18,22,21,689/- was paid in cash to six different parties and the statement of which is as under: Sr. No Name of the party to whom payments are made. L.F. No. Total amount paid in (Rs.) 1. M/s. Alfa Trading Co. 6/6 4,88,71,069/- 2. M/s. Anant Trading Co. 12/13 1,27,87,314/- 3. M/s. Kamal Trading Co. 30/43 3,78,72,484/- 4. M/s. Mona Trading Co. 36/51 13,00,000/- 5. M/s. Marshal Trading Co. 37/53 6,07,02,214/- 6. M/s. Navkar Trading Co. 41/58 2,06,88,608/- Total 18,22,21,689/- 3.3 During the reassessment proceedings, the assessee was asked to explain the above amount. It was submitted on behalf of the assessee that the assessee has not made any single payment exceeding Rs. 20 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oth the CIT(A) as well as the ITAT have erred in deleting the addition made by the Assessing Officer under Section 40A(3) of the Income-tax Act without appreciating the fact that the assessee had effected the cash payment of Rs. 20,000/- in contravention of Section 40A(3) of the Income-tax Act. It is submitted that as such the assessee failed to discharge the onus cast on him to prove that such transactions are less than Rs. 20,000/- each as claimed by him. It is further submitted by Shri Mehta, learned Counsel appearing on behalf of the revenue that both the CIT(A) as well as ITAT have erred in directing the Assessing Officer to compute the income on the basis of 0.25% on the total turnover without appreciating the fact that estimate of the profit was not an issue and the Assessing Officer made the disallowance for violation under Section 40A(3) of the Income-tax Act. It is further submitted that as such the assessee had never admitted either in the assessment proceedings or in the appeal filed before the CIT(A) that he was to get only 0.25% as commission on the bills. It is submitted that CIT(A) had materially erred in deleting the addition made by the Assessing Officer under Sec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... picture of "make believe" nature, quantum and profitability of business. But behind the veil the reality as found and admitted was that only bills were issued on commission basis. However, the estimation of real income will have two important components. Firstly, the rate of claimed commission @ 0.25% which has not been disputed by the AO nor retracted by the appellant till now. The other component would be to ascertain the quantum of sale on which this rate needs to be applied. As per audit report the total sale stands at Rs. 1,02,57,52,103/-. It transpires that the assessee has given entries not only in rough and polished diamonds but also in garments, jewellery, copper scrap and colour stones. In my view, when at the beginning itself the AO mentions that the appellant had admitted the true nature of business to be only giving hawala entries, the ascertainment of profit would have been vis-a-vis the commission earned on verifiable turnover. All the entries of purchases are patently wrong claims with non-existent parties. No goods were purchased nor were they sold. The transactions were in reality in sham transactions. Therefore, the so called huge cash payments made f ..... X X X X Extracts X X X X X X X X Extracts X X X X
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