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TMI Blog2023 (3) TMI 758X X X X Extracts X X X X X X X X Extracts X X X X ..... was allowed in regard to the purchases of the assessee, there was no need to look into the provisions of section 40A(3). From the table extracted in the earlier part of this order it is an undisputed fact that the additional income of the assessee is arrived at based on estimated profit rate without allowing any specific deduction towards purchases. Therefore, in our view, the ratio laid down by the Hon ble Allahabad High Court is applicable to assessee s case and respectfully following the same, we hold that no separate disallowance u/s. 40A(3) can be made in assessee s case. The disallowance made by the AO for all the assessment years is deleted.Appeals are allowed in favour of the assessee. - ITA Nos. 1021 to 1024/Bang/2022 - - - Dated:- 9-2-2023 - SHRI N. V. VASUDEVAN , VICE PRESIDENT AND Ms. PADMAVATHY S , ACCOUNTANT MEMBER For the Assessee : S / Shri K. R. Vasudevan Ankur Pai , Advocates For the Respondent : Shri Sunil Kumar Singh , CIT - 2 ( DR ) ( ITAT ) , Bengaluru . ORDER Per Padmavathy S. , Accountant Member This appeal is against the order of CIT ( Appeals) - 2 , Panaji dated 25.8.2022 for the AY 2016-17 to 2019-20. 2. The assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is general and ground No.3 is consequential. Accordingly these grounds do not warrant a separate adjudication. 7. Ground No.2 relating to disallowance u/s. 40A(3) which is common for all the appeals read as follows:- 1. General grounds: The order dated 25 August 2022 passed learned Commissioner of Income-tax (Appeals)-2, Panaji [ Ld CIT(A)/I] under upholding the assessment order dated 24 February 2021 passed by the learned Assessing Officer, Deputy Commissioner of Income-tax, Central Circle, Mysuru ( Ld AO/l) under section 143(3) read with section 153A of the Income-tax Act, 1961 ( Act/l) for the AY 2016-17 is contrary to the facts and circumstances of the present case and is not in accordance with law. 2. Grounds relating to disallowance under section 40A(3) - Rs.67,54,114/- The grounds mentioned hereinafter are without prejudice to one another. 2.1 The Ld CIT(A) erred in upholding the assessment order passed by the Ld AO making disallowance of Rs.67,54,114/- under section 40A(3) of the Act. 2.2 The Ld CIT(A) and the Ld AO erred in making adjustment under section 40A of the Act to the income accepted and declared by the Assessee on the estimat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ither the Ld AO nor the CIT(A) have doubted the genuineness of the payment that it is for purchase of boulders but have invoked section 40A(3) only for the reason that the payments in cash under a single voucher were exceeding Rs.20,000/-. The ld AR further submitted that it has not claimed any expenditure in its return of income and the gross profit takes care of amount incurred on purchases, etc., and hence, there is no need of further disallowance under section 40A of the Act. The ld AR relied on the following decisions in support of its arguments: a. Allahabad high Court in Banwari Lal Banshidhar (1998) 229 ITR 229 (Allahabad); b. Madras High Court in CIT v S Mohammed Dhurabudeen [Tax Case (Appeal) No. 885/2007]; c. Punjab Haryana High Court in CIT (Central) v Smt Santosh Jain (2008) 296 ITR 324 (Punjab Haryana); d. Punjab Haryana High Court in CIT (Central) v Gobind Ram (2014) 48 taxmann.com 14 (Punjab Haryana); e. Madras High Court in CIT v Amman Steel Allied Industries (2015) 377 ITR 568 (Madras); f. Rajasthan High Court in PCIT v Jadau Jewellers Manufactures (P) Ltd (2018) 409 ITR 85 (Rajasthan). 9. The ld AR also presented ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nue. Question No. 2, on which finding was recorded in the alternative, is returned unanswered. 12. In assessee s case, we notice that the assessee has conceded the addition made towards unaccounted sale during the search proceedings. We also notice that the additional income has been computed on an estimated basis at 10% of sales. The relevant part of the AO s order in this regard is extracted as below:- 3. Unaccounted sales in Stone Crusher: Sri P B Karigowda owns a stone crushing unit in the name and style of Sri Venkateshwara stone Crushers located at Ganangur, Srirangapatna Taluk, Mandya District and was producing material like jelly, M-sand and dust. During the course of search, evidences for unaccounted sales of jelly, in sand and dust were found and seized. Vouchers evidencing unaccounted purchases of boulders were also found and seized. In his statement u/s 131 recorded after the search on 25.02.2019 has accepted that neither the purchases nor sales for which evidences were found were accounted in the books of account. From the evidences available it can be concluded that though Sri Venkateshwara stone Crushers was functioning during financial years 2014-15 to 20 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... During the year Rs. 90,75,941 was the expenditure incurred for the purchase of boulders for which purchase vouchers have been seized in A/PBK/02, A/PBK/03, A/PBK/04, A/1)BK/05 and A/PBK/06 for the period 01.04.2015 to 31.03.2016. The source for these purchases is stated to be sales made earlier and not accounted in the books. From these vouchers the average purchase rate of boulders is worked out and the sale rate is determined and OP of 10% is estimated after taking into account other costs incurred for production. Penalty u/s 271(1)(c) is initiated for concealment of income of Rs. 15,19,670 resulting out of unaccounted sales in the crusher unit. 13. From the above, it is noted that the unaccounted purchases were the basis for estimation of the additional income and such unaccounted purchases were arrived at based on the purchase vouchers seized during the course of search (A/PBK/01 to A/PBK/22). We also notice that the same seized material has been used by the AO for analysing the payments made in excess of Rs.20,000 and accordingly to arrive at the disallowance u/s. 40A(3). 14. The ratio laid down by the Hon ble Allahabad High Court in the case of Banwarilal Bansidhar ( ..... X X X X Extracts X X X X X X X X Extracts X X X X
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