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TMI Blog2023 (4) TMI 271X X X X Extracts X X X X X X X X Extracts X X X X ..... m appeared before the AO and confirmed the supply of goods. Similar is the case with respect to Lucky Enterprises. CIT (A) noted that when there are sales, purchases are bound to be there and therefore, it cannot be disallowed. No infirmity in the order of the learned CIT (A) to that extent. Accordingly, ground no.1.1 and 1.2 of the appeal deserves to be dismissed. CIT (A) enhanced the addition by invoking the provision of Section 40A(3) - CIT (A) noted that though the purchases are genuine, however, the payments for such purchases have been made in violation of Section 40A (3) - We find that even in the genuine purchase if it violates the Provisions of Section 40A (3) separate disallowance can be made despite allowing the deduction of purchase. We do not find any infirmity in the order of the learned CIT (A) in invoking the provision of Section 40A (3) of the Act despite deleting the disallowance with respect to unverified purchases. Power of CIT for enhancement u/s 251 - Enhancement of income by CIT-A - Addition u/s 40A (3) and cash transportation expenses - Addition for cash payment in transportation expenditure which is not in violation of the provisions of section 40 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rounds of appeal:- 1. On facts and circumstances of the case and in law, the fundamental requirement of serving notice is invalid. Hence, entire assessment is void ab initio. 2. On facts and circumstances of the case and in law, the assessment proceedings of learned AO and learned CIT (A) is invalid. Thus making entire assessment and appeal proceedings void and liable to be quashed. 3. On facts and circumstances of the case and in law, the learned AO and CIT (A) has erred in interpretation and it's application w.r.t. section 40A (3) and section 68. 4. On facts and circumstances of the case and in law, the learned AO and CIT (A) has erred in relying on third party statement without offering cross-examination. 5. On facts and in the circumstances of the case and in law, the learned CIT (A) has erred in enhancing income by wrongly applying treatment tax in relation to genuine transactions. 6. On facts and circumstances of the case and in law, the learned AO and CIT (A) has narrated modus operandi of transactions thereby based his order on assumptions and surmises rendering the order as null and void. The Appellant craves leave to add, amend, alte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , 1961 (the Act) was passed on 28th February, 2014 at the total income of ₹5,84,12,807/-wherein following additions/disallowances were made:- i. of ₹44,35,916/- disallowed as unproved transportation charges under Section 37 of the Act. ii. Of ₹2,87,26,562/- unproved purchases under Section 37 of the Act. iii. Disallowance under Section 40A(3) of the Act of ₹9,98,000/- out of purchases. iv. Unproved hiring charges disallowed under Section 37 and under Section 40 (a)(ia) of the Act of ₹63,02,742/-. v. Addition under Section 68 of the Act on account of cash deposit of ₹10,50,000/-. vi. Undisclosed income from Lodha Dwellers Pvt. Ltd. of ₹1,44,76,220/- vii. Undisclosed income under Section 68 of the Act from Luster Engineering Company of ₹92,400/. 05. Thus the learned assessing officer has made the following addition to the total income of the assessee:- serial number Nature of addition on disallowance Amount rupees 1 Transportation charges under section 37 ₹ 4,435,916 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a dwellers private limited ₹ 14,476,200 ₹ 13,387,820 Nil 7 Undisclosed income from Luster engineering under section 68 ₹ 92,400 92,400 Nil 8 enhancement made by the learned CIT A on account of personal balance sheet and profit and loss account Rs. 97,83,899 on account of deposit in bank accounts cash deposit of ₹ 4,00,500 in Kotak bank account on account of other income of ₹ 516,277 Total 5,60,81,840 07. Therefore, the order of the learned CIT (A) is challenged by the assessee on various additions confirmed as well as enhancement made by the learned CIT (A). The Ld AO is aggrieved with deletion of the addition/ disallowance made by the learned CIT (A).Thus, these cross appeals. 08. The learned Authorized Representative has filed detailed paper books containing two box files of various submissions and written submission made before t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e parties that showed the details of purchases and mode of payment, the copies of the bills raised by these parties were also produced along with permanent account number of the supplier entities. All the suppliers also submitted an affidavit that they had supplied material to the assessee and his proprietary concerned M/s Yogiraj Enterprises. 014. These details were sent by the learned CIT (A) for the examination to the learned Assessing Officer and assessee was asked to reconcile the corresponding sales against the purchases. Assessee submitted such detail and based on this, the learned CIT (A) deleted the addition with respect to the above three parties. With respect to VA Inamdar, the Assessing Officer did not give any adverse comment. With respect to Geetesh Co., the proprietor of the firm appeared before the learned Assessing Officer and confirmed the supply of goods. Similar is the case with respect to Lucky Enterprises. The learned CIT (A) noted that when there are sales, purchases are bound to be there and therefore, it cannot be disallowed. We do not find any infirmity in the order of the learned CIT (A) to that extent. Accordingly, ground no.1.1 and 1.2 of the appea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... addition with respect to the above sum. However, on verification of the details, he found that there are certain cash payments of more than ₹ 20,000 in transportation charges. He verified that out of the total cash payment of transportation of expenses of ₹ 1,761,657/ , Rs 291,330 are more than ₹ 20,000. Therefore, according to him as per the provisions of section 40 A (3) the above sum is disallowable. Accordingly, he issued notice under section 251 (2) as per letter dated 7/3/2016 that why the above amount should not be added. The assessee submitted that the amount of expenditure is incurred for various persons for diesel expenses, which was required to be paid at the petrol pump fulfilling fuels to heavy vehicles. The learned CIT A went through the Ledger account and found that in the Ledger account it is simply mentioned that diesel and fuel charges and the appellant does not have any plausible explanation to justify cash payment of more than 20,000. Accordingly, he made an enhancement under section 251 of the act of Rs 2,91,330/ . 022. With respect to the balance sum of cash payment of ₹ 14,70,327/- , assessee produced cash vouchers, which were ve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4,435,916 for the reason that some of the parties did not respond to the queries raised by the learned assessing officer. The learned CIT A on remand report of the learned assessing officer on the submission of the assessee and thereafter held that disallowance made by the learned assessing officer on account of transportation expenditure is not sustainable. Accordingly, he deleted the addition of Rs. 4,435,916. However, during the course of appellate proceedings, he found the details submitted by the assessee contain cash payment of transportation charges. Therefore, he found that the provisions of section 251 (2) of the act are to be invoked. He invoked those provisions vide letter dated 7/3/2016 that why a sum of Rs. 291,330/ should not be disallowed under section 40 A (3) of the act. The assessee submitted his reply. Based on this he made a disallowance of the above sum under section 40 A (3) of the act. With respect to the balance cash payment of Rs. 4,070,317, he made a disallowance and the rate of 25% for inadequate details mentioned in the supporting vouchers. 027. On the objection of the learned authorized representative against the provisions of section 251 (2) of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rned assessing officer of transportation charges of Rs. 4,435,916, which was completely deleted by the learned CIT A, his order, is confirmed. Further, the enhancement made by the learned CIT A of Rs 291,330/- is upheld and further the addition made by the learned CIT A of Rs. 367,581/ is directed to be deleted and his order is reversed. Therefore out of the total transportation charges addition of Rs 291,330/ under section 40 A (3) of the act is sustained. 031. Now we come to the second issue of addition on account of cash payment of Rs. 998,000/- made by the learned assessing officer under section 40 A (3) of the act. The learned assessing officer noted that there are two parties namely lucky enterprises to whom payment of Rs. 298,000 has been made and M/S Geetesh Co to which the payment of Rs. 7 lakhs have been made which are in violation of the provisions of section 40 A (3) of the act and same are required to be disallowed. 032. The learned CIT A found the Ledger account of both these parties and noted that case of one of the entity assessee has made the payment of Rs. 4,750,000 in cash and with respect to lucky enterprises, the assessee has made the payment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ave the tally back up to the person who represented the assessee. It is a different manner of taking the report of tally printout of the Ledgers. He submitted that there is no difference between the Ledger account produced before the assessing officer and the Ledger accounts produced before the learned CIT A both are part of the same set of books of accounts 037. With respect to the cash payment is submitted that assessee has only made the cash payment of Rs. 998,000 with respect to the two parties and has not made the cash payment of Rs. 4,750,000 and Rs. 1,681,800 to two different parties mentioned by the learned CIT A.. 038. with respect to the cash payment it was submitted that for the purpose of disallowance under section 40 A (3) of the act, each amount of expenditure incurred by the assessee as well as the payment made by the assessee both should be in excess of Rs. 20,000. if anyone of them is less than Rs. 20,000 the disallowance under section 40 A (3) of the act cannot be made. It was further stated that the assessee has not made any cash payment to the parties for the purchase of the goods wherein the payment and the amount of Bill both are in excess of Rs. 20, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of Rs. 20,000 warranting any disallowance under section 40 A (3) of the act. It was further claimed that there are two different version of the print out of the same Ledger of the tally books of accounts of the assessee, which were presented before the learned assessing officer as well as before the learned CIT A which warranted invoking the provisions of section 251 (2) of the act by the learned CIT A. It is also a fact that in one of the entries name of the assessee himself is mentioned. In some of the entries are its journal entries and not cash book entries. In view of the above facts where there is no clear cut answer available what kind of expenditure the assessee has incurred which is in violation of the provisions of section 40 A (3) of the act, whether all the bills of the expenditure and the cash payment related to those expenditure are in excess of the provisions of section 40 A(3) of the act are not, whether the amount of mentioned against the name of the employees in the respective account of those parties are comprising of several bills or not, whether the cash payment mentioning the name of the employees, stated to be bunch of cash payments less than the prescr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... penditure incurred on transportation of goods by the assessee is genuine. The finding of the learned CIT appeal was based on the fact that the amount of transportation expenditure incurred by the assessee was corresponding to the income shown by the assessee. Here in this case the transportation expenditure for the material was held to be genuine by ld CIT (A) , however he held that the material so purchased which were transported are not genuine. The reasons given by him are the inadequate details of transportation. The fact itself shows that when the transportation expenditure is held to be genuine by the learned CIT A, how he can say that such transportation expenditure required for transportation of the goods purchased by the assessee, but such purchases are not genuine. Even otherwise if the learned CIT A find that a sum of purchases made by the assessee amounting to Rs.4,164,720 is non genuine, there is no justification to allow balance 75% of such expenditure by the learned CIT A instead of 25% of such expenditure. If he did not find the detail adequate, he should made disallowance of 100 % of Rs. 4,164,720. Therefore, there is a dichotomy/contradiction in the findin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t aside that issue back to the file of the learned assessing officer to verify whether there is any violation of the provisions of section 40 A (3) of the act considering the explanation made by the assessee. Therefore for the similar reasons we set-aside this addition also back to the file of the learned assessing officer with similar direction. 048. We now come to the addition of Rs. 144,76,220/- on account of receipt from Lodha dwellers private limited. The learned assessing officer has noted that as per the details available with the Department the assessee has received above sum from Lodha dwellers private limited on tax deduction at source has also been made under section 194C and 194I of the act. The assessee has claimed the credit of the entire tax deduction at source appearing in form number 26 AS. During the course of assessment proceedings, the assessee was asked to reconcile the above sum. The learned assessing officer further made enquiry from Lodha dwellers private limited who answered by a letter dated 17/05/2013 confirming that an amount of Rs 1 44,76,220/ was paid to the assessee as a compensation to vacate the land. The assessee was confronted with this inform ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d additional evidences in the form of balance sheet of the assessee and affidavits that were not available before the assessing officer. The learned CIT A rejected all the affidavits stating that i. it was executed on the stamp paper on which the declaration of having received the money for surrendering the right on encroached land is given are all purchased on 20/12/2014 by one advocate who is incidentally the authorized representative of the assessee. ii. The above stamp papers are also serially numbered. iii. All the affidavits are of common language. iv. They have also been notarized by one person. Therefore, it created out. v. The learned CIT A asked the assessee whether these persons who received the money have shown income in their return, their PAN and to produce those persons. vi. The learned CIT A further asked the copies of the bank account of these persons where the above sum has been deposited. vii. The assessee was also asked to produce these persons. 051. The assessee produced all these persons and the statement were recorded by the learned CIT A. The statements of all these persons were recorded in presence of the advocate of the asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that he is handling the appeal matter of the assessee and therefore as the assessee has made payment to the various persons, their affidavits were obtained. It was further stated that the affidavits was signed in the office of the assessee or at the residence of those persons. With respect to the notary of those affidavits, he also explained that he is a witness to that process. 054. The learned CIT appeal further noted that these affidavits were prepared only to give a color of genuineness. It was further held that affidavit of these persons could be obtained by the assessee being a zilla panchayat member who hold the power over the above person in that area. Accordingly, he concluded that the assessee has received payment of Rs.133,87,820 /- which is undisclosed income of the assessee. 055. The learned authorized representative submitted that Lodha dwellers private limited has paid the assessee a sum of Rs. 1 22,65,464 for settlement of the land . The land was having encroachment by several persons. The assessee was asked to help the developer to get this land settled and encroachment removed by amicable settlement. The assessee entered into discussions with parties who are ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wer authorities. The fact shows that the learned assessing officer has made an addition of ₹ 14,476,220 as undisclosed income. It was seen from the ITS details available on the Department system against the assessee's permanent account number that during the year the assessee has received a sum of ₹ 14,476,220/ from M/s Lodha dwellers private limited and tax deduction at source thereon has also been made. The assessee has also claimed credit for the entire tax deduction at source appearing in forms number 26AS. The assessee has not disclosed these receipts in the return filed. Therefore, the assessee was provided a copy of the form number 26AS details asking him to reconcile and explain the amounts with reference to the return filed. The above sum was not found reflected in the assessee's books of accounts. The assessee submitted as per letter dated 7/2/2014 the unsigned the Ledger extract of Lodha dwellers private limited in its books along with the copies of the bills along with the bank statement of the assessee. Meanwhile the learned assessing officer also collected confirmation from Lodha dwellers limited wherein it was stated that a sum of ₹ 14,476, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re either illiterate or ignorant. All these persons are of very poor standard and do not have the bank account. The money payment is split into small amounts in various names. Further, the stamp papers on which these affidavits are executed are bought by one person. The stamp papers were also in running serial number. The language of the affidavit was also identical. The learned CIT A also noted that there would have been tripartite agreement for sale in purchases between the real owner and Lodha and the encroachers for vacating land. The same agreement was not there. None of the recipients despite having received the money has any details of investment made by them. According to him, had these persons actually received the money, they would have invested the same in their businesses or had purchased some tangible assets with the money. In addition, none of the recipients has paid any taxes. Accordingly, he disbelieved the whole transaction and made an addition of ₹ 13,387,820. On careful examination of the letter of Lodha dwellers private limited dated 17 October 2013 submitted before the learned assessing officer, it clearly states that during the financial year 2010 11 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and. Many of the persons have also identified the area of the land in their statement. They have also confirmed that for how many years they were occupying this land. They have expressed that they do not know who the owner of the land is. Naturally, when the land is encroached, it may be possible that they will not know who the original owner is. Assessee has already offered a sum of ₹ 2,416,230/ as his income for this reason. The sum of ₹ 2,210,760/ has already been offered as income on account of sale of Morum. Further, the Lodha dwellers private limited itself as certified that there was an encroachment of the assessee as well as other persons also. Therefore, assessee has already offered income of Rs. 24,16,230/- which is approximately 20% of the above sum. In view of these facts, we do not find that the whole of the sum received by the assessee from Lodha dwellers is chargeable to tax in the hands of the assessee because, there were many encroachers who have confirmed received payment for removing such encroachment. Accordingly, we find that the sum of 20% added in the hands of the assessee of ₹ 2,416,230/ is sufficient to be taxed in the hands of the asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rves to be deleted. 061. The learned departmental representative vehemently supported the order of the learned CIT A. 062. We have carefully considered the rival contention and perused the orders of the lower authorities. We find that assessee has deposited in his bank account with union bank of India account number 50161 a sum of ₹ 525,000/- on 1/1/2011. Prior to the deposit of the above cash assessee has withdrawn the sum of ₹ 16 lakhs in cash from the same bank account. Therefore, assessee was having enough sources of funds available in cash with him to deposit the above sum of ₹ 525,000 in cash in the above bank account. There is no finding of the lower authorities that the sum of cash withdrawn on earlier dates was utilized for some other purposes and assessee was not having the above cash available in his hands. In view of this we direct the learned assessing officer to delete the above addition of ₹ 525,000 because of cash deposited in union bank of India account number 50161. 063. The next addition relates to an undisclosed income from luster engineering company of ₹ 92,400. During the course of assessment proceedings, the learned AO ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ils, which were not considered and decided by the ld AO. On looking that income, he issued notice u/s 251 of the Act. Only issue before us is whether the ld CIT (A) has such powers. The Appellate powers of ld CIT (A) shows that in an appeal against an order of assessment, the appellate authority may confirm, reduce, enhance, or annul the assessment. In an appeal against an order imposing a penalty, he may confirm or cancel such order or vary it so as either to enhance or to reduce the penalty. The explanation to the provision further emphasizes that the appellate authority may consider and decide any matter arising out of proceedings in which the order appealed against was passed, though such matter was not raised before him by the appellant. 068. In CIT v. Shapoorji Pallonji Mistry [1962] 44 ITR 891 (SC), the assessment year was 1947-48, and the case was finally decided in February 14, 1962. Therefore, the Act considered was pre-Independence enactment. Examining section 31 of the old Act, the Hon. Supreme Court has held that there is no doubt that the appellate authority can enhance the assessment . This power must, at least, fall within the words enhance the assessment , if ..... X X X X Extracts X X X X X X X X Extracts X X X X
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