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2017 (10) TMI 480 - AT - Income TaxAdditions u/s. 40A(3) and 40A(3A) - best judgment assessment - rejection of books of accounts - Held that:- From the perusal of Section 144 we donot also find any restriction on the powers of the AO to only estimate income based on profitability after rejecting books of accounts. There is no equity under taxing statute and if the provision of the statute are clear and unambiguous, full effect is to be given to them to compute income of the assessee. There is no scope of adding or deleting any word in taxing statute if the language is clear, simple and unambiguous. We donot find any restricting words in Section 144 restricting the AO to only assess profitability after rejecting books of accounts to compute income of the assessee. Further perusal of Section 40A(1) also clearly reveals that it has a non obstante clause which clearly stipulates that Section 40A(which includes 40A(3)/40A(3A) ) has an overriding effect notwithstanding anything to the contrary contained in any other provision of the 1961 Act relating to the computation of income under the head ‘Profit and gains of business or profession’ . Section 28 deals with computation of income from profits and gains of business or profession which is to be computed in accordance with the provisions contained in Section 30 to 43D which included Section 40A(3)/40A(3). Section 40A(1) has a non obstante clause ‘notwithstanding anything to the contrary contained in any other provision of the 1961 Act relating to the computation of income under the head ‘Profit and gains of business or profession’’ as is contained in Section 40A(1) and in our considered view even if accounts are rejected u/s 145(3), the AO can estimate income of the assessee by taking recourse to Section 40A(3) which has an overriding effect over Section 145(3) r.w.s. 144. The assessee in the instant case has admitted that books of accounts were rightly rejected by the AO u/s 145(3) and hence in our considered view, the AO has rightly framed assessment for AY 2009-10 which was upheld by learned CIT(A) which we are not inclined to interfered and hence we uphold/sustain the appellate order of learned CIT(A) and the additions are confirmed. The assessee fails in this appeal. So far as appeal of the assessee for AY 2008-09 AO shall work out disallowance in the similar manner as for AY 2008-09 as was done for AY 2009-10 by invoking applicable provisions of Section 40A(3)(a) and (b). We also have noticed that assessment for AY 2008-09 was framed by the AO by invoking Section 69C wherein all purchases stood dismissed, while for framing assessment for AY 2009-10, the AO invoked Section 40A(3)/40A(3A) wherein disallowance has been made based on payments made to the so called purchasing parties in excess of ₹ 20000/- otherwise than by account payee cheque or account payee draft which has led to double jeopardy to the assessee as the assessee has opening creditors on 01-04-2008 of ₹ 10.82 crores who virtually got disallowed twice, once when entire purchases were disallowed for AY 2008-09 u/s 69C and secondly when payments against those purchases were made against preceding year outstanding’s in AY 2009-10 which has led to double jeopardy . However, this figure of double jeopardy needs to be worked out by the AO and in any case since now we have directed the AO to compute disallowance with reference to Section 40A(3)(a) and (b)
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