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2022 (4) TMI 800 - AT - Income TaxAddition u/s 40A(3) - expenditure paid at various project sites in cash mode - unexplained expenditure - Addition based on assessee's alleged search statement making the corresponding disclosures - HELD THAT:- There is no rebuttal to the CIT(A)'s clinching findings that the assessee's books are neither reliable nor do they indicate the specific violation of the impugned statutory provision that the impugned cash payments had exceeded the specified limit; payee-wise, as the case may be. We thus invoke stricter interpretation of the impugned disallowance provision in Section 40A(3) that it is attracted only when an assessee incurs "any expenditure in respect of which a payment of aggregate of payments in a day". We also quote hon'ble apex court's recent landmark decision in Commissioner of Customs Vs. Dilip Kumar [2018 (7) TMI 1826 - SUPREME COURT] that provisions in the Act have to be strictly construed only. We accordingly uphold the CIT(A)'s findings deleting Section 40A(3) disallowance. Undisclosed income addition based on the assessee's search statement - AO had only made Section 40A(3) disallowance only than un-disclosed income addition based on the assessee's authorised person's search statement. That being the case, we are afraid that the Revenue's hands are indeed tied at this stage as it would not be allowed to make any addition once the AO has invoked Section 40A(3) only. Case law CIT Vs. Shapoorji Pallonji Mistry [1962 (2) TMI 12 - SUPREME COURT] as well as CIT Vs. Union Tyres [1999 (9) TMI 81 - DELHI HIGH COURT] hold that such an addition would not be allowed to be made even by way of enhancement in first appellate proceedings despite the fact that the CIT(A) is vested with his jurisdiction co-terminus with the AO. Their lordships make it clear that Section 251(1) enhancement jurisdiction does not extend to a new source of income. We therefore accept assessee's arguments and reject Revenue's stand regarding the alleged undisclosed income addition which was never added in both assessment orders since the Assessing Officer had merely invoked Section 40A(3) disallowance. We therefore accept the assessee's pleadings to this limited extent.
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