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Commissioner of Income Tax, Dhanbad Versus T.N. Malhotra, M/s Jai Steel Industries, Mahuda More, Dhanbad

Dis-allowance of insurance claim written off - Held that:- It appears that theft was committed on 10th of September, 1989. Insurance was claimed by the assessee which was rejected by the insurance company in the next year mainly for the reason that there was no theft of plant and machinery or the raw materials. This amount was written off in the year 1993-94. Thus, in the assessment year 1993-94 no theft was committed, but, it was in the year 1989 and, therefore, rightly A.O. as well as the Comm .....

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e CIT(A) in restricting the additions made u/s 40A(3) to 20% of the cash purchases in excess of ₹ 10,000/- Held that:- In the facts of the present case, 175 vouchers were also fabricated, because no vouchers were signed for the receipts of such cash. Moreover, Section 40A(3) of the Income Tax Act, 1961 imposes a limit of 20% of disallowance of the total cash transaction which was brought into effect from 1st of April, 1996, whereas, prior thereto, there were no such limit of 20%. The prese .....

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J. For the Appellant : Mr Deepak Roshan For the Respondent : M/s Nitin Kumar Pasari and Ranjana Mukherjee JUDGMENT Per D. N. Patel, J. 1) This appeal has been preferred against the judgment and order delivered by Income Tax Appellate Tribunal, Circuit Bench Ranchi, camp at Jamshedpur in Income Tax Appeal No.355/Pat/96 & 138-140/Pat/05 order dated 14th December, 2005. 2) Counsel for the appellant has raised the following substantial questions of law: - 1) Whether, on the facts and in circumst .....

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, by taking recourse to a prospective amendment made in Section 40A(3) of the IT Act, 1916 w.e.f. 01/04/1996? 3) Counsel for the appellant submitted that the respondentassessee had declared total loss of ₹ 15,03,098/- in the return of Income filed on 29th of October, 1993 for the assessment year 1993-94. Thereafter, notices were issued by the appellant upon the assessee; statement of P.N. Malhotra and other persons were also recorded on oath under Section 131 of the Income Tax Act. Thereaf .....

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of Section 40A(3) of the Income Tax Act, 1961. These cash transactions were on 175 occasions. It is submitted by the counsel for the appellant that against the order passed by the A.O., appeal was preferred by the assessee before the Commissioner (Appeals) who partly allowed the appeal of the assessee. So far as cash transactions are concerned and so far as insurance amount is concerned, the same was decided in favour of the Department and to that extent, the appeal was not allowed. The Commiss .....

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4. Department's appeal is bearing No.ITA/393/Pat/96 mainly for the reason that the Commissioner (Appeals) allowed against the restriction put by the Commissioner (Appeals) upto 20% of the total cash transactions. ITAT vide order dated 14th December, 2005 dismissed the appeal preferred by the appellant and allowed the appeal preferred by the assessee. Counsel for the appellant submitted that the socalled theft was committed at the premises of the assessee on 10th September, 1989 for which ins .....

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reason for dis-allowance of the insurance claim written off was that the machinery parts, trolley machines, etc were stolen but they were not the spare parts and other items (not being plant and machinery or raw materials). This aspect of the matter has not been properly appreciated by the Income Tax Appellate Tribunal. It is also submitted by the counsel for the appellant that both the Commissioner (Appeals) as well as ITAT has failed to appreciate Section 40A(3) of the Income Tax Act, 1961 whi .....

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ee. These aspects of the matter have not been properly appreciated by the Commissioner (Appeals), nor by the ITAT. Hence, the aforesaid substantial questions of law have been raised by the appellant. 4) Counsel for the assessee submitted that because of the theft committed at the premises of assessee, insurance claim was made which was not granted by the insurance company and ultimately, the said amount of ₹ 1,17,775/- was written off in the assessment year 1993-94. Once, the factum of the .....

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961, 20% of the total cash transaction was added to the income of the assessee and no error has been committed by the Commissioner (Appeals) as well as the ITAT in deciding this issue. Hence, this appeal may not be entertained by this Court and the two substantial questions of law which are raised are in fact no substantial question of law at all and, hence, this Tax Appeal may kindly be dismissed. Reasons:- 5) Having heard learned counsels for both sides and looking to the facts and circumstanc .....

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nce about the insurance claim written off at ₹ 1,17,775/- and about the cash transaction at ₹ 14,58,354/-. So far as dis-allowance of insurance claim written off for the assessment year 1993-94 is concerned, it appears that theft was committed on 10th of September, 1989. Insurance was claimed by the assessee which was rejected by the insurance company in the next year mainly for the reason that there was no theft of plant and machinery or the raw materials. This amount was written of .....

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rance claim ought to be added in the income of the assessee. 6) So far as cash transaction is concerned, it appears that there are several cash transactions in violation of Section 40A(3) of the Income Tax Act, 1961. They are 175 in numbers. There is a cash payment of ₹ 9000/- to 9900/- on 175 occasions and there are other cash transactions also. There are no vouchers which were signed for the receipts of such cash. Moreover, to one M/s. Puja Industries, on 22 occasions more than ₹ 1 .....

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refore, the dis-allowance of 20% of the total cash transaction as decided by the Commissioner (Appeals) as well as ITAT are absolutely against the provisions of the Income Tax Act, especially, Section 40A(3) thereof. 7) Rule 6DD of the Income Tax Rule, 1962 carves out exception to this cash transaction. Whenever any assessee is claiming or relying upon exception, then burden of proof is upon the assessee to prove the existence of circumstances or conditions imposed under Rule 6DD. Assessee has f .....

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