TMI Blog2015 (9) TMI 745X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee did not suppress any profit margins. In our considered view, it is incumbent upon the assessee to prove the genuineness of its claim in respect of the purchases made, but the assessee in the given case has grossly failed to do so. The AO pointed out that on the bills furnished by the assessee, there was no mention of VAP/ST Numbers. All the bills were computer-generated did not have detailed addresses of the parties and no contact numbers are mentioned in any of the Bill. - Decided against assessee. Confirmation of disallowance u/s.40A(3) - contention of the assessee is that the payment is made to the Electricity Company of the Government of Gujarat - Held that:- the payment was made in cash is not in dispute. The payment i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he payment did not infringed section 40A(3) r.w.s.6DD of the Income Tax Rules, and hence, the disallowance upheld is bad in law. The appellant reserves its right to add, amend, alter or modify any of the grounds stated hereinabove either before or at the time of hearing. 2. Briefly stated facts are that the case of the assessee was picked up for scrutiny assessment and the assessment u/s.143(3) of the Income Tax Act,1961 (hereinafter referred to as the Act ) was framed vide order dated 30/12/2010; thereby the Assessing Officer (AO in short) made addition of ₹ 12,69,880/- on account of inflated expenses. The AO also made addition by invoking the provisions of section 40A(3) in respect of the Electricity Bill paid by way of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s found to be incorrect. He further submitted that the judgement of the Hon ble Jurisdictional High Court in the case of Mayank Diamonds Pvt.Ltd. vs. ITO as relied upon by the ld.counsel for the assessee relates to Diamond Industries where profit margins are very low, whereas the assessee is engaged in the business of embroidery job-work where profit margins are high. 3.2. In rejoinder, the ld.counsel for the assessee submitted that the GP ratio as disclosed by the assessee is very high being 29.68% and it cannot be concluded that the assessee has suppressed the profit margins. 4. We have heard the rival submissions, perused the material available on record and gone through the orders of the authorities below as well as the judgement ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Bill. The ld.counsel for the assessee has placed reliance on the judgment of the Hon ble Jurisdictional High Court in the case of Mayank Diamonds Pvt.Ltd. vs. ITO (supra). However, the facts before the Hon ble High Court related to the Diamond Industry. Since the profit margin vary from industry to industry, under these facts, we do not see any reason to interfere with the order of the ld. CIT(A), same is hereby confirmed. Thus, ground Nos.1 to 1.2 are dismissed. 5. Ground Nos.2 2.1 are inter-connected and are against confirmation of disallowance u/s.40A(3) of the Act of ₹ 1,37,780/-. The ld.counsel for the assessee submitted that the payment was made to Dakshin Gujarat Veej Company Ltd. The ld.counsel for the assessee submitted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ties to whom the payment was required to be made. It is apparent that the appellant-assessee was not doing well in its business and was lacing liquidity and financial crunch. An examination of the bank account statement shows that whenever cash deposit was made in the bank account, it was immediately thereafter utilized to issue cheques towards the expenditure. The explanation of the appellantassessee was that payments were made in cash, as preparation of a bank instrument or issue of cheque would have resulted in a missed opportunity or failure of a favourable or good business deal with the third parties. The provisions of Section 40A (3) and Rule 6 DD (j) have been incorporated in the Act in order to check the incurring of bogus and ficti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , we refrain from issuing the said direction and accept the contention of the appellant. 9. In view of the aforementioned, the answer to the above question is in negative and in favour of the appellant and against the Revenue. The appeal is allowed. No costs. 6.1. We find in the instant case, the payment was made in cash is not in dispute. The payment is made to a Company engaged in the business of distribution of power-supply. It is not the case where the assessee has booked bogus expenditure to a non-existent entity. Therefore, keeping in view the object of the provisions of section 40A(3) of the Act and intention of the legislation, we hereby direct the AO to delete the addition. Thus, ground Nos.2 2.1 are allowed. 7. I ..... X X X X Extracts X X X X X X X X Extracts X X X X
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