TMI Blog2022 (9) TMI 1079X X X X Extracts X X X X X X X X Extracts X X X X ..... ory provisions such as Section 40A(3) were made, before being allowed deduction by Revenue. No infirmity in the order of the Assessing Officer , the ld. CIT(A) has misdirected itself by applying net profit rate , despite the assessee having admitted to have cash payment in violation of Section 40A(3) and the case also does not fall under exceptions as are provided in Rule 6DD of the 1962 Rules. The appellate order passed by ld. CIT(A) cannot be sustained and is reversed and the assessment order passed by the AO is confirmed so far as additions disallowance u/s. 40A(3) with respect to material consumed and labour payments are concerned. This disposes of ground number 2 and 3 raised by Revenue in its memo of appeal filed with tribunal , which stood allowed. Ground concerning disallowance of depreciation is not adjudicated by ld. CIT(A) - rectification of mistake - HELD THAT:- The assessee filed its first appeal with CIT(A), and in case if the ground no. 6 raised by assessee concerning disallowance of depreciation is not adjudicated by CIT(A), the assessee stood prejudiced and it is not shown that the assessee has come in an appeal before tribunal to seek redressal of its grie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rrided/substituted by general provision of I.T. Act by invoking section 145(3) of the I.T. Act. 4. The CIT(A) erred in not adjudicating ground no. 6 which is related to disallowance of depreciation of Rs.3,37,520/- which was wrongly mentioned in his order at Rs.33,75,200/-. 5. The appellant craves right to add alter or amend any ground which may be taken at the time of hearing. 3. This appeal filed by Revenue is almost four years old. This appeal was first fixed for hearing before Division Bench(DB) on 17.10.2109 , when none appeared on behalf of the assessee nor any adjournment application was moved, and the appeal was adjourned by DB. Thereafter, this appeal came up for hearing before DB on 23.03.2022 , again none appeared on behalf of the assessee before the DB when this appeal was called for hearing nor any adjournment application was moved, and directions were issued by the Bench to issue notice to the assessee through RPAD and by email, and the appeal was adjourned. This appeal again came up for hearing before DB on 20.4.2022, tand again none appeared on behalf of the assessee bur however adjournment application was moved in writing by the assessee, and the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gs , as found mentioned in the order sheet entry dated 24.02.2015. The AO further observed that no books of accounts were also produced in the assessment proceedings conducted by AO in consequence of the revisionary order passed by ld. Pr. CIT u/s 263. The AO further observed that no bills and vouchers were produced by the assessee during assessment proceedings conducted by AO in pursuance to revisionary order passed by ld. Pr. CIT u/s 263, and it was noted by AO in his order that except written submissions, nothing else was produced by the assessee. The AO observed that even in original assessment proceedings, the assessee has filed merely photocopies of some ledgers, while no bills and vouchers were produced by the assessee. The AO observed that the assessee has submitted ledger account of material purchases ,and it was observed by the AO that the assessee has made payments of Rs. 5,80,12,836/- towards material purchases which were paid in cash. The AO further observed that the ledger account submitted in original assessment proceedings and in the assessment proceedings in pursuance to revisionary order passed by ld. Pr. CIT , the assessee has submitted two different sets of mate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... laws. Had this much strength of labours the assessee should have certainly taken permission of the concerned authority of labour department. 2. From this muster roll is it not clear that the same actually belong to the assessee. Even the assessee has not certified that the same pertains to him. 3. On these muster role the payments have been made at the end of the month only. However, in labour charges payment ledger it is seen that apart from the above payment of Rs. 1,81,47,450/- the remaining payment of Rs. 35,19,914/- has also been made on different dates other than month ending. This muster role does not contain the details such of payments made dates other than month ending. Therefore, this muster role is not reliable. 4. The work has been conducted on three or four sites , who has supervised the work or who has made such payment to labours is not clear. 5. It has also not been clarified by the assessee that he has made payments to somebody who disbursed the amounts to the labours concerned. 6. It seems that this muster roll is an afterthought of the assessee. The AO observed that the assessee has not produced books of accounts, and hence av ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uring original assessment proceedings u/s 143(3), the books of accounts were produced by the assessee, which were not rejected by AO u/s 145(3) of the 1961 Act. The ld. CIT(A) referred to Section 40A(3) and Rule 6DD of the Income-tax Rules, 1962. The ld. CIT(A) referred to decisions of the Courts and observed that ratio of law laid down by Hon ble High Courts is that the object of Section 40A(3) is to check evasion of taxes so that payment is made from disclosed sources. It presupposes that the transaction must be a genuine transaction. The ld. CIT(A) observed that Rule 6DD relaxes the rigours of Section 40A(3) , in a genuine and bonafide cases to avoid harassment and hardship. It was observed by ld. CIT(A) that the practibility of Rule 6DD (j)(2) is to be judged from the point of view of businessmen and not from the point of Revenue. The ld. CIT(A) observed that where the payment is made in cash, the AO has to see that the transaction is genuine and allow the deduction. The ld. CIT(A) further observed that circular of Board is not exhaustive but illustrative, and the AO has to see the surrounding circumstances , consideration of business expediencies and the facts of each particul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld. CIT-DR submitted that ld. CIT(A) rejected books of account u/s. 145(3) and assessed income of the assessee @ 6% of the gross receipt of Rs.10,18,28,011/-. 8. We have heard the contentions of the ld. CIT-DR and perused the material on record. The brief facts of the case are that assessee is a civil contractor. This assessee filed its return of income declaring total income of Rs. 64,87,970/-, on 29.09.2012 . The assessment was completed by Assessing Officer by assessing total income of Rs.67,43,840/- in original assessment proceedings conducted u/s 143(3) read with Section 143(2), vide assessment order dated 29.09.2012 passed u/s 143(3) of the 1961 Act , wherein certain expenses were disallowed by the AO . The ld. Pr. CIT, Gorakhpur invoked revisionary powers u/s. 263 of the Act , and set aside the assessment order dated 29.09.2012 passed by the AO u/s 143(3) by treating the same as erroneous so far as prejudicial to the interest of Revenue and directing AO to conduct fresh assessment, vide revisionary order dated 29.03.2017 passed by ld. Pr. CIT u/s 263 of the 1961 Act, by holding as under: From the above it clear that assessment was completed without due proper and ad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bifurcate these cash payments to bring down below the threshold limit of Rs. 20,000/- per day. The AO observed that the assessee has not produced cash book, receipt book , bills or voucher(s), so that the payments could be verified. The AO observed that the assessee has changed the ledger account of material consumed to bring down cash payments within threshold limit of Rs. 20,000/- per day, in order to avoid being hit by provisions of Section 40A(3). The AO observed that in the material consumed ledger filed during assessment proceedings consequent to the revisionary order passed by ld. Pr. CIT, even names of the payee is changed. Further, the AO observed that none of the cash payments towards material purchases made by the assessee are supported by vouchers. This led to the additions to the tune of Rs.5,13,57,520/- being made by the AO to the income of the assessee on account of such payments been made in cash otherwise than through account payee cheque, by invoking provision of Section 40A(3) by the AO and the material consumed to the tune of Rs. 5,13,57,520/- was added to the income of the assessee. We have carefully gone through these two different sets of ledger accounts, an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The AO observed that the assessee has not produced books of accounts, the availability of cash in hand cannot be verified. The AO observed that the payments have been made exceeding Rs. 20000/- in cash on single day, and no explanation has been offered by the assessee, which led AO to invoke provisions of Section 40A(3) and cash payments to the tune of Rs. 1,81,47,450/- towards labour payments, stood added to the income of the assessee , vide assessment order dated 12.12.2017 passed by AO u/s 143(3) read with Section 263 of the 1961 Act. The ld. CIT(A) has given erroneous finding that the books of accounts were produced by the assessee before the AO. Infact no vouchers, invoices, cash book, books of accounts were produced, and merely ledger accounts were produced and that too were changed by assessee in assessment proceedings conducted in consequences to revisionary order passed by ld. Pr. CIT u/s 263. The assessee is claiming deduction towards material purchases and labour payments from its income chargeable to tax, and thus the onus is on the assessee to bring on record cogent material to substantiate the same , as well that compliances of statutory provisions such as Sectio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to have led evidences to substantiate that no such cash payments in excess of Rs. 20000 in a day was made, rather the assessee in assessment proceedings conducted by AO u/s 263 read with Section 143(3) instead of explaining that these cash payments are not hit by Section 40A(3) read with Section 40A(1), falsified the record by bringing on record second set of ledger s of material purchases and labour payments. The assessee has tried to wriggle out of clutches of Section 40A(3) by producing second set of ledger account in the assessment proceedings conducted by AO consequent to revisionary order passed by ld. Pr. CIT u/s 263. Once there is a clear infringement of provision of Section 40A(3) and the assessee is not able to demonstrate that its case falls under exceptions as contained in Rule 6DD of Income-tax Rules, 1962, the authorities are bound to make additions u/s 40A(3) , which is to be read with Section 40A(1) which carries a non obstante clause. It could not be demonstrated that the assessee case falls under exceptions as are contained in Rule 6DD of the 1961 Act, and by ld. CIT(A) erroneously granted relief to the assessee by applying Rule 6DD of the 1962 Rules although the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... charges wherein it claimed that no cash payments exceeding Rs. 20000 was made in a day to a person, in assessment proceedings conducted by AO u/s 143(3) read with Section 263. While in first of ledger of material purchases and labour payments, filed by the assessee in original assessment proceedings conducted by AO u/s 143(3) read with Section 143(2), the assessee filed ledgers of material purchases and labour payments, where the cash payment in a day exceeding Rs. 20000/- in infringement of Section 40A(3) and no explanation was made rather the assessee falsified and manipulated the records by bringing altogether different set of ledger of material purchased and labour payments. The AO has enclosed both the sets of ledger accounts in its assessment order. It was for the assessee to have demonstrated that It did not infringed provisions of Section 40A(3) , or to make out its case to fall under exceptions under Rule 6DD of the 1962 Rule , but no such case was made out by the assessee, while ld. CIT(A) fell into an error by granting relief to the assessee by granting relief by applying Rule 6DD of the 1962 Rules, without any basis or justification or any material whatsoever on record ..... X X X X Extracts X X X X X X X X Extracts X X X X
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