TMI Blog2023 (1) TMI 1232X X X X Extracts X X X X X X X X Extracts X X X X ..... ) or u/s. 68, is a specific adjustment/s (to the returned income), and would not for that reason make it a case of estimation of income. As explained by the Hon'ble Apex Court in Kale Khan Mohd. Hanif vs. CIT [ 1963 (2) TMI 33 - SUPREME COURT] ; CIT v. (M.) Ganpathi Mudaliar [ 1964 (4) TMI 22 - SUPREME COURT] ; and CIT vs. Devi Prasad Vishwanath Prasad [ 1968 (8) TMI 5 - SUPREME COURT] , there is nothing in law that prevents the assessing authority in taxing both, the cash credit, the nature and source of which is not satisfactorily explained, and the business income estimated by him after rejecting the books of account as unreliable. It would be a different matter though where the cash credit is explained in terms of secreted profit of the business for the current or a preceding year, so that relief is allowed on that basis, i.e., of the same income being subject to tax twice (also see: Anantharam Veerasinghaiah Co. [ 1980 (4) TMI 2 - SUPREME COURT] One thing to say that the operating result as derived for one year, for which books stand properly scrutinised and income assessed making specific adjustment/s to the returned income, is, on the premise of the same r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e purpose of the expenditure respectively, i.e., prove the expenditure in the sum claimed, and to which the answer is clearly in the negative, further finding the disallowance as made, i.e., Rs. 8.89 PMT (160.53 151.64), reasonable. No basis for reduction has been stated by the ld. CIT(A). Here it may be clarified that reference to the cost for the preceding year, as indeed to that of the comparable case, is only toward the reasonability of the disallowance made. Disallowance u/s. 40A(3) qua transport expenses - Quantum of disallowance u/s. 40A(3) and s.40(a)(ia), which could again overlap, shall be with reference to the total amount allowed, i.e., excluding, from the sum claimed the amount held as not allowable and confirmed for disallowance u/s. 37(1). NP estimation - CIT-A reducing the net profit by estimating the net profit of the assessee @2.57% of sale of bauxite - determine whether various activities constitute the same or separate business no single test can be devised as universal and conclusive - HELD THAT:- A case for retention of profit rate at 33% on the mining receipt, and revision thereof to 8% for the transport (and loading) receipt. We are conscious t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... kewise, for Gd. 2, which contests the application of profit rate of 8% on the transport and loading charges receipt, found by us as very reasonably estimated. The two issues being interrelated, the foregoing adjudication would thus cover the said Ground as well. Our adjudication of the Revenue s appeal would govern the assessee s CO as well. We cannot help here recording our appreciation for the discretion and circumspection exercised by the AO in determining and applying the estimates. Rather, as apparent from the foregoing, but for the sharp, though unexplained decline in the transport receipt, i.e., by 25% thereof; the two issues being interrelated, we might as well have restored the matter back to the AO for consideration on the lines suggested inasmuch as the Tribunal is to decide on the basis of findings of fact, based on material on record. The assessee s CO is accordingly held as without merit. We decide accordingly. Addition of bogus creditors - HELD THAT:- We confirm the disallowance for Rs. 121.68 lacs, i.e., corresponding to the 8 creditors in whose cases no payment stands made. For the balance 2, to whom payments for Rs. 25 lacs in aggregate stand made during t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... facts of the case, find this positive and definite test as satisfied, i.e., of assessee having proved the expenditure in terms of s. 37(1). It is permissible for the tax authorities to consider disallowing the sum estimated as incurred in excess (Swadeshi Cotton Mills Co. Ltd. v. CIT [ 1966 (9) TMI 30 - SUPREME COURT] ; Lakshmiratan Cotton Mills Co. Ltd.[ 1968 (9) TMI 13 - SUPREME COURT] ; Lachminarayan Madan Lal [ 1972 (9) TMI 4 - SUPREME COURT] ) - The AO has, accordingly, made an estimate of the expenditure liable for disallowance, which we find as reasonable. We, accordingly, uphold the disallowance as made. Addition of interest component disallowed by the AO regarding it as the penalty under the sales-tax law - HELD THAT:- The basis of the relief (to the extent of Rs.3800) by the ld. CIT(A) is on the basis of the detail furnished by the assessee before him, claiming the amount impugned to be interest and not penalty. Before us, it was the admitted position that the penalty component cannot be allowed as a deduction inasmuch as infraction of law cannot be regarded as an incident of business. And that the matter may be remitted to the file of the AO. Surprisingly, the asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e said disallowances, become irrelevant where the expenditure itself is regarded as not genuine and, besides, would amount to a double disallowance. Where, however, the said disallowance/s, i.e., as confirmed, is reversed in further appeal, in whole or in part, i.e., on the expenditure being regarded as genuine to that extent, the same would become liable to be effected. The same would though require the assessee being heard on quantification, and may have a bearing in the assessment of a subsequent year/s as well The exercise for identifying the payment in violation of s. 40A(3) or, as the case may be, s.40A(3A), as indeed u/s. 40(a)(ia), would thus extend to the entire sum. Finally, we here also clarify that the disallowance u/s. 40A(3A), would, where so, stand to be made only in respect of the sums allowed u/s. 37(1) for AYs 2012-13 and 2014-15, and cannot extend to sums already allowed for preceding year, but liable to be disallowed in assessment for any of the three years under reference inasmuch as the same do not qualify as the subject matter of appeal. - I.T.A. No. 252/JAB/2016 And C.O.No. 01/JAB/2017 (Arising out of I.T.A. No. 252/JAB/2016) And I.T.A. Nos. 96 & 129/JA ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Further, in all cases the payments were made through self-cheques, liable for disallowance u/s. 40A(3). On the basis of the information furnished by the assessee during assessment proceedings, the transportation cost worked to an average of Rs.125/- per metric tonne (PMT), which, on the basis of the quantity shipped (254956 MT), worked to Rs.318.70 lacs, suggesting, thus, an excess claim of Rs.736.17 lacs (Rs.1054.87 lacs Rs.318.70 lacs). The AO further found that vouchers for payments, in excess of Rs.20,000 each, were missing for a total of Rs.85.93 lacs. The payments in sums less than 20,000 each, i.e., Rs. 291.81 lacs, were through vouchers which were not verifiable and, thus, liable for disallowance, at least in part. The AO accordingly made disallowance for Rs.654.87 lacs (i.e., Rs.592.87 lacs + Rs.62.00 lacs) u/s. 37(1) of the Act. No separate disallowance was made u/s. 40A(3), which as per him worked to Rs.391.46 lacs, inasmuch as that would amount to a double disallowance. The only other disallowance was for Rs.20 lakhs in respect of labour expenditure, i.e., on breaking, sorting and screening of raw stock, claimed at Rs.361.19 lakhs, on account of the same being not pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Loader expenses: Rs. 100.43 lacs, principally on account of the expenditure being unverifiable. Further, the creditor level had increased from Rs.389.35 lacs (as on 31/3/2012) to Rs.695.28 lacs (as on 31/3/2014), even as sales has declined from Rs.21.11 crores (for fy 2011-12) to Rs.12.06 crores (for fy 2013-14). Notices u/s. 133(6) were accordingly issued and sent to 10 parties, against which the audited accounts reflected an aggregate liability of Rs.189.62 lacs. Only two, i.e., Sh. Hetram Kol (Proprietor, Earth Movers Construction) Sh. Dujiya Kol (Prop., Premier Consimation), with outstanding balances at Rs.10.82 lacs and 20.67 lacs respectively, responded, while others were not found at the stated addresses. Their statements were recorded u/s. 131 (PB pgs. 92 to 95), wherein they confirmed having not done any transportation work for the assessee (or M/s. New Minerals). The entire credit balance of Rs.189.62 lacs was accordingly added to income, even as the total expenditure claimed for the year in respect of these creditors was at Rs.197.37 lacs. Further, two creditors, namely Mangalam Engg. Works (Prop. Sh. Rajesh Tipa) Mandal Construction (Prop. Smt. Jyoti Tipa), with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and loading receipts at Rs.386.05 lacs and Rs.65.33 lacs respectively. Reliance was placed by him on the decisions in Vrajlal Manilal Co. v. CIT [1973] 92 ITR 287 (MP); Joseph Thomas Bros. v. CIT [1968] 68 ITR 796 (Ker); and T.O. Abraham Co. v. Dy. CIT [2010] 325 ITR 201 (Ker), partly allowing the assessee s appeal vide order dated 13/2/2018. For AY 2014-15, the ld. CIT(A), vide order dated 23/3/2018, confirmed the addition in respect of unconfirmed transport credits for the two who deposed in assessment proceedings, i.e., at a total of Rs.31.49 lacs, while deleting the addition for the balance Rs.158.13 lacs (Rs.189.62 lacs Rs.31.49 lacs), on the ground that confirmations had been filed by the assessee during the course of the assessment proceedings, discharging the onus on him. The retraction by the two deponents, being by way of their affidavits, sought to be submitted as additional evidence, was not admitted by him as they were not covered under any of the clauses (a) to (d) of rule 46A(1). The disallowance of various expenses was deleted by him as being adhoc, following the decision in Ganesh Pratap Singh v. Asst. CIT (ITA 214/Jab/2013, dated 23/6/2016). The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... failed to state the name, PAN, or furnish confirmations from the creditors, had failed to establish their identity, with payments to them being per self cheques, even as they were not traceable at the stated addresses! What further proof, one may ask, could there be of the assessee s claim being bogus , at least qua these creditors, who had raised transportation bills for Rs.592.87 lacs for the year (AY 2012-13). 3.2 The assessee, we observe, has not met or rebutted any of the factual findings by the AO, and on the basis of which the disallowance stands effected by him, at any stage. Rather, he confirms the cost of Rs.125 PMT vide his reply (to the AO s show cause letter dated 19.3.2015) dated 24.3.2015 (reproduced at pg. 6 of the assessment order), wherein he clarifies (at para-2 thereof) that the actual transportation cost works to Rs.3,47,95,609 (and not Rs.3,18,69,500) inasmuch as the total quantity works to 278364.870 MT (and not 254956 MT, as worked out by the AO). Though this difference of Rs.29.26 lacs (as per the assessee s working) is, in context, neither material nor relevant as the claim allowed by the AO is at an even higher figure of Rs.400 lacs (1054.87 lacs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bered, as well as not properly signed, indicating the name designation of the person signing, both of which seriously undermine their credibility. All of them are, in fact, on computer stationery, in almost identical format, which is same as that for the bills issued by the assessee for supply of Bauxite. Juxtapose this with the fact that the notices u/s. 133(6) could not be served on the creditors, nor their confirmations, much less their names, PAN, ITRs, etc., despite being called for, furnished. The bills, surprisingly, do not bear any address or any registration number, viz. TIN (Taxpayer Identification Number), TAN, under Service Tax, etc. nor in fact even the name of any trade association; transporters being normally organized thus, or even bank account particulars. The AO under the circumstances stating that even their identity is not proved, cannot but have our approval. Further, the bills, in the range of Rs.7 lacs each, are for quantities transported over a period of one month to three months. This itself raises serious doubt inasmuch as a transporter would normally insist on immediate payment, as he has to incur expenditure, on daily basis, on fuel, labour, as indeed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aising further doubt in the matter. For example, the outstanding (Rs.389.35 lacs) spread over 10/5 creditors (say) would imply on average outstanding of Rs.39/Rs.78 lacs per creditor (transporter). In fact, while arguing the case qua sec.40 A(3), Sh. Ghai, the ld. counsel for the assessee, was at pains to emphasize the urgent need for remitting funds to the creditors, being small transporters who could not afford being not paid immediately and, thus, by cheque inasmuch as the same entails a clearing period of 2-3 days. So much for the emergent need to remit monies; the credit extending to 4 months and 4.7 months qua the total and impugned credits respectively. Why, expense vouchers for a sum aggregating to Rs.85.93 lacs were also found missing. How could that be, unless the vouchers pertain to a particular party, separately filed (which is not the case) or are over a particular period, so that the voucher file for a particular period is missing, which is again not the case; the payments spanning from 01/04/2011 to 27/03/2012 (refer page 4 of the assessment order). The AO has though not made, we may add, any separate disallowance in its respect, and this is stated only to br ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... egion, to HIL (also see para 11). A total cost of Rs.94.53 lacs has been claimed on a total bauxite sale (purchase and self-mined) of 2,76,738 MT, yielding an average cost of Rs.34.16 PMT, which would stand to fall further if the quantity of clay, laterite and coal sales are also included, which being insignificant in relation to bauxite sales, are ignored, as in the assessee s case. This is startling as, even though transportation cost depends on the distance from the railway siding, the same, as clarified by the assessee per his written submissions before the ld. CIT(A) (PB pgs. 1-17), is at 16 km from Tikeriya mines, from which almost the assessee s entire bauxite sale has originated. Now, this distance of 16 km is, to our mind, as small a distance as one could think of. Even assuming a lower distance, i.e., of 10-15 km. (which though is a matter of fact) in case of C.R. Mittal and Co., the comparable case, the cost in the assessee s case should not exceed Rs.40-45 PMT. It needs to borne in mind that the cost of internal transportation, i.e., for transfer of overburden to dump and for raw stock from deep mine to surface, would be fairly uniform/constant across different mines, w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t claimed is at a multiple of 12 (414.74/34.16) over the comparable cost and 3.57 times of that for two years ago. Surprisingly, there is no plot rent in the balance-sheets as on 31.3.2012 to 31.3.2014, nor a note in the accounts explaining the same . There is also no stock at the plot, i.e., at the beginning or the close of the year, being only at the Mine and Siding, which is highly improbable as some stock is bound to obtain at the storage site in the normal course of business. 3.5 The assessee having himself stated the cost at Rs.125 PMT, also, justifying it, rather than rebutting it and, further, been allowed at Rs. 162 PMT, we need not have, in considering the validity of the disallowance by the AO, travelled thus far. The exercise, also afore-explained, has however been done to apprise ourselves of the facts emanating from the material on record before issuing any final finding of fact and, equally, to avoid any miscarriage of justice. This becomes imperative in view of the varying and conflicting claims. The only thing that is clear is that the assessee s accounts are seriously manipulated, with no coherence and in complete disagreement with the stated facts. The asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .50 loaded in to wagon inclusive of Rs.100 ad hoc royalty (billing of additional Rs 12.00 per MT will as quantity bonus for 7th rake only) 3. Rates for 8th Rake: Rs. 745.50 loaded in to wagon inclusive of Rs.100 ad hoc royalty (billing of additional Rs 22.00 per MT will as quantity bonus for 8 rake only) 4. Rates for 9th Rake: Rs. 755.50 loaded in to wagon inclusive of Rs.100 ad hoc royalty (billing of additional Rs 32.00 per MT will as quantity bonus for 9th rake only). An increase of Rs.15/- over the existing rate of Rs.164.50 was bargained w.e.f. 01.5.2011. The price of Rs.165 as against a cost of Rs.115 (see para 3.4/AY 2010- 11), gives a margin of Rs.50 PMT (@ 30.30%). The price increase, allowed qua transportation as well, does not though mention of an increase in transportation cost/s as among the reasons for the same, much less as the sole reason. True, there is reference to liaison expenses incurred by the assessee with the Railways and other Departments. However, there is no claim qua such expenditure, and in fact at any stage, including before us. This is perhaps as the same would be unevidenced and, in any case, attract Explanation to s. 37(1), precludin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the AO has made specific disallowance out of transport expenses in absence of documentary evidences as required under the provision of section 37 of IT Act 1961. (iii) The CIT(A) has erred in allowing relief out of transport expenses when particularly, the AO had given finding that a sum of Rs.3,91,45,959/- was paid by self cheque and therefore, provisions of section 40A(3) are clearly applicable for disallowance. (iv) The CIT(A) has erred in allowing relief out of transport expenses when particularly, a sum of Rs.2,91,81,025/- was claimed through unverifiable self-made vouchers. (v) In the facts and circumstances the CIT(A) has erred in not appreciating the facts that the addition was made because the assessee could not furnish the confirmation identity in respect of alleged creditors. (vi) The ld. CIT(A) has erred in deleting the Addition under the head labour expenses amounting to Rs.18,00,000/-. (vii) The ld. CIT(A) has erred in not appreciating the fact that the total payment to labourers were made through self-made vouchers. (viii) That the appellant reserves the right to amend/alter any of the grounds of appeal/add other grounds of appeal at the time of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat is, a false claim could be in different forms and fact settings, with no material difference though, being in pari materia . We may clarify that while the law provides for disallowance u/s. 37(1) even if an expenditure, though incurred, is not wholly and exclusively for the purpose of the assessee s business, the disallowance in the instant case is for the reason of it having not been incurred, i.e., to that extent. We may here also add that a disallowance would be sustainable on the assessee being unable to prove an expenditure, and it is not necessary for the Revenue to actually disprove the same. That we have found the same as, besides being unsubstantiated, grossly inflated and, further, in examining its genuineness, considered it from various angles, including its quantum, inasmuch the two were found inter-related, would not make it any less a disallowance s.37(1). And, further, not convert it into a case of estimation of income, i.e., merely because the same works to a tidy sum in relation to sales. The disallowance u/s. 37(1), as indeed an addition u/s. 41(1) or u/s. 68, is a specific adjustment/s (to the returned income), and would not for that reason make it a case of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ITR 287 (MP). The appellate order is thus flawed not for the reason that it regards, incorrectly though, the income for the year (AY 2012-13) being estimated, but for estimating it and, further, on the basis of the income of another (AY 2013-14), which stands itself estimated for non-production of accounts, and for which estimation no basis stands stated. That is, for the manner in which the income for the first year is determined, including the validity of the underlying assumptions. Now, it is one thing to say that the operating result as derived for one year, for which books stand properly scrutinised and income assessed making specific adjustment/s to the returned income, is, on the premise of the same representing a normative profit, applied to another, subsequent, year, for which the book-results, though similarly disclosed; the books of account having not been produced in assessment, income has to be estimated, and quite another to do just the opposite, i.e., applying the results for the second (subsequent) year, liable to be estimated, to the first year. That would be putting the cart before the horse . There has been clearly no adjudication by the ld. CIT(A) qua the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... acs on a sold quantity of 2,51,327 PMT (PB pg. 132) both figures as reflected per the audited accounts, which works to Rs. 320 PMT. Further, in addition thereto, is the loading receipt, at Rs. 85.43 lacs, which, on being unitized, translates to Rs. 34 PMT (85.43/802.91 * 320), i.e., at a gross rate of Rs. 354 PMT. It is this exorbitant rate of realization, as against the claimed rate of Rs. 165 PMT (Rs. 180 PMT), or Rs. 167 PMT, on the basis of the quantities and rates stated at paras 3.2 3.5 respectively, that results in a higher profit, and has nothing to do with the cost allowed, and which also explains the attempt by the assessee to supress this profit by booking bogus expenditure. The cost allowed by the AO, as would be seen, at Rs. 162 PMT (para 3.6), is rather very close to the average receipt @ Rs. 167 PMT, even as non-incurring of the additional cost (Rs. 37.2 PMT) on the ore shipped that is purchased, or at least the entire of it, would result in an average lower, i.e., than Rs. 162 PMT, cost to the assessee, again pointing to the reasonability thereof and, thus, no reason to disturb the same. There has been no examination of the expenditure by the ld. CIT(A), much l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iture on breaking, sorting, and screening of the ore, claimed at Rs.361.19 lacs. The claim was found wanting by the AO as the same was through self-made vouchers, which were not amenable to verification, with the assessee further failing to produce the labour register. The same, as it appeared to him, was through Mukkadams (petty contractors), which is generally the case, though no tax had been deducted at source (para 6 of the AO s letter dated 19/3/2015/also see pg. 5 of the assessment order). Before the first appellate authority, the assessee sought to justify the expenditure on the basis of the same being consistent with the past inasmuch as the claim for AY 2011-12 was, at Rs.353.60 lacs, @ Rs.157.15 PMT, as against @ Rs.160.53 PMT for the current year; the production for both the years being at 225000 MT. The ld. CIT(A) also found the assessee s claim as deficient, though disagreed with the AO on the quantum of disallowance, restricting it to Rs.2 lacs. His reference to the decision in Leeladhar Khodiyar (supra) is not understandable. The AO has nowhere stated that the workers had put their thumb impression, or that the expenditure is doubted for that reason. The assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rges , in the case of C.R. Mittal Co. (for the relevant year), is at Rs.267.12 lacs on a mined quantity of 2,32,627 MT, i.e., at Rs.115 PMT. The quantity (scale) is comparable, and the nature of work, same. The disallowance at Rs.20 lacs by the AO works to an allowance of cost at Rs.151.64 PMT, as against at Rs.160.53 PMT claimed by the assessee. It may here be mentioned that the return for AY 2011-12 was not subject to scrutiny, while that for the two preceding years were without any appraisal of evidence/s and, consequently, any finding/s, subject only to token disallowances. The same is itself not valid in law, as explained in Asst. CIT v. Arthur Anderson Co . [2005] 94 TTJ 736 (Mum), relied upon by the assessee before the ld. CIT(A). The disallowance, as being confirmed by us, i.e., on the touch-stone of whether the assessee has been able to, in the conspectus of the case, prove the amount claimed (Rs. 361.19 lacs) as incurred wholly and exclusively for business purposes, the two indicating quantum and the purpose of the expenditure respectively, i.e., prove the expenditure in the sum claimed, and to which the answer is clearly in the negative, further finding the disallow ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... here each single payment is in excess of Rs.35,000. We, accordingly, issue no finding with regard to the quantification, which, both for s. 40A(3) and s.40(ia), would be, where required, subject to determination after hearing the assessee in the matter, so that we may only be regarded as having a approved the disallowances under these provisions in principle. We are conscious that the AO has not referred to s.40(a)(ia). That, however, would be little consequence inasmuch as the issue of disallowance qua transport expenses is open before us and, further, there is no estopple against law, with we having, as incumbent upon us, queried and sought the response of the parties during hearing. As clarified by the Apex Court time and again, it is the correct legal position that is relevant, and not the view that the parties may take of their rights in the matter (viz. CIT v. C. Parakh Co. (I) Ltd . [1956] 29 ITR 661 (SC); Kedarnath Jute Mfg. Co. Ltd. v. CIT [1971] 82 ITR 363 (SC)). The purview of the appellate proceedings under the Act is the correct determination of the assessee s tax liability (see NTPC v. CIT [1998] 229 ITR 383 (SC)). The scope of assessment proceedings under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... alter any of the grounds of appeal/add other grounds of appeal at the time of hearing. 2. That the appellant reserves the right to amend/alter any of the grounds of appeal/add other grounds of appeal at the time of hearing. 11.1 We observe no difference in the approach of the ld. CIT(A), who agrees in principle with the AO, applying the derived results, i.e., as obtaining upon effecting disallowances for the preceding year (AY 2012-13), as confirmed by him. Apart from the differences in the (amount of the) said disallowances, which shall stand substituted by that as modified by this order, or as may be further modified in further appeal, there are however other differences in the working by the assessing and the first appellate authority, which we shall examine for their validity/correctness by us. We may, in the process, stating reason/s therefor, also modify the said working with a view to remove the deficiencies or anomalies as may be found, so as to bring the assessed income in conformity with facts and law. The first deficiency observed by us is in the AO regarding the transportation and loading charges receipt as of separate businesses of the assessee. The same, ev ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the mining business, which have nothing to do with the delivery, which would be either from the storage site or the mine head to the railway siding. The argument though is without merit, as these costs would have also been incurred in the past. Neither the assessee s return for the year under reference nor for the preceding years, nor the assessments for any of those years, the results of which stand relied upon, state so, or even remotely so suggest, i.e., of an independent business. In fact, there is nothing on record to support the contention, much less corroborate it and, on the contrary, is inconsistent therewith. The idea of a separate business stands projected by the AO de hors any material and, as it appears to us, only with a view to, and for the purpose of, computing income, returned by the assessee, as in the past, as indeed for the following year (AY 2014-15), as of one, single business. Why, he himself computes the net profit rate for AY 2012-13 correctly at 33.05%, i.e., on a gross turnover of Rs.2110.83 lacs, i.e., inclusive of the transport receipt. However, he falters while applying the same (at 32%) for AY 2013-14, doing so only on the bauxite sale (Rs.84 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... transportation of ore from the storage site to the railway siding. That is, even the contours of the transport business, i.e., the set of activities which stand to be included therein, remain unspecified, much less the related costs ascertained. As afore-noted, no such attempt, i.e., toward segregating cost, has been made at any time for the preceding years as well. Where, then, is the profit for the base year/s, or the normative profit, which may then be applied for the year for which the book results are found unacceptable, defeating the very purpose and objective of the undertaking the estimation. Even this elementary exercise, which follows in consequence, has not been performed by the ld. CIT(A). Put differently, the only manner in which the method adopted by the AO, and followed by the ld. CIT(A), is to be applied for AY 2013-14, is to delineate the set of activities comprising the transport business, and reduce the related costs, as finally allowed, in arriving at the profit of the said business. This is the only manner in which, even assuming so, i.e., a separate business, a separate rate of profit could be applied for transport business . This would be so even where trans ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... activity, of course without stating any basis therefor, he applies the same for the first year, i.e., AY 2012-13, for which we observe no legal or factual basis (also see para 5.3). Sure, he states of no factual difference observed in the facts for the two years (para 6.3 of his order), but that would rather suggest applying the rate for that year (AY 2012-13), as factually determined, to the current year. This is precisely what led us to state that he, rather than correcting, compounds the error of the AO. As explained in Kapurchand Shrimal v. CIT [1981] 131 ITR 451 (SC), an appellate authority has the jurisdiction, as well as the duty, to correct all errors in the proceedings under appeal and to issue, if necessary, appropriate directions to the authorities below, in disposing of the whole or any part of the matter afresh, unless forbidden by law from doing so . The profit rate for any business is bound to, for various reasons, vary from year to year; nay, from time to time, and which rather is the justification for maintaining accounts and basing the assessment of income of a business under the Act thereon, so that, unless the accounts themselves are not reliable, the book ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vides for giving opportunity to the assessee for being heard on the material gathered by the AO and, thus, observing the principles of natural justice, except where the assessment is, as in the instant case, made u/s. 144; the assessment in that case being u/s. 143(3). The AO, rather than not following, as the ld. CIT(A) presumes, has in fact followed the dictum of s.142(3), which provision again has not been read by him, and which also explains our observing of he having, without application of mind, merely repeated what the assessee states before him. 11.2 We may next review the judicial precedents with regard to two (or more) activities, i.e., the mining and the transport, constituting two separate businesses (of the assessee), or a single business. In CIT v. Prithvi Insurance Co. Ltd. [1967] 63 ITR 632 (SC), the life insurance and the general insurance businesses of the respondent company were held as constituting one composite business on the basis of the inter-connection, inter-lacing, inter-dependence and unity furnishing evidence as to the existence of common management, common business organisation, common administration, common fund and a common place of business. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... egarded as a separate, independent business of the assessee. The same, as it obtains, would rather cease to exist in the absence of mining; the transport being admittedly sourced from outside to comply with the terms of delivery of the mining business. The Revenue, on the other hand, would again reiterate the basic facts of the case i.e., the transportation being confined only to the ore (bauxite) mined by the assessee and sold to its customer/s, so that the matter did not admit of two views. The interlacing and intertwining of the two activities, as indeed of the same management, has not been denied and, rather, is undeniable. This exercise, as afore-noted, was done only by way of abundant caution with a view to provide opportunity to the parties in the matter, which we believe as relevant and could have significant implication insofar as determination of income is concerned. In fact, even regarding the transportation activity as a separate business, it would matter little inasmuch as its results are in pari materia with that for the other business; with there being nothing on record to suggest the adopted rate of 8%, applied by the ld. CIT(A), and in fact for an earlier year as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... /s made on examination in assessment for AY 2012-13, glossed over by the ld. CIT(A), and confirmed by us, which would therefore make us wary of applying the results for these years; rather, retrograde and contradictory. AY 2009-10, the operating statement for which does not contain any transport receipt, is even otherwise beyond 3 years, so that it would not fall for consideration. We have already (at para 11) noted the fallacy in applying the presumed transport rate at nil, itself without any basis, in determining the profit rate for mining activity for AY 2012-13, for the purpose of applying it to the current year, i.e., the reverse application, making a travesty of the estimation process and, thus, of justice. The results for AY 2011-12 are not made available for reasons best known to the assessee, even as it falls within the period of 3 years preceding the current year, results of which were applied by the ld. CIT(A). We, therefore, regard the operating results for AY 2012-13, as finally determined, as liable to be applied for AY 2013-14, and we are in this also supported, both in facts and in law, for which (the latter) reference may be made to the decision in Vrajlal Mani ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sale rate in that case is Rs.634.94 PMT, i.e., at Rs.148.35 PMT more. Surely, it is argued, that would give rise to a higher profit in that concern. The argument is misconceived. This is as it is nobody s case that the bauxite is not supplied at the siding in C.R. Mittal Co., but is ex mine . Further, the rate applied by the AO is lower than the derived result of 33.05% (for AY 2012-13) in the assessee s own case. The comparison has thus resulted in a lower rate of 32% being applied, so that the assessee, rather than suffers, benefits on account of the said comparison, stated to be detrimental/prejudicial to him! In fact, the said firm has no separate transport receipt, which perhaps results in a lower gross sale rate, i.e., when reckoned at gross of transport receipt. The assessee has incurred indirect expenditure at 7% and 8% for AYs. 2012-13 and 2013-14 respectively. Adding the same to the net profit rate to the determined/applied rate of 33% and 32% respectively for those years, works to a gross profit rate of 40% for both the years, which neatly matches with the average of the disclosed gross profit rate of 35% and 44% for the said years by the said concern (see para 2.3 ). ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ase of Rs. 36 PMT in ore sale realisation, so that there has been a net decline by only Rs. 39 PMT. We, however, are inclined to regard the two receipts, though arising from and forming part of the same business, separately for the purpose of estimation of profit incident thereon. This is as, as already noted, the cost dynamics of the two are different and which perhaps has led to the two being billed separately to the buyer. Two, and equally important, we had found the profit rate on the transport receipt for AY 2012-13 as largely on account of exorbitant rate of Rs. 320 PMT. It is, this, that led to our finding of the profit rate thereon as matching the profit rate on the ore sale and, thus, corroborating the average profit rate of 33%. This, however, does not obtain for the current year, bringing down the profit margin thereon, and which has been found as conservatively reasonably estimated at 8%. 12.4 We, therefore, notwithstanding our observations at para 12.1 above, in view of the differences that obtain between the two years, approve of the applied rate of 8% in respect of transport activity for the current year. As regards the mining activity, the same clearly shows an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t, i.e., by 25% thereof; the two issues being interrelated, we might as well have restored the matter back to the AO for consideration on the lines suggested inasmuch as the Tribunal is to decide on the basis of findings of fact, based on material on record. The assessee s CO is accordingly held as without merit. We decide accordingly. 14. In the result, the Revenue s appeal is allowed and the assessee s CO is dismissed. AY 2014-15 15. We shall take up the principal addition in the Revenue s appeal first; being qua bogus creditors, for Rs.189.62 lacs. The assessee s balance-sheet as at 31.3.2014 reflects as many as 49 (i.e., at an increase of 20% over that for AY 2012-13) trade creditors, aggregating to Rs.695.28 lacs as at the year-end (PB pgs. 19-30). Notices u/s. 133(6) were sent to 10 of them, with balances aggregating to Rs.189.62 lacs, 2 of whom responded and deposed u/s. 131 to have not done any transport work for the assessee. The others were not found at the stated addresses. The AO, accordingly, added the entire balance outstanding qua the said creditors, i.e., Rs. 189.62 lacs, even as confirmations from them had been filed with him. Both the statements and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng very marginal. The assessee has, accordingly, booked an additional expenditure of Rs. 352 PMT (428 76), or, at Rs. 355.84 lacs, on the current year volume of 101090 MT. A moderate hike in transportation cost, as for receipt, would result in a cost of ~ Rs. 500 PMT, yielding an excess cost by ~ Rs. 342 PMT. That apart, the claim of Rs. 414 PMT for AY 2012-13, the base year, was found to be in excess by far, i.e., ~ 60%, booked essentially to contain the increased profit due to a higher transport yield. The expenditure claimed thus far exceeds the actual expenditure, lower by far than the assumed cost of 92%, so that the profit margin of 8% becomes, in view of the peculiar circumstances, valid for AY 2013-14 only. Coming to the specific evidences, for and against, the assessee s entire case is based on the confirmations filed which, having been relied upon before us by both the parties, form part of their respective paper-books (as APB pgs.59-90). In addition, while the Revenue relies on the denial statements on oath by the two who deposed u/s.131 on 28.12.2016 (PB pgs. 92-95), the assessee does on the retraction statements dated 30.1.2018 furnished in the appellate proceed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and nothing was therefore due to them from him. That they had no vehicle and, in fact, did not file any income-tax return. Both stated to be having a single bank account, i.e., with Canara Bank, Katni. They are, clearly, poor, illiterate or semi- literate workers, who could not write, subscribing their thumb impressions on the depositions, working in the mines of the assessee and his brother for a living. The assessee himself does not file any counter affidavit, averring the said statements to be false or incorrect in any material respect. He does not seek cross-examination to rebut the charges made by them per their sworn statements. The facts stated therein thus remain undisputed . He does not even state any substantive fact, viz. the additional need for hiring since January, 2014; not hiring directly from the market; the reason for the outstanding inasmuch as no amount stands paid; the capacity of the creditor to extend the credit for any sum, much less the entire sum billed ; the transportation record on the basis of which the claims for the work performed had been made by them; the vehicles (quantity, with registrations numbers, deployed by them for the purpose); bills raise ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s thus not valid, and the retraction statement not admissible evidence in law, i.e., on merits. We, next, consider the addition for the balance Rs.158.13 lacs qua the remaining 8 creditors. To begin with, we observe that no payment, as to the two creditors afore-discussed, has been made, and the entire amount billed outstands as at the year-end, for 6 creditors aggregating to Rs.97.94 lacs. For the other 2, the position is as under, and shall be considered separately: (Amt. in Rs.) s.no Name of the persons Opening balance as on 01.04.2013 Bills raised during year Payment made Outstanding as on 31.03.2014 1. K.K.Earth Movers 8,85,800/- 37,11,704/- 15,00,000/- 30,97,504/- 2. S.C. Consilmation 8,38,963/- 30,82,511/- 10,00,000/- 29,21,474/- The confirmation in all cases was filed not by the creditor concerned, but by the assessee himself, on 19.12.2016 (refer submissions filed o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s cost implications for the assessee, who would rather obtain services direct from the market, saving additional cost, being a primary concern, as indeed for any reasonable person, even as seen from the minutes of the meeting with HIL, exhibiting the price increase being subject to a thorough and informed deliberation. Again, there is no deduction of tax at source on the bills raised on him . Continuing further, none of them is an assessee, inasmuch as the AO also required them to file the tax return for AYs 2013-14 to 2015-16, as well as the balance-sheet for those years. The copy of the assessee s accounts are in english, even as all of them, including the two who deposed, have, save one, signed in hindi or by putting their thumb impression. Rather, we amusingly observe, even the name of the concern is a fancy name in english. In all cases, the bills on the assessee, not produced (before the AO), are raised with a periodicity of one month, and are the only bills raised by the creditor concerned . No payment is made by the assessee even as the bills are raised month after month, to the tune of Rs.4 to Rs. 6 lacs per month, January 2014 onwards, resulting in an outstanding of Rs. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of creditors, except the two who deposed, could be served the notices u/s. 133(6), being not found at the stated addresses. The confirmations obtained from them and furnished to the AO have been by the assessee, making it his evidence, as against that of the Revenue, as where the confirmations/statements had been given directly to it in response to the said notices. Even the copy of account furnished along with is not from their accounts, as called for, but from the assessee s accounts, and on which their signature/thumb impression had been obtained. Why were they not produced, so that they could be examined? There is, further, nothing to show of them maintaining accounts? Why? How, and on what basis, then, did they validate the account statements presented before them, even as the same was only much later in time? Further, what value, then, their confirmations, i.e., in the absence of accounts? It is their accounts which would exhibit the persons from whom they, in turn, hired the vehicles, as also as to how the operations were financed. No tax at source, clearly, stands deducted by them . The question is not of the balance as at the year-end, which may well be nil, but of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 695.28 Excluded Creditors 468.98 119.93 Net 382.32 575.35 That is, quixotically, while the regular creditors, presumably well-established, provide credit for 3 months, the non-regular ones, with no credentials, do so for, on an average, six times the same! We are conscious that the impugned trade credits (other than where part-payment is made) stand sourced January, 2014 onwards, so that a linear assumption qua credit period would not apply. The information/ comparison is no less significant. With no trade relations to back on, and in fact no resources, the normal behaviour would be one of circumspection, treading carefully, with, rather, being only mediators, themselves out-sourcing, they would be operating on very thin margins, further disallowing them any room for extending credit and, thus, entail financial risk. While here we find them to, as afore-said, continue to provide services with abandon, without a care in the world for being paid; the two who stand paid during the year, having been in fact not paid for year/s. The bizarre average credit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... higher sum, as where no payment is made, or is in a sum lower than the opening balance . That is, neither the opening balance nor the stated payment shall impact the amount of disallowance, which is u/s. 37(1), finding the expenditure as not genuine. The question of non-deduction of tax at source, which is otherwise attracted, leading to a disallowance u/s. 40(a)(ia), also becomes irrelevant, a non sequitur, in-as-much as the expenditure itself is found as bogus. The same shall though become liable to be invoked where the expenditure is, reversing our finding, held as genuine, in whole or in part . The AO s action in bringing only the amount outstanding to tax is thus inconsistent with his finding of the same being not genuine. It is, rather, self-defeating, as it could be construed to imply that the expenditure is, to the extent paid, genuine! Why, for that matter, even that outstanding as at the year-end, would get discharged at some later point in time (in the assessee s accounts), lending it credibility as it were. That is, an expenditure found not genuine, becomes liable to be regarded as genuine on account of its payment subsequently, a contradiction in terms inasmuch as an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... antecedents vis-a-vis the creditors under reference, would, where comparable, have provided a ground for regarding them as genuine. It is settled law that a failure to adduce evidence and, rather, the best evidence that a party can furnish, being that which is supposed to be in its possession, would raise the presumption as to adverse inference ( Union of India v. Rai Deb Singh Bist [1973] 88 ITR 200 (SC); CIT v. Krishnaveni Ammal [1986] 158 ITR 826 (Mad)). We may though clarify that, in the conspectus of the case, the same provides yet another ground for regarding the impugned credits as not genuine, even as a comparison, to the extent possible under the circumstances, stands made by us. Coming to the quantum, suffice to state that the claim, as against at Rs.414 PMT for AY 2012-13, disallowed to the extent of Rs.257 PMT, has been made at Rs.842 PMT. The disallowance (Rs.189.62 lacs), implies Rs.188 PMT; the assessee s claim being at Rs.851.30 lacs and thus an allowance of Rs.654 PMT, as against Rs.162 PMT for AY 2012-13, i.e., is much higher than that would arise if the assessee s income was to be computed on an estimate basis, taking an overall view of the net profit or gross ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tands clarified (para 11.1) that an appellate authority is within its jurisdiction and, rather, duty bound to correct all the errors of fact or law made by the authorities whose order/s is under challenge before it. Appellate proceedings, it needs to be borne in mind, are only a continuation of the assessment proceedings, and subject only the limiting terms of the statute ( CIT v. Reham Foundation [2019] 418 ITR 205 (All) (FB)). The Tribunal being final fact finding authority, is to decide all questions that arise out of the subject matter of appeal, which itself is to be broadly construed ( CIT v. Edward Keventer (Successors) P. Ltd. [1980] 123 ITR 200, 212 (Del)) and, further, in the light of the evidence and consistent with the justice of the case ( CIT v. Walchand Co. (P) Ltd . [1967] 65 ITR 381 (SC)). It may be noted it is the subject matter of appeal that constrains us to restrict the scope of the adjustment to the correct amount of disallowance/ addition. The Tribunal is in fact required to decide all questions of fact or law raised or arising in appeal ( Esthuri Aswathiah v. CIT [1967] 66 ITR 478 (SC)). We have already noted at para 7, with reference to the judicial pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the impugned sum of Rs.15.82 lacs. The ld. CIT(A) did not admit additional evidence even as, without doubt, the said statement was not confronted during assessment to the assessee, i.e., without a valid reason, as in the case of the other 2 transport creditors (see para 15). The same, being an affidavit dtd.30/1/2018 by Shri Rajesh Tipa, is admitted (PB pg. 192). It states of he (and his wife) having undertaken transport work for Shri Shankarlal Vishwakarma in the past, against which dues were outstanding in the stated sum/s from him. The said business had though been since closed due to losses. We are, again, unable to fathom the assessee's non-requisition for cross examining the said creditor/s and, instead, approaching them and procuring an affidavit from him. The affidavit does not state any reason for giving a false/wrong statement earlier. The reason stated is of the deposition being in the absence of any record inasmuch as he just happened to visit the Tax Department for some other purpose on that date. Now, this is as farcical at it can get. Rather, whether he had any other work in the Department on that date, unstated though, is wholly irrelevant. What matters, a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee, makes it as his evidence, even as his only right in law is to be supplied a copy of the statement relied upon in assessment, and opportunity to cross examine the deponent, not sought. The opening balance in both the cases, as evident from the details listed in the assessment order (para 2, page 2) for AY 2012-13, finding mention at Sr. Nos.22 26 of the list of 30 creditors, as under, arises out of the bills raised during the previous year relevant to that year: s.no Name of creditors Credit balance as on 31.3.2012/2014 (Rs.) Total of bills raised during the year (Rs.) Total payments received (Rs.) 1. Mandal Constn. Goshalpur 7,23,005/- 16,23,005/- 9,00,000/- 2. Mangalam Engg Works, Satna 8,58,650/- 17,58,650/- 9,00,000/- If anything, the continuing outstanding, despite they being in losses, validates our inference of the same being bogus, and therefore its disallowance (forming part of Rs.654.87 lacs disallowed) f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sion therefore does not arise. In case, however, the same is found as genuine expenditure a matter of fact ( Ratanchand Darbarilal v. CIT [1985] 155 ITR 720 (SC)), we, for the reason/s afore-stated, have found it as liable for addition. And which could be u/s. 41(1)(b) or s.69, or even u/s.68. As regards s.41(1)(b), the same becomes applicable in the face of definite statement on facts, unrebutted, of no amount being due to him (and his wife) as on 31.3.2014, so that the inference that consequently arises, in wake of the expenditure found as genuinely incurred, is of remission of the liability in favour of the assessee. That the assessee has not though chosen to record this fact in his accounts is a different matter, not determinative thereof. It is trite law that the passing or, as the case may be, non-passing of accounting entries is by itself not determinative of the matter (refer Sutlej Cotton Mills Ltd. v. CIT [1979] 116 ITR 1 (SC); Kedarnath Jute Mfg. Co. Ltd. (supra)). The decision in Bhogilal Ramjibhai Atara (supra) becomes distinguishable on facts. The other inference, equally valid, is the creditor having been paid outside books, which fact therefore is not recor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to exhibit the capacity of the creditor, viz. his balance-sheet, capital account, income-tax return etc., with he (and his wife) not being even shown to be assessees on the record of the Revenue. While therefore the nature of the credits stand reasonably explained, i.e., as purchase of services, the source thereof is rendered in serious doubt, at least as on 31.3.2014, if perhaps also earlier, as on 31.3.2012 and 31.3.2013. That is, the amount is for that reason liable to be included as income u/s. 68 for any of the years. Lest it be said that a trade liability cannot be subject to s.68, the provision makes no such distinction, though this question does not normally arise where the genuineness of a purchase is not in doubt. The purchase of goods/services, it may be appreciated, is only an explanation of the nature of the credit. That would not though oust it from its source being required to be satisfactorily explained, particularly where circumstances, as we have found to exist, raise genuine doubts in its respect. Reference, in this context, may, with profit, be made to the decisions in Vijay Kumar Talwar v. CIT [2011] 330 ITR 1 (SC); V.I.S.P. (P.) Ltd. (supra); Indian Wool ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cases, toward inflation of expenditure, was effected by the AO. None of this finding has been met or rebutted at any stage, including before us. The ld. CIT(A) has allowed relief on the legal premise of disallowance u/s. 37(1) being un-permissible as an ad hoc disallowance, relying on the decision by the Tribunal in Ganesh Pratap Singh (Supra). 20. We have heard the parties, and perused the material on record. Section 37(1) reads as under: 37. (1) Any expenditure (not being expenditure of the nature described in sections 30 to 36 and not being in the nature of capital expenditure or personal expenses of the assessee), laid out or expended wholly and exclusively for the purposes of the business or profession shall be allowed in computing the income chargeable under the head Profits and gains of business or profession . Clearly, as the language of the provision itself states, both the conditions of wholly and exclusively are to be satisfied for an expenditure to be allowed as deduction as a business expense u/s. 37(1). As is well-settled, the word wholly refers to the quantum of expenditure, and the word exclusively refers to the motive, the objective or p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... AO is an admission of same. The tax audit report u/s. 44AB for the relevant year (PB pgs. 32-43) reports the penalty at Rs.5808 (vide para 21 (a)(vi)). Under the circumstances, we consider it appropriate to rely thereon and, accordingly, confirm the disallowance at Rs.5,808, so that the balance Rs. 6800 is to be allowed. We decide accordingly. 22. Next, we may consider the assessee s CO. All its grounds are supportive of the impugned order and, therefore, warrant no separate adjudication, i.e., except Ground 2, which agitates the confirmation of an addition for Rs.4,30,000 u/s. 56(2)(vii) of the Act. 23. The brief facts in relation thereto are that the assessee purchased an immovable property at Katni for Rs.9.17 lacs on, as stated, 10.3.2013, the market price of which as on the date of purchase was Rs.14.21 lacs. The assessee objecting, on being show caused for an addition for the difference of Rs.5.03 lacs, the matter was referred by the AO to the District Valuation Officer, Jabalpur, who valued the property at Rs.13.47 lacs. Reducing the difference in valuation to Rs.4.30 lacs, which was brought to tax u/s. 56(2)(vii). The same was confirmed in appeal for the same reason/s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nditure, has however been made by the assessee in its accounts or even otherwise per his returns of income. The adjudication by the Tribunal, the final fact finding authority, is to be necessarily based on the material on record, and not on the basis of assumptions and presumptions, case law on which is legion, even as we may cite some, viz. CIT v. Radha Kishan Nandlal [1975] 99 ITR 143 (SC) Udhavdas Kewalram v. CIT [1967] 66 ITR 462 (SC) Omar Salay Mohamed Sait v. CIT [1959] 37 ITR 151 (SC) Dhiraj Lal Girdharilal v. CIT [1954] 26 ITR 736 (SC) True, the income liable to be assessed is the real income, but the same is again subject to the provisions of the Act ( Poona Electric Supply Co. Ltd. (supra); Southern Technologies Ltd. (supra)). In fact, even if the assessee had so claimed, the same would not be a permissible deduction in view of Explanation to s.37(1) barring all expenditure prohibited by law. In fact, even prior thereto, the same being against public policy, stood regularly struck down by the Hon ble Courts as not a legitimate claim ( Maddi Venkataraman Co. (P) Ltd. v. CIT ) [1998] 229 ITR 534 (SC)). The matter admits of no two views, and the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Asst. CIT (in ITA No. 48/Jab/2017, dated 13.9.2022). The decision in Shree Choudhary Transport Co . (supra) would apply both on facts, qua at least two other aspects. That is, the provision being applicable to the part of the expenditure paid during the year. And, further, of the amendment w.r.t. the disallowance being restricted to a fraction thereof (thirty percent) by Finance (No. 2) Act, 2014, w.e.f. 1/4/2015, being prospective. Further, we are conscious that while the disallowance for Rs.592.87 lacs (out of disallowance of Rs.654.87 lacs for AY 2012-13) is a total disallowance, that for balance of Rs.62 lacs is itself at a fraction (of Rs.291.81 lacs). As such, it would not be possible to identify as to which amounts out of the total sum of Rs.291.81 lacs stands disallowed and, thus, upon reversal, in whole or impart, allowed. The exercise for identifying the payment in violation of s. 40A(3) or, as the case may be, s.40A(3A), as indeed u/s. 40(a)(ia), would thus extend to the entire sum of Rs.291.81 lacs. Finally, we here also clarify that the disallowance u/s. 40A(3A), would, where so, stand to be made only in respect of the sums allowed u/s. 37(1) for AYs 2012-13 and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , be omitted. b) Notation i.e., be inserted after the word business in the sentence beginning with the words That the assessee is . and ending with the word irrelevant (pg. 30-31). c) The word making in the sentence beginning with the words The foregoing explains both .. and ending with the word entire process (at pgs. 35-36), be read as made . 10. Para 19 (pg. 67): In the following sentence, at sub-para 4 of the para (at pg. 67), the words this and finding be read as his and findings : None of this finding has been met or rebutted at any stage, including before us. 11. Para 20 (pg. 68) The words: (refer para 19) be read in the sentence beginning with the words We do not, .. , after the words in the facts of the case , and the word the be read before the word assessee . And the following sentence be read thereafter: Science has yet not invented any instrument to measure reliability of evidence ( CIT v. Durga Prasad More [1971] 82 ITR 540 (SC) (also see: CIT v. Rimjhim Ispat Ltd . [2016] 382 ITR 152 (All). 12. Para 25 (pg. 71) The following sentence be read at the end of the para at pg. 71: Rather, the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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