TMI Blog2022 (11) TMI 1440X X X X Extracts X X X X X X X X Extracts X X X X ..... ion over and above the declared income, if considering the books of accounts, past history and material collected by the AO, no interference is warranted. Thus, we don t find any justification on the application of enhanced GP rate of 3.25% which is completely without furnishing any justified grounds hence, the GP rate as declared by the assessee at 1.68% is hereby accepted. Therefore, the authorities below were completely unjustified in applying higher GP rate of 3.25%. Suppression of sale - We find nothing on the record to justify the case of suppression of sale i.e., though amount was received but was not recorded. Moreover, to effect the sale to such an extent, corresponding purchases of the vehicles are also required by the assessee, however, neither the claimed purchases have been discussed nor it is alleged so. At the best it was a case of mere suspicion which was not substantiated with the help of strong evidences, wherein the revenue has completely failed. Thus, the enhancement of the sale (due to suppression) and application of GP rate of 3.25% is not approved and the resultant addition to the extent of Rs. 2,26,41,521/- is hereby deleted. However, in the peculiar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent that where the payee had already paid the taxes, no further disallowance can be made. It is noticed that all the payees are public limited companies or corporations being M/s Maruti Udhyog Ltd. is the Public Limited Companies. Moreover, M/s Sundaram Finance, AU Finance and Mahindra Mahindra Finance are Non-Banking Finance Corporation, which are renowned companies of their field. They must have already filled the return of income and paid tax due thereon considering the subjected amount paid to them of Rs. 6,96,201/- in their respective declared income. Therefore, no disallowance should have been made in view of the binding decision of the Hon ble Supreme Court in the case of Hindustan Coca Cola Beverage (P) Ltd. [ 2007 (8) TMI 12 - SUPREME COURT] which, has very categorically held and rather prohibited the department to make recovery of the taxes again. Now, the second proviso to S.40(a)(ia) has taken care of a situation where payee has already paid taxes, no disallowance should be made. We are satisfied that the authorities below were not justified in making the impugned disallowance hence the same is directed to be deleted. - SHRI SANDEEP GOSAIN, JM DR MEET ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Therefore, the AO inferred that the assessee has suppressed the sales from 0.25% to 0.5% and thus, the assessee has shown only 99.5% of sale. Further in 12 cases (as per table at Pg-9 10 of the assessment order) in which the AO analyzed the detail filed by the assessee, it was noticed that there is a difference of Rs. 1,35,337/- of sale amount as appeared in the Registration Certificate Performa invoice. Sale Bill shown in the leger A/c of the assessee of Rs. 31,27,663/- and the Bill amount Rs. 32,63,000/- shown in the ledger. Thus the difference in terms of percentage was of 4.1476%. Therefore, the AO inferred that the assessee might have suppressed his sale to this extent. Accordingly, the AO rejected the Books of Account u/s 145(3) and as per calculation at pg 6 of the impugned order, worked out the alleged suppressed sale and enhanced the declared sale of Rs. 1,14,86,38,878/- to Rs. 1,19,83,41,281/- and after applying the G.P. of 3.25% as per comparable case [3.92% declared in the case of M/s Relan Motors (P) Ltd.] as against 1.68% declared by the assessee, finally, he estimated trading addition of Rs. 2,26,41,520/-. 2.3 In the first appeal the ld. CIT(A) confirmed the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... GP rate while both the companies were dealing in the sale of various brands of Maruti cars as dealers of the Maruti Udhyog Ltd. The AO has pointed out that there has been consistent profit margin in the sale of the cars of the above company. Further the AO has also mentioned that it was initial phase of the Relan Motors as dealer of Maruti Udhyog Ltd as compared to established market presence of the assessee who has been established dealer of the said company. Further the AO has applied GP rate of 3.25% only after considering all the contentions of the appellant. In view of above circumstances, the GP rate applied by the AO is held to be reasonable and is confirmed. In view of above discussion, the books have been appropriately rejected u/s 145(3) of the I.T. Act and sales have been enhanced based on the enquiries and details available in the assessment order. The application of the GP rate of 3.25% is also confirmed in the case of the assessee as discussed above. In view of above discussion and findings of the AO, the addition made by the AO is confirmed and this ground of appeal is dismissed. 2.4 During the course of hearing, the ld. AR of the assessee placed fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... entire trading addition be deleted here itself. B. On merit: Alternatively, on merits also, there was no case with the AO to have made this addition, as submitted herein below: 1. Fair estimation required - Legal Position:1.1 In these circumstances a pertinent question arise whether after the rejection of account and invoking of Sec.145(3), is there any scope of again referring to the same books of account finding various deficiencies, defects and faults and then to estimate the income on that basis. Although after rejecting the account it is not disputed that what is all required is a fair estimation. However, invoking of Sec.145 does not confer blind powers upon the AO and he is not at liberty to assess the income at whatever figure he wants. He is bound to make an honest estimation of income, keeping in view of the material available on record, past history of the case, local knowledge and repute of the assessee. He is also supposed to collect necessary material for the purpose, if so required. The law is settled that in making fair estimation, one needs some cogent material to justify estimations. An arbitrary, capricious and wild estimation, as done i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ast history has been held to be the best guide in the cases of fair estimation. The appellant, this year declared G.P. rate of 1.68% on total turnover of Rs. 1,14,86,38,878/- as compared to 1.01% on total turnover of Rs. 58,60,77,936/- last year and 0.70% in the year on total turnover of Rs. 40,48,20,629/- before last (as per table at pg-4 of the ld. CIT(A) order in A.Y. 2011-12). Kindly refer chart below:- COMPARATIVE G.P. CHART FOR LAST THREE YEARS Particulars A.Y. 2009-10 A.Y. 2010-11 A.Y. 2011-12 Sales (Rs.) 40,48,20,629/- 58,60,77,936/- 1,14,86,38,878/- Gross Profit (Rs. 2,04,269/- 17,97,028/- 23,35,701/- G.P. rate 0.05% 031% 0.20% (a) Other Income (Dealer margin in DRF) (Rs.) 23,67,931/- 39,95,739/- 1,69,64,723/- (b) Warranty Income Incentives (Rs.) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... comparable case The past history of the assessee takes preference over a comparable case Assessee having declared higher GP rate than the preceding year, its trading results require acceptance and trading addition requires deletion Also refer Madan Lal VS. ITO 99 TTJ 538 (JD), CIT vs. Ashok Behi Bharat Sethi Party (2013)35 taxmann.com 214 (Raj.) (DPB 43-46) 4.3 Justifiable reason behind non-considering comparable case: The comparison so made with the G.P. declared two years later by a third party, is not a good basis for making addition. The justification behind the trading results of the current year are always to be examined in the light of the past history but not in the light of the later years. 4.4 The reasons of low G.P. (if compared with M/s Relan Motors (P) Ltd.) and reason behind non-considering the said case , were submitted before the lower authorities in great detail. The relevant extract from the submission of the ld. CIT(A), reproduced at Pg-4 5 are reproduced hereunder: Thus the Gross profit overall is low but after including the pay-outs of company (Various schemes incentives). The overall Gross profit percentage is up. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le dealer of same market. Therefore request to consider our gross profit based and calculated on market situation of product demand/supply. But the AO without analysed the facts have simply considered that since the trade trend in the automotive company has been consistent especially in the case of Maruti Suzuki as the same is leading and established brand of the automotive industry. Therefore, the margins for the dealers and the other market forces are almost the same in this company from the long period of time. Thus, considering the gross profit rate declared by the comparable case may be made as basis for the purpose of applying the gross profit rate in the assessee s case. Further, considering the quantum of turnover of the assessee and the reply of the assessee; I deem fit that the gross profit rate in the case be applied in the instant case. And considering the fact that the year of operation of the comparable case was only the intial phase; therefore, there ought to be element of more competition for that party in order to stand in the market. In view of the same, rather the higher rate of gross profit ought to be there in the assessee s case. x x x x x ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... though not admitting, the application of higher GP rate was required, the same could have been only with reference to the current year sale and not with reference to the entire sale of Rs. 114.86 cr. 6. No suppression of Sale transaction / Sale Consideration as alleged:*/ [Note: All references made to PB is to paper book separately filed whereas all references made to Annexures are the Paper annexed with the assessment order by the AO.] 6.1. The authorities below have made a much hue and cry alleging this a case of suppression of sale consideration. For this purpose, the AO made inquiry from one of the customers, namely Sunil Bhutani to whom, the appellant claimed to have sold a Maruti Versa DX-2 car for a consideration of Rs. 3,62,069/- vide bill dated 10.08.2010 (Annexure B-2 to the assessment order). In response to summon issued u/s 131 on 24.03.2014 for 25.03.2014 (Annexure A-1), Shri Bhutani appeared and furnished the reply on 25.03.2013 (Annexure A-2 to the assessment order) and also reproduced at Page 2-3 of the assessment order. From such reply the AO drew adverse inference that The assessee has been in receipt of the full and final payment as per the Quot ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e which has vitiated the assessment proceedings. Consequently, the impugned addition must be deleted. Kindly refer Vimal Chandra Golecha v/s ITO Anr. (1982) 134 ITR 119 (Raj.), ITO Anr v/s Gargidin Jawla Prasad Maholi Ors. (1980) 124 ITR 203 (All). 7.2. The law is well settled that in a case where there is a violation of Principles of natural justice and a party has been deprived of its valuable rights of being heard effectively yet, an order has been passed containing huge additions, such an action has to be considered as having been done without jurisdiction and vitiating the entire order which, results into as nullity and is not case of mere irregularity. Kindly refer Colonisers vs. ACIT [1992] 41 ITD 57 (Hyderabad) (SB)/[1993] 45 TTJ 114 (Hyderabad) (SB) (DPB-17-30) holding that: In the preceding paragraphs it has been indicated why the assessee's version cannot be rejected as regards the credits appearing in his books. Perhaps the only justification, if at all it can be called a justification, for the ITO to reject the credits as not genuine is the failure of the assessee to produce the creditors when called upon to do so by the ITO. At this stage it i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The AO raised queries vide order sheet entry dated 25.03.2014 only (AO Pg-3) whereas the assessment was completed on 28.03.2014, hardly providing, two days time. The ld. CIT(A) at Pg-6 without appreciating, alleged that there was no explanation thereto. Similarly the assessee was asked regarding the advances received from customer vide order sheet entry 21.03.2014 and thereafter he himself states that the assessee furnished the details in parts on daily basis till the date of the order (AO Pg-12). This clearly shows that neither the AO was fully satisfied nor the assessee could furnished its explanation upto its own satisfaction. Yet then the AO acted hastily and made a huge addition running into crores. 7.4 Also kindly refer Andaman Timber vs CCE (2015) 281 CTR 241 / 127 DTR 241 (SC)(DPB-12-16), wherein it was held that Conclusion: Not allowing Assessee to cross-examine witnesses by Adjudicating Authority though statements of those witnesses were made as basis of impugned order, amounted in serious flaw which make impugned order nullity as it amounted to violation of principles of natural justice . This way, the honourable courts have held that such attempts by the AO r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Paid by assessee to the Maruti by Cheque Annex B-1 25.08.2010 Accessories Purchased 6,818/- Expenses incurred by Assessee Annex B-5 31.08.2010 Other Expenses including other Accessories 12,720/- Expenses incurred by Assessee Annex B-7 Total (Rs.) 4,13,720/- 8.1.3 The above chart clearly shows that there was no suppression of the total amount of sale consideration so received. The assessee, on one hand received Rs. 4,13,720/- on different dates and adjusted the same towards the agreed sale consideration and towards various expenses incurred on behalf of the customer. The supporting vouchers of expenses incurred, were issued to the said customer as evident from his reply and the fact that with his reply he also submitted that copies of supporting evidences in response to the summon u/s 131. 8.2. Surprisingly, the authorities below are completely silent on t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f a single penny. In such a state of affairs one surprise as to how this was considered to be a case of suppression of the sale consideration and then it has been repeatedly cited by the AO in this very year while making addition of suppression of sale i.r.t the advance received from customer and not only in this year but also in other years, this was made as a basis. Other 12 customer s cases w.r.t advance received from customers: 9. Suppression of 4.1476% is unjustified: 9.1 Against theory of statistics: The AO analysed the details submitted by the assessee (AO pg. 9-10) by considering sample cases of 12 customers by way of a chart based on the details submitted by the assessee and alleged a difference between the sale consideration mentioned in the RC (based on the Performa/VAT Invoice) and those entered in the books of accounts. He worked out a difference of Rs. 1,35,337/- (Sales amount as per books Rs. 31,27,663/- and as per RC- Performa/VAT Invoice Rs. 32,63,000/-) and drew adverse inference based thereon that assessee was indulged in the suppression of sales to the extent of 4.1476%. In other words, the theory of statistics has been applied. However ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is no suppression at all. Chart clarifying the difference alleged by AO at Pg. 09-10. (Regarding Difference found between Bill Details as Per Ledger Bill Details as Per Registration Certificate) S. No Customer Name Bill Details as per Registration Certificate (A) Bill Details as per Ledger Account (B) Difference Amount as Per AO Order Rs. (C) (A-B) R. T. O exp. Amt. Rs. (D) Insurance Exp. Rs. (E) Price of Accessories Rs. (F) Total Debits Rs. (G) (D + E + F) Difference Rs. (C-G) 1 Raj Kumar Swami ( Alto) PB-84-85 2,17,000/ 1,98,994/- 18,006/- 8,382/- 8,438/- 990/- 17,810/- 196/- 2 VirendraKumar Sharma ( Alto Lxi) PB-82-23 2,83,000/- 2,56,953/- 26,047/- 12,514/- 9,255/- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 11 Mohammad Husain ( A-Star Lxi) PB-80-81 3,44,000/- 3,39,946/- 4,054/- 1,895/- 1,895/- 2,159/- 12 Om Prakash Omni 2,20,000/- 2,07,797/- 12,203/- 0 12,203/- TOTAL 32,63,000/- 31,27,663/- 1,35,337/- 88,046/- 40,959/- 16,133/- 1,45,138/- 9.3 Similarly, the AO initially alleged that copies of Temporary Registration Certificate (TRC), insurance certificate etc. were not furnished but later on himself admitted the submission of the same at pg. 12 as under: In compliance thereto, the assessee furnished the details in parts on daily basis till the date of order either in the form of the Temporary Registration Certificates or Insur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rtly irrelevant material to make an order of assessment, if it is established that conclusive material was available to show the turnover from sugar distinctly from the gross turnover of the assessee. It is also true that the assessee could have produced the sales-tax assessment order. But, here, we are concerned with the propriety and fairness of the estimate made by the ITO, who ventured upon an investigation, which on the face of it is found to be incomplete. ITO should have in fairness sought the details of sales-tax assessment order, so that he could have obtained the real figures of turnover regarding sales of sugar. In view of Item 31B of Sch. V of Karantaka Sales-tax Act, 1957, turnover relatable to sugar is not taxable under the said Act. If so, taxable turnover under the Sales-tax Act would not disclose the real turnover pertaining to sugar . The appellate authority should have accepted the material produced by the assessee, as clarificatory in nature and consider the same to test the fairness and propriety of the estimate of income made by the ITO. Though it was a belated production of a very relevant material, no prejudice (in its legal sense) would have resulted to th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reproduced for the sake of brevity. Hence, the impugned addition kindly be deleted in full. 2.5 On the other hand, the ld. DR strongly relied upon the findings recorded by the authorities below and justified the additions made and confirmed by the ld. CIT(A) and prayed to uphold the addition/disallowance. 2.6 We have carefully considered the facts of the case, finding recorded in the impugned orders, the rival contentions raised by both the parties as also the material placed on record, we have also gone through the judicial pronouncements cited by the parties. Coming to the correctness of the application of the GP rate of 3.25% by the AO based on one M/S Rellan Motors for AY 2013-14 stated by the revenue to be a comparable case, we find the law is settled that in the matters of estimation of income assessee s own history is the best guide unless facts are not the same. Various decisions of Hon ble Rajasthan High Court and other Courts were cited in support of the contention. Hence instead of looking into others cases, the past history of the assessee, where available shall take preference. Hence when we first look into the past history of the case, from a perusal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... without furnishing any justified grounds hence, the GP rate as declared by the assessee at 1.68% is hereby accepted. Therefore, the authorities below were completely unjustified in applying higher GP rate of 3.25%. 2.6.1 Now coming to the aspect of suppression of sale, it is seen that such an enhancement was not justified which is not based on any cogent material placed on record and in the light of strong contentions. It is noted that the AO made enquiries from one of the customers namely Shri Sunil Bhutani and drew inference of suppression of sale to the extent of 0.25% to 0.50%. A perusal of the record shows that Rs. 4,01,000/- which was considered by the AO to be the sale consideration received but not declared, was not a final sale bill but as per statement of Shri Bhutani itself, as also from a perusal of record, it was only a quotation towards the sale consideration, road tax, insurance expense etc. From a perusal of the ledger account of Shri Bhutani it is noticed that the assessee, in fact, declared total receipts of Rs. 4,13,720/- on account of the sales including VAT, RTO expenses, insurance, extended warranty, cost of accessories and other expenses etc which is much ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... spicion which was not substantiated with the help of strong evidences, wherein the revenue has completely failed. Thus, the enhancement of the sale (due to suppression) and application of GP rate of 3.25% is not approved and the resultant addition to the extent of Rs. 2,26,41,521/- is hereby deleted. However, in the peculiar facts of the case and the reasoning adopted by the authorities below, we uphold the rejection of the accounts and taking an overall view of the entire matter it is felt justified that an ad hoc addition of Rs. 2,00,000/- shall cover up the possible leakage of the income, if any. This ground No. 1 of the appeal is therefore partly allowed. 3.1 In Ground of Appeal No. 2 of the assessee, the Addition of Rs. 62,98,437/- is under challenge. 3.2 Brief facts of the case are that during the year under consideration, the assessee has shown advance from customers shown as on 31.03.2011 of Rs. 30,46,50,118/- as against Rs. 44,87,96,115/- shown last year i.e. in A.Y. 2010-11. After making various allegations, the AO noted that out of total confirmed advances for sum of Rs. 10,79,64,236/-, the sales affected/registered during the year are for a sum of Rs. 6,58,31,919/ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... customers of Rs. 30,46,50,118/-, sales have been effected to the extent of 60.97% during the year and balance 39.02% sales have been effected in the subsequent year. So the AO determined the sales made during the year at Rs. 18,57,60,104/-. However later, the sales from advance from customers were estimated at Rs. 30 crores. It may be mentioned that in the Ground No. 1 addition was made only in respect of the sales recorded in the books of accounts and not sales against the advances from customers for which addition has been made in Ground No. 2. As regarding the assessee s contention that as the assessee has offered these sales in subsequent year, it will amount to double addition it may be mentioned that AO has only taxed the sales affected during the current year only i.e. in respect of 60.97% of the advance from customers. The assessee is free to claim the credit for these sales in subsequent year, if appellant proves that these same sales have been again offered by him in subsequent year. For that claim, onus squarely lies on the appellant to prove the claim in subsequent year. As regarding the VAT component of 15% in the advance from customers taxed during the yea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... current year, which is 60.9749% (or 61%) in terms of percentage whereas the amount of advances to the extent of Rs. 4,21,33,045/- were the amount of the sale effected / registered in the later year/s which is 39.0251% (or 39%) in terms of percentage. Thus, as per AO out of the total advances Rs. 30.47 Cr., the sales effected / registered was to the extent of 61% and accordingly, he determined the sales out of the advances received to the extent of Rs. 18,57,60,105/- (Rs.30,46,50,118/- x 60.9749%), which, the assessee should have offered in this year. But making further addition the AO estimated the sale to the extent of Rs. 30 Cr. and applied GP rate of 3.25% on the same, resulting into trading addition of deferred sale of Rs. 97,50,000/- vide assessment order passed u/s 143(3) dated 28.03.2014. The ld. CIT(A), in principle approved the theory applied by the AO but rejecting the over estimation of Rs. 30 Cr., confirmed the sale to the extent of Rs. 18.58 Cr. only. 1.1.3 In A.Y. 2009-10, when the assessee s case was reopened u/s 148, the AO changed the approach and took an altogether different view as was taken by his predecessors earlier. He firstly, worked out the advances ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vital aspect going to the root. Kindly refer Dhakeshwari cotton Mills 26 ITR 775 (SC). Use of words might and appears support this contention. 2. Settled Past Practice: 2.1 It is submitted that the assessee has been carrying on the same business in the same setup and under the same facts and circumstances. Even the manner and method of recording the transactions has also been the same since beginning. The same books of account and the other ancillary record showing details maintained in a similar manner as in the past. Therefore, there appears no special reason as to why the revenue has departed from the settled position on facts and on law between the parties and to unsettle the settled position. In these circumstances therefore the doctrine of res judicata certainly applies on the facts of the present case, so far as this aspect is concerned. It has been held that though the doctrine of res judicata do not apply to Income Tax proceeding yet however, unless there is a change in the facts and circumstances, the view taken earlier should normally be taken consistently. For this kindly refer Sardar Kehar Singh v/s CIT (1991) 92 CTR 88/(1992) 195 ITR 769 (Raj ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or that year and made an addition u/s 68 on account of unverified advance. On the other hand, in the present year the AO at Pg. 13 Pr. 5.5 has clearly admitted that the sale to the extent of Rs. 8.50 Cr. (Rs.5.81 Cr. and 2.68 Cr.) are the cases of such advances of customers which were outstanding as on 31.03.2010 and continued as on 31.03.2011 also, meaning thereby, the advances to the extent of Rs. 8.50 Cr. approx. constituted a part of the advances of Rs. 20.29 Cr., which was already added by the AO in A.Y. 2010- 11. Thus, on one hand the AO has added this entire amount of Rs. 8.50 Cr. in A.Y. 2010-11 as a part of Rs. 20.29 Cr. addition and again in the current year, he considered the same amount of Rs. 8.50 Cr. to be a part of the deferred sale (in as much as instead of considering the net of 21.96 Cr. (Rs.30.46 Cr. less Rs. 8.50 Cr.) he considered entire 30.46 Cr. and by applying 60.97% thereon, he computed the deferred sale of Rs. 18.57 Cr). Going by AO`s own theory, the AO could have applied 60.97 or 61% on the amount of Rs. 21.96 Cr only which comes to Rs. 13.64 Cr. only but not on Rs. 30.46 Cr. (which included Rs. 8.50 Cr. relating to the A.Y. 2010-11). Again in A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , the CIT(A) has shifted the onus upon the assessee which is not justified because the computation of deferred sale made by the AO is not correct with a mathematical precision. Regarding GP rate please refer our submission in GOA 1. Hence the impugned addition be deleted in full. 3.4 On the other hand, the ld. DR strongly relied upon the findings recorded by the authorities below and justified the additions made and confirmed by the ld. CIT(A) and prayed to upheld the addition/disallowance. 3.5 We have carefully considered the facts of the case, finding recorded in the impugned orders, the rival contentions raised by both the parties as also the material placed on record, we have also gone through the judicial pronouncements cited by the parties. We find that ld. CIT(A) restricted the estimation of sale upto Rs. 18,57,60,104/- being 60.97% of the sales against the advances from the customers received during this year but also enhanced the same by 4.14% as the suppression of sale on the same reasoning as was adopted by the AO in ground of appeal no. 1 and this way estimated the deferred sale related to this year at Rs. 19,37,98,072/-. However, further estimation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he I.T. Act, 1961. Accordingly, he disallowed entire amount of Rs. 6,96,201/- u/s 40(a)(ia) and added to the total income of the assessee. 4.3 In the first appeal the ld. CIT(A) confirmed the action of the AO vide order dated 31.03.2015 in appeal no. 431/2013-14. 5.3 I have considered the contentions of the appellant as well as assessment order. It is seen that the interest has been claimed in respect of interest accruing to Maruti Udhyog Ltd. and M/s Sundaram Finance, M/s AU Financer and M/s Mahendra Mahendra. The assessee has claimed that M/s Sundaram Finance, M/s AU Finance M/s Mahindra Mahindra are non-banking financial corporation (NBC) and provision of Sec. 194A are not applicable to them in view of Sec. 194A(3)(iii)(a) of the I.T. Act. It may be mentioned that assessee's contentions are not acceptable as the exemption is applicable only in respect of interest paid to a banking company to which Banking Regulation Act, 1949 applies or to Cooperative Society engaged in carrying on the business of banking. It has not been shown that the above institutions are the banking companies as prescribed by the Act. Further it has not been shown that the payment by the ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ny money borrowed or debt incurred. In this view of the matter it is clarified that the provisions of section 194A of the Income-tax Act are not attracted in such transactions. 2.1 No disallowance u/s 40(a)(ia) when books rejected and income estimated: Another aspect of the matter is to be considered is that the accounts of the assessee has been rejected and S.145 has been applied. Once income of the given a year has been estimated by the AO the fact of claim of individual expenditure loses its identity and only net income i.e. Gross Receipts (less) all expenditure, is estimated. The facts are not denied that the AO in this case applied adhoc GP rate 3.25% by rejecting the accounts therefore, the income for the current year has been estimated and does not require any further disallowance. Kindly refer: 2.2 ACIT vs. Salauddin (2019) 414 ITR 335 (Patna)(DPB- 38-39) holding as under: Business expenditure Disallowance under s. 40(a)(ia) Accounts rejected and income estimated Once the books of account were rejected and the profit was estimated @ 8 per cent of turnover, then, the same books of account cannot be relied upon for the purpose of making addition u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lied or NP rate has been applied. But the moot question is whether any estimation of income has been made or not. Since in this case business income has already been estimated. All the incoming / outgoings related to the business, must be taken as already considered. 4. No TDS When payee already paid taxes: 4.1 It is submitted that S.40(a)(ia) is not applicable in this case, for the reason that the payee company i.e. M/s Maruti Udhyog Ltd. is the Public Limited Companies. Moreover M/s Sundaram Finance, AU Finance and Mahindra Mahindra Finance are Non-Banking Finance Corporation. All these corporation / companies are the renowned and must have already filled the return of income and paid tax due thereon considering the subjected amount paid to them of Rs. 6,96,201/-. Therefore, in view of the ratio laid in the binding decision of the Hon ble Supreme Court in the case of Hindustan Coca Cola Beverage (P) Ltd. v/s CIT (2007) 211 CTR (SC) 545: (2007) 293 ITR 226 (SC)which, has very categorically held and rather prohibited the department to make recovery of the taxes again, in case where the recipient (the buyer) has already paid the taxes. In that case it was held as under: ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... payments were related for A.Y. 2009-10 and return for A.Y. 2009-10 already might have been filed by these NBFC by including these interests receipts as their income. Therefore, we do not find any reason to interfere in the order of the Ld. CIT(A). 5.2 On identical factsand circumstances, the Hon ble ITAT Jaipur bench, Jaipur in the case of ACIT vs M/s. Vastuvedik Colonizers Developers Pvt. Ltd. In ITA No. 320/JP/2015 dated 24/10/2018 has set aside the matter holding as under: 4.1. The second disallowance was made by the AO in respect of Interest payment to M/s. Tata Motor Finance. The ld. A/R of the assessee has submitted that the recipient has considered the said amount in its total income and paid the tax, however this issue requires verification of fact as the assessee did not file the requisite certificate to the extent that the recipient has considered this amount in the total income and paid tax on the same. Accordingly, we set aside this issue to the record of the AO for verification of the fact and then deciding this issue in the light of the decision of Hon ble Delhi High Court in the case of CIT vs. Ansal Land Mark Township (P) Ltd., 234 Taxman 825 (Delh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ic Limited Companies. Moreover, M/s Sundaram Finance, AU Finance and Mahindra Mahindra Finance are Non-Banking Finance Corporation, which are renowned companies of their field. They must have already filled the return of income and paid tax due thereon considering the subjected amount paid to them of Rs. 6,96,201/- in their respective declared income. Therefore, no disallowance should have been made in view of the binding decision of the Hon ble Supreme Court in the case of Hindustan Coca Cola Beverage (P) Ltd. v/s CIT (2007) 211 CTR (SC) 545: (2007) 293 ITR 226 (SC) which, has very categorically held and rather prohibited the department to make recovery of the taxes again. Similar view has been taken in the case of CIT vs. Rajasthan Rajya Vidyut Prasaran Nigam Ltd. (2006) 287 ITR 354 (Raj). Now, the second proviso to S.40(a)(ia) has taken care of a situation where payee has already paid taxes, no disallowance should be made. The coordinated Bench of ITAT Jaipur in the cases of ACIT v/s Girdhari Lal Bargoti in ITA No. 757/JP/2012 on dated 10.04.2015, Shri Mahesh Khanwani vs ITO in ITA No. 879/JP/2017 dated 27/11/2018, Doon Valley V/s ITO in ITA No. 668/JP/2017 Date 05.01.2018 has ..... X X X X Extracts X X X X X X X X Extracts X X X X
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