JAP RESTAURANT PRIVATE LIMITED,ANJUNA vs. ASSISTANT COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE, PANAJI

INCOME TAX APPELLATE TRIBUNAL, PANAJI BENCH ‘DB’, PANAJI BEFORE DR. MANISH BORAD, ACCOUNTANT MEMBER AND SHRI VINAY BHAMORE, JUDICIAL MEMBER ITA Nos. 5 to 7/PAN/2024 (िनधा�रणवष�/AssessmentYears:2014-15, 2016-17 and 2017-18 JAP RESTAURANT PRIVATE ASSISTANT COMMISSIONER LIMITED OF INCOME TAX, CENTRAL CIRCLE 1152, MAZAL VADDO, OPP. OUR LADY OF HEALTH CHAPEL, PUNDALIK NIWAS, 2ND FLOOR, Vs. ANJUNA, MAPUSA-403509, GOA NEAR PATTO FOOT BRIDGE PANAJI-403001, GOA अपीलाथ�Appellant ��थ� Respondent Permanent Account Number of Assessee: AABCJ5450B अपीलाथ��ारा/Appellant represented by: Shri S. J. Kamat, CA ��थ��ारा/Respondentrepresented by: Shri Narasimharaju M, CIT-DR सुनवाईकीतारीख/Date of conclusion of hearing: 17-Aug-2026 घोषणाकीतारीख/Date of pronouncement: 12.10.2026 आदेश / ORDER PER VINAY BHAMORE, JUDICIAL MEMBER : The captioned appeals filed by the Assessee relate to A.Yrs. 2014-15, 2016-17 and 2017-18 and are directed against the separate orders of ld.CIT(A)-2, Panaji which inturn are arising out of respective Assessment Years passed u/s.153A of the Income Tax Act, 1961 (in short ‘the Act’). 2. These are recalled matters. The earlier order of the Tribunal dated 21.08.2025 has been recalled vide M.A.Nos. 05 to 07/PAN/2026 order dated 14.08.2026. 3. We find that the appeals filed by the assessee are belated by 429 days and the assessee has filed an Affidavit stating the reasons. On going through the contents of the Affidavit, we find that there exists sufficient

ITA Nos. 5 to 7/PAN/2024 JAP RESTAURANT PRIVATE LIMITED cause on the part of the assessee for not presenting the appeals before this Tribunal within the prescribed time limit, We therefore condone the delay in light of judgment of Hon’ble Apex Court in the case of Collector, Land Acquisition, Anantnag&Anr. Vs. Mst. Katiji&Ors. reported in (1987) 2 SCC 107 and admit the appeals for adjudication. 4. We first take up ITA No.5/PAN/2024 relating to A.Y. 2014-15 as the lead case. Facts of the case as borne out from the record are that the assessee is a company and filed its original return of income u/s.139(1) of the Act on 04.09.2014 declaring total income at Rs.63,860/-. Return has been processed u/s.143(1) of the Act. Thereafter, search and seizure action u/s.132 of the Act was carried out in the case of assessee on 06.04.2018. Notice u/s.153A of the Act was served on the assessee requiring the assessee to furnish the return of income. Subsequently, notice u/s.142(1) along with detailed questionnaire was issued and served upon the assessee and in response the assessee filed the return of income on 20.01.2021 declaring total income of Rs.8,83,490/-. During the course of search action, various documents in excel sheets for the period November, 2013 to March, 2014 were seized and the details of the sales effected by the assessee by mentioned in the assessment order at pages 2 and 3 of the order. Statement of Mr. Bawmra Jap, Director of the assessee was recorded u/s.132(2) of the Act. From the above details, ld. Assessing Officer noted that the turnover of the assessee disclosed in original return is only Rs.47,34,473/-. On an analysis of the details, ld. Assessing Officer found there is difference between the actual turnover and the turnover shown in the income tax return. Books of accounts are not maintained and return of income has been filed based on rough calculations. In the course of proceedings, in response to Question No.37, the Director admitted that assessee company has made suppressed sale for A.Y. 2014-15, 2016-17, 2018-19 aggregating to Rs.2,63,89,316/- and voluntarily disclosed the said income as additional income. Further, in response to notice u/s.153A of the Act, the assessee filed the return of income showing total turnover

ITA Nos. 5 to 7/PAN/2024 JAP RESTAURANT PRIVATE LIMITED amounting to Rs.57,06,727/-. Assessee submitted that it has incurred expenses amounting to Rs.30,35,951/- on account of unaccounted sales. Ld. Assessing Officer also observed that assessee has made cash expenditure exceeding Rs.20,000/- violating section 40A(3) of the Act. Accordingly, ld. Assessing Officer calculated the expenses at Rs.24,55,859/- and allowed the said sum out of the suppressed sale. Finally, ld. Assessing Officer made addition of Rs.32,41,483/- and determined the income of the assessee at Rs.41,24,973/-. 5. In appeal, the ld.CIT(A) with regard to the addition made on suppressed sales confirmed the action of the Assessing Officer by observing as under : “4.4 The AO was therefore completely justified in adopting the figure of suppressed sales admitted by the Director of the appellant company. The AO also allowed all the allowable expenditure even when these were not disclosed in the books to arrive at the net income of the appellant. In such a scenario, the claim of the appellant that the AO should have adopted Gross Profit calculation is completely bereft of any logic or sense and has to be rejected.” 6. Ld.CIT(A) also confirmed the disallowance made by ld. AO u/s40A(3) observing as under : “5.6 Circular dated 6-7-1998 issued by Finance Department clarifies that object of incorporation of Section 40A(3) was to make a provision to counter evasion of tax through claims for expenditure shown to have been incurred in cash with a view to frustrating proper investigation by the department as to the identity of the payee and the reasonableness of the payment. The Hon'ble Supreme Court dealt with the ambit and scope of Section 40A (3) read with Rule 6DD and held that Section 40A (3) only empowers the Assessing Officer to disallow the deduction claimed as expenditure in respect of payments is made in cash. It was further held that consideration of business expediency and other relevant factors are not excluded and genuine and bona fide transactions are not taken out of the sweep of the Section and it is open for the appellant to furnish to the satisfaction of the Assessing Officer the circumstances under which the payment in the manner prescribed under section 40A (3) was not practicable or would have caused genuine difficulty to the payee. It is also open to the appellant to identify the person who has received the cash payment. Rule 6DD provides that an appellant can be exempted from requirement of payment by a crossed cheque or a crossed bank draft in the circumstances specified in the Rule. It was further held that from conjoint reading of section 40A (3) and rule 6DD, it is evident that they are

ITA Nos. 5 to 7/PAN/2024 JAP RESTAURANT PRIVATE LIMITED intended to regulate the business transactions and to prevent the use of unaccounted money or reduce the chances to use black money for business transactions. 5.7 In the light of the aforesaid well settled legal principles, it now needs to be examined whether the appellant in the facts of the case has complied with the aforesaid requirement so as to enable him to claim exemption from provisions of section 40A(3) of the Act. While the appellant, in the Statement of Facts attached with the appeal states that payments in cash had to be made on certain days as the banks were closed and that in other cases the payment to their agents where they were required to make payment in cash for goods or services onbehalf of such person. However, absolutely no details along with proof in this regard has been submitted. Fact remains that payments exceeding Rs. 20,000/-were made by the appellant in cash and thereafter the burden to show that these payments were covered by the exceptions and therefore allowable shifted completely on the appellant. Bald statement without any specifics and proof cannot be of any help to the appellant in discharging this burden. The appellant could not demonstrate with cogent evidences that there was business expediency or sufficient cause for such cash payments to various parties in the relevant assessment year. In the case of Oceanic Bio Harvest Ltd. v. Deputy Commissioner of Income-Tax, Corporate Circle 1(1), Chennai [2021] 127 taxmann.com 50 (Chennai Trib.), it was held that where appellant had incurred pond and farm maintenance expenses in cash, but no evidence had been placed on record to prove that payments had been made to cultivator, grower or producer as per rule 6DD(e) in order to exclude said payments from provision of section 40A(3), 'pond and farm maintenance expenses' could not come under exclusion provided under rule 6DD(e). Following judgments are also of relevance in this case: -  Payment before delivery of goods as advance Covered by Sec.40A(3) If no exceptional circumstances existed, liable to be disallowed u/s 40A (3) Vijay Kumar Ajith Kumar Vs CIT(All) 191 ITR 391  No Payment for purchases made 6-7 days after transaction exigency to make cash payment Addition under sec. 40A3) upheld. Naghi Lal Vs CIT(Raj) 167 ITR 139  Making payment on bank holidays do not ipso facto permit appellant to make cash payments The circumstances which compelled the appellant to make payment on bank holidays have to exist and shown to the assessing authorities Jai Talkies Vs ITO (ITAT, Del) 57 TTJ 745  To consider the disallowance u/s 40A(3), total bill amount is to be taken and not the cost of each individual item mentioned in the bill Addl. CIT Vs Shree Shanmuga Gunny Stores (Mad) 146 ITR 600  Exception under Rule 6DD(1) only to an agent of appellant and not the employee of appellantDCIT Vs Vijaykumar to Rameshchand& Co. (ITAT, Pune) 108 ITD 626  In a place where banking facilities are available, exemption cannot be granted merely because recipient had not opened bank account -Addition under sec. 40A(3) upheld. ITO Vs KenaramSaha& Subhash Saha (ITAT,SB-Kol) 116 ITD 1  Provisions of sec. 40A(3) will apply to transactions outside the books of accounts - Where income from an undisclosed business is brought to tax, provisions of sec. 40A(3) will come into play. CIT Vs Hynoup Food and Oil Ind. P. Ltd. (Guj) 290 ITR 702  Rule 6DD(a) applies only for payments to institutions referred to therein and not for payment made to any party's account maintained in such institutions Payments made in cash to the account of the suppliers

ITA Nos. 5 to 7/PAN/2024 JAP RESTAURANT PRIVATE LIMITED maintained with banks did not qualify for deduction. CIT Vs K. Abdu & Co. (Ker) 170 Taxman 297  Hoshiarpur District Co-operative Milk Producers Union Ltd. cannot be considered to be a producer of milk as its constitution does not permit individual producers to be its members and consequently, payment made by the appellant to the said union cannot be treated as payment made to producer of milk in terms of rule 6DD(j) Chanchal Dogra Vs ITO (HP) 67 DTR 10. 5.8 In view of the aforesaid, the claim of the appellant is found to be without any cogent basis and therefore Ground 3 of the appeal is dismissed.” 7. Similar additions have been made by the Assessing Officer for the A.Yrs 2016-17 and 2017-18. 8. Aggrieved with such order of ld.CIT(A), the assessee is in appeal before this Tribunal by raising the following grounds : “1. The order of the commissioner of income tax appeals is opposed to the facts of the case and the law. 2. The Commissioner of income tax (appeals) has erred in sustaining the addition of Rs 32,41,483/- as income instead of directing the AO to restrict the addition to the gross profit Rs 8,19,627/- embedded in the suppressed sale as shown in the return of income furnished by the appellant. 3. Without prejudice to ground number 2 the Commissioner of income tax (appeals) has erred in not deleting the addition under section 40A(3) which were covered under rule 6DD. 4. The appellant craves leave to add to, delete from or to modify the above grounds at the time of hearing.” 9. At the time of hearing, ld. Counsel for the assessee referring to the paper book and the documents placed on record submitted that when suppressed sales only the profit element embedded therein should be taxed. He further submitted that there is no iota of allegation that any unexplained asset was found. He relied on the following decisions :  CIT Vs. President Industries reported in (2002) 124 Taxman 654 (Gujarat)  CIT Vs. Balchand Ajit Kumar reported in (2004 135 taxman 180 (MP)  Man Mohan Sadani VS. CIT reported in (2008) 304 ITR 52 (MP)

ITA Nos. 5 to 7/PAN/2024 JAP RESTAURANT PRIVATE LIMITED  DCIT Vs. M/s Rameshwar Textile Mills Ltd. – ITA No.1666/Ahd/2011 dated 21.10.2015  PCIT Vs M/s. Rameshwar Textile Mills Ltd.- Tax Appeal No.629/2016 judgment dated 29.08.2016  CIT Vs. Shri Hariram Bhambhani – Tax Appeal No.313 of 2013 dated 04.02.2015 10. On the other hand, ld. DR vehemently argued supporting the orders of AO as well as of ld.CIT(A). 11. We have heard the rival submissions and perused the record. We find in the instant case post survey u/s.133A of the Act, the Director of the assessee company has admitted to have made sales as well as suppressed expenditure outside the books of income and offered the additional income of Rs.2,63,89,316/- towards unaccounted sales for A.Yrs. 2014-15 to A.Y. 2018-19. Ld. Assessing Officer after allowing the expenses at Rs.24,55,859/- has eventually made addition of Rs.32,41,483/- as suppressed sales, outside the books of account. During the course of hearing it was the alternate request of ld. counsel of the assessee to apply 20% Gross Profit on suppressed sale admitted by the assessee. 12. After taking into cognizance all the judicial precedents placed on record, there is no dispute that the entire sales cannot be brought to tax and the only profit attributable on the total unrecorded sales consideration can only be subjected to tax. Since the Assessing Officer in the case of assessee has made addition on the basis of suppressed sales as well as on the ground of cash payments in violation of section 40A(3) of the Act, after allowing the benefit of suppressed expenditure. Considering the totality of the facts of the case & in the interest of justice, to cover up all leakages including disallowance u/s.40A(3) of the Act, we deem it appropriate to restrict the addition by estimating the Gross Profit by applying 25% of the unrecorded sales, after giving the benefit of income already disclosed by the assessee in the return filed in response to notice u/s 153A of the IT Act.

ITA Nos. 5 to 7/PAN/2024 JAP RESTAURANT PRIVATE LIMITED Ld. Assessing Officer is directed to recompute the income of the assessee for all the three assessment years under appeal in light of discussion made herein above. Impugned orders of ld.CIT(A) are set aside and grounds of appeal raised by the assessee are partly allowed. 13. In the result, all the three appeals of the assessee are partly allowed. Order pronounced in the open court on 12th October, 2026. Sd/- Sd/- (MANISH BORAD) (VINAY BHAMORE) ACCOUNTANT MEMBER JUDICIAL MEMBER Pune/ िदनांक Dated : 12th October, 2026 Sujeet/DOC Digitally signed by Sujeet Kumar Sujeet Kumar Sharma Sharma Date: 2026.10.14 12:01:50 +05'30' Copy to: JAP RESTAURANT PRIVATE LIMITED, 1152, MAZAL VADDO, OPP. OUR LADY OF 1 HEAL CHAPEL, ANJUNA, MAPUSA-403509, GOA ASSISTANT COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE, 2 PUNDALIK NIWAS, 2ND FLOOR, NEAR PATTO FOOT BRIDGE, PANAJI-403001, GOA 3 THE PCIT / CIT, 4 THE D.R., ITAT, PANAJIBENCH 5 GUARD FILE आदेशानुसार/ BY ORDER, // True Copy // Assistant Registrar आयकरअपीलीयअिधकरणITAT, Pune