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Income Tax Appellate Tribunal, “C’’BENCH: BANGA LORE
Before: SHRI N.V. VASUDEVAN & SHRI B.R. BASKARAN
PER B.R. BASKARAN, ACCOUNTANT MEMBER:
The assessee has filed this appeal challenging the order dated 13.2.2015 passed by Ld. CIT(A)-11, Bengaluru and it relates to assessment year 2011-12.
Though the assessee has raised as many as 10 grounds of appeal
, the Ld. A.R. pressed only ground Nos.7 & 8, which read as under:
7. Without prejudice to the above, the authorities below failed to appreciate that there could be a disallowance u/s 40A(3) of the M/s. Arshad Exports, Hospet Page 2 of 4 Act, only when there is specific claim for allowance and since the appellant has estimated the income, there cannot be any disallowance of any expenditure u/s 40A(3) of the Act and therefore, the invocation of section 40A(3) of the Act is misconceived and liable to be deleted.
8. The authorities below failed to appreciate that the appellant estimated the income of Rs.75,00,000/-on a turnover of Rs.21,07,83,262/- for the year under appeal and consequently, is not justified in making any further additions for the year under appeal by way of making additions u/s 69C to the extent of Rs.28,79,883/-. Accordingly, remaining grounds are dismissed as not pressed.
3. In these grounds, the assessee is challenging the addition of Rs.28,79,883/-made by the Assessing Officer u/s 69C of the Income-tax Act,1961 ['the Act' for short].
The facts relating to the addition of Rs.28,79,883/- are stated in brief. The revenue carried out search & seizure operation in the hands of Shri B. Nagendra and in connection thereto, the assessee’s premises was searched on 25.10.2010. During the course of search, the revenue seized certain documents, which revealed that the assessee has incurred expenses in cash for payment of transport charges. As per the evidences, the transport charges paid by the assessee for the year relevant to assessment year 2011-12 was Rs.28,79,883/-.
The assessee filed return of income for the assessment year 2011-12 declaring a total income of Rs.75.00 lakhs on estimated basis. The return of income was taken up for scrutiny and during the course of assessment proceedings, the A.O. asked the assessee to explain the details of transportation charges. The assessee submitted that the recipient of transport charges has confirmed the receipt of the same. It was further submitted that the expenses were incurred out of cash withdrawals made from the bank
M/s. Arshad Exports, Hospet Page 3 of 4 account. The A.O. did not accept the explanations of the assessee and observed that the assessee has failed to establish one to one relationship between the cash withdrawals and the payments made. Further, he observed that there was violation of sec.40A(3) also. Accordingly, he added the transportation charges of Rs.28,79,883/- holding that the same represent expenses incurred outside the books. The Ld. CIT(A) also confirmed the same.
The Ld. A.R. submitted that the assessee has submitted before the search officials that it did not maintain books of accounts for its business operations. Further, the assessee also filed return of income declaring total income on estimated basis. Accordingly, he submitted that the A.O., having accepted the return declared on estimated basis could not have made a separate addition. He further submitted that the A.O. could not have come to the conclusion that the impugned payments were made outside books of accounts when no books of accounts have been maintained by the assessee and for the same reasoning there is no scope for making addition u/s 40A(3) of the Act also.
We heard Ld. D.R. and perused the record. We find merit in the submissions of the assessee. The fact that the assessee did not maintain books of accounts has been accepted by the A.O. Further, the copy of return of income furnished in the paper book would show that the assessee has estimated the income of Rs.75 lakhs while filing return of income and the said estimate has also been accepted by the A.O. When the assessee does not maintain book of accounts and further when the income declared on estimated basis has been accepted, it is not possible for the A.O. to come to the conclusion that the impugned payment has been made outside the books of accounts. Accordingly, we do not find any merit in the impugned addition. Accordingly, we set aside the order passed by M/s. Arshad Exports, Hospet Page 4 of 4 Ld. CIT(A) and direct the A.O. to delete the impugned addition made in the assessment year 2011-12.
In the result, the appeal filed by the assessee is partly allowed.
Order pronounced in the open court on 6th Sept 2021.