SH. KAMALPREET SINGH,PATIALA vs. ACIT, PATIALA

1

IN THE INCOME TAX APPELLATE TRIBUNAL
“B” BENCH, CHANDIGARH

HYBRID HEARING

BEFORE HON’BLE SHRI LALIET KUMAR, JM
AND HON’BLE SHRI MANOJ KUMAR AGGARWAL, AM

&
4. आयकरअपीलसं./ ITA No.185/CHANDI/2015
(िनधाŊरणवषŊ / Assessment Year: 2009-10)
Shri Kamalpreet Singh
Prop. M/s Saran Enterprises
4, DLF Shopping Complex, Patiala.
बनाम/ Vs.
ACIT-Circle Patiala
Patiala.
̾थायीलेखासं./जीआइआरसं./PAN/GIR No. ACBPS-1831-N
(अपीलाथŎ/Appellant)
:
(ŮȑथŎ / Respondent)

Assessee by :
Shri Tejmohan Singh (Advocate) – Ld. AR
Revenue by :
Smt. Kusum Bansal (CIT) – Ld. DR

सुनवाईकीतारीख/Date of Hearing
:
06-08-2025
घोषणाकीतारीख /Date of Pronouncement
:
04-09-2025
आदेश / O R D E R

Per Bench

Assessment Proceedings
2.1 The assessee declared income of Rs.4.56 Lacs which was subjected to scrutiny proceedings. The assessee is stated to be engaged in trading of scrap, rice, nakoo, floor etc. During the course of assessment proceedings, the assessee furnishedledgers and cash books which were examined on test check basis. The assessee was also subjected to survey u/s 133A.
2.2 It transpired that the case of the assessee was transferred to ACIT, Circle, Patiala by JCIT, Patiala Range, Patiala vide order No.689
dated 15-07-2011. Subsequently, notice u/s 143(2) was issued by said officer on 08-08-2011. The assessee challenged the juri iction of case with ACIT, Patiala which was rejected by Ld. AO by providing a copy of JCIT order dated 15-07-2011. The assessee again challenged the same. The copy of letter of assessee was sent to JCIT, Patiala regarding the juri iction of case. The JCIT, Patiala, vide letter No.1321
dated 04-11-2011 stated that the case was transferred by exercising the powers conferred on JCIT by the order of CIT (Patiala) order dated
12-08-2010 in exercise of powers conferred on him by Sec.120(1), (2)
& (3) of the act read with notification SO No.1540 (E) dated 24-06-2008
and in pursuance of CCIT, NWR, Chandigarh’s order and the earlier orders of juri iction issued from time to time. Vide this order, CIT
(Patiala), had authorized the Addl /JCIT to issue orders in writing for the exercise of the power and performance of the functions by AO who are subordinate to him as specified in the order. As per the said order,

CIT (Patiala) designated the authorities subordinate to JCIT Patiala
Range, Patiala to allocate work among the authorities subordinate to him. Reference was made by Ld. AO to the decision of Amritsar
Tribunal in the case of Worldwide Cricket Co. Pvt Ltd. (ITA
No.64/Asr/2009 dated 26-11-2009) to support the validity of assumption of juri iction. Considering the same, the assessee’s objection to the juri iction was rejected.
2.3 On merits, it was found that the assessee reflected sundry creditors of Rs.191.15 Lacs as on 31-03-2009 and the assessee was directed to file confirmed copy of account and original purchase bills.
The assessee stated that the creditors were trade creditors for purchases and the most of the balances represent opening balances only. Most of the existing as well as fresh creditors were street peddler or pheriwalas or kabaris and their nature of working was that of moving around the streets and collecting the scrap and used bottles which was purchased by the assessee from them. As such, they did not have any fixed place of business and it was not possible to provide the address of these kinds of petty vendors. These creditors were duly paid during current year as well as in subsequent years. The complete address of main suppliers along with copy of account and complete address was filed. However, Ld. AO held that the assessee failed to furnish original purchase bills but furnished photocopies of the bills. The same were held to be fake and bogus which was further supported by the opinion of fingerprint expert Shri Navdeep Gupta. According, the amount of 5

Rs.4.98 Lacs pertaining to this year was added to assessee’s income u/s 68. 2.4 The Ld. AO made another addition invoking the provisions of Sec.40A(3) and 40A(3A) for cash payments to the vendors for Rs.308.33 Lacs.The assessee contended that the payment was made in routine course of business which was supported by confirmed copy of accounts. Most of the purchases were stated to be from petty vendors and other vendors located at nearby stations. The salesmen /
agents of these supplies would visit the place of business and the payment would be made to them as per the directions of the vendors.
The assessee also stated that there was no payment exceeding
Rs.20,000/- per day in cash. However, Ld. AO rejected the same on the ground that it made cash payment on regular basis which was not practical in routine business. The assessee, though made payments exceeding Rs.20,000/- per day, but depending upon the availability of cash, tried to camouflage the same by showing it at Rs.20,000/- or less. The assessee failed to establish that it did not violate the provisions of Sec.40A(3) or Sec.40A(3A). Consequently, the amount of Rs.308.33 Lacs was added to assessee’s income invoking these provisions.
2.5 The third and last addition was for Rs.2.23 Lacs u/s 194C r.w.s.
40(a)(ia) which represent freight payment by the assessee without deducting applicable TDS. The assessee contended that the transport was called as and when required and he had no contract with the transport company. Each individual freight was below the specified limit which required deduction of tax at source. Each GR would present separate contract and therefore, these provisions would not apply to the assessee. However, Ld. AO made addition of Rs.2.23 Lacs u/s 40(a)(ia) for alleged violation of TDS provisions u/s 194C. Aggrieved, the assessee preferred first appeal against the assessment order.
Appellate Proceedings
3.1 The Ld. CIT(A) rejected the legal grounds of the assessee challenging juri iction of Ld. AO. On merits of addition u/s 68, the assessee contended that the report of handwriting expert was not confronted to the assessee which was in gross violation of principles of natural justice. Further, Ld. AO did not reject the books and no addition could be made u/s 68 since the sale or purchase was not doubted by Ld. AO. However, Ld. CIT(A) rejected the same and confirmed the addition. Similarly, the disallowance u/s 40(a)(ia) was confirmed by observing that GRs were in sequence though the payments were shown to have been made on different dates which cast doubt on authenticity of the GRs. Aggrieved by rejection of legal ground and confirmation of these two items, the assessee has preferred cross- objections before us by way of CO No.13/Chandi/2015. 3.2 On the merits of disallowance u/s 40A(3) / 40A(3A), Ld. CIT(A) concurred that AO did not reject the books of accounts. He simply assumed that the assessee might have paid cash exceeding
Rs.20,000/- at a time while the entries in the books were shown to be less than Rs.20,000/-. The Ld. AO did not doubt the payments so made by the assessee. Further, no evidence was brought on record to show that any single cash payment exceeded threshold of Rs.20,000/- and therefore, this addition was deleted against which the revenue is in further appeal before us.
Our findings and Adjudication
4. First, we deal with the merits of the quantum additions. So far as disallowance as made by Ld. AO u/s 40A(3) / 40A(3A) is concerned, it could be seen that the assessee has furnished cash book to Ld. AO which show that the assessee has not made any payment which exceeds threshold limit of Rs.20,000/-. It has duly been explained by the assessee that payment was made in routine course of business which was supported by confirmed copy of accounts. Most of the purchases were from petty vendors whose agents / salesmen would visit assessee’s place and collect payment on behalf of the vendors.
There is no single instance brought on record by Ld. AO to establish the fact that any single payment exceeded Rs.20,000/-. Apparently, this addition is on mere presumption and guess-work which is impermissible. The Ld. AO has not doubted the payments made by the assessee. Therefore, this addition has rightly been deleted by Ld.
CIT(A). The corresponding grounds raised by the revenue, in this regard, stand dismissed.
5. The second addition is for Rs.4.98 Lacs u/s 68 for sundry creditors balances. From the facts, it emerges that out of sundry creditor balance of Rs.191.15 Lacs as on 31-03-2009, only an amount of Rs.4.98 Lacs pertain to this year. The sundry creditors represent trade payables for the assessee against purchases and in such a case, provisions of Sec.68 would have no application. These provisions would apply only when there is unexplained cash credit which is not the case here. These creditors represent payables against purchase of trading goods by the assessee. Further, these creditors have duly been paid / settled by the assessee in subsequent year. Lastly, the impugned addition stem from report of handwriting experts which apparently has never been confronted to the assessee which is in gross violation of principles of natural justice. This fact alone would make impugned addition unsustainable in law. Upon cumulative consideration of factual matrix, we hold that this addition could not be sustained. We order so.
6. So far as disallowance u/s 40(a)(ia) is concerned, it is admitted fact that transport payments are represented by separate GRs. The assessee is not shown to have any contract with the transporters.
Merely because the GRs were consecutively numbered, the same could not lead to a conclusion that the assessee was in a contractual relationship with the transporter. Each of the freight payment was settled separately and each of the GR represent separate contract for the assessee. On these facts, this addition could not be sustained. We order so.
7. Since quantum additions as agitated by the assessee has been deleted and we have dismissed revenue’s ground on quantum addition, going into legal grounds challenging juri iction of Ld. AO as raised by the assessee in its cross-objection has been rendered mere academic /

infructuous in nature and therefore not gone into. The revenue’s appeal stands dismissed. The assessee’s cross-objection stand partly allowed.
ITA No.225 & 185/Chandi/2019
8. Admittedly, facts as well as issues in these appeals are pari- materia the same. In the assessment order, Ld. AO made addition of sundry creditors u/s 68 for Rs.186.32 Lacs and made disallowance u/s 40(a)(ia) for Rs.3.70 for want of TDS on freight payments. The Ld.
CIT(A) confirmed the same against which the assessee is in further appeal before us. The Ld. AO made another addition of Rs.355.48
Lacs invoking the provisions of Sec.40A(3) & 40A(3A) which stood deleted by Ld. CIT(A) on similar reasoning. Aggrieved, the revenue is in further appeal before us.
9. Facts being pari-materia the same, our adjudication as above would mutatis mutandis apply to both these appeals. In other words, the revenue’s appeal stands dismissed. The assessee’s appeal stands partly allowed. The addition of Rs.186.72 Lacs and Rs.3.70 Lacs stand deleted.
Conclusion
10. ITA
Nos.224
&
225/Chandi/2015
stands dismissed.
CO
No.13/Chandi/2015 & ITA No.185/Chandi/2015 stand partly allowed.
Order pronounced on 04-09-2025. (LALIET KUMAR) (MANOJ KUMAR AGGARWAL)
JUDICIAL MEMBER ACCOUNTANT MEMBER

Dated: 04-09-2025

आदेश की Ůितिलिप अŤेिषत /Copy of the Order forwarded to :
1. अपीलाथŎ/Appellant
2. ŮȑथŎ/Respondent
3. आयकरआयुƅ/CIT
4. िवभागीयŮितिनिध/DR
5. गाडŊफाईल/GF