ITO, PATIALA vs. SH. BALWINDER SINGH, PATIALA

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 1. Aforesaid appeals by revenue in case of two separate assessees have identical facts and issues. The assessee has also preferred cross-objections / cross-appeals on legal ground as well as against confirmation of certain quantum additions. First, we take up revenue’s appeal Assessment Year (AY) 2009- 10which arises out of an order of learned Commissioner of Income Tax (Appeals), Patiala [CIT(A)] dated 26-12-2024 in the matter of an assessment framed by Ld. ACIT, Circle Patiala [AO] u/s. 143(3) of the Acton 23-12-2011.The assessee has preferred cross-objections challenging the jurisdiction of Ld. AO on certain legal grounds. The assessee has also challenged the confirmation of two additions by Ld. CIT(A). Having heard rival submissions and upon perusal of case records, the appeal is disposed-off as under.

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 jurisdiction 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 jurisdiction 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 jurisdiction 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 jurisdiction. Considering the same, the assessee’s objection to the jurisdiction 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 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 jurisdiction 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.