ASSTT. CIT CENTRAL CIRCLE-1(1), NAGPUR vs. SMT. JOTI SURESH BAJORIA , NAGPUR

BEFORE SHRI SATBEER SINGH GODARA, JUDICIAL MEMBER AND DR. DIPAK P. RIPOTE, ACCOUNTANT MEMBER आयकर अपील सं. / िनधा"रण वष" / Assessment Year : 2013-14 The Assistant Smt. Jyoti Suresh Bajoria, Commissioner of Income V 402/403, Jagat Plaza, Law Tax, Circle-1(1), s College Square, Amravati Nagpur. Road, Nagpur – 440010. PAN: ABRPB2740G Appellant / Revenue Respondent /Assessee Assessee by Shri Kapil Sharma– AR Revenue by Shri Kailash Kanojiya – DR Date of hearing 28/08/2023 Date of pronouncement 31/08/2023 आदेश/ ORDER

PER DR. DIPAK P. RIPOTE, AM:

2. On the facts and in the circumstances of the case and in law, the CIT(A) has erred in deleting disallowance u/s 40A(3) of Rs.3,67,41,579/- as the income was estimated by applying the gross profit rate without appreciating the fact that the non obstante clause in section 40A(3) has a far wider amplitude because it uses the words 'notwithstanding anything contained in any other provision of this act' and speaks of 'restriction' on the allowance of a particular expenditure representing cash payment.

3. On the facts and in the circumstances of the case and in law, the CIT(A) has erred in deleting disallowance u/s 40A(3) of Rs.3,67,41,579/- as the income was estimated by applying the gross profit rate without appreciating the fact even if income from unaccounted business transactions admittedly in the same line of business was brought to tax, for the purposes of ascertaining the correct income, the deductions and allowances can be allowed only in accordance with the provisions under the Act.

4. Any other question to be raised at the time of appeal.

5. It is humbly prayed that the Order of CIT(A) be set aside and Order of the Assessing Officer be restored.” Brief facts of the case :

2. The assessee is a proprietor of J.B.Jewels dealing with purchase and sale of jewellery. The Assessing Officer(AO) has estimated the profit of the assessee at 6% on the total turnover taking into consideration various seized documents. The AO also made disallowance under section 40A(3) as assessee has made certain purchases in cash in violation of section 40A(3). Aggrieved by the order of the AO, the assessee filed appeal before the ld.CIT(A). The ld.CIT(A) in para 6.2.9 held as under : “6.2.9 I find that in case of the appellant a search and seizure 2 Smt. Jyoti Suresh Bajoria [R] operation was conducted where it was seen that the appellant was conducting business of sale and purchase of jewellery outside the books of account. The AO has calculated the turnover of the appellant and thereafter gone in to compute appellant’s profit by applying @ 6% to the total turnover of the appellant. That being the case, the facts of the appellant’s case is covered by various judicial pronouncements relied upon by the appellant as stated above in the appellate order. Therefore, taking into account, the facts of the case and various judicial pronouncements as stated above, I am of the considered view that the addition made by the AO u/s 40A(3) cannot be sustained. The AO is directed to delete the addition of Rs.3,67,41,579/- made to the income of the appellant. This ground is accordingly allowed.”

3. Aggrieved by the order of the ld.CIT(A), the Revenue has filed appeal before this Tribunal.

Submission of ld.DR : 4. The ld.Departmental Representative(ld.DR) for the Revenue relied on the order of the AO. The ld.DR submitted that section 40A(3) is a non obstante clause and hence, AO has rightly made disallowance under section 40A(3).

Submission of ld.AR : 4. The ld.Authorised Representative(ld.AR) for the Assessee submitted that ld.CIT(A) has followed the decision of various Hon'ble High Courts that no disallowance under seduction 40A(3) can be made once profit is estimated. The ld.AR relied on following case laws :

3 Smt. Jyoti Suresh Bajoria [R] S.No. Particulars 1. J.K. Construction Co. Vs. ITO (ITAT Jodhpur) 2. CIT Vs. Smt. Santosh Jain (2008) 296 ITR 324 (P&H HC) 3. CIT Vs. Gobind Ram (2015) 229 Taxman 491 (P&H HC) 4. PCIT Vs. Jadau Jewellers & Manufacturers (P) Ltd. (2018) 409 ITR 85 (Rajasthan HC : Jaipur Bench) 5. CIT Vs. S. Mohammad Dhurabudeen (2008) 4 DTR 218 (Madras HC) 6. CIT Vs. Purshottamlal Tamrakar Uchehra (2004) 270 ITR 314 (MP HC) 7. CIT Vs. Banwarilal Banshidhar (1998) 229 ITR 229 (Allahabad HC) 8. Satishkumar Vishnudas Bhutada Vs. ITO (ITAT Pune) 9. Kirtikumar Vishnudas Bhutada Vs. ACIT (ITAT Pune) 10. DCIT Vs. Shri. Narendra Mithailal Agrawal (ITAT Pune)

4 Smt. Jyoti Suresh Bajoria [R] “8. All the three questions, referred to this court, revolve round the same controversy. The question for consideration is when no deduction was sought and allowed under s. 40A(3), was there any need to go into s. 40A(3) and r.6DD(j). We see force in the view taken by the Appellate Tribunal that when the income of the assessee was computed applying the gross profit rate and when no deduction was allowed in regard to the purchases of the assessee, there was no need to look into the provisions of s. 40A(3) and r.6DD(j). No disallowance could have been made in view of the provisions of s. 40A(3) read with r.6DD(j) as no deduction was allowed to and claimed by the assessee in respect of the purchases. When the gross profit rate is applied, that would take care of everything and there was no need for the AO to make scrutiny of the amount incurred on the purchases by the assessee.”