When income of the assessee was computed by applying gross profit rate, there was no need to look into the provisions of section 40A(3), as applying the gross profit rate takes care of expenditure otherwise by way of cross cheque also. Following the same the action of Tribunal could not be held as unjustified.
FULL TEXT OF THE HIGH COURT ORDER / JUDGMENT
1. By way of this appeal, the appellant has assailed the judgment and order of the Tribunal whereby Tribunal has dismissed the appeal of the department.
2. Counsel for the appellant has framed following substantial question of law :–
“1. Whether on the facts and circumstances of the case and in law the decision of Hon’ble ITAT was perverse in restricting trading addition to only Rs. 9,52,599 out of the total trading addition of the Rs. 91,37,068 made by the assessing officer ignoring the facts brought out by a qualified chartered Accountants in special Audit Report which is based on very reasonable analysis of the facts derived from the seized material and information provided by the assessee during Special Audit process?
2. Whether on the facts and circumstances of the case and in law the Hon’ble ITAT was justified in confirming the order learned Commissioner (Appeals) deleting the disallowance of Rs. 2,71,50,538 made by the assessing officer under section 40A(3) of the Income Tax Act, 1961 ignoring the facts that addition under section 40A(3) is entirely different from trading results of the assessee and this allowance has been made out of the transaction in the seized duplicate/parallel books of accounts and not out of the regular books of accounts?
3. Whether on the facts and circumstances of the case, the finding of the Tribunal is perverse, contrary to the record and untenable in the eye of law?”
3. Counsel for the appellant has taken us to the order of assessing officer as well as Commissioner (Appeals) and contended that the view taken by the assessing officer is required to be restored.
3.1 The first issue is now covered by the decision of this court and tribunal has followed the same.
3.2 In that view of the matter, the tribunal has not committed any error in deciding question no. 1.
3.3 Regarding question no. 2, the issue is covered by the decision of Punjab and Haryana High Court in CIT v. Smt. Santosh Jain (2008) 296 ITR 324 (P&H) wherein it has been held as under :–
We are of the view that when income of the assessee was computed by applying gross profit rate, there was no need to look into the provisions of section 40A(3) of the Act, as applying the gross profit rate takes care of expenditure otherwise by way of cross cheque also. We are in agreement with the view taken by the Allahabad High Court in Banwari Lal Banshidhars case (supra) to the following effect:
……………The question for consideration is when no deduction was sought and allowed under section 40A(3), was there any need to go into section 40A(3) and rule 6DD(l). 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 section 40A(3) and rule 6DD(J). No disallowance could have been made in view of the provisions of section 40A(3), read with rule 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 assessing officer to make scrutiny of the amount incurred on the purchases by the assessee.
3.4 Similar view was taken by the same High Court in Dy. CIT v. Gobind Ram (2015) 229 Taxman 492 (P&H).
3.5 The third issue regarding perversity does not arise as there is no perversity in the judgment of the tribunal.
3.6 No substantial question of law arises.
4. Hence, the appeal stands dismissed.