PE R S USH M A CHO WL A, J . M, : T h e a pp e al f il ed b y t h e a s s es s e e is a ga i ns t t h e o r de r o f t he C omm iss io n er o f In c o m e -t ax (A pp e a ls ), Shi ml a da t e d 3 0. 01 .2 01 2 r e l ati n g to as s ess me n t ye a r 2 0 03 - 04 aga i n st t he o rd e r p as s ed u/s 14 3( 3 ) o f t he In c o m e T ax A c t, 1 96 1 ( in sh o rt th e A ct ) . 2 . T h e a ss e ss e e h as r ai s ed th e fol lo wi n g gr o u nd s o f ap p e al:

1. That in the facts and circumstances of the case the Ld.CIT(A) is not justified in sustaining the addition of Rs.1826347-on account of the purchases made from six different parties of Delhi treating the same as bogus purchases.

2. That in the facts and circumstances of the case the Ld CIT(A) is not justified in holding that the payments made on consecutive dates or at a very short intervals had to be bunched together for working out the voilation of the provisions of section 40A(3) and for computing the disallowance accordingly.

3. That in the facts and circumstances of the case the Id Commissioner of Income Tax (Appeals) is not justified 2 in upholding the addition of Rs. 66000/- on account of salary paid to Smt Sarojini Devi as working partner.

4. That in the facts and circumstances of the case the Ld Commissioner of Income (Appeals) is not justified in upholding the additions of Rs.19402/- and Rs.4160/- made by disallowing l/5th of the expenditure on account of salary of salesman, travelling expenses and shop expenses and telephone expenses respectively.

5. That the order of the Ld CIT(A) is bad in law and facts.

3 . T h e i ss u e r ais e d i n gr o u n d N o. 1 i s a ga i nst th e di s all ow an c e m ad e o n a c c ou nt o f al l e ge d b o gus p u r ch as e s a mo unt in g to Rs .1, 8 2, 63 4/ -. 4 . T h e b ri e f f a ct s r el at in g t o th e i ss ue a re th at t h e a ss es s e e i s tr a di n g i n h a rd w ar e , p ai nts an d e l ec tr i c al ite m s at Kot kh a i. D u ri n g t h e ye a r u n de r c on si de r at ion t he r e w as f a ll in G P r at e a nd th e a sse s s e e h a d f ail e d t o pr ov id e q ua nti ta ti v e a nd qu a lit at iv e d et a ils o f cl os in g s t oc k. T he A s se ss in g O f f i ce r a c c o rd in gl y e s t im at e d t h e GP r a t e at 8 % a s a ga i n st 6 . 22 % d e cl a r ed b y t h e ass e ss e e an d 1 1 .8 0% d e cl a re d in th e pr e c e din g ye a r . C o ns e qu e ntly, t r a d in g a d dit io n o f Rs. 1, 24 ,1 68 / - w a s m a d e in the h a nd s o f t h e as s ess e e . T h e As se ss in g O f f i c e r fu rt h e r n o t ed f r om the ex a min a tio n o f b o oks o f a c c ou nt t ha t th e pu r ch a s es to t ali n g R s. 1, 82 ,6 34/ - w e re m a de f r om e ac h p a rt y e n l ist e d at p a ge 5 of th e a s s ess m ent or d e r. T h e A ss e ssi n g Of fic e r c al le d f o r in fo rm at io n f r om th e s a id fi rm /s u nd e r s e ct io n 1 33 ( 6) o f t h e A c t a nd al l the l et te r /s w er e r e c e iv e d b a c k w ith t h e p os t al r em a rks th at th e s aid f irm s we r e no t in ex ist e n c e on th e a d d r ess e s m en tio ne d in t h e l ett e r . T h e A ss e ssi n g O f f i ce r a ls o d e put e d t h e In s p e ct o r o f t h e In c o m e Tax t o m a ke t he e n qu ir i es f rom D elh i o n t he s aid a dd re s s gi v en b y t h e a ss e ss e e fi rm . T h e In s p e c t o r vid e it s r e p o rt d at ed 1 4. 3.2 0 06 f ou nd n o su ch p e r so n at t he s a id a dd r e ss. T h e s t at em e nt o f th e a s s ess e e w a s r e co rd e d du ri n g t h e c o u rs e o f a ss e ssme n t p ro c e ed in gs in w hi c h h e a dmit t ed t h at th e s a id p u r ch a se s w e r e m ad e t h ro u gh a ge nt of th e s ai d fi r m/s wh o u se d to v isi t 3 t h e bu si ne ss p r em is e s a nd s up pli e d th e go ods as p er t he o rd e r an d th e b ill s w e re r e c e iv e d f r o m t h e s aid p a rt ie s. It w a s f u rt he r c o nt e nd e d b y t h e as s es se e th a t all th e s e go ods w e r e s u pp li ed f r om ou t o f St a t e, w hi ch w e r e du l y e n t e r e d a t P a r w an oo b a r ri er . Th e As s ess in g O f f i ce r , h ow e v er , r e j e ct ed th e ex pl a na ti on o f t h e ass e sse e a n d t r e at ed th e p u r ch a se s t o b e b o gus an d m ad e a dd iti on o f Rs .1 ,8 2, 63 4/ - . 5 . T h e C IT ( A p pe a ls) d el et e d th e ad dit io n ma d e o n a c cou nt o f GP r a t e. H ow e v er , t he a d dit io n in r el a tion to t h e p u r ch as e s m a d e f r om t h es e p a rt i es o f D el hi t ota li n g R s. 1, 82 ,6 34/ - w a s up h eld b y t h e C IT ( A pp e al s ), h ol di n g th e s am e to be n on - ge n uin e . 6 . T h e l e a rn e d A .R. fo r t h e as se ss e e v eh e m ent l y s t a t ed tha t t h e s ai d p u r ch a se s w er e in te r st a te s al e s m ad e b y t h e p a r ti es in D e l hi a nd th e go o ds h a d p a ss ed t h ro u gh t h e b a r ri e r o f P a rw a no o fo r w h ic h n ec e ss a r y e v id e nc e w as fu r nis h ed b ef o r e th e Ass e ssi n g O f fi c er a nd i s a lso e n clo s ed i n th e Pa p e r Boo k. 7 . T h e le a r n ed D. R. fo r th e R ev en u e poin t ed ou t t h at t h e sa i d p a rt i es w e r e n ot ex is tin g p a rt i es a t t h e ad dr e s se s giv e n i n the b il ls a nd th e p a ym e n ts to t h e s ai d p a rt ie s w er e mad e in c as h. It w a s f u rt h e r p oin t ed o ut b y t h e l ea r n ed D . R. f or th e R e ve n u e t h at t h e b a r rie r r e c e ipt s w er e p r od u c ed a t la t er da t e . 8 . W e h av e h e a r d t h e r iv al c ont e nti on s a n d p e ru s ed t he r ec o r d. Th e a s s ess e e h as m ad e c e r t ai n int e rs t at e p u r c ha s es f r om pa r ti e s i n D elh i. D u ri n g th e c ou r se o f a s se ss me nt p ro c e e din gs , t h e Ass e ssi n g O f fi c e r m a d e e nq ui ri e s a t t h e gi v en a dd r es s es o f th e s aid p a rtie s a nd t h e s ai d p a rt i es w e r e f ou nd to b e n on - ex is tin g a t th e s ai d a dd r ess e s. T he cl ai m o f t h e ass e ss e e w as th at all th e ab ov e s aid pu r ch a s es w e r e i nt e rst a te s a le s m a d e b y t h e s a id p ar ti es a nd the go o d s h a d cr os s ed th e b a r ri e rs fo r 4 w h ic h t h e re l ev a nt e v id e nc e w as f u rnis h ed b e fo r e t h e A ss e ssi n g O f fi c e r. T h e pe r us al o f th e P a pe r Boo k fil e d b y t h e a ss e ss e e at p a ge s 49 to 60 r e f l e ct t he a ss es s ee t o h av e obt a in ed t h e do c um e nts f rom t h e o f fi c e o f t h e Ex c is e & T ax ati on O ff i ce r un de r w h ic h th e t r a nsi t of go o ds t hr ou gh t h e b a rr i er is re f lec t e d. T h e l e ar n ed A .R . f o r th e as s es s e e po in te d o ut t h at o ne c op y o f th e s a id d o cum e nt w a s av ai la bl e w it h th e as s ess e e an d t h e s am e w as p r od uc e d b e f or e t h e As se s si n g O f fi c e r. H ow e v e r, s in c e the A s se ss in g O f fi c e r h a d m a de th e a ddi ti on r ej e ct in g th e sa i d evi d en c e , the a s s ess e e h ad a ppli e d fo r s e c on d co p y f r o m t h e Ex c i se & T ax ati on D e p a rtm e nt wh i ch i s p l ac e d be f o re u s. In t h e e nti r et y o f th e f a ct s an d c i r cu mst a n c es wh er e t h e f ac tum o f th e go o ds b ein g t r an sp o rt ed th r ou gh t h e ba r ri e r st an ds e s t ab lis h ed , w e fi nd n o m e ri t i n tr e a ti n g th e s ai d p u r ch a se s m ad e b y t h e a ss e ss e e as bo gu s. Co ns eq u en tly, w e d i r e ct t h e A s se ss in g O f fi c er t o d el et e t he ad di ti on o f Rs .1 ,8 2, 63 4/ - . T h e gr o un d N o .1 ra is e d b y t h e a s s ess e e is all o w ed. 9 . T h e i ss u e i n gr ou n d N o. 2 r ai se d b y t h e a s s es se e is a ga i nst d is al lo w an c e m ad e u n d e r s e ct io n 40A ( 3 ) o f t h e A ct. T h e A ss e ssi n g O f f i ce r at pa ge s 6 a nd 7 h ad t a bul at e d d at e - wis e p aym e n t ma d e to d i ff e r en t p er so ns o f Rs .2 0, 00 0/ - o r l o w e r. T h e A ss e ssi n g O f f ic er o bs e r v ed t he as s es se e to h a v e m ad e cas h p a ym e nt of R s. 20 , 00 0/ - a s ma n y a s 3 8 ti me s t o s ix p a rt i es . As p er the A s s ess in g O f fi c er t h e s ai d p ar ti es w e r e out st at io n p ar ti e s a nd i t w a s no t c l e ar as to why s a i d p a ym e n t s w e r e m ad e d a y- t o - d a y a n d w e r e n ot p a id b y w a y o f c h e q u e or D e m an d D r a f t. Co ns e qu en tl y, 2 0 % o f t h e s a id ex p e nd itu r e a m ou nt in g t o R s. 1, 46 ,5 15/ - w a s d is al lo w ed u nd e r se c ti on 4 0 A( 3 ) o f t he A ct . 1 0 . T h e C IT ( A pp e al s) u p he ld th e o r d er o f th e A ss e ssi n g Of fic e r . 5 1 1 . T h e l e a rn e d A .R. fo r t h e ass e ss e e p oin t ed out th at e a ch o f t h e s ai d p a ym e n ts w as m ad e o n di f f er e nt d at e s a n d w a s t o th e t un e o f Rs .2 0, 00 0/ - o r l es s er a n d h en c e n o t in c on t ra v en tio n o f p ro vis io ns o f s e c ti on 4 0A ( 3 ) o f t h e A c t. It w a s a ls o p oi nt ed out by t h e l e a rn e d A .R. f o r t h e a ss es s e e t h at t h e s a id c as h p a id b y t h e a s s es s ee w a s dul y e n t e r e d i n t h e a c co unt s o f t he pa rt i es a s pla c e d at p a ge 6 1 of t h e P a p er Boo k. 1 2 . T h e le a r ne d D. R. fo r th e R ev en u e poin t ed ou t t h at t h e pa r ti e s we r e s t a yi n g a t d i ff e r en t p l a ce s out si de H im a c h al P r ad e sh a n d t he C IT ( A p pe a ls ) h ad r es t ri ct ed t he d is al lo w an c e o f pa ym e nt m ad e on c o ns e c uti v e da t e or a t sh or t i nt e rv a ls . 1 3 . W e h a v e h e a rd t h e r i va l co nt en tio ns an d p e r us ed th e r e cor d . U nd e r t h e p r ov isi on s o f se c ti on 4 0A ( 3) o f t he A c t a n y p a ym e n t m a d e o th e r wis e b y w a y o f c r o ss c he q u e o r D em an d Dr a f t ex ce e di n g Rs .2 0 ,0 00/ - o n e a ch d a y i s c o ve r e d u nd e r th e p r ov isi on s o f s e cti on 40 A (3 ) o f th e A ct an d 2 0 % o f su c h a ggr e ga t e pa ym e n t is t o b e di s all ow e d i n th e re l ev a nt a s s ess m ent ye a r . Th e p er us al of t h e de t ai ls fu rn is h ed at p a ge s 5 ,6 , an d 7 o f t h e a ss es sm en t o r d e r re f le c ts ea ch of t h e p a ym e n t an d o n e a ch d at e t h e p a ym e n t t o t h e p a rt y w a s Rs .2 0, 00 0/ - o r lo w e r. N on e o f t h e c as h p a ym e n ts w er e ex ce e d in g R s. 20 ,0 00 /- o n a n y o n e d at e to a n y o n e p ar t y. In v i e w o f th e p r ovi sio ns of s ec ti on 40 A (3 ) o f t h e A ct , w e fi nd no m e ri t i n th e d is al lo w an ce m ad e b y t h e As se s si n g Of fi c e r an d p a rt l y u p h e ld b y t h e C IT ( A p p e a ls ). C o n s eq u ent l y, w e d e l et e t h e sa me . G r o un d No .2 r a is e d b y t h e as s ess e e is t hu s al lo w ed. 1 4 . T h e is su e i n gr o un d N o. 3 r a is ed b y th e as s es se e i s aga i n st th e a d dit io n o f Rs .6 6, 0 00/ - o n ac c ou nt o f s al a r y p a i d t o Smt .S a roj ni D e vi a s w o rki n g p ar t ne r . T h e ass e ss ee f i rm ha d p a id s a la r y o f R s .5 50 0/ - p e r mo nth to Sm t.S a ro jni D e vi, w h o wa s l oo ki n g a f t e r t h e c a sh 6 t r an s a cti on o f th e b u si n ess . T h e sta t em e nt o f th e l ady w a s r e c o r d ed d u ri n g t h e co ur s e of a ss e ssm e nt pr o c ee d in gs i n w hi c h she a dm itt e d to th e s a me . T h e As s ess in g O f f i c e r, ho w e ver , di s all o we d th e sa i d s a l ar y p a i d t o S mt .S ar oj ni D e vi as s h e h ad n o kn ow l ed ge a bo ut th e na m e an d a dd r es s o f th e su pp li e rs of t h e fi rm a nd a ls o d id no t s i gn t he c he q u e o r op e r at e t h e b an k a c co un t. T h e C IT ( A pp e al s) u p he ld th e s ai d di sa ll o w an c e. 1 5 . U n d er th e a m en ded p r ovi si ons o f th e A ct , i n t h e c as e o f t h e p a rt n e rs hip c o n c ern w h e r e th e p a ym e n t o f s a l ar y t o a w o r ki n g p a rt ne r is a u th or iz ed b y t h e d e e d o f p a rt ne r sh ip , th e s am e is a l lo w a bl e a s a d e du c tio n i n th e ha n ds o f th e p ar tn er s hi p fi rm un d e r th e p r ovi si ons o f s e ct io n 4 0( b ) o f th e A ct . In t h e fa c ts o f th e p r e se nt c as e t h e l ad y a d mit te d to ha v e t ak e n c a r e o f th e c ash t r a ns a cti on of ass e ss e e f ir m a nd m e r el y b e c a u s e sh e d id not h av e kn ow l ed ge o f e a ch and e v e r y a s p e c t o f t h e b usi n ess , d o es n ot j ust i f y t h e di s all ow a n c e o f s ala r y p a i d t o th e w o r kin g p a rt ne r . A c c o rd in gl y, w e d ir e c t th e As se ss in g O f f i ce r t o d el et e t h e ad di tio n o f R s.6 6 ,0 00/ - . T he gr o u n d No .3 r a is ed b y t h e a ss e ss e e i s t hu s al lo w ed . 1 6 . T h e iss u e i n gr o und N o .4 r ai s ed b y t h e a s s es s ee is a ga i ns t ad dit io n o f Rs .1 9, 40 2 an d R s. 41 60 /- b ei n g 1 / 5 t h di s all ow a n ce o ut o f sa l ar y, t r av e lin g e x p e ns es , s h op ex pe ns e s an d t e l ep ho n e ex p en s es . T h e l e a rn e d A .R . fo r th e a sse s s e e p oi nt ed ou t t h at it w as a ggr i e v ed b y t h e d is al lo w an c e o f 1/5 t h o ut o f s al a r y t o t al in g R s. 66 ,0 00 / - a n d in re sp e ct o f t h e b al a nc e dis al low a n c e it w as n ot p r e ssi n g t h e gro und . T he le a r ne d A .R . fo r t h e a ss e ss e e f ai rl y c o n c e d ed th at th e s a id d is a llo w a nc e w as ex c e ssi v e. 1 7 . In v i e w o f t h e f a c ts a nd ci r c um st an c e s o f t h e c a s e , the d is al lo w an c e w as m a d e o ut of th e sa la r y a c c o u n t as t h e a m ou nt w as p aid 7 i n c ash to t w o p e rs on s. W e r est ri c t t h e di s all ow a n c e t o 1 /1 0 t h o f the t ot al ex p en dit u r e o f R s. 66 ,0 00 /- d ebi te d u nd e r t h e h e ad s al a r y p a i d t o s a le sm a n. Th e ba la n c e d is all o w an c e m a d e b y t h e As s ess in g O f fi c e r is u p he ld a s b e in g n ot p r es se d. T h e gr ou n d N o. 4 r ai se d b y t h e as s es se e is p a rt l y a l l ow e d. 1 8 . In t h e r es ult , t h e ap p e al o f th e a ss e sse e is p a rtl y a l lo w ed . O r d e r P r on ou n ce d in t h e Op e n Co ur t on 29 t h d a y o f J a nua r y, 2 0 13 . S d/ - S d/ - (T.R.SOOD) (SUSHMA CHOWLA) ACCOUNTANT MEMBER JUDICIAL MEMBER Dated : 29 th January, 2013 *Rati* Copy to: The Appellant/The Respondent/The CIT(A)/The CIT/The DR. Assistant Registrar, ITAT, Chandigarh