1.   COMMISSIONER OF INCOME TAX (CENTRAL), LUDHIANA VS M/S SAI METAL WORKS, ITA NO.125 OF 2004 DATED: MARCH 10, 2011, HIGH COURT OF PUNJAB AND HARYANA

The assessee filed its return for the block period 1.4.90 to 6.4.2000. The AO in the course of the assessment made addition on account of claimed expenses being found to be in violation of Section 40A(3). It was observed that the seized material revealed that ledger containing the details of purchases made against cash payment exceeding Rs.20,000/- which could not be allowed and on that account addition towards undisclosed income had to be made. The assertion of the assessee was that on that account disallowance could not be made. The AO did not accept this plea. The CIT(A) set aside the addition, and the same was upheld by the Tribunal, observing that Section 40A(3) could not be invoked in the case of the assessee where block assessment was by estimate on the basis of GP rate.

Judgment of the Court

Section 40A(3) applies to the proceedings to assessment under Chapter XIV-B. As regards the said provision not being taken into account where assessment is by estimation basis on GP rate. If the estimated income impliedly takes into consideration the expenditure incurred, the said principle may apply. If the expenditures which are legally not permissible has been taken into account, the same can certainly be disallowed n the present case, the assessee has not been able to cover its case under Rule 6DD. In the circumstances, the AO was justified in disallowing expenditures incurred in contravention of Section 40A(3).

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2.   M/s BAGORIA UDYOG Vs COMMISSIONER OF INCOME TAX KOL-XVI, ITA No.270 of 2003, Dated: March 17, 2011, THE HIGH COURT OF CALCUTTA

That although a concession by a counsel on behalf of his client on a question of law is not binding but a concession made on a question of fact is binding on his client. The law is equally settled that if a Tribunal records a wrong finding that there was a concession on an issue of fact, a litigant is not remediless. In such a situation, the litigant should immediately file an application for review supported by the assertion of that very counsel that no such admission was made and the recording of the Tribunal was wrong. If such an application is filed, it is the duty of the Tribunal to answer the allegation made against it by the litigant and if the Tribunal maintains that such a concession was made, the litigant should approach the higher forum challenging also the finding of the Tribunal that there was really any such concession; that the Tribunal did not enter into such question and dismissed the application for review on the sole ground that the same was not maintainable.

Thus, it is apparent that in this case, the Tribunal did not dispute the assertion of the representative of the assessee that he did not make any such concession. Thus, it should be presumed that no such concession was made on behalf of the assessee; that within the scope of appeal before the Tribunal preferred by the Revenue, the question was whether the CIT (Appeals) was justified in passing the order on the basis of materials on record and there was no question of deciding the appeal on the basis of any admission when at no point of time in the past there was any admission of the assessee that there was no business connection between the assessee and the borrower and such alleged admission was also not put forward as one of the grounds by the Revenue in appeal before the Tribunal. It was the duty of the Tribunal to answer the question of deemed income in accordance with law of the land. The Tribunal accepted the position of law that the waiver of interest as per agreement was permissible. Thus the addition was deleted.

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