Shri Satish Kumar HUF, Prop. M/s Ram Bhaj Pansari & Sons vs Income Tax Officer, Ward-4, Rohtak

This assessee’s appeal for assessment year 2014-15, arises against the Commissioner of Income Tax (Appeals)-3, [in short, the “CIT(A)”], Gurugaon in appeal no. CIT (A), Rohtak/10857/2016-17dated 13.10.2025 involving proceedings under section 144 of the Income-tax Act, 1961 (hereinafter referred to as ‘the Act’).

Heard both the parties. Case file perused.

Learned Counsel representing assessee does not press for his first and foremost ground alleging lack of proper notice under section 143(2) of the Act going by the CBDT Instruction dated 23^rd June, 2017. Rejected accordingly.

He further does not press assessee’s ground no.2 regarding the salary disallowance amounting to Rs.91,700/- keeping in mind smallness thereof. Rejected accordingly.

The assessee’s third substantive ground herein seeks to reverse both the lower authorities’ respective findings invoking section 36(1) interest payment disallowance of Rs.5,14,821/-alleging diversion of interest-bearing funds for non-business purposes. That being the case, it is noticed from a perusal of the CIT(A)’s lower appellate discussion at pages 20-21 that the assessee had interest free funds of Rs.1,29,92,402/- against interest free advances made in question total to Rs.13,00,466/-. It is thus clear that both the lower authorities have nowhere considered the assessee’s interest free funds available which could not forms subject matter of section 36(i)(iii) disallowance going by CIV vs Reliance Utilities and Power Ltd. (2009) 313 ITR 340 (Bom). The impugned disallowance is accordingly directed to be deleted.

The assessee’s fourth substantive grounds challenges the learned lower authorities’ action upholding a sum of Rs.6 lakhs as bogus liabilities. The Revenue could hardly dispute the same forms part of the assessee’s opening balance from the preceding assessment years which could not have been disallowed in the impugned assessment year. Deleted accordingly.

Next comes, the assessee’s substantive ground no.5 is regarding on account of expenditure payment of disallowance of Rs.6,14,877/- made in both the lower appellate proceedings for the reason that the same had not been incurred wholly and exclusively for the purpose of business. The Revenue could hardly dispute that such expenditure claims under various miscellaneous and other heads are routine business expenses which could have been disallowed. The facts also remains that the assessee has not been able to plead and prove the same to the entire satisfaction of both the lower authorities.

Be that as it may, it is deemed appropriate that a lumpsum addition of Rs.35,000/- only in the given facts of the case roughly @6% would meet the ends of justice with a rider that the same shall not be treated as a precedent. Partly accepted in very terms.

Learned Counsel does not press for the assessee’s 6^th substantive ground keeping in mind smallness thereof since involving a sum of Rs.84,794/- i.e. 9% of its bogus purchases. Rejected accordingly subject to a rider that the same shall not be treated as precedent.

Next comes the assessee’s 7^th substantive ground directed against both the lower authorities’ action invoking section 40A(3) disallowance of of Rs.6,00,000/- alleging cash payment qua the foregoing bogus purchases. This tribunal finds no merit in the same going by Indwell Constructions vs CIT (1998) 233 ITR 776 (AP) constructions settling the issue in assessee’s favour and against the Revenue that once GP is estimated, no further disallowance is warranted. Deleted accordingly.

The assessee’s 8^th and 9^th substantive ground raise the issue of alleged shortage of stock involving GP estimation @9% on alleged sales as well as shortage of stock itself amounting to Rs.4,67,760/- in issue. This tribunal is of the considered view that a lumpsum estimation @9% in case of the assessee’s alleged shortage of stock will cover both these items. Necessary computation shall follow as per law. Both these assessee’s grounds are partly allowed in foregoing terms.

The assessee does not press for its 10^th substantive ground involving cash difference of Rs.27,033/- keeping in mind the smallness thereof. Rejected accordingly subject to a rider that the same shall not be treated as precedent.

No argument has been made for other grounds by both parties. Hence, the same are dismissed.

The assessee’s appeal is partly allowed.