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This appeal at the instance of the assessee is directed against the order of CIT(A), Trivandrum dated 04/10/2019. The relevant assessment year is 2011-12.
2. The assessee is an individual who is a textile dealer at Punalur. For the assessment year 2011-12, the return of income was filed on 17.02.2012 declaring total income of Rs.9,27,050/-. The assessment was taken up for scrutiny by issuance of notice u/s. 143(3) of the I.T. Act. The assessment was completed u/s. 143(3) of the I.T. Act vide order dated 31/01/2014, determining the total income at Rs.39,49,670/- as against the returned income of Rs.9,27,050/- . In completing the said assessment, the Assessing Officer made the following additions:
3. Aggrieved by the assessment order, the assessee preferred the appeal before the first appellate authority. The CIT(A) partly allowed the appeal of the assessee by deleting the adhoc disallowance of Rs.1,50,000/-.
4. Aggrieved by the order of the CIT(A), the assessee is in appeal before the Tribunal raising the following grounds of appeal:
1. The Officers be ow were not justified in invoking/ confirming the addition made u/s. 40A (3).
2. The Commissioner of Income-tax (A) is not justified in holding that the appellant is not covered by exemption stated under rule u/s. 6DD.
3. The Commissioner of Income-tax(A) did not appreciate the fact that the appellant business is located in Punalur which is about 40 KM away from the place of purchase i.e. Kollam.
4. Merely because the appellant did not produce any letter from the seller insisting for cash payment by the seller of goods, the Commissioner of Income-tax(A) is not justified in confirming the addition made on this ground.
5. The Commissioner of Income-tax(A) also did not consider the decision of Madras High Court filed during the course of hearing.
6. The Officers below are not justified in confirming the disallowance made u/s. 40A(2) especially when all those in receipt of salary have included the same and filed their I.T. Return.
7. The Officers below are not justified in not considering the fair market value of services rendered by relatives as excessive and unreasonable having regard to the Market value of such services.
8. The confirmation of disallowance of 1/3 of car expenses was not in order as different cars were utilized for different purpose like for purchase, for collection of credit sales for visiting the Bank and the like.
9. For the above grounds and other grounds as may be adduced at the time of hearing, your appellant prays that the Hon’ble Tribunal may consider theabove grounds.
5. I shall adjudicate the grounds, issuewise as follows:
Disallowance of Rs.20,44,371/- : (Ground Nos. 1 to 5)
5.1 During the course of assessment proceedings, it was noticed that the assessee purchased textile goods from SPM & Sons, Kollam for a sum of Rs.20,44,371/. It was further noticed by the Assessing Officer that the entire payment for these purchases were in cash. The Assessing Officer show caused the assessee as to why the said cash payments made to SPM & Sons, Kollam should not be disallowed by invoking the provisions of section 40A(3) of the I.T. Act. The assessee filed his reply dated 13/12/2013 wherein it was contended that the purchases were made for effecting reduction sale after Onam season. It was stated that in order to avoid delay in getting goods, the purchases were made beyond banking hours in cash. It was also stated that the payments were