Section 40(A)(3) – Once the addition has been made by increasing the gross profit rate then there is no further scope of making separate additions.

Section 40(A)(3) – Once the addition has been made by increasing the gross profit rate then there is no further scope of making separate additions.

The assesse derives income from newspaper agency. During the assessment, the AO rejected the books of accounts u/s. 145(3). While making the best judgment, the AO accepted the sales as declared by the assesse but applied the higher gross profit rate and made addition of Rs. 3.19 lakh. Besides, the addition of Rs. 21.6 lakh was also made u/s. 40A(3) on account of payments made in cash for purchase of newspaper. On appeal, the CIT(A) deleted the addition made u/s. 40A(3) and the addition of Rs. 3.19 lakh made by the AO was restricted to Rs. 1 lakh.

Before the tribunal, the revenue justified the order of the AO and placed reliance on the Gujarat high court decision in the case of CIT vs. Hynoup Food & Oil Ind. Pvt. Ltd. (290 ITR 702) and justified the disallowance made by the AO for the payments made in cash exceeding the prescribed limit u/s. 40A(3).

Held

The tribunal noted the ratio laid down in the decisions listed below, viz. that, once the addition has been made by increasing the gross profit rate then there is no further scope of making separate additions under different provisions. Based thereon, the tribunal upheld the decision of the CIT(A).
The decisions relied on by the tribunal were as under:
1. CIT vs. G. K. Contractor (19 DTR 305)(Raj);
2. CIT vs. Pravin & Co. 274 ITR 534 (Guj);
3. Choudhary Bros. (ITA No. 1177/JP/2010 dt. 31-5- 2010;
4. CIT vs. Banwari Lal Banshidhar 229 ITR 229 (All)