JUDGMENT :

Alok Mathur, J.

1. Heard Sri Suyash Agarwal, learned counsel for the petitioner as well as Sri Praveen Kumar, learned counsel for the respondents.

2. The petitioner by means of this writ petition has challenged the order passed by the Principal Commissioner, Income Tax, Gorakhpur thereby he has rejected the application preferred by the petitioner under Section 264 of the Income Tax Act, 1961 (hereinafter referred to as “the Act, 1961”).

3. Learned counsel for the petitioner submits that petitioner is proprietor of M/s Purushottam Das Ajai Kumar, Asif Ganj, Azamgarh and is engaged in the business of retail trading of ready made and other clothes in the name of the proprietary concern. For the assessment year 2008-09, the petitioner’s firm filed income tax return which included income of Rs.34,912/-earned from the house property besides business income of Rs.1,70,304/-. The petitioner got his firm’s accounts audited with net profit of Rs.1,61,012/-showing @ 2.00% and gross profit of Rs.8,67,837/- being 44.33% of the gross receipt.

4. It has been further submitted on behalf of petitioner that he disclosed about the advance given to supplier’s account as well as copy of the account of M/s Jalan Synthetics, Varanasi before the assessing authority which clearly demonstrated that on various dates the amount of payment has been deposited by the petitioner in UBI, Varanasi bank on their instructions. It has further been contended that the assessing authority while passing the assessment order for the assessment year 2008-09, did not raise any objection relating to the aggregate amount of Rs.3,40,000/-deposited on various dates in the bank account of M/s Jalan Synthetics.

5. The assessment proceedings were completed in exercise of power under Section 143(3) of the Act, 1961 on the income of Rs.2,80,004/-by order dated 10.11.2010 and giving appeal effect it was revised at Rs.1,99,804/-.

6. The petitioner received a notice dated 30.03.2013, issued under Section 148 of the Act, 1961, stating therein that the authorities had reason to believe that cash payment of Rs.3,40,000/-had been made by the petitioner to M/s Jalan Synthetics for the assessment year 2008-09, in violation to the provisions of Section 40A(3) of the Act, 1961, which is other than by making payment through crossed account payee cheque or crossed bank draft, as such the same is liable to be disallowed and added back to the income of the petitioner.

7. The petitioner objected to the notice issued under Section 148 of the Act, 1961 and submitted that he had truly and faithfully disclosed all the facts necessary. He further stated that payment of Rs.3,40,000/-was genuine and that there is no violation of Section 40(3) of the Act, 1961 read with Rule 6DD of the Income Tax Rules, 1962 (hereinafter referred to as “the Rules, 1962”) and further that payment of Rs.3,40,000/-in cash to M/s Jalan Synthetics is also reflected in their ledger accounts and therefore, there was no basis for reopening of the assessment proceedings.

8. The assessing authority not being satisfied by the reply submitted by the petitioner proceeded to make addition of Rs.3,40,000/-in the income of the petitioner and disallowed the benefit/exemption under Section 40A(3) of the Act, 1961 for the reason that payment exceeding Rs.20,000/-was made other than crossed cheque or bank draft.

9. The petitioner being aggrieved by the order dated 14.03.2014, preferred an application under Section 264 of the Act, 1961 before the Principal Commissioner, Income Tax, Gorakhpur on 07.04.2014.

10. By means of impugned order dated 19.01.2016, the Principal Commissioner, Income Tax, Gorakhpur has considered the application of the petitioner and has rejected the same holding that the petitioner had clearly misrepresented in his return as well as audit report with respect to application of Section 40A(3) of the Act, 1961 read with Rule 6DD of the Rules, 1962 and concluded that the payment made to M/s Jalan Synthetics Ltd. is not c