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2014 (6) TMI 631 - AT - Income TaxEnhancement of disallowance u/s 40A(3) - scope of the term 'expenditure' - Cash payment of Rs. 52.88 lakhs for purchase of land - payment made before registration even on Sundays – Held that:- The assessee has debited/charged an amount towards purchases account-land to the Profit and Loss A/c - the word "expenditure" has not been defined in Income-tax Act – Relying upon Indian Molasses Co. Ltd. vs. CIT [1959 (5) TMI 5 - SUPREME Court] - expenditure is what is paid out or away and is something which is gone irretrievably - the assessee has not claimed the payment as expenditure in the Profit and Loss A/c - It is an item of payment to sundry creditors viz., P. Srinivas & SLN Real Estate (Landlord) Account and not debited to the Profit and Loss A/c. as an expenditure – the amount paid by the assessee cannot be construed as an expenditure charged to Profit and Loss A/c - When the amount paid by the assessee had not been claimed as deductible expenditure while computing the business income provisions of section 40A(3) cannot be applied. Mere entry in the books of account will not change the character of the transaction - there is no dispute that the payments are made on Sunday where there is banking holiday on that day - the payment is not required to be made when the banks are closed i.e. after banking hours - the purpose of the disallowance u/s 40A (3) is to dissuade transactions by cash - no banking facility is available where the properties were purchased by the assessee or payments were made on holidays i.e., Sundays, therefore, there was no choice for the assessee except to make the payments in cash due to exceptional or unavoidable circumstances as provided under Rule 6DD. – thus, the disallowance u/s 40A(3) of the Act is not warranted – Decided in favour of Assessee. Estimation of income – Held that:- CIT(A) deleted the addition on the basis that books of account are not rejected to estimate income of the assessee - certain expenditure towards labour and other miscellaneous expenditure are self-vouched and not verifiable - AO estimated the income at 10% of the sales and given deduction towards interest to partners - the estimation by the AO is reasonable and was accepted by the assessee during the course of assessment by signing the order-sheet - deduction cannot be deleted and is to be confirmed – Decided in favour of Revenue.
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