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2016 (5) TMI 204 - HC - Income TaxDisallowance u/s 40A(3) - Held that:- Where disallowance is made under section 40A(3) of the Act in respect of entries made in regular books of account, which have no relation with the undisclosed income, or the entries not recorded in the books of account or documents unearthed during the search, such allowance cannot be treated as part of the undisclosed income. However, if such expenditure relates to undisclosed income found during the search, the disallowance under section 40A(3) of the Act, would be justified. The Tribunal had held that while computing the undisclosed income of the block period, the provisions of section 40A(3) of the Act would be applicable in respect of payments made for the purchase of gold, exceeding the amount of ₹ 20,000, as such expenditure was found recorded in the loose sheets discovered during the course of search and seizure operations. Relying on the decision of this court, in M. G. Pictures (Madras) Limited v. Asst. CIT [2002 (4) TMI 16 - MADRAS High Court] the Appellate Tribunal had dismissed the appeal filed by the assessee. Having considered the reasons given by the Appellate Tribunal, we are fully convinced that there is no error in the impugned order passed by the Appellate Tribunal, dated June 16, 2006. In the given facts and circumstances of the case, it is clear that the provisions of section 40A(3) of the Act would be applicable. As per the provisions of the said section, no deduction could be allowed for purchases exceeding ₹ 20,000, as provided therein. However, the case of the assessee is not found to be falling in the exceptions provided in the proviso to the said section. As such the purchases of gold jewellery had exceeded ₹ 20,000, as found from the loose sheets discovered during the search and seizure operations. The disallowance of deduction by the Assessing Officer is correct in law. As such, we find no cause or reason to interfere with the order passed by the Appellate Tribunal, dated June 16, 2006. - Decided in favour of the Revenue and against the assessee
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