Home Case Index All Cases Income Tax Income Tax + AT Income Tax - 2016 (9) TMI AT This
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2016 (9) TMI 436 - AT - Income TaxDisallowance u/s 40A(3) - cash purchase - Held that:- The assessee has made payment of purchase under exceptional circumstances out of business expediency and also filed all the relevant documents and evidence in support of the same before both the lower authorities and the lower authorities have not brought any material on record by verifying the same that they are false, bogus or unreliable. Therefore, in the given circumstances, we are of the view that the assessee is covered by the exceptions in the proviso below sub-section (3A) to section 40A(3) and no disallowance u/s 40A(3) can be made in the hands of the assessee. Further with regard to the contention of the assessee that the land purchased was shown as part of its closing stock thereby no expenditure having been claimed in the profit and loss account during the year under consideration in the computation of business profits, no disallowance u/s 40A(3) can be made by the Assessing Officer. We find that before the Assessing Officer the assessee filed tax audit report and submitted that it is evident from the tax audit report that the assessee has not claimed expenditure and entire cost of land and development work is carried forward to next assessment year which fact has not been disputed either by the Assessing Officer or the learned CIT(A). Therefore, as no expenditure having been claimed by the assessee in the profit and loss account while computing its total income, no disallowance u/s 40A(3) can be made. Our above view is fortified by the decision of the Delhi Bench of the Tribunal in the case of M/s Saral Motors and General Finance Ltd. vs. ACIT (2008 (5) TMI 301 - ITAT DELHI-B ) wherein it was held that there cannot be disallowance of expenditure without any claim of allowance of expenditure having been made. Therefore, the disallowance in the instant case u/s 40A(3) cannot be made on this count also. We, therefore, set aside the orders of the lower authorities and delete the disallowance - Decided in favour of assessee Disallowance under the head bogus purchases - Held that:- Assessing Officer has himself allowed deduction for purchases of ₹ 2,45,000/- made from Kailash Porwal. Thus, part of the purchases was accepted from the said party by the Assessing Officer as genuine. He has doubted the purchases of ₹ 13,34,400/- only for the reason that payments were made in cash for them. The Assessing Officer has brought no material after verification to show that the purchases were bogus and the assessee has shown the same in its profit and loss account to reduce its profit. No material has been brought on record after comparing the material consumed in the year under appeal and in earlier year to show that the purchases are inflated by the assessee. It can be a case where the assessee due to business necessity has to make payments for materials through vouchers in cash but that alone cannot be a ground for disallowing the genuine business expenditure of the assessee. In our considered view, suspicion howsoever grave cannot take place of proof and entitle the Assessing Officer to make disallowance of genuine business expenditure claimed by the assessee. Therefore, we set aside the orders of the authorities below and vacate the disallowance.
|