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2022 (9) TMI 1311 - ITAT RAJKOTAddition of expenditure out of the income disclosed during the survey proceedings - AO also found that the impugned amount of expenditure was incurred in cash and therefore, the same cannot be allowed as deduction by virtue of the provision of Section 40A(3) - AO disallowed the same and added to the total income of the assessee - HELD THAT:- We find that the genuineness of the construction expenses has nowhere been doubted by the authorities below. What has been doubted is this that the assessee will claim the WIP as an express in the subsequent year against the sales. Thus, effectively the assessee will get the benefit representing the construction expenses. Once the undisclosed income of the assessee has been admitted by the revenue then the corresponding expenses incurred out of such income should also be allowed as deduction until and unless claim of the assessee is bogus. However, the case before us is not of bogus expenses. Disallowance made under the provisions of Section 40A(3) - We note that expenses claimed by the assessee were incurred out of the unaccounted income which has already been suffered to tax. Therefore, any further disallowance under the provisions of Section 40A(3) of the Act would lead to the double addition to the total income of the assessee which is unwanted under the provisions of law. Furthermore, if the assessee claims the expenses but at the same time the assessee has also increased its WIP by the said amount which makes the same as tax neutral. Thus, the claim as such was not made by the assessee for any deduction in the year under consideration. In view of the above and after considering the facts in totality, we are not inclined to uphold the finding of the authorities below. Accordingly, we set-aside the order of the Ld. CIT-A and direct the AO to delete the addition made by him. Hence, the ground of appeal of the assessee is allowed.
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