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2023 (6) TMI 734 - ITAT CHENNAIReopening of assessment u/s 147 - Reopening beyond period of four years - establishment of failure of the assessee to disclose fully and truly all material facts - disallowance of cash payment u/s. 40A(3) - HELD THAT:- We find that the reasons recorded for reopening of assessment clearly establishes failure of the assessee to disclose fully and truly all material facts necessary for assessment and thus, in our considered view the proviso to section 147 does not apply to the case of the assessee. Audit objection - As we find that although the basis for reopening of assessment may be audit objection, but on perusal of reasons recorded for reopening of assessment, it is very clear that the AO has established escapement of income and there is a live link between reasons and escapement of income and thus, we reject second ground of the assessee. Reopening of assessment in the given facts and circumstances of this case is on valid grounds and thus, the grounds of appeal taken by the assessee challenging validity of reopening of assessment are dismissed. Additions towards disallowance of cash payment in excess of prescribed limit - AO has disallowed 10% of cash expenses on the ground that the assessee could not furnish necessary books of accounts and other evidence to justify cash payment made in respect of purchase of milk - HELD THAT:- Although the assessee claims to have earned less than 1% net profit, but could not justify said profit with necessary evidence. Since, both the parties failed to prove their case with necessary evidence and reasons, in our considered view to settle dispute between the assessee and the Assessing Officer, a reasonable amount of disallowance needs to be estimated. Assessee is a distributor for milk product and also in this line of business, the percentage of profit is very less, we deem it appropriate to direct the Assessing Officer to disallow 4% of cash expenses. Accordingly, the AO is directed to disallow 4% on total cash expenses in excess of prescribed limit. CIT(A) in directing AO to verify the applicability of provisions of Rules 6DD(e) of the I.T. Rules, 1962, on the ground that the CIT(A) does not have any power to set aside the appeal to the AO - We find that the ld. CIT(A) in principal, approved the findings of the Assessing Officer on disallowance of cash expenditure in excess of prescribed limit u/s. 40A(3) of the Act, however set aside the issue for the limited purpose of verification of claim of the assessee in light of provisions of Rules 6DD(b) of the I.T. Rules, 1962 on the ground that M/s. Tamilnadu Co-operative Milk Producers’ Federation Limited is a Government entity or not. In our considered view, there is no error in the reasons given by the CIT(A) to give directions to the Assessing Officer to verify the claim of the assessee in light of relevant provisions of I.T. Rules, 1962 and thus, we reject the ground taken by the revenue and dismiss appeal filed by the revenue.
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