Case Laws
Acts
Notifications
Circulars
Classification
Forms
Manuals
Articles
News
D. Forum
Highlights
Notes
🚨 Important Update for Our Users
We are transitioning to our new and improved portal - www.taxtmi.com - for a better experience.
⚠️ This portal will be discontinued on 31-07-2025
If you encounter any issues or problems while using the new portal,
please
let us know via our feedback form
so we can address them promptly.
Home
Issues:
1. Addition of Rs. 1,83,570 made by the Assessing Officer. 2. Determination of business income and addition of cash payments under section 40A(3). Detailed Analysis: 1. The appeal pertains to the addition of Rs. 1,83,570 made by the Assessing Officer for the assessment year 1984-85. The assessee, a building contractor, had initially shown total income at Rs. 1,39,630 in the return of income, which was later revised to Rs. 2,10,000 under the Amnesty Scheme. The Assessing Officer found discrepancies in the purchases of iron and steel, unexplained cash credits, and cash payments exceeding Rs. 2,500, leading to the addition in question. The CIT(A) upheld the addition, emphasizing the lack of evidence provided by the assessee to justify the cash payments. 2. The second issue involves the determination of business income and the addition of cash payments under section 40A(3). The CIT(A) determined the business income at Rs. 2,15,663, maintaining the gross profit rate but adjusting the gross receipts after verification. The primary grievance of the assessee was against the addition made under section 40A(3) for cash payments. The ITAT observed that after rejecting the books of account and applying a flat profit rate, there was no need to revisit the entries and make further additions based on cash payments. The ITAT highlighted that the purpose of section 40A(3) was to prevent fictitious transactions, not to penalize the assessee. Therefore, the ITAT concluded that the addition of Rs. 1,83,570 was unwarranted and deleted the same, noting that it would inflate the net profit rate beyond reason for the nature of the business. In conclusion, the ITAT ruled in favor of the assessee, deleting the addition of Rs. 1,83,570 as it was deemed unnecessary and unjustified after the application of the flat profit rate. The judgment emphasized the objective of section 40A(3) to prevent fictitious transactions rather than penalize the assessee, leading to the decision to overturn the addition based on cash payments.
|