2013 (10) TMI 1293 - AT - Income Tax

Disallowance of unexplained investment - difference in purchases made by the assessee - Held that - The burden lay on the Department to prove that the assessee made the purchases. In our opinion no addition can be made merely on the basis of assumption and presumption. There may be various reasons that other party might have shown sales to the assessee and in fact assessee would have not made purchases. Subjection whatever wrong may be, it cannot take the shape of actuality. If the Assessing Officer did not agree with the purchases made by the assessee, the onus is on the Assessing Officer to prove by bringing relevant material that in fact the assessee has made purchases. Merely there is a difference in the reconciliation of the accounts of the suppliers and the assessee, it cannot be presumed that the assessee has made purchases outside the books of account. Under these facts and circumstance, we are of the opinion that it is not a fit case that the addition can be sustained. Jurisdiction under section 263 can be invoked if both conditions, i.e., that the order passed by the Assessing Officer is erroneous and it is prejudicial to the interests of the Revenue. If only one of the conditions is satisfied, the jurisdiction under section 263 cannot be invoked. We noted from the assessment order that the Assessing Officer has not made any disallowance under section 40A(3) of the Act. It is apparent from the provisions of section 40A(3) that prior to substitution of this provision by the Finance Act, 2008, with effect from April 1, 2009, this provision does not require that the aggregate of the payment made to a person in a day has to be taken into account for the purpose of computing the limit of ₹ 20,000. - there is no violation of the provisions of section 40A(3) and, therefore, there is no error in the order of the Assessing Officer. We also noted from the assessment order that the Assessing Officer at page 4 had duly considered the discount given by the assessee and on this account, the Assessing Officer made the disallowance to the extent of ₹ 31,458. It is settled law in view of the decision of the hon'ble Supreme Court in the case of Malabar Industrial Co. Ltd v. CIT 2000 (2) TMI 10 - SUPREME Court that unless a view taken by the Assessing Officer is unsustainable in law, it cannot be said that the order passed by the Assessing Officer is erroneous and prejudicial to the interests of the Revenue. No error in the order of the Assessing Officer - order under section 263 is quashed - Decided in favour of assessee.

Summary

Issues:
1. Sustenance of addition for suppression of purchases.
2. Validity of invoking section 263 for excess cash payments.

Analysis:

Issue 1: Sustenance of addition for suppression of purchases
The appeal was filed against an order concerning the assessment year 2008-09 under section 143(3) of the Income-tax Act, 1961. The primary contention was the sustenance of an addition of Rs. 1,27,733 by the Commissioner of Income-tax (Appeals) related to suppression of purchases. The assessee, engaged in wholesale medicine business, maintained audited accounts without adverse comments. The dispute centered on unaccounted investment in purchases. The Assessing Officer noticed a difference in purchase figures between the assessee and suppliers, leading to the addition. However, the Tribunal noted discrepancies in the assessment, emphasizing the need for concrete evidence to prove unaccounted purchases. Relying on legal precedent, the Tribunal highlighted the burden of proof on the Department to establish actual purchases outside the books of account. Considering the lack of substantial evidence, the Tribunal ruled in favor of the assessee, deleting the addition.

Issue 2: Validity of invoking section 263 for excess cash payments
In another appeal for the same assessment year, the order under section 263 was challenged due to alleged violations of section 40A(3) regarding excess cash payments. The Commissioner invoked section 263 based on discrepancies in cash payments exceeding Rs. 20,000 to specific parties. The Tribunal scrutinized the assessment records and ledger accounts, concluding that the Assessing Officer's order was not erroneous. It highlighted that the provision of section 40A(3) did not mandate aggregating payments to a person in a day before April 1, 2009. As the cash payments to individual parties did not breach the limit, the Tribunal found no violation of section 40A(3). Additionally, it emphasized that unless the Assessing Officer's decision was legally unsustainable, invoking section 263 was unwarranted. Consequently, the Tribunal overturned the order under section 263, ruling in favor of the assessee.

In both cases, the Tribunal's decisions underscored the importance of concrete evidence and adherence to legal provisions while assessing tax liabilities, ultimately safeguarding the rights of the taxpayer.