2010 (4) TMI 1124 - AT - Income Tax

Summary

Issues Involved: Disputed additions u/s.40A(3) and u/s.68 of the Income-tax Act, 1961.

Addition u/s.40A(3):
The Assessing Officer disallowed 20% of cash payments made by the assessee, adding it to the total income. The CIT(A) confirmed this action stating the payments did not fall under exceptional circumstances. The AR did not dispute the excess cash payments but failed to prove they were exceptional. The Tribunal upheld the disallowance as justified, dismissing the appeal.

Addition u/s.68:
The Assessing Officer observed discrepancies in the cash book and sales invoices, suspecting the introduction of secret funds. He added the amount of unexplained fund utilization to the total income. The CIT(A) upheld this decision. The AR argued that unrecorded cash receipts balanced the negative cash, but lacked evidence. The Tribunal found the negative balance unexplained but limited the addition to the peak negative balance, ordering only a portion to be added to the income. Consequently, the appeal was partly allowed.