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2013 (6) TMI 355 - AT - Income TaxInvocation of provisions of section 40A(3) - Addition u/s 69 - Held that - A perusal of the assessment order shows that in respect of the difference between the rough cash book and the ledger, the AO has been repeatedly claiming that the bills and vouchers had not been produced by assessee. In fact, the main ground for the disallowance is non-production of bills and vouchers by the assessee. In respect of the excess claim under different heads, though the assessee says that no bills and vouchers were demanded by the AO, the fact that the AO has mentioned that none of the bills and vouchers has been produced as also on account of the fact that before the CIT(A) also the assessee has not produced any of the bills and vouchers, this issue would have to be restored to the file of the AO for readjudication after granting the assessee adequate opportunity to produce all such evidence as are required to substantiate its claim. Difference between the payments made to the partners as per the statement recorded in the course of survey and as recorded in the regular books of account, this issue is also restored to the file of the AO for readjudication. If the payments have been offered to tax in the hands of the partners no disallowance to this extent shall be made in the hands of the firm. Appeal of the assessee partly allowed for statistical purposes.
Issues Involved:
1. Legality and timing of the assessment order. 2. Non-production of bills and vouchers by the assessee. 3. Invocation of provisions under Section 40A(3) of the Income Tax Act. 4. Discrepancy in payments made to partners. Detailed Analysis: 1. Legality and Timing of the Assessment Order: The assessee contended that the assessment order dated 31.12.2010, served on 01.02.2011, was backdated and thus non-est in law. The Tribunal analyzed Section 153 of the Income Tax Act, which uses the term 'make' rather than 'serve'. The Tribunal held that 'made' implies the order should be completed by the specified date, not necessarily served. The Tribunal disagreed with the precedent set by the Coordinate Bench in Durga Condev Pvt. Ltd., emphasizing that treating 'made' as 'served' would render the section unworkable. Consequently, the Tribunal found no substantial evidence to prove the order was backdated and upheld its legality. 2. Non-production of Bills and Vouchers by the Assessee: The assessee argued that the AO's disallowance due to non-production of bills and vouchers was unjustified, as the AO did not specify which vouchers were needed. The Tribunal noted that the AO repeatedly mentioned the non-production of bills and vouchers, and the assessee also failed to produce them before the CIT(A). Therefore, the Tribunal restored this issue to the AO for re-adjudication, granting the assessee an opportunity to provide the necessary evidence to substantiate its claims. 3. Invocation of Provisions under Section 40A(3) of the Income Tax Act: The assessee contended that the rough cash book entries, which were payments to partners and key employees for expenses, should not invoke Section 40A(3). The Tribunal agreed that if the payments recorded in the rough cash book were indeed for partners or key employees and subsequently recorded in the regular books, Section 40A(3) should not apply. This issue was also restored to the AO for re-adjudication, allowing the assessee to provide evidence supporting its claim. 4. Discrepancy in Payments Made to Partners: The AO disallowed payments to partners based on a partner's statement during the survey, which the assessee claimed was a misunderstanding. The Tribunal restored this issue to the AO, directing the assessee to show that the payments recorded in the regular books were offered to tax in the partners' hands. If substantiated, no disallowance should be made in the firm's hands. Conclusion: The Tribunal partly allowed the assessee's appeal for statistical purposes, restoring several issues to the AO for re-adjudication. The Tribunal emphasized the need for the assessee to provide adequate evidence to substantiate its claims regarding bills and vouchers, the application of Section 40A(3), and the discrepancy in payments to partners. Order Pronouncement: The order was pronounced and dictated in the open court, emphasizing transparency and adherence to procedural norms.
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