2015 (8) TMI 74 - AT - Income Tax

Addition on the basis of statement given by assessee at the time of survey - CIT(A) deleted the addition - Held that - A.O. without giving any reason whatsoever and addition of ₹ 60 lakhs was made by him merely on the basis of statement made by the assessee during the course of survey without giving any basis to corroborate the same. As rightly pointed-out by the assessee and taken note by the Ld. CIT(A), there was a clear down-fall in the sales of the assessee during the course of post survey period. Moreover, net profit of 9% was declared by the assessee on the entire sales for the year under consideration in the return of income filed and the same being fair and reasonable in the facts and circumstances of the case, the Ld. CIT(A) held that there was no justification in making a further addition of ₹ 60 lakhs which would have given an unusual higher net profit rate of 34%. Having regard to all the facts of the case, we find no infirmity in the impugned order of the Ld. CIT(A), deleting the addition of ₹ 60 lakhs made by the A.O. merely on the basis of statement made by the assessee during the course of survey - Decided against revenue. Addition under section 40A(3) on account of cash payments exceeding ₹ 20,000 - CIT(A) deleted the addition - Held that - . CIT(A) has deleted the said disallowance made by the A.O. on the ground that individual payments did not exceed ₹ 20,000, there is nothing either in his impugned order or even in the details furnished by the assessee in the paper book to establish the same. An opportunity may be afforded to the A.O. to verify this aspect. Since the Ld. Counsel for the assessee has no objection in this regard, we set aside the order of the Ld. CIT(A) on this issue and restore the matter to the file of A.O. for deciding the same afresh, after verifying the stand of the assessee that the individual payments made in cash did not exceed ₹ 20,000 at a time. - Decided in favour of revenue for statistical purposes.

Summary

Issues:
1. Addition of Rs. 60 lakhs based on statement during survey
2. Disallowance under section 40A(3) for cash payments exceeding Rs. 20,000

Issue 1: Addition of Rs. 60 lakhs based on statement during survey

The Revenue filed an appeal against the deletion of an addition of Rs. 60 lakhs made by the Assessing Officer (A.O.) for A.Y. 2009-2010 in the case of M/s. Srinilaya A.R. Projects. The assessee, a partnership firm engaged in the construction business, admitted this additional income during a survey under section 133A. However, the assessee did not include this amount in the return of income filed for the relevant year, leading to the A.O. adding it to the total income. The assessee explained that the admission was based on anticipated sales, but actual sales figures showed a clear downfall post-survey. The assessee declared a net profit of 9% on total sales, which was deemed reasonable. The Commissioner of Income Tax (Appeals) [CIT(A)] accepted the assessee's explanation, noting the lack of justification for the additional income. The Income Tax Appellate Tribunal (ITAT) upheld the CIT(A)'s decision, emphasizing the absence of a valid basis for the A.O.'s addition and the reasonable profit declared by the assessee.

Issue 2: Disallowance under section 40A(3) for cash payments exceeding Rs. 20,000

The A.O. disallowed Rs. 13,49,252 under section 40A(3) for cash payments exceeding Rs. 20,000 made by the assessee. The CIT(A) deleted this disallowance, stating that some payments were made in cash to the Head of laborers for individual payments below Rs. 20,000 each, and the remaining amount represented aggregate payments below Rs. 20,000 on a single day. However, the Revenue contended that all payments exceeded Rs. 20,000 and sought verification. The ITAT agreed with the Revenue, setting aside the CIT(A)'s decision and instructing the A.O. to re-examine the individual payment amounts to ensure compliance with the cash payment limit. The issue was restored to the A.O. for further assessment.

In conclusion, the ITAT partly allowed the Revenue's appeals for statistical purposes, upholding the addition of Rs. 60 lakhs in one case and remanding the disallowance under section 40A(3) for further verification in both cases.