2011 (12) TMI 703 - AT - Income Tax

Summary

Issues involved:
The judgment by Appellate Tribunal ITAT Pune pertains to an appeal by the Revenue against the order of the Commissioner of Income-tax (Appeals)-III, Pune dated 25.2.2010, arising from an order dated 31.1.2005 passed by the Assessing Officer u/s 143(3) of the Income-tax Act, 1961 for the assessment year 2002-03.

Issue 1: Suppressed Sales and Gross Profit Addition
The first issue raised by the Revenue is regarding the addition of suppressed sales as undeclared income. The Assessing Officer added the suppressed sales as undeclared income, but the Commissioner of Income-tax (Appeals) restricted the addition to the gross profit earned on understated sales. The Tribunal affirmed the decision of the Commissioner, noting that the Assessing Officer's proposition of adding the entire amount of sales would result in an abnormal gross profit rate, inconsistent with previous years. The Tribunal found no evidence of unrecorded purchases beyond what was shown in the Profit & Loss account, supporting the Commissioner's decision.

Issue 2: Disallowance under Section 40A(3)
The second issue raised by the Revenue concerns the deletion of a disallowance of &8377; 3,30,899/- made under section 40A(3) of the Act. The Assessing Officer disallowed 20% of payments made in cash/bearer cheques, invoking section 40A(3). However, the Commissioner of Income-tax (Appeals) deleted the disallowance, citing Rule 6DD(f)(ii) which exempts payments for the purchase of produce of animal husbandry or dairy farming from the section 40A(3) prohibition. The Tribunal upheld the Commissioner's decision, stating that the payments in question fell under the exception provided by the rule.

Conclusion:
The Tribunal dismissed the Revenue's appeal, affirming the decisions of the Commissioner of Income-tax (Appeals) on both issues. The judgment was pronounced on the 15th Day of December, 2011.