2018 (3) TMI 1749 - AT - Income Tax

Addition u/s 40 A(3) - cash payments exceeding ₹ 20,000/- - cash payments relatable to Chandigarh Spun Pipe - HELD THAT - Submissions of the AR on facts cannot be accepted. No attempt has been made to demolish the conclusions drawn on facts. The argument that there was mistake by an Accountant remains un-substantiated and infact is shown to be not supported even in the explanation offered by the assessee in the facts of the present case. The explanation de-hors facts does not inspire any confidence what-so-ever. Accordingly, finding in agreement with the conclusion drawn by the CIT(A) in para 5 to appeal of the assessee is dismissed. For ready reference, relevant finding Amount paid in contravention of section 40 A(3) and its Entries with voucher numbers in which vouchers no, in the copy of account submitted entries has been split-up in the changed 23.12.2014 of account of Chandigarh Spun Pipe Co. submitted on 20.02.2015 of the CIT(A) upholding addition made in the assessment order upheld in the present proceedings - Decided against assessee.

Summary

Issues Involved:
1. Addition of ?24,77,000/- under Section 40A(3) of the Income Tax Act, 1961.
2. Alleged mistake by the accountant in submitting the account details.
3. Violation of the provisions of Section 40A(3).

Issue-wise Detailed Analysis:

1. Addition of ?24,77,000/- under Section 40A(3) of the Income Tax Act, 1961:
The assessee challenged the addition of ?24,77,000/- made under Section 40A(3) by the Assessing Officer (AO) during the scrutiny assessment. The AO had identified cash payments exceeding ?20,000/- in contravention of the provisions of Section 40A(3). The assessee's initial defense was that the accountant had made errors in the submitted account details. However, the AO provided a detailed breakdown of the cash payments, demonstrating that the payments were indeed made in excess of the permissible limit. The AO's findings were upheld by the Commissioner of Income Tax (Appeals) [CIT(A)], leading to the present appeal before the ITAT.

2. Alleged mistake by the accountant in submitting the account details:
The assessee claimed that the accountant had erroneously summarized the payments, leading to incorrect figures being submitted. An affidavit from the accountant was provided to support this claim. However, upon detailed examination, the AO found discrepancies in the revised account statements submitted by the assessee. The AO noted that the revised entries were not merely corrections of typographical errors but involved splitting of entries and changes in voucher numbers and dates. This indicated a deliberate attempt to circumvent the provisions of Section 40A(3). The CIT(A) also found that the revised entries were not credible and upheld the AO's findings.

3. Violation of the provisions of Section 40A(3):
The AO provided a comprehensive analysis, including specific examples, to demonstrate the violation of Section 40A(3). For instance, an original entry of ?30,000/- paid on 09.04.2011 was split into two entries of ?18,500/- and ?11,500/- on different dates in the revised account. Similarly, a payment of ?2,70,000/- on 27.04.2011 was split into multiple entries below ?20,000/- spread over several days. The AO concluded that these changes were not merely due to an accountant's error but were intentional modifications to avoid the provisions of Section 40A(3). The CIT(A) agreed with the AO's detailed reasoning and upheld the addition, dismissing the assessee's appeal.

Conclusion:
The ITAT, after considering the submissions and examining the records, found no reason to deviate from the conclusions drawn by the AO and the CIT(A). The tribunal noted that the arguments presented by the assessee were unsubstantiated and did not inspire confidence. The appeal was dismissed, and the addition of ?24,77,000/- under Section 40A(3) was upheld.

Order Pronounced:
The appeal of the assessee was dismissed, and the order was pronounced in the Open Court on 27.03.2018.