2013 (12) TMI 1710 - AT - Income Tax

Additions to the assessee's income on account of unaccounted credits - Disallowance u/s 40A(3) on payments made in cash - HELD THAT - Alleged cash payments are appearing in bank statement of payee and not being cash payments. Also , books of the assessee were duly tallied with the books of the payee company and the payment of purchases were duly settled periodically. In 1995 (8) TMI 108 - ITAT PUNE , it was held that since the genuineness of payment was proved and the accounts were tallying, it is an allowable expenditure. Decision in favor of assessee.

Summary

Issues involved: Appeal against deletion of additions to income u/s 40A(3) and unaccounted credits.

Deletion of additions to income u/s 40A(3): The assessee, a consignment agent, made purchases on statutory forms and through various modes of payment including account payee cheques and direct bank deposits. The ld. CIT(A) found the purchases genuine and in compliance with statutory requirements. The appellant's books tallied with the payee company's, and the payments were settled periodically. The Assessing Officer's suspicion arose due to a time gap in entries, but no contrary evidence was presented. Citing judicial precedents, the ld. CIT(A) held that the payments fulfilled the criteria of Section 40A(3) and were allowable expenditures. The appeal of the Revenue was dismissed, affirming the CIT(A)'s conclusion.

Deletion of unaccounted credits: The Assessing Officer made additions to the assessee's income on account of unaccounted credits. However, the ld. CIT(A) deleted the addition after considering the appellant's submissions and relevant documents. It was established that the appellant, as a consignment agent, made genuine purchases through banking channels, with payments reflected in bank statements. The ld. CIT(A) noted that the purchases were duly recorded and matched the opening and closing balances of both parties. Citing judicial pronouncements, the ld. CIT(A) concluded that the addition made by the Assessing Officer was not justified. The ground of appeal was allowed, and the addition was deleted.

This judgment highlights the importance of maintaining proper documentation and compliance with statutory requirements in financial transactions to avoid unwarranted additions to income.