2016 (10) TMI 1373 - AT - Income Tax

Addition u/s 40A(3) - return of income was filed by the assessee on presumptive basis u/s 44AF - HELD THAT - We find merit in the submission of assessee that similar issue was decided by this Bench in favour of assessee as respectfully following the decision of ITAT Ahemdabad Bench in the case of Gopalsingh R Rajpurohit 2004 (7) TMI 271 - ITAT AHMEDABAD hold that once the assessee has filed his return u/s 44AF no further disallowance can be made u/s 40A(3) of the Act. It is noteworthy that in this case no trading irregularity was found and addition has been sustained only on technical issue of Section 40A(3) of the Act. The presumptive system of tax u/s 44AF starts with non-obstante clause and overrides other provisions. There is no justification in making the addition which is deleted. Since the addition is deleted on merits there is no need to go into alternative ground. Thus the appeal of the assessee is allowed.

Summary

Issues: Appeal against addition made under section 40A(3) of the Income Tax Act, 1961 for the assessment year 2007-08.

In this judgment, the assessee appealed against the addition of Rs. 2,99,981 made under section 40A(3) of the Income Tax Act, 1961 for the assessment year 2007-08. The main contention was that since the return of income was filed on a presumptive basis under section 44AF, no further disallowance under section 40A(3) could be justified. The appellant argued that the ld. CIT(A) erred in sustaining the addition without considering this aspect. The appellant also claimed that exceptional circumstances under Rule 6DD and supporting evidence in the form of affidavits were ignored by the ld. CIT(A) in confirming the disallowance. During the hearing, the appellant's representative pointed out a similar issue decided in the appellant's favor by ITAT Jaipur Bench in a previous case. The appellant relied on the decision of ITAT Ahemdabad Bench in a related case to support their argument that no further disallowance can be made under section 40A(3) once the return is filed under section 44AF. The ITAT, following previous decisions, allowed the appeal and directed the deletion of the addition, stating that the issues raised by the appellant were covered by previous ITAT orders. The appeal was allowed, and the addition was deleted based on the merits of the case and the precedents cited.