2018 (5) TMI 1597 - AT - Income Tax

Disallowance u/s 40A(3) - addition on account of undisclosed purchase - Held that - the assessee made payment against purchases an amount exceeding ₹ 20,000/- in a day and thereby violating provision of section 40A(3) - issue is squarely covered in favour of the assessee by the decision of the Coordinate Bench of ITAT, Kolkata in assessee s own case, in ITA No. 1034/Kol/2016 - revenue was unable to produce any material to controvert the findings - thus addition is deleted - decided in favor of assessee. Undisclosed purchases - Amount of TDS deducted - Additions as per form 26AS - Held that - the total purchases debited in P&L a/c is ₹ 48,35,023/- whereas the amount shown in the Form No.26AS excluding TCS is to the tune of ₹ 47,31,926/- - thus the difference of ₹ 1,03,095/- is being added to the income of the assessee - since the assessee is not able to reconcile the difference - hence appeal filed by the assessee is partly allowed.

Summary

Issues:
1. Disallowance u/s 40A(3) - ?42,06,080/-
2. Undisclosed purchase of ?1,24,200/-
3. Addition of undisclosed bottle purchase - ?81,550/-
4. Addition of ?8,53,867/- as per alleged 26AS
5. Assessment of business Profit - ?54,57,290/-

Issue 1: Disallowance u/s 40A(3) - ?42,06,080/-
The Assessing Officer disallowed ?42,06,080/- under section 40A(3) as the assessee made payments exceeding ?20,000 in a day, violating the provision. The CIT(A) confirmed the addition. However, the ITAT Kolkata, relying on a previous case, held in favor of the assessee, deleting the disallowance as exceptional circumstances justified the cash payments. The addition was deleted as the Revenue failed to produce any material to challenge the findings.

Issue 2, 3, 4: Undisclosed Purchase & Additions
The Assessing Officer made additions for undisclosed purchases of ?1,24,200/-, undisclosed bottle purchases of ?81,550/-, and a difference in purchase amounts of ?8,53,867/- as per 26AS. The CIT(A) upheld these additions. The assessee provided a reconciliation statement showing a difference of ?1,03,095/- between the Profit & Loss account and Form No.26AS. The ITAT restricted the addition to this reconciled amount, as the assessee couldn't explain the difference, partly allowing the appeal.

Issue 5: Assessment of Business Profit
The assessee contested the assessment of business profit exceeding the purchase price and % of total sales as absurd and bad in law. However, this issue was not pressed during the hearing, focusing only on specific grounds related to disallowances and additions. No specific judgment or decision was mentioned related to this issue in the summary provided.

In conclusion, the ITAT Kolkata partly allowed the appeal, deleting the disallowance under section 40A(3) and restricting the additions related to undisclosed purchases and discrepancies in purchase amounts. The judgment was detailed and considered previous case law to decide in favor of the assessee on specific grounds of appeal.