2018 (6) TMI 58 - AT - Income Tax

Disallowance of expenses u/s.40A(3) - double expenditure - Held that - We find that the CIT(A) while dealing with the disputed issue of disallowance u/s.40A(3), observed that the disallowance by the AO u/s.40A(3) of the Act pertaining to the same expenses already disallowed by the tax auditor will lead to double taxation. No good reason to interfere with the order of CIT(A) on this issue and the same is upheld. - Decided in favour of assessee. Unexplained expenditure - Held that - CIT(A) while dealing with the disputed issue has observed that the assessee has proved from the evidences of its regular cash book and bank statement that all the transactions as per seized cash panna are duly recorded in the regular books of accounts and deleted the addition - DR could not bring any new facts on record to controvert the above findings of the CIT(A). - Decided in favour of assessee.

Summary

Issues:
1. Disallowance of expenses under section 40A(3).
2. Addition of unexplained expenditure under section 69C.

Issue 1: Disallowance of expenses under section 40A(3):
The Revenue appealed against the CIT(A)'s order deleting the addition of expenses under section 40A(3) for the assessment year 2012-2013. The Revenue contended that certain expenses were incurred in cash, violating section 40A(3) of the Income Tax Act, 1961. However, the CIT(A) noted that the expenses already disallowed by the tax auditor would lead to double taxation if further disallowed by the AO. The CIT(A) found that the disallowance by the AO was not sustainable as the same expenses were already included in the disallowance by the tax auditor. The Tribunal upheld the CIT(A)'s decision, stating that there were no new facts presented by the Revenue to challenge the findings.

Issue 2: Addition of unexplained expenditure under section 69C:
Regarding the addition of unexplained expenditure under section 69C, the CIT(A) observed that the assessee had proven from regular cash books and bank statements that all transactions noted in the seized cash records were duly recorded in the regular books of accounts. The CIT(A) found that the AO had wrongly treated the cash transactions as unexplained or disallowable expenses without considering the source of funds and other expenses. The Tribunal concurred with the CIT(A)'s decision, stating that the AO's conclusion was based on presumption and ignoring crucial evidence provided by the assessee. As the transactions were found to be part of regular accounting records, the addition of unexplained expenditure was deemed unsustainable and was deleted. The Tribunal dismissed the Revenue's appeal, upholding the CIT(A)'s order.

In conclusion, the Tribunal dismissed the Revenue's appeal, affirming the CIT(A)'s decisions on both the disallowance of expenses under section 40A(3) and the addition of unexplained expenditure under section 69C for the assessment year 2012-2013.