2018 (9) TMI 1316 - AT - Income Tax

Addition of low house hold withdrawals - Held that - The assessee has disclosed total income of ₹ 4,59,640/- against total turnover of ₹ 10.28 crores (approx) and no cash has been withdrawn by her towards household expenses. The contention of the Ld. Counsel that assessee s husband took care of total household expenditure cannot justify that the assessee was not required to make any withdrawal for household expenses. In this give facts we find no inconsistency in the findings of Ld.CIT(A) confirming the addition of ₹ 1,00,000/-. Assessee s Ground No.2 stands dismissed. Disallowance u/s 40A(3) - Held that - The alleged transactions of making cash transactions as well as the modus operandi of the assessee of entering such transactions of M/s. Sai Impex of making huge purchase, huge sales and making the payments only in cash other than the bank holidays needs extensive verification. A.O also need to cross verify from Ms/. Sai Implex as to whether similar transactions of cash have been shown on the very same date in their books of accounts. We accordingly set aside this issue of disallowance u/s 40A(3) to the file of AO to make necessary verification along with the application of the provision of 40A(3) on all these transactions of cash payment in the light of various judgments referred and relied by the Ld. Counsel for the assessee during the course of hearing before us. Disallowance u/s 40A(3) is allowed for statistical purpose

Summary

Issues:
1. Addition of low household withdrawals at ?1,00,000
2. Disallowance under section 40A(3) of the Income Tax Act at ?1,00,72,000

Issue 1: Addition of Low Household Withdrawals

The assessee, a sole proprietor, disclosed income of ?4,59,640 against a turnover of ?10.28 crores, with no cash withdrawals for household expenses. The Assessing Officer estimated low household withdrawals at ?1,50,000, later reduced by the CIT(A) to ?1,00,000. The contention that the husband managed household expenses did not absolve the assessee from making withdrawals. The Tribunal found no inconsistency in the CIT(A)'s decision, dismissing the assessee's appeal related to low household withdrawals.

Issue 2: Disallowance under Section 40A(3)

The assessee made cash payments of ?1,00,72,000 to M/s. Sai Impex, with transactions exceeding ?20,000 on certain dates. The ledger showed significant credit balances with no transactions through cheques or bank drafts despite holding a bank account. The AO invoked section 40A(3) without detailed examination. Both parties agreed to set aside the issue for further verification by the AO. The Tribunal directed extensive verification of the cash transactions with M/s. Sai Impex and application of section 40A(3) by the AO, considering various judgments cited by the assessee. The appeal related to the disallowance under section 40A(3) was allowed for statistical purposes.

In conclusion, the Tribunal partially allowed the assessee's appeal, setting aside the disallowance under section 40A(3) for further examination by the Assessing Officer.