DILIP KUMAR KHETAN,AMBEDKARNAGAR vs. INCOME TAX OFFICER, AMBEDKARNAGAR

ITA 18/ALLD/2020Status: DisposedITAT Allahabad05 July 2021AY 2013-1411 pages
AI SummaryPartly Allowed

What did the Tribunal hold?

The Tribunal held that the AO cannot make additions based solely on a low GP rate if the books of account are not found to be defective. Regarding cash payments, the Tribunal noted that the third proviso to Section 40A(3) allows a higher limit of Rs. 35,000 for payments to transport operators, and since none of the payments exceeded this limit, no disallowance was warranted.

What were the facts?

The assessee declared a low Gross Profit (GP) rate of 0.65% on sales of Rs. 17.07 crores. The Assessing Officer (AO) made an addition of Rs. 67,840 by applying a GP rate of 0.69%, considering past years' rates. The assessee also incurred expenses paid in cash, leading to disallowances under Section 40A(3).

What were the issues?

Whether additions can be made solely on the ground of low GP rate without rejecting the books of account, and whether cash payments exceeding Rs. 20,000 but within the Rs. 35,000 limit for transport operators attract disallowance under Section 40A(3).

Which sections of the Income-tax Act were involved?

Section 40A(3),Section 145(3)

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Cases cited in this judgment(2)Show list

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Income Tax Appellate Tribunal, ALLAHABAD BENCH ‘SMC’ ALLAHABAD

Before: SHRI.VIJAY PAL RAO

For Appellant: Shri Shailendra Kumar Mishra
For Respondent: Shri A.K. Singh, CIT ( Sr. DR)
Hearing: 13.07.2021Pronounced: 15.07.2021

PER SHRI VIJAY PAL RAO, JUDICIAL MEMBER:

This appeal by the assessee is directed against the order dated 17.10.2019 of Ld. CIT(A)-1, Lucknow for the A.Y. 2013-14. 2. The assessee has raised the following grounds.:- “1. That the learned Commissioner of Income-tax (Appeals) has erred in law and on facts in confirming the arbitrary extra profit addition of Rs. 67,840/- which was made by the A.O. , without considering the audit report.

2.

That the learned Commissioner of Income-tax (Appeals) has erred in law and on facts in confirming the disallowance of expenses of Rs.20,892 @ 12.5% out of shop expenses, travelling expenses and Vehicle running and maintenance expenses as against addition of Rs.41,78

The order continues below.

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