SAIYED ZAHARUL ALAM,MURSHIDABAD vs. I.T.O., WARD - 42(1), MURSHIDABAD

ITA 2233/KOL/2026Status: DisposedITAT Kolkata16 October 2026AY 2013-20147 pages
AI SummaryPartly Allowed

What were the facts?

The assessee, Saiyed Zaharul Alam, an individual engaged in the business of purchasing and selling raw hides and skins, filed his return for AY 2013-14. The Assessing Officer (AO) initiated proceedings under Section 147 and made additions of Rs. 3,98,667/- to gross profit and Rs. 38,44,000/- under Section 69A. The CIT(A) set aside this assessment for de novo review. The subsequent assessment by the AO on 06.03.2026 included additions of Rs. 10,76,000/- for disallowed expenses, Rs. 17,66,159/- for cash expenditure violating Section 40A(3), and Rs. 3,98,668/- for suppressed sales. The CIT(A) upheld these additions in an order dated 14.05.2026. The assessee appealed against the disallowance of expenses (Rs. 10,76,759/-, being 20% of expenses) and the disallowance under Section 40A(3) (Rs. 17,66,159/-).

What did the Tribunal hold?

The Tribunal held that the disallowance of expenses of Rs. 10,76,759/- was not justified. The AO had not found any expenditure to be bogus or unsupported by vouchers, nor had he rejected the audited books of account. The disallowance was based on mere conjecture due to discrepancies in nomenclature used by an illiterate accountant, which were clarified. Therefore, the addition was directed to be deleted. Regarding the addition under Section 40A(3), the Tribunal found that the AO had not sufficiently examined the assessee's contentions regarding payments to different persons, business expediency, and the applicability of exceptions under Rule 6DD. Consequently, this issue was set aside and remitted back to the AO for further verification and re-determination. The assessee was directed to furnish necessary details, and the AO was given liberty to make inquiries. The ratio for the first issue is that disallowance of expenses without rejecting books of account and without specific findings of bogus or unsupported expenditure is arbitrary. For the second issue, the ratio is that the AO must thoroughly examine the applicability of exceptions under Rule 6DD before invoking Section 40A(3).

What were the issues?

1. Whether the disallowance of 20% of expenses amounting to Rs. 10,76,759/- is justified without rejecting the assessee's books of account, given that the AO did not find any expenditure to be bogus or unsupported by vouchers? (Question of law and fact, turning on Section 143(3) and general principles of disallowance). 2. Whether the disallowance of Rs. 17,66,159/- under Section 40A(3) is attracted, considering the assessee's contention that cash payments for raw material (hides and skins) are exempt under Rule 6DD(e) and that no single payment exceeded Rs. 20,000/- to a single person in a day? (Question of law and fact, turning on Section 40A(3) and Rule 6DD(e)). Assessee's arguments: For the first issue, the assessee argued that the disallowance was arbitrary as the AO did not reject the audited books of account and failed to point out defects in the submitted clarifications. Reliance was placed on PCIT v. Forum Sales (P) Ltd. For the second issue, the assessee contended that Rule 6DD(e) provides an exception for payments for produce of animal husbandry, including hides and skins, and that no single payment exceeded Rs. 20,000/-. Revenue's arguments: The revenue argued that the impugned additions should be upheld as the CIT(A) had considered all contentions and no interference was warranted.

Which sections of the Income-tax Act were involved?

Section 147,Section 69A,Section 40A(3),Section 250,Section 143(3)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, “(SMC

Before: Shri Yogesh Kumar US & Shri Gopalan Gurusamy

Per Gopalan Gurusamy, AM: This is an appeal preferred by the assessee against the order of the Ld. Commissioner of Income Tax (Appeals)-NFAC, Delhi (hereinafter referred to as the “Ld. CIT(A)”] passed u/s 250 of the Act dated 14.05.2026 for the AY 2013-14 in Appeal No. NFAC/2012- 13/10588668. 2 Assessment Year: 2013-14 Saiyed Zaharul Alam

2.

The assessee, an individual has filed his return of income for AY 2013-14 declaring a total income of Rs. 9,75,610/-. The Assessing Officer initiated proceedings u/s 147 of the Act, based on certain information and, thereafter, completed the assessment o

The order continues below.

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