SRI.R.P.NARAYANA RAO,MYSORE vs. INCOME TAX OFFICER, MYSORE

The assessee has raised the following grounds :

4. Ground Nos.2 to 5 are regarding disallowance made under Section 40A(3) of the Income Tax Act, 1961 (in short 'the Act') . The Assessing Officer noted that the assessee has shown cash payments in excess of Rs.20,000 to 11 parties for purchase of textiles. The details of the payments are reproduced by the Assessing Officer in para 2 as under :

Before the Tribunal, the learned Authorised Representative of the assessee has submitted that out of Rs.4,39,000, a sum of Rs.1,90,009 was paid through DD and therefore the said amount was not hit by the provisions of Section 40A(3) of the Act. The learned Authorised Representative of the assessee has further contended that as per the unamended provisions of section 40A(3) which are applicable for the year under consideration if the individual payment is less than Rs.20,000 then no disallowance can be made under this section by clubbing together various payments made to the same party. The learned

On the other hand, the ld. DR has submitted that it is clear that the assessee has splitting the amount into various small payments made to same party in a single day with the motive and object to circumvent to Section 40A(3) of the Act. Thus the learned Departmental Representative has contended that splitting of payment is not a separate transaction but only to avoid the provisions of section 40A(3) of the Act then the disallowance made by the Assessing Officer is justified.

Having considered the rival submissions as well as the relevant material on record, it is noted that the assessee has paid cash to same party in a single day by splitting it to Rs.15,000 each. It is pertinent to note that the said payment is not representing separate individual transaction but the payment has been made in respect of a single transaction. The numbering given on the cash vouchers reflect that more than one payment of Rs.15,000 to each party has been made under same manual number though the printed voucher number is different. Thus when more than one payment has been made on a single day to a single party in respect of single transaction then it is not a separate payment but it is only splitting of the amount which is more than Rs.20,000 into small amounts into Rs.15,000. Therefore when a payment in respect of a single transaction has been made to a party on same date though it may be shown by splitting in Rs.15,000 each then the total sum paid by the assessee in respect of a single transaction will be counted for the purpose of provisions of Section 40A(3) of the Act. Only when each payment represents a separate transaction then as per the unamended provisions of section 40A(3), the same will not attract the disallowance under the said section. Therefore I do not find any substance or merits in the contention of the learned Authorised Representative that as per the unamended provisions of the Act, the transactions of the assessee do not attract the provisions of section 40A(3). As regards the claim of the assessee that out of Rs.4,39,000, a sum of Rs.1,09,000 was paid through DD, this fact has not been examined by the authorities below

Ground No.6 is regarding addition under Section 68 of the Act on account of unexplained loan credit. The Assessing Officer noted that the assessee has shown the creditors in the name of 8 parties total amounting to Rs.1,40,000.

Before the Tribunal, the assessee has filed the additional evidence regarding the confirmation as well as address and ID proof. The learned Authorised Representative of the assessee has submitted that the additional evidence may be remitted to the Assessing Officer for verification.

On the other hand, the learned Departmental Representative has vehemently opposed to the additional evidence filed by the assessee at this stage.

Having considered the rival submissions as well as the relevant material on record, it is noted that the addition under Section 68 of the Act was made by the authorities below for want of the necessary details of address and creditworthiness of the loan creditors. The assessee has now filed the additional evidence in the shape of address and ID proof placed at page Nos.15 to 22 of the paper book. Having regard to the facts and circumstances of the case, when the addition has been made for want of necessary details and evidence, the additional evidence filed by the assessee is remitted to the record of the Assessing Officer for verification and adjudication of the issue.

Ground No.7 is regarding addition on account of suppressed sales.

During the course of appellate proceedings, the information was received from the sales tax department regarding unaccounted sale of the assessee.

The learned Authorised Representative of the assessee has submitted that the enhancement of assessment on account of suppressed sales of the total amount is not justified and only a gross profit addition can be made on this amount.

On the other hand, the learned Departmental Representative has relied upon the order of authorities below and submitted that when the assessee has not claimed any expenditure against this suppressed sales, then the entire amount has to be added to the income of the assessee.

Having considered the rival submissions as well as the relevant material on record, it is noted that on the basis of the information received from the sales tax department, the CIT (Appeals) found that there is unaccounted sale of Rs.83,601. The CIT (Appeals) has further noted that all relatable expenditure were already claimed and allowed in the assessments and therefore the entire amount was directed to be added to the income of the assessee.

In the result, the appeal of the assessee is partly allowed.