Addition towards Cash Payment u/s 40 A(3) will not sustain without Incriminating Material: ITAT [Read Order]

The Income Tax Appellate Tribunal (ITAT), Chennai bench has held that addition towards cash payment u/s 40A(3) will not sustain without incriminating material and deleted the addition made by the AO.

The assessee was represented by S Sridhar and the revenue was represented by Mr M Rajan

The appellant assessee appealed against the order of CIT(A) by alleging that the CIT(A) failed to appreciate the lack of seized materials and the non-consideration of the proviso below section 40A(3A) of the Act would vitiate the addition made in the computation of taxable total income. The assessee contended that in absence of any reference to incriminating materials found during the search, no addition can be made and stated that the addition made by the Assessing Officer towards disallowance u/s.40A(3) was without any reference to incriminating materials found during the search. The appellant claimed that cash found during the search pertains to the assessment year 2010-11 was rejected by the Assessing Officer without any valid reasons, except stating that ‘recently’ means the assessment year 2012-13.

The respondent submitted that the assessee was subjected to a search and during the search, various incriminating materials were found which pointed out undisclosed income not offered to tax and rejected the argument of the assessee. It is a well-established principle that in absence of incriminating materials found during the search for each assessment year, no additions can be made in the concluded assessments

It was concluded that the time limit for statutory notice u/s.143(2) of the Act, was expired on 30th September 2009 and observed that no addition can be made in the assessment framed u/s.143(3) r.w.s 153A of the Act, in absence of any incriminating materials found during search qua, each assessment year. Further observed that the reasons given by the Assessing Officer were purely based on suspicion and surmises manner, without there being any contrary materials to reject the claim of the assessee.

The Coram consisting of Shri V Durga Rao, JM and Shri G Manjunatha, AM, has held that the additions made by the AO cannot be sustained and deleted the additions made by the Assessing Officer towards disallowance of expenses u/s.40A(3) of the Act and additions towards closing stock. The tribunal observed that the respondent failed to produce further evidence to justify agricultural income declared from those lands, including sale receipts etc and directed the Assessing Officer to restrict addition towards agricultural income to Rs.3,00,000/- as against disallowance of Rs.5,00,000/- made by the Assessing Officer. The appeal filed by the assessee was partly allowed.

To Read the full text of the Order CLICK HERE

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