The Income Tax Appellate Tribunal (ITAT), Patna Bench has held that no evidence of tax evasion by showing fictitious or false transactions and deleted the addition of expenditure under section 40A(3).
The appellant, Smt. Heera Mani Devi, L/H of Late Shri Ashok Kumar, is engaged in the business of trading medicine and is the stockist of H. L. Medicines. During assessment proceedings, the Assessing Officer disallowed the purchase made in cashthat exceeded Rs.20,000/- in a single day which is contrary to the provisions of section 40A(3) of the Act. The CIT(A) confirms the addition; hence the appellant approached the ITAT.
The counsel for the appellant submitted that the purchases were made against different bills and none of such bills exceeded Rs.20,000/-. The counsel further submitted that the value of each invoice would not be hit by the provisions of section 40A(3) of the Act as each invoice has to be considered as a separate contract.
The Coram of Mr. Sanjay Garg, Judicial Member, and Mr. Girish Agrawal, Accountant Member observed that the intention behind the introduction of provisions of section 40A(3) of the Act, is curbing expenditure in cash and to counter tax evasion.Both the parties i.e., the purchaser (assessee) and the seller (M/s. Trishul Agency) duly recorded in their respective books of accounts the purchases and sales.
The Tribunal relying on the decision of Patna ITAT in the case of Ambika Prasad Gupta has allowed the appeal and directed the AO to delete the addition of Rs.17,43,683/- made by invoking section 40A(3) of the Act.
Mr. Ashish Agrawal, CA,and Mr. Rupesh Agrawal have appeared on behalf of the appellant and respondent respectively.
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