2000 (6) TMI 696 - AT - Income Tax

Tribunal affirms CIT(A)'s decision on cash payments, rules in favor of assessee on profit addition (j)

The Tribunal upheld the CIT(A)'s decision in both appeals, dismissing the Revenue's appeal regarding the deletion of addition made on account of cash ... Business disallowanc Issues:1. Appeal against deletion of addition made on account of cash payments in violation of section 40A(3) of the Income-tax Act.2. Appeal against confirmation of addition on account of profit on sale of goods.Analysis:Issue 1:The first issue in this case revolves around the deletion of an addition made by the Assessing Officer on account of cash payments in violation of section 40A(3) of the Income-tax Act. The CIT(A) deleted the addition, citing Rule 6DD(j) of the Income-tax Rules, 1962, as the payments were made to a party without a bank account at the assessee's location. The CIT(A) relied on the decision of the Punjab and Haryana High Court in CIT v. Brij Mohan Singh & Co. [1994] 209 ITR 753. The Tribunal agreed with the CIT(A) and emphasized that section 40A(3) must be read along with Rule 6DD(j), allowing for exceptions based on business expediency and genuine transactions. The Tribunal also referred to a previous case where a similar decision was upheld. Thus, the Tribunal upheld the CIT(A)'s decision to delete the addition, as the payment fell under the provisions of Rule 6DD(j), and dismissed the Revenue's appeal.Issue 2:The second issue pertains to the confirmation of an addition on account of profit on the sale of goods. The assessee contended that the issue was similar to a previous case where the Tribunal had ruled in favor of the assessee. The Tribunal noted that the Assessing Officer had not provided sufficient evidence to establish that the assessee had made the purchases, and the entries in the books were not conclusive. The Tribunal emphasized the lack of justification in making the addition and the failure to collect substantial evidence. Referring to the previous case, the Tribunal set aside the CIT(A)'s order and allowed the claim of the assessee, ultimately dismissing the Revenue's appeal.In conclusion, the Tribunal upheld the CIT(A)'s decision in both appeals, dismissing the Revenue's appeal in the first issue and allowing the assessee's appeal in the second issue.