ITAT decision: Rs. 60 lakh addition deleted, Rs. 13.49 lakh disallowance upheld

The ITAT upheld the deletion of an addition of Rs. 60 lakhs made by the A.O. for A.Y. 2009-2010, emphasizing lack of justification for the additional income declared during a survey. However, the ITAT set aside the CIT(A)'s decision to delete a disallowance of Rs. 13,49,252 under section 40A(3) for cash payments exceeding Rs. 20,000, instructing further examination by the A.O. to ensure compliance with the cash payment limit. The ITAT partly allowed the Revenue's appeals, upholding one addition and remanding the disallowance for further verification.

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Issues:
1. Addition of Rs. 60 lakhs based on statement during survey
2. Disallowance under section 40A(3) for cash payments exceeding Rs. 20,000

Issue 1: Addition of Rs. 60 lakhs based on statement during survey

The Revenue filed an appeal against the deletion of an addition of Rs. 60 lakhs made by the Assessing Officer (A.O.) for A.Y. 2009-2010 in the case of M/s. Srinilaya A.R. Projects. The assessee, a partnership firm engaged in the construction business, admitted this additional income during a survey under section 133A. However, the assessee did not include this amount in the return of income filed for the relevant year, leading to the A.O. adding it to the total income. The assessee explained that the admission was based on anticipated sales, but actual sales figures showed a clear downfall post-survey. The assessee declared a net profit of 9% on total sales, which was deemed reasonable. The Commissioner of Income Tax (Appeals) [CIT(A)] accepted the assessee's explanation, noting the lack of justification for the additional income. The Income Tax Appellate Tribunal (ITAT) upheld the CIT(A)'s decision, emphasizing the absence of a valid basis for the A.O.'s addition and the reasonable profit declared by the assessee.

Issue 2: Disallowance under section 40A(3) for cash payments exceeding Rs. 20,000

The A.O. disallowed Rs. 13,49,252 under section 40A(3) for cash payments exceeding Rs. 20,000 made by the assessee. The CIT(A) deleted this disallowance, stating that some payments were made in cash to the Head of laborers for individual payments below Rs. 20,000 each, and the remaining amount represented aggregate payments below Rs. 20,000 on a single day. However, the Revenue contended that all payments exceeded Rs. 20,000 and sought verification. The ITAT agreed with the Revenue, setting aside the CIT(A)'s decision and instructing the A.O. to re-examine the individual payment amounts to ensure compliance with the cash payment limit. The issue was restored to the A.O. for further assessment.

In conclusion, the ITAT partly allowed the Revenue's appeals for statistical purposes, upholding the addition of Rs. 60 lakhs in one case and remanding the disallowance under section 40A(3) for further verification in both cases.

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