ITAT upholds CIT(A)'s decision on cash expenditure & loss carry forward denial. Section 40A(3) applied.

The ITAT upheld the Ld. CIT(A)'s decision, confirming the addition under Section 40A(3) for cash expenditure and denial of carry forward of the loss due to late filing. The appeal was dismissed, and the order was pronounced on 10/01/2022.

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Issues:
1. Appeal against the order passed by the Ld. Commissioner of Income Tax (Appeals), Gandhinagar, Ahmedabad, relating to Assessment Year 2013-14.
2. Disallowance of expenditure made in cash exceeding the limit specified in Section 40A(3) of the Income Tax Act.
3. Addition made on account of preliminary expenses and denial of carry forward of the loss.

Issue 1: Appeal against CIT(A) Order
The appeal was filed by the assessee against the order passed by the Ld. Commissioner of Income Tax (Appeals), Gandhinagar, Ahmedabad, for Assessment Year 2013-14. The assessee did not appear during the hearings, leading to the appeal being heard ex-parte. The grounds raised by the assessee included issues related to the order being passed against the principles of natural justice, addition under Section 40A(3) of the Act, and addition on account of preliminary expenses.

Issue 2: Disallowance under Section 40A(3)
The Ld. CIT(A) confirmed the addition of Rs. 4,66,000 made under Section 40A(3) of the Act. The assessee had purchased land in cash, justifying it by stating that the sellers insisted on cash payments due to lack of banking facilities. However, the assessee failed to provide documentary evidence or details of the sellers' names and addresses. The Ld. CIT(A) upheld the disallowance, citing the lack of substantiation and reliance on a previous ITAT decision. The ITAT upheld the Ld. CIT(A)'s decision, stating that the assessee did not qualify for exemption from Section 40A(3) requirements.

Issue 3: Addition of Preliminary Expenses
The Ld. CIT(A) disallowed a claim of Rs. 6,44,785 as preliminary expenses, not due to being preliminary expenses, but because it resulted in a loss that the assessee was not entitled to carry forward. The return of income was filed beyond the due date, leading to the denial of carrying forward the loss. The ITAT upheld the Ld. CIT(A)'s decision, emphasizing the statutory provisions of law and the consequences of filing returns after the prescribed time. The denial of carry forward of the loss was upheld, and the appeal by the assessee was dismissed.

In conclusion, the ITAT upheld the Ld. CIT(A)'s decision on both issues, confirming the addition under Section 40A(3) and the denial of carry forward of the loss due to filing the return beyond the due date. The appeal by the assessee was dismissed, and the order was pronounced on 10/01/2022.

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