Burden of proof on cash purchase additions: unsupported allegations under section 40A(3) cannot stand without cogent evidence.

An addition for alleged cash purchases under section 40A(3) was found unsustainable where the assessee denied the transaction and the assessment was built on undisclosed information. Because the assessee was not supplied the relied-upon material or reasons, the burden shifted to the Assessing Officer to support the allegation with cogent evidence. No positive material was brought on record to prove that the assessee had made the impugned cash purchases, so the addition was directed to be deleted in favour of the assessee.

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Issues: Whether the addition made under section 40A(3) of the Income-tax Act, 1961 for alleged cash purchases was sustainable when the assessee denied the transaction and the Assessing Officer failed to furnish the relied-upon information and bring positive evidence on record.

Analysis: The assessee specifically denied having made any purchase from the stated concern and sought the material on which the assessment was based, but the relevant reasons and information were not supplied. In such a situation, the burden shifted to the Assessing Officer to substantiate the allegation with cogent evidence. No positive material was brought on record to prove that the assessee had made the impugned cash purchases.

Conclusion: The addition under section 40A(3) was held to be unsustainable and was directed to be deleted, in favour of the assessee.

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