No Additions Invoking Sec. 69B if Exp. Was Held Disallowable u/s 40A(3) & Not for Unexplained Exp. | ITAT

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Disallowable u/s 40A(3)

Case Details: Gurinder Makkar vs DCIT - [2024] 162 taxmann.com 731 (Chandigarh-Trib.)

Judiciary and Counsel Details

    • Vikram Singh Yadav, Accountant Member & Aakash Deep Jain, Vice President
    • Sudhir Sehgal, Adv. for the Appellant.
    • Smt. Amanpreet Kaur, Sr. DR for the Respondent.

Facts of the Case

The assessee was engaged in the manufacturing of fabrics and readymade garments. A survey action under section 133A was conducted at the business premises of the assessee wherein the assessee surrendered an amount on account of excess stock over and above its normal business income, discrepancy in cost of building and on account of disallowance under section 40A(3).

Subsequently, the assessee filed its return of income by declaring total income, including the surrendered income. The Assessing Officer (AO) contended that the surrendered income on account of cash expenditure was chargeable under section 69B and to be taxed as per the provisions of section 115BBE.

Aggrieved by the order, the assessee preferred an appeal to the CIT(A). The CIT(A) confirmed the AO’s additions, and the matter reached the Amritsar Tribunal.

ITAT Held

The Tribunal held that there was no finding that cash expenditure had been found and that it had not been accounted for. In such a situation, it was not understood as to how the deeming provisions can be invoked.

Where the expenditure has been held disallowable in terms of section 40A(3), which means that certain expenditure has been incurred, accounted for in books of accounts and is incurred in cash in violation of section 40A(3), the question of unexplained expenditure or unaccounted expenditure doesn’t arise for consideration.

Hence, the action of the AO in invoking the deeming provisions in this regard was to be set aside.

List of Cases Referred to

    • CIT v. Deepak Agarwal [2013] 35 taxmann.com 293/357 ITR 741/216 Taxman 153 (Allahabad) (para 6.6)
    • Famina Knit Fabs v. Asstt. CIT [2019] 104 taxmann.com 306/176 ITD 246 (Chandigarh – Trib.) (para 6.6)
    • Chokshi Hiralal Maganlal v. DCIT 131 TTJ (Ahd.) 1 (para 8.3)
    • DCIT v. Shri Ram Narayan Birla ITA No. 482/JP/2015 (para 8.5).

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