The Tax Publishers2020 TaxPub(DT) 5144 (Gau-Trib) : (2020) 184 ITD 0525

INCOME TAX ACT, 1961

Section 40A(3)

Where assessee submitted that modus operandi of its business was that when customer placed any order with the assessee, in order to know that the customer was bona fide, the assessee took some cash/cheque in advance from such customer and when vehicle/parts was delivered to the customer, then advance or security deposit so taken by was returned back in cash to the customer and AO made addition of said cash payment under section 40A(3), which was not justified, however, the assessee failed to adduce any evidences before AO and CIT (A), therefore, the matter was remanded to the AO for fresh consideration with a direction to examine the veracity of the contention/modus operandi made by the assessee.

Business disallowance under section 40A(3) - Cash payments exceeding prescribed limit - -

AO made addition under section 40A(3) on account of cash payments exceeding Rs. 20,000. Assessee submitted that alleged cash payments were on account of adjustments of its customers' accounts, who came for purchase of new vehicles/automobiles in its show room. It was further submitted that those payments were refund of money, which was taken by the assessee from the customers at the time of booking new vehicles/automobiles, therefore such payments would not come under the purview of 'expenditure incurred' as envisaged under section 40A(3). Further, CIT (A) also confirmed such addition. Held: Assessee submitted that modus operandi of its business was that when customer placed any order with the assessee, in order to know that the customer was bona fide, the assessee took some cash/cheque in advance from such customer and when vehicle/parts was delivered to the customer, then advance or security deposit so taken by was returned back in cash to the customer and AO made addition of said cash payment under section 40A(3), which was not justified as it was basically a trading receipt in the form of advance/cash for the purpose of selling the goods/automobiles. However, it was found that the assessee failed to adduce any evidences before AO and CIT (A). Therefore, the matter was remanded to the AO for fresh consideration with a direction to examine the veracity of the contention/modus operandi made by the assessee.

REFERRED :

FAVOUR : Matter remanded.

A.Y. : 2015-16



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