INCOME TAX ACT, 1961

Section 40A(3)

Business disallowance under section 40A(3) - Cash payments exceeding prescribed limit - Applicability of provision when assessable income was computed by applying a percentage rate on unaccounted turnover -

Revenue challenged order of Tribunal holding that provisions of section 40A(3) could not be applied when assessable income was arrived by applying a percentage rate on unaccounted turnover. Held: When income of assessee was computed by applying GP rate and no deduction was allowed in regard to purchases of assessee, there was no need to look into provisions of section 40A(3) and rule 60DD(j). When GP rate was applied, that would take care of everything and there was no need for AO to make scrutiny of amount incurred on purchases by assessee.

Followed:CIT v. S. Mohammad Dhurabudeen (2008) 4 DTR 218 (Mad) : 2008 TaxPub(DT) 0809 (Mad-HC).Confirmed:The ACIT v. Amman Steel & Allied Industries [I.T.A Nos. 2057 to 2060/Mds/2010, dt. 23-8-2011].

REFERRED :

FAVOUR : In assessee's favour.

A.Y. : 2002-03

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