INCOME TAX ACT, 1961

Section 40A(3)

Business disallowance under section 40A(3) - Cash payment in excess of prescribed limit - Impugned cash purchases got covered in GP addition made by AO after rejection of books -

AO made disallowance under section 40A(3) on account of cash payments made towards certain purchases in excess of prescribed limit. Assessee contended that once books of accounts had been rejected and GP addition had been made on purchase and sales of assessee, it would take care of all such purchases made in cash and no further disallowance could be made under section 40A(3) and assessee could not be made to suffer twice, once in GP addition and other in addition under section 40A(3).Held: Clearly, AO after considering sales and purchases made in cash had estimated/enhanced declared profit rate and made GP addition and thus element of purchase in cash got subsumed in the income calculated by AO and, therefore, no further disallowance made under section 40A(3) could be made.

Relied:Banwari Lal Bansidhar v. ITO (1998) 229 ITR page 229 (All) : 1998 TaxPub(DT) 570 (All-HC).

REFERRED :

FAVOUR : In assessee's favour.

A.Y. : 2008-09

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