Case Law Details
No disallowance under section 40A(3) of Income Tax Act, 1961 on cash refund of excess money received on sale of goods
Assessing Officer disallowed amounts refunded to the customers on the ground that the same is not verifiable and no vouchers for such payments were kept by the appellant. During the appeal proceedings, appellant submitted that complete vouchers were maintained and the refund amount is as per the ledger account of the customers. Appellant submitted ledger accounts and vouchers which were forwarded for AO’s report by my predecessor. On verification of these vouchers and details, assessing Officer pointed out that in some of the vouchers, customer’s signature is not there. It was also pointed out by the AO that Revenue Stamp is not put where payments exceeds Rs. 5,000/-. Appellant submitted that after discount, the money received from the customers became refundable and the same is refunded as per ledger account details in each case. As regards customer signature not there in some vouchers, appellant submitted that only in some cases it might not be there otherwise most of the vouchers carried customer’s signature. The revenue Stamp is only a technical requirement, violation of which will not make any payment doubtful.
I have gone through the list of persons to whom excess money received was refunded. Appellant received booking advance in cash. Thereafter, loan is taken by the customer which is credited in his account. Against this advance and loan, sale bill and discount etc. are debited and net amount received in excess is refunded. The details of customers are available and therefore it cannot be said that the recipients are not identifiable. Since the refund is given mostly to the farmers against excess money received, it is refunded in cash as most of them may not have bank accounts. Considering the fact that the refund given to the customers is based on ledger accounts and AO did not find fault with any of the entry in the ledger accounts therefore refund based on such ledger accounts cannot be questioned. Refund is of the balancing figure which is arrived at by certain debit and credit entries. If these debit and credit entries are not found to be incorrect, balancing figure cannot be questioned. Appellant also argued that this is the practice being followed since last many years and assessing officer did not make any disallowance in earlier years. Considering the facts of the case and no mistake found in the ledger accounts representing transactions with the customers, I do not find any merit in disallowance of refund of excess money received from customers.
Assessing Officer also submitted that some of the payments were made in cash in excess of Rs. 20,000/- in violation of section 40A(3) which are disallowable. Appellant submitted that disallowance of section 40A(3) can be made in respect of expenditure claimed and not against any other payment. Since the refund is on account of excess money received on sale of goods, disallowance under section 40A(3) will not be applicable. Accordingly the assessing officer’s argument in this regard is not tenable. The disallowance made by the assessing officer is accordingly deleted
Assessment based on Mere Suspicion or Income earning Probability not Valid
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