Cash expenditure, exceeding threshold limit u/s section 40A(3), disallowed

ACIT Vs Bajrang Bahadur Singh (ITAT Varanasi)

Manipulation and falsifying records by making wrong entries to bring itself out of clutches of provisions of section 40A(3) is unsustainable in law. Cash expenditure above threshold limit u/s 40A(3) disallowed

Facts- The assessee filed its ROI declaring total income of Rs.64,87,970/-, on 29.09.2012. The assessment was completed by the AO by assessing total income of Rs.67,43,840/- in original assessment proceedings, wherein, certain expenses were disallowed by the AO . The ld. Pr. CIT, Gorakhpur invoked the revisionary powers u/s. 263 of the Act , and set aside the assessment order dated 29.09.2012 passed by AO u/s 143(3) by treating the same as erroneous and so far as prejudicial to the interest of Revenue and directed AO to frame fresh assessment, vide revisionary order dated 29.03.2017 passed by ld. Pr. CIT u/s 263 of the 1961 Act.

It was alleged that the assessee didn’t produced books of account, ledger and documents. It was observed by AO that the assessee has submitted ledger account of material purchases ,and it was observed by the AO that the assessee has made payments of Rs. 5,80,12,836/- towards material purchases which were paid in cash. The AO observed that the assessee has tried to bifurcate these cash payments to bring down cash payments in a day to below the threshold limit of Rs. 20,000/-. The AO observed that the assessee has changed the ledger account of material consumed to bring down cash payments within threshold limit of Rs. 20,000/- , in order to avoid being hit by provisions of Section 40A(3). The AO observed that in the material consumed ledger filed by assessee during assessment proceedings consequent to the revisionary order passed by ld. Pr. CIT , even names of the payee is changed. Further, the AO observed that the none of the cash payments towards material purchases made by the assessee are supported by vouchers. This led to the additions to the tune of Rs.5,13,57,520/- being made by the AO to the income of the assessee on account of such payments been made in cash otherwise than account payee cheque, by invoking provisions of Section 40A(3) by the AO during assessment proceedings conducted by AO u/s 263 read with Section 143(3), and the material consumed to the tune of Rs. 5,13,57,520/- was added to the income of the assessee.

Conclusion- We have carefully gone through these two different sets of ledger accounts, and observes that the assessee has manipulated and falsified the records by making wrong entries in the second set of ledger account filed in assessment proceedings conducted by AO in consequences to revisionary order passed by ld. Pr. CIT, in order to bring itself out of clutches of provisions of Section 40A(3).

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