Gold AIK Vs ITO (ITAT Chennai)
ITAT Chennai held that since income of the assessee is assessed by applying flat gross profit rate of 2% hence provisions of section 40A(3) cannot be invoked. Accordingly, disallowance u/s. 40A(3) not justified.
Facts- The assessee is a partnership firm engaged in the business of retail sale of gold in the name and style of M/s. Gold AIK. Post search operation, AO computed unaccounted sales of the assessee at Rs. 1,36,05,133/- and estimated the profit on unaccounted sale of jewellery at Rs.16,32,616/- and added to the returned income of the assessee. AO also unaccounted cash of Rs.10,17,517/-.
CIT(A) deleted the addition of unexplained cash added by AO u/s.69A of the Act amounting to Rs.10,17,517/- but sustained the addition of gross profit and directed the AO that only gross profit on unaccounted sales of unaccounted purchases is to be taxed by applying gross profit rate of 8.49% instead of net profit applied by AO at 12%.
The CIT(A) enhanced the assessment by disallowing cash payment made to the extent of 10,17,517/- by invoking the provisions of section 40A(3) of the Act. The CIT(A) directed the AO to disallow cash payment of Rs.10,17,517/- u/s.40A(3) of the Act.
