ACIT Vs Irulandi Thevar Vetrivel (ITAT Chennai)
ITAT Chennai held that once the books of accounts have been rejected and the profits are being estimated, then no further separate disallowance u/s 40A(3) or 40(a)(ia) of the Income Tax Act is warranted.
Facts- The assessee is a contractor who is involved in the construction of roads, bridges, runways and tunnels etc. The assessee is also engaged in the business of operating petrol bunks, cinema theatres and manufacture of blue metals and ready-mix concrete.
A search u/s 132 of the Act was conducted upon the assessee on 03.03.2021 pursuant to which, his books of accounts, documents and other materials were seized and sworn statements of the assessee and other key persons were recorded. Subsequent thereto, the AO issued notices u/s 153A of the Act to the assessee for AYs 2016-17 to 2019-20 on 05.08.2021.
The AO noted that, the assessee only filed the retraction statements of the employees, but did not submit any proof or details to establish the genuineness of these bulk expenses. According to AO therefore, since the assessee did not furnish any material evidence in response to the show cause, he proceeded to complete the assessment by making the disallowance as proposed in the show cause. The AO further observed that, the assessee had declared higher income in the return filed u/s 153A vis-a-vis the original return filed u/s 139 of the Act for AYs 2016-17 to 2020-21, which according to him, proved that the assessee did not have any details to substantiate the genuineness of the bulk entries recorded in different TA Nos.131 to 136/Chny/2024 (AYs 2016-17 to 2021-22) ledgers, as tabulated above. The AO further noted that, since these transactions were conducted in cash, it was also otherwise disallowable under Section 40A(3) and Section 40(a)(ia) of the Act. With these findings, the AO made the impugned disallowances, as tabulated above, over and above the additional income offered by the assessee.
