Dineshbhai Dahyabhai Patel vs. Deputy Commissioner of Income Tax

Parties Involved

Facts Summary

The assessee filed his return of income on September 28, 2015, declaring a total income of Rs. 53,76,830/-. The initial assessment under section 143(3) of the Income Tax Act was completed, resulting in a total income assessment of Rs. 54,06,208/-, which included an addition of Rs. 29,378/- due to income mismatch per Form 26AS. Subsequently, the assessment was reopened under section 147 and finalized on December 2, 2019, resulting in a revised total income of Rs. 67,06,230/-. This revision included an addition of Rs. 1,56,122/- under section 56(2)(vii) and Rs. 11,43,895/- attributed to short-term capital gains. During the review of the case records, Principal CIT noted that the cash book for the relevant year reflected multiple cash payments exceeding Rs. 20,000/- to various individuals on the same day, which contravened section 40A(3) of the Act. These cash transactions included payments for petrol, medical expenses, and conference fees, among others, totaling to Rs. 40,31,520/-. Section 40A(3) disallows deductions for expenditures made in cash exceeding specified limits unless certain exceptions apply, which were found not to be relevant in this instance. Principal CIT observed that the Assessing Officer raised the issue of disallowance under section 40A(3) during assessment proceedings, but the assessee only provided cash book without sufficient corroborative evidence to substantiate the claims. The Assessing Officer, having not verified the entries or collected additional …

Legal Issues

• 1. Whether the Principal Commissioner of Income Tax was justified in setting aside the assessment order under section 263 of the Income Tax Act?

Judgment Outcome

Decided in favour of Assessee.

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