ITAT confirms Income Tax Addition on cash payments exceeding Rs. 20,000 per day:

ITAT confirms Income Tax Addition on cash payments exceeding Rs. 20,000 per day The assessee, an individual engaged in the business of trading plastic scrap through a proprietorship copany, filed returns for many assessment years. The case was reopened based on information received from the Investigation Wing indicating that the assessee had made substantial cash purchases from M/s Uflex Ltd. During assessment, the Assessing Officer observed that cash payments exceeding Rs. 20,000 per day amounting to Rs. 22.45 lakh were made, allegedly in violation of Section 40A(3). The assessee failed to produce complete purchase bills, ledger accounts, or confirmations from the supplier. The AO relied on records found during search proceedings in the case of M/s Uflex Ltd., which reflected sales to the assessee. CIT(A)'s Decision: The CIT(A) upheld the disallowance, leading to further appeal before the Tribunal. Issue Before Tribunal: Whether cash purchases exceeding the prescribed limit can be allowed when the assessee fails to substantiate the applicability of exceptions under Rule 6DD despite claiming business exigency. ITAT's Ruling: The Tribunal dismissed all appeals and upheld the disallowance. It held that the assessee failed to furnish crucial evidence such as supplier confirmations, ledger accounts, or supporting documents, to justify the cash transactions. The claim of business necessity and oral agreement was not backed by credible material. The Tribunal noted that a significant portion of payments to M/s Uflex Ltd. was made in cash, clearly exceeding the statutory threshold. In the absence of proof that the case fell within the exceptions under Rule 6DD, the disallowance under Section 40A(3) was rightly made. Thus, the orders of the lower authorities were upheld, and the additions sustained for all assessment years. To Read Full Judgment, Download PDF Given Below