Section-69a

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SUBHASH BANKA (Querist)
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10 February 2012 An Assessee opted for sec-44AF.Case was selected for scrutiny and AO disallowed some purchases because of non availability of some invoice. As per AO's opinion since purchase could not be established, assessee had cash to the extent of disallowance. He treated this cash as unrecorded money in the possession of the assesse and added to the income under section-69A in the order. He has not made any disallowance on account of purchases while computing income under the head business. It is probably because of section 44AF. Can AO ask for invoice when section-44AF is in operation and can AO apply section-69A here.

CA PARAS BAFNA

CA PARAS BAFNA (Expert)
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10 February 2012 In case of Section 44AF, books of account are not required to be maintained by the assessee if he shows 5% net profit.
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Where books of account have not been maintained by the assesee, it can not be said that the money has not been recorded in the books of account.

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Question of unexplained money can be raised only on concrete findings by the AO.
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The assessee's explanation towards money utilised towards purchases is a valid explanation, and it can not be said by the ITO that as you are not having purchase bills, it means you are having cash or money.

Corresponding sales, and closing stock show that purchases were definitely made.
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So in my view, the addition if made on such
grounds are likely to be deleted in the appeals.
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