#Audited Books

The ITAT Bangalore has ruled that the Assessing Officer cannot impose ad hoc disallowance under Section 69C when audited books of account substantiate genuine purchases from agriculturists, even in the absence of PAN details. This sets a critical precedent for small traders and farmers' suppliers, affirming that procedural compliance cannot override substantive verification of transaction authenticity.

The ITAT Bangalore ruled that unexplained cash deposits under Section 69A cannot be added if the assessee substantiates the source through audited financial records and verified cash flow patterns, rejecting the Assessing Officer’s speculative assumption. This sets a critical precedent for individuals and small businesses facing scrutiny over bank deposits, affirming that documentary evidence trumps mere disbelief.

The ITAT Bangalore ruled that disallowance under Section 40A(3) is invalid when the assessee’s audited books show no excess cash payments and the tax officer fails to substantiate a violation. This reinforces that procedural fairness and evidentiary burden apply even in remote-sector businesses, protecting compliant taxpayers from arbitrary profit estimations.