VISHAL ASSOSCIATES,KANPUR vs. THE INCOME TAX OFFICER, WARD-1(2)(4), KANPUR

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ITA 343/LKW/2026Status: DisposedITAT Lucknow12 May 2026AY 2018-195 pages
AI SummaryRemanded

What did the Tribunal hold?

The Tribunal found that neither the AO nor the CIT(A) had determined whether the cash payments were saved by the provisions of Rule 6DD. Therefore, the impugned appellate order was set aside.

What were the facts?

The assessee's income was determined at Rs. 29,07,370/- against a returned income of Rs. 94,460/-, with an addition of Rs. 28,09,711/- made under Section 40A(3) for cash payments. The CIT(A) dismissed the assessee's appeal.

What were the issues?

The primary issue was whether the cash payments made by the assessee were eligible for exemption under Rule 6DD of the Income Tax Rules, 1962, which was not examined by the lower authorities.

Which sections of the Income-tax Act were involved?

Section 40A(3)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, LUCKNOW BENCH ‘SMC’, LUCKNOW

Before: SHRI ANADEE NATH MISSHRA

PER ANADEE NATH MISSHRA:A.M.

(A) This appeal has been filed by the assessee against the impugned appellate order of learned CIT(A)/National Faceless Appeal Centre (NFAC), Delhi vide order dated 06.02.2026 for the AY 2018-19. The assessee has raised the following grounds of appeal:

“1. That the Ld. C.I.T.(A), NFAC, Delhi has erred in law and on facts in sustaining the impugned order passed under section 143(3) read with section 143(3A) and 143(3B) of the Income Tax Act, 1961 ignoring the fact-

i) That the Ld. Assessing Officer has erred in law as well as on facts and circumstances of in making the Addition of Rs. 28,09,711/- without

I.T.A. No. 343/Lkw/2026 Assessment Year: 2018-19 2

appreciating the facts and circumstances of the case and the nature of trade, hence illegal, bad in law and arbitrary, liable to be deleted.

ii) That the Ld. Assessing Officer has erred in law as well as on facts and circumstances of in making the Addition of Rs. 28,09,711/- without appreciating the facts that the business place is not served by any banking facility in radius of 7-8 Kilometers against genuine purchase bills to the identified persons, hence arbitrary, against the principles of natural justice, bad in law, be deleted.

iii) That the Ld. Assessing officer has erred in law as well as on facts as one hand the A.O. has made the addition without giving any Show Cause to appellant. Hence illegal, arbitrary, against principles of natural justice, illegal, bad in law and liable to be quashed

2.

That the Ld. Commissioner of Income Tax (Appeals), NFAC Delhi has erred in law and on facts in sustaining the Addition of Rs. 28,09,711/- arbitrarily made by the Ld. A.O. without bringing any cogent material on record, therefore the addition made is unsustainable in law and liable to be deleted.

3.

That the Ld. Commissioner of Income Tax (Appeals), NFAC Delhi has erred in law and on facts in sustaining the Addition of Rs. 28,09,711/- arbitrarily made by the Ld. A.O. without giving any opportunity of being heard, therefore, the addition made is unsustainable in law and liable to be quashed.

4.

That the Ld. Commissioner of Income Tax (Appeals), NFAC Delhi has erred in law and on facts in sustaining the Addition of Rs. 28,09,711/- arbitrarily made by the Ld. A.O. on the basis of presumption, conjectures and surmises and is liable to be deleted.

5.

That the Ld. Commissioner of Income Tax (Appeals), NFAC Delhi has erred in law and on facts in sustaining the Addition of Rs. 28,09,711/- arbitrarily made by the Ld. A.O. ignoring the facts of genuine purchase bills to the identified persons, therefore the addition made by the Ld. A.O. is unsustainable in law and liable to be deleted.

6.

That the Ld. Commissioner of Income Tax (Appeals), NFAC Delhi has erred in law and on facts in sustaining that no independent enquiry was

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made by the Ld. A.O. and made the arbitrary addition of Rs. 28,09,711/- in the income of the appellant, therefore the addition made by the Ld. A.O. is unsustainable in law and liable to be deleted.

7.

That the notice dated 28.09.2019 issued under section 143(2) of the Income Tax Act was not in the format prescribed by CBDT Instruction F.No. 225/157/2017/ITA-II dated 23.06.2017, therefore the Notice issued under section 143(2) of the Income Tax Act, 1961 is invalid and unsustainable in law and consequently the Assessment Order passed under section 143(3) of The Income Tax Act, 1961 is unsustainable in law and liable to be quashed.

8.

That the impugned Order has been passed without following the laid down procedure as per Provisions of Income Tax Act, and CBDT Circular/Notification/Instruction, therefore the impugned Assessment Order is unsustainable in law and liable to be quashed.

9.

That the Assessment Order passed by the Ld. A.O. is without Jurisdiction and therefore liable to be quashed.

10.

That the High Pitched Addition of Rs. 28,09,711/- arbitrarily made by the Ld. A.O. in the Income of the appellant is much too high and excessive, is unsustainable in law and liable to be deleted.

11.

That the High Pitched Addition of Rs. 28,09,711/- arbitrarily made by the Ld. A.O. in the Income of the appellant is contrary to the principles of natural justice and equity, is unsustainable in law and liable to be deleted.”

(B) In this case, assessment order dated 06.04.2021 was passed by the Assessing Officer under section 143(3) r.w.s 143(3A) & 143(3B) of the Income Tax Act, 1961 (the Act) wherein the assessee’s total income was determined at Rs. 29,07,370/- as against the returned income of Rs. 94,460/-. In the aforesaid assessment order an addition of Rs. 28,09,711/- was made under section 40A(3) of the Act on the ground that payments for expenses amounting to Rs. 28,07,370/- were made in cash vide impugned appellate order dated 06.02.2026 .The assessee’s appeal against the aforesaid addition of Rs.

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28,09,711/- was dismissed. The present appeal has been filed by the assessee against the aforesaid impugned appellate order of Learned CIT(A) dated 06.02.2026. Although several grounds have been taken in this appeal, they all pertain to the aforesaid disallowance and additions of Rs. 28,09,711/-. For the sake of convenience and brevity they are being disposed off together.

(C) At the time of hearing, there was no representation from the assessee’s side. In absence of any representation from the assessee side, the Learned Departmental Representative was heard. He relied on the assessment order and on the aforesaid impugned appellate order dated 06.02.2026 of the Learned CIT(A). After hearing him and on perusal of records, it is found that there is no finding by the Learned CIT(A) and by the Assessing Officer in their respective orders whether the aforesaid cash payments amounting to Rs. 28,07,370/- disallowed under section 40A(3) of the Act were saved by provisions of Rule 6DD under Income Tax Rules, 1962. In the absence of this finding it is not possible on the basis of materials on record, to come to a definite finding whether Rule 6DD of Income Tax Rules has any applicability in this case, and therefore, whether the aforesaid disallowance of Rs. 28,09,711/- made under section 40A(3) of the Act is partly or wholly justified having regard to the facts and circumstances of the case and applicable law. In view of the foregoing, the impugned appellate order of the Learned CIT(A) is set-aside and the issue in dispute regarding the aforesaid disallowance of Rs. 28,09,711/-under section40A(3) of the Act is restored back to the file of Assessing Officer with the direction to pass denovo order on this issue, in accordance with law, after providing reasonable opportunity to the assessee and after due verification of whether Rule 6DD has applicability, partly or

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wholly, to the aforesaid transactions totaling Rs. 28,07,370/- claimed as expenditure.

(D) All grounds of appeal are treated as disposed off, in accordance with the aforesaid directions. For statistical purposes, the appeal is partly allowed.

(Order was pronounced in the open court on 12/05/2026)

Sd/- (ANADEE NATH MISSHRA) Accountant Member Date: 12/05/2026 SK, Sr.PS

Copy of the order forwarded to : 1. The Appellant 2. The Respondent. 3. Concerned CIT 4. D.R., I.T.A.T., 5. CIT(A)

Senior Private Secretary Income Tax Appellate Tribunal Lucknow

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