MAYA DEVI SUHALKA,UDAIPUR vs. ITO WARD 2(1), UDAIPUR, UDAIPUR

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ITA 1094/JODH/2025Status: DisposedITAT Jodhpur03 June 2026AY 2020-216 pages
AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that the assessee made rent payments in cash, but each individual payment did not exceed Rs. 10,000 on any given day. Therefore, there was no violation of Section 40A(3).

What were the facts?

The assessee paid rent of Rs. 2,40,000 in cash throughout the financial year. The Assessing Officer disallowed this amount under Section 40A(3) alleging violation of cash payment limits. The CIT(A) confirmed this addition.

What were the issues?

Whether the cash payments of rent, individually not exceeding Rs. 10,000 on any day, constitute a violation of Section 40A(3) leading to disallowance of expenditure.

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, JODHPUR BENCH, JODHPUR

For Appellant: Shri Shrawan Kumar Gupta
For Respondent: Shri Bhawani Shankar Mathur, DR (Virtually)

IN THE INCOME TAX APPELLATE TRIBUNAL JODHPUR BENCH, JODHPUR

BEFORE DR. MITHA LAL MEENA, HON’BLE ACCOUNTANT MEMBER AND SHRI SUDHIR PAREEK, HON’BLE JUDICIAL MEMBER ITA No. 1094/Jodh/2025 (Assessment Year 2020-21) Maya Devi Suhalka ITO, Ward-2(1), Udaipur 5, Gariyawas, Udaipur-313001 PAN-DMSPS7277E Assessee by Shri Shrawan Kumar Gupta, Advocate (Virtually) Revenue by Shri Bhawani Shankar Mathur DCIT-DR (Virtually) Date of Hearing 19 / 05 / 2026. Date of Pronouncement 03 / 06 / 2026.

ORDER PER: DR. MITHA LAL MEENA, A.M.: This appeal is filed by the assessee against the order of the National Faceless Appeal Centre (NFAC), Delhi [hereinafter referred to as the NFAC/CIT(A)] dated 30.10.2025 with respect to assessment year 2020-21, challenging therein confirmation of addition of Rs. 2,40,000/- by the CIT(A) under Section 40A(3) on account of cash payment of rent.

2.

At the outset the Ld. AR submitted that the AO has disallowed Rs. 2,40,000/- under Section 40A(3) of the Act without considering the

2 ITA No. 1094/Jodh/2025 (Assessment Year 2020-21) material filed on record in true perspective. The AR submitted that the assessee is an individual and engaged in business of retail sale of liquor i.e. IMFL and Beer. That the assessee has obtained the licence for the shop from Rajasthan State Excise Department for the financial year 2019- 20 for the shop at Udaipur. The shop is allotted by the government on the payment of license fee. The AR contended that the appellant has paid rent per month to Prem Kumar in cash on different dates throughout the year. In support, the appellant has filed a copy of the rent account, as under:-

Maya Devi Suhalka Rent A/C Ledger Account 1 Apr 2019 to 31-Mar-2020 Date Particulars Vch Type Vch No. Debit Credit 28-5-2019 Cr Cash Payment 64 10,000.00 29-5-2019 Cr Cash Payment 66 10,000.00 30-5-2019 Cr Cash Payment 68 10,000.00 31-5-2019 Cr Cash Payment 71 10,000.00 23-6-2019 Cr Cash Payment 109 10,000.00 30-6-2019 Cr Cash Payment 131 10,000.00 24-7-2019 Cr Cash Payment 169 10,000.00 31-7-2019 Cr Cash Payment 183 10,000.00 28-8-2019 Cr Cash Payment 228 10,000.00 31-8-2019 Cr Cash Payment 234 10,000.00 25-9-2019 Cr Cash Payment 281 10,000.00 30-9-2019 Cr Cash Payment 292 10,000.00 15-10-2019 Cr Cash Payment 328 10,000.00 31-10-2019 Cr Cash Payment 346 10,000.00 25-11-2019 Cr Cash Payment 389 10,000.00 30-11-2019 Cr Cash Payment 398 10,000.00 24-12-2019 Cr Cash Payment 436 10,000.00 31-12-2019 Cr Cash Payment 448 10,000.00 20-1-2020 Cr Cash Payment 467 10,000.00 31-1-2020 Cr Cash Payment 501 10,000.00

3 ITA No. 1094/Jodh/2025 (Assessment Year 2020-21) 20-2-2020 Cr Cash Payment 540 10,000.00 29-2-2020 Cr Cash Payment 554 10,000.00 19-3-2020 Cr Cash Payment 594 10,000.00 31-3-2020 Cr Cash Payment 603 10,000.00 Closing Balance 2,40,000.00 2,40,000.00

3.

From the rent account, it is evident that no payments on a single day has been made by the assessee of amount of more than Rs. 10,000/-. Thus, all the payments are being made on different dates and the said amount being less than Rs. 10,000/- on a single day, the assessee has not violated the violated the provisions of Section 40A(3) of the Act. Thus, the AR pleaded that addition made by the AO and confirmed by the Ld. CIT(A) merely based on suspicion without bringing any cogent material evidence on record to controvert the claim of the assessee deserves to be deleted. In support he placed reliance on the judgment of Dhakeshwari Cotton Mills 26 ITR 775 (SC) and also referred to R.B.N.J. Naidu Vs. CIT 29 ITR 194 (Nag), Kanpur Steel Co. Ltd. Vs. CIT 32 ITR 56 (All.), where it has been held that addition made by the AO merely based on suspicion was not desirable in the eyes of law. Accordingly, he pleaded that the addition made by the AO may be deleted.

4.

On the other hand the Ld. DR relied on the impugned order.

4 ITA No. 1094/Jodh/2025 (Assessment Year 2020-21) 5. Heard both the sides and perused the material on record. Admittedly, the appellant assessee was allotted a liquor license/shop by the Excise (Abkari) Department of Rajasthan and for that inspection of shop was made by the District Excise Officer (APB Page No. 3). It is an undisputed fact on record that the shop was taken on rent at the rate of 10,000/- per month. However, the department alleged that the assessee has paid the rent of Rs. 2,40,000/- in one go in violation of provision of Section 40A(3) of the Income Tax Act, 1961 as against Rs. 10,000/- each day claimed to be paid by the assessee. However, the department did not bring on record any corroborative documentary evidence that the assessee has made payment of any rent of more than Rs. 10,000/- in cash in a single day in the whole of the financial year under consideration. The appellant assessee has maintained cash book as he was required to mandatorily maintain books of accounts and these books of account are also be required to be audited by qualified chartered accountant.

6.

From the record it is evident that assessee has made payment of rent in cash, however, the each cash payment made towards the rent payment has never been more than Rs. 10,000/- in a day for the entire financial year under consideration.

5 ITA No. 1094/Jodh/2025 (Assessment Year 2020-21) 7. The department did not point out any discrepancy either in the cash book or the books of accounts maintained by the assessee which are duly audited. In our view, without pointing out any defect or discrepancy in the books of accounts and disproving the claim of the assessee that none of the cash was more than Rs. 10,000/- each day during the year. The addition made by the AO merely based on suspicion alleging violation of provision of Section 40A(3) of the Income Tax Act is unwarranted. The Section 40A(3) of the Income Tax are reproduced for ready reference herein:-

(3) Where the assessee incurs any expenditure in respect of which a payment or aggregate of payments made to a person in a day, otherwise than by an account payee cheque drawn on a bank or account payee bank draft exceeds twenty thousand rupees no deduction shall be allowed in respect of such expenditure. 8. From the plain reading of the provisions of Section 40A(3) of the Income Tax Act, 1961, it is apparently clear that only an expenditure of Rs. 10,000/- or more is paid to a person in cash or other than account payee cheque or bank draft in a day is held in violation of Section 40A(3) of the Income Tax Act, 1961. In the present case, there is no such

6 ITA No. 1094/Jodh/2025 (Assessment Year 2020-21) payment of cash of more than Rs. 10,000/- on a specific day has been established by the department.

9.

We, therefore, hold that the order of the Ld. CIT(A) is perverse to the facts on record and as such, addition of Rs. 2,40,000/- confirmed by the Ld. CIT(A) under Section 40A(3) of the Act, is deleted.

10.

In the result, the appeal of the assessee is allowed.

Order pronounced on 03 / 06 / 2026 in the open court.

Sd/- Sd/- (SUDHIR PAREEK) (DR. MITHA LAL MEENA) JUDICIAL MEMBER ACCOUNTANT MEMBER Dated : 03 / 06 / 2026. Pritesh Vaishnav PS True Copy Copies to : (1) The appellant. (2) The respondent. (3) CIT (4) CIT(A) (5) Departmental Representative (6) Guard File

BY ORDER,

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