GENESIS ADVERTISING PVT. LTD.,KOLKATA vs. A.C.I.T., CC - 4(1),, KOLKATA

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ITSSA 83/KOL/2025Status: DisposedITAT Kolkata27 October 2025AY 2019-20206 pages
AI SummaryAllowed

What did the Tribunal hold?

The Tribunal allowed the assessee's appeals, deleting the disallowance of Rs. 4,30,000/-. The Tribunal found substance in the assessee's arguments, noting that the intention of Section 40A(3) is to check unaccounted money and not to restrict business activities. It emphasized that Section 40A(3) should be read in conjunction with Rule 6DD. Citing the Supreme Court's decision in Attar Singh Gurmukh Singh vs. ITO, the Tribunal highlighted that Section 40A(3) is not absolute and considerations of business expediency are not excluded, especially when Rule 6DD provides exceptions. The Tribunal also referred to the Calcutta High Court's decision in CIT vs. CPL Tannery, which held that disallowance under Section 40A(3) is not justified if the genuineness of the transaction is not doubted and Rule 6DD is considered for exceptions based on commercial expediency. The Tribunal concluded that the disallowance was uncalled for.

What were the facts?

The assessee, Genesis Advertising Pvt. Ltd., filed appeals for assessment years 2019-20 and 2020-21 against orders of the CIT(A)-27, Kolkata, passed under Section 250 of the Income Tax Act. The appeals were consolidated as they involved common issues. The primary dispute concerns the disallowance of Rs. 4,30,000/- as business expenditure under Section 40A(3) of the Act. This disallowance was made by the Assessing Officer (AO) following a search operation under Section 132(1) and survey operations on the Genesis group, of which the assessee is a related entity. The AO alleged failure to substantiate cash payments exceeding Rs. 10,000/- in a single day to a single person. The assessee argued that these payments were made to project managers acting as agents for exhibition organization and to parties insisting on cash, with amounts not exceeding the threshold. The CIT(A) upheld the disallowance.

What were the issues?

1. Whether the disallowance of Rs. 4,30,000/- as business expenditure under Section 40A(3) of the Income Tax Act is justified, considering the assessee's contention that cash payments were made to project managers acting as agents for exhibition expenses and to parties insisting on cash, with amounts not exceeding the threshold limit, and in light of commercial expediency and Rule 6DD? Assessee's Contention: The assessee argued that the cash payments were made to project managers who acted as agents at project sites for organizing exhibitions and making payments to parties who insisted on cash. These payments, it was contended, did not exceed the threshold limit. The assessee also submitted that payments were made in cash due to commercial expediency, as parties refused cheque payments and resided in areas without proper banking facilities. Reliance was placed on the Supreme Court decision in Attar Singh Gurmukh Singh vs. ITO and the Calcutta High Court decision in CIT vs. CPL Tannery. Revenue's Contention: The Revenue, through the CIT-DR, supported the CIT(A)'s order, stating that the CIT(A) had considered the ledger and bank account and found that a suspense account was maintained even after the books were finalized.

Which sections of the Income-tax Act were involved?

Section 40A(3),Section 250,Section 132(1),Section 153A,Section 142(1)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, “B” BENCH KOLKATA

Before: Shri Rajesh Kumar & Shri Pradip Kumar Choubey

आयकर अपील�य अ�धकरण, कोलकाता पीठ, कोलकाता IN THE INCOME TAX APPELLATE TRIBUNAL “B” BENCH KOLKATA Before Shri Rajesh Kumar, Accountant Member and Shri Pradip Kumar Choubey, Judicial Member IT(SS).A Nos.83 & 84/Kol/2025 Assessment Years: 2019-20 & 2020-21 Genesis Advertising Pvt. Ltd …………..…………………………….…….……Appellant 2A, Dwarka, 7 Sarat Bose Road, Kol- 700020. [PAN: AABCG0780D] vs. ACIT, Central Circle-4(1), Kolkata …………..………………...……...…..…..Respondent Appearances by: Shri S.K. Tulsiyan, Advocate & Jyoti Duggar, AR, appeared on behalf of the appellant. Shri P N Barnwal, CIT-DR, appeared on behalf of the Respondent. Date of concluding the hearing : October 14, 2025 Date of pronouncing the order : October 27, 2025 ORDER Per Pradip Kumar Choubey, Judicial Member: Both the captioned appeals have been preferred by the assessee for the assessment years 2019-20 & 2020-21 against separate orders dated 23.07.2025 & 25.07.2025 of the Commissioner of Income Tax (Appeals)- 27, Kolkata [hereinafter referred to as ‘CIT(A)’] passed u/s 250 of the Income Tax Act (hereinafter referred to as the ‘Act’) respectively. Since, the issues involved in both the appeals are common and relate to the same assessee, therefore, these appeals have been heard together and are being disposed of by this consolidated order. ITA No.83/Kol/25 is taken as lead case for the sake of convenience and narrations of facts.

2.

ITA No.83/Kol/2025 – The ld. AR challenges the very impugned order thereby submitting that the ld. CIT(A) erred in having upheld the disallowance of business expenditure of Rs.4,30,000/- u/s 40A(3) of the

IT(SS)A Nos.83 & 84/Kol/2025 Genesis Advertising Pvt. Ltd Act alleging that the assessee’s failure to substantiate the cash payment more than 10,000/- in a single day to a single person ignoring the fact that the advance was given to the project managers acting as agents of the company at the project site for organizing exhibitions and for making payment to the parties who insisted cash payment which did not exceed the threshold limit. The ld. AR further submits that in fact the amount of Rs.4,30,000/- was handed over to the project manager appointed by the company. He has given a chart to submit that project managers made payment in cash on various expenses which are apparent from the ledger enclosed in the pages 1 to 5 of the paperbook. The ld. AR further submits that cash payment made in excess of Rs.10,000/- in a single day to a single person by the project manager which is reflected in the books of account enclosed at page no.6 of the paperbook. The ld. AR further submit that with reference to the cash payment more than Rs.20,000/-, the payments were made to different parties in cash out of commercial expediency as the parties refused to accept cheque payment and insisted for cash payments and further submits that payments in cash were made to those parties who resides in places where there were no proper banking facilities. The ld. AR brought a decision passed in Apex Court in the case of Attar Singh Gurmukh Singh vs. ITO reported in [1991] 59 taxman 11 (SC) and decision of Hon’ble Calcutta High Court in the case of CIT vs. CPL Tannery (2009) 318 ITR 179 (Cal).

3.

Contrary to that, the ld. DR supports the impugned order of the ld. CIT(A) thereby submitting that the ld. CIT(A) has considered the ledger and bank account and thereafter, held that the suspense account was still maintained in tally once the books were already finalized.

4.

Brief facts of the case of assessee are that assessee being a company filed its return of income declaring total income at Rs

IT(SS)A Nos.83 & 84/Kol/2025 Genesis Advertising Pvt. Ltd 27,21,65,660/- under the normal provision, there after a search u/s 132(1) of the Act and survey operation was conducted in the case of Genesis group, and the assessee company was one of the related persons of the group. A notice u/s 153A of the Act was issued. In response to the notices AR filed details. The learned AO passed an assessment order where in disallowance of Rs 4,30.000/-was made u/s 40A(3) of the Act. Aggrieved by the order Assessee preferred appeal before Cit(A) where in appeal of the assessee dismissed.

5.

Upon hearing the counsels of the respective parties and on perusal of the impugned order, we find that the assessee company is engaged in providing service of advertising, creation of advertising content and event management on behalf of clients in different parts of the country. It appears to us that the assessee company has also engaged in providing advertising services, creating different subject matter for advertising by shooting/filming the content required by the client at different locations. The materials required for making the pandals for events like hardware material, wooden materials, paints, plumbing materials and various other types of materials are sometimes required to be purchased in cash on the spot. Furthermore, the conveyance expenses, charges paid to local laborers for services received from the, the fooding expenses of the labourers are also required to be paid in cash. In this respect, the ld. AR given a chart which is as under:

Date Head Amount (Rs.) 06.04.2019 Kranti Bhowmick Advance 50,000.00 25.09.2019 Saurabh Lal Advance 15,000.00 25.09.2019 Kranti Bhowmick Advance 20,000.00 09.10.2019 Suman Das Advance 2,00,000.00

IT(SS)A Nos.83 & 84/Kol/2025 Genesis Advertising Pvt. Ltd

17.10.2019 Soumyajit Dey Advance 35,310.00 24.12.2019 Suman Das Advance 59.000.00 04.11.2019 Suman Das Advance 1,38,500.00 11.11.2019 Suman Das Advance 20,000.00 07.12.2019 Suman Das Advance 1,00,000.00 07.12.2019 Kingshuk halder 1,00,000 07.12.2019 Biswajit Majumdar 1,00,000 07.12.2019 Kumaresh nandy 1,00,000 07.12.2019 Saurabh lal 1,00,000

5.1 A perusal of the ledger filed by the assessee in pages 1 to 2 of the paperbook, we find that the cash payments done Rs.10,000/- in many cases. On perusal of the ledger books and books of account, we find that the total cash payment of more than Rs.10,000/- during the year was Rs.1,96,583/- only and not Rs.4,30,000/- as mentioned in the notice u/s 142(1) of the Act. The ld. AR has also brought our attention to the ledger book in which we find that advance paid to the project manager, the intention of section 40A(3) of The Act is to only check unaccounted money and not to restrict the business activity of assessee. Section 40A(3) should be read in conjunction with Rule 6DD of the Rules. We have gone through the decision cited by the assessee and find that the Hon’ble Apex Court in Court in the case of Attar Singh Gurmukh Singh vs. ITO (supra) has held as under:

“Section 40A(3) must not be read in isolation or to the exclusion of Rule 6DD. This section must be read along with the Rule 6DD and if read together it is clear that the provisions of the section are not intended to restrict the business activities. It only empowers the assessing officer to disallow the deductions claimed as expenditure in respect of which payment is not made by crossed cheque or crossed bank draft. The same is insisted only to enable the assessing authority to ascertain whether it was out of the income from disclosed sources and even the terms of section 40A(3) are not absolute. Considerations of business expediency

IT(SS)A Nos.83 & 84/Kol/2025 Genesis Advertising Pvt. Ltd and other relevant factors are not excluded, since it is open to the assessee to furnish the circumstances under which the payment was not practicable or would have caused genuine difficulty to the payee. Rule 6DD provides that an assessee can be exempted from the requirement of payment by a crossed cheque or crossed bank draft in the circumstances specified under the rule. Thus section 40A(3) and Rule 6DD are intended to regulate the business transactions and to prevent the use of unaccounted money or reduce the chance to use black money for business transactions. Moreover, while interpreting a taxing statute the Court cannot be oblivious of the proliferation of black money which is in circulation in our country. Thus any restraint intended to use or create black should not be regarded as curtailing the freedom of trade or business.” 5.2 We also find that in the decision of Hon’ble Calcutta High Court in the case of CIT vs. CPL Tannery (supra), wherein it was held that disallowance of expenditure u/s. 40A(3) is not justified where the genuineness of the transaction is not doubted. The relevant part of the decision is as under:

“Rule 6DD was created to curve out exception of the rigours of section 40A(3) and such exceptions are to be understood in the background of commercial expediency and other relevant factors. This has been accepted by the CBDT by issuing press note dated 02.05.69 and the view that products otherwise covered under rule 6DD, when subjected to some processing should also qualify for exemption has been admitted. In this view of the matter and after considering the issue in great detail, we are of our considered view that the addition of Rs.2.50 lacs u/s 40A(3) is uncalled for and hence deleted. The first ground of appeal thus succeeds.”

6.

Keeping in view the above discussions and considering the judicial precedents, we find substance in the argument of the ld. counsel of the assessee and the disallowance of Rs.4,30,000/- is hereby deleted. ITA No.83/Kol/2025 is allowed.

7.

ITA No.84/Kol/2025 – Since the facts and issues involved in both the appeals are identical, therefore, our findings/directions given above in ITA No.83/Kol/2025 will mutatis mutandis apply to ITA No.84/Kol/2025. Hence, ITA No.84/Kol/2025 is allowed.

IT(SS)A Nos.83 & 84/Kol/2025 Genesis Advertising Pvt. Ltd 8. In the result, both the appeals filed by the assessee are allowed.

Kolkata, the 27th October, 2025.

Sd/- Sd/- [Rajesh Kumar] [Pradip Kumar Choubey] Accountant Member Judicial Member Dated: 27.10.2025. RS Copy of the order forwarded to: 1. Appellant - 2. Respondent - 3. CIT(A)- 4. CIT- , 5. CIT(DR),

//True copy// By order Assistant Registrar, Kolkata Benches

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