ROOPA LAMBA,CHANDIGARH vs. INCOME TAX OFFICER, WARD 1(3), CHANDIGARH, CHANDIGARH

This is an appeal filed by the assessee against the order of the Ld. Addl/JCIT(A)-2, Gurugram dt. 17/03/2025 pertaining to Assessment Year 2017-18.

Briefly, the facts of the case are that the assessee filed her return of income declaring total income of Rs. 14,04,060/-. The case of the assessee was selected for limited scrutiny under CASS to examine cash deposits during the year under consideration. Thereafter, notices under section 143(2) and 142(1) were issued calling for the necessary information and documentation and thereafter, the AO completed the assessment under section 143(3) dt. 17/12/2019 wherein an amount of Rs. 6,21,042/- was brought to tax invoking the provisions of Section 40A(3) as the assessee has made certain cash payments in violation of the said provisions.

The assessee thereafter carried the matter in appeal before the Ld. Addl/JCIT(A)-2, Gurugram who has sustained the order and findings of the AO. Against the order of the Ld. Addl/JCIT(A)-2, Gurugram, the assessee is in appeal before us.

During the course of hearing, the Ld. AR submitted that the case of the assessee was selected for limited scrutiny to examine cash deposits during the demonetization period. It was submitted that the necessary details were submitted during the course of assessment proceedings and no adverse finding has been recorded by the AO. At the same time, the AO has invoked the provision of Section 40A(3) holding that the assessee has made certain cash payments exceeding Rs. 20,000/- which are in violation of Section 40A(3) of the Act. It was submitted that where the case of the assessee was selected for limited scrutiny to examine the cash deposits, the AO is required to restrict the examination to the issue basis which the case of the assessee was selected for scrutiny. However in the present case, the AO has went ahead and examine the cash payments incurred by the assessee. It was submitted that the said action on the part of the AO is clearly beyond his jurisdiction and more particularly, on account of the fact that the case of the assessee was selected for limited scrutiny and not complete scrutiny. 5. Further, it was submitted that the accounts of the assessee are duly audited and as far as the nature of payment are concerned, the same have been incurred wholly and exclusively for the purpose of business and the payments have been made either on account of business exigencies or on banking/public holidays and thus, satisfying the test of business expediency and falling under the exceptions so carved out. It was accordingly submitted that the AO has erred in invoking the provisions of Section 40A(3) of the Act.