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Facts
The assessee filed her return for AY 2015-16 declaring income of Rs. 27,950/-. Subsequently, information was received that the assessee made cash payments of Rs. 5,00,000/- to M/s. V M Barai & Co. on five occasions, violating Section 40A(3) of the Income Tax Act, 1961.
Held
The Tribunal noted that each payment was below Rs. 20,000/-, which is within the permissible limit under Section 40A(3) of the Act. Therefore, the addition made by the Assessing Officer was deleted.
Key Issues
Whether the cash payments made by the assessee violate the provisions of Section 40A(3) of the Income Tax Act, 1961, given that each individual payment was below Rs. 20,000/-.
Sections Cited
40A(3), 147, 144, 144B, 142(1), 148
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Income Tax Appellate Tribunal, RAJKOT BENCH (SMC
Before: DR. ARJUN LAL SAINI.
Appellant by : Shri Chetan Agarwal, Ld. AR Respondent by : Shri Dheeraj Kumar Gupta, Ld. Sr. (DR) Date of Hearing : 14/05/2025 Date of Pronouncement : 05/08/2025 आदेश / O R D E R Per,Dr. Arjun lal Saini AM: Captioned appeal filed by the assessee, pertaining to Assessment Year 2015-16, is directed against the order passed by Learned Commissioner of Income Tax (Appeal), vide order dated 15/04/2025, which in turn arises out of an order passed by the Assessing Officer, dated 22/09/2021, under section 147 r.w.s. 144 read with section 144B of the Income Tax Act, 1961.
Grounds of appeal raised by the assessee are as follows: 1.The ld. CIT(A) erred in law as well on fact in upholding disallowance of Rs. 5,00,000 made by ld.AO u/s.40A(3) of the Act.
3. Succinct facts are that assessee filed her 'Return of Income' for the assessment year (A.Y.) 2015-16, on 15/03/2016, in ITR-4S, declaring total income of Rs.27,950/-. Subsequently, information was received that the Page | 1 assessee has made payments in cash, in favour of M/s. V M Barai & Co., on five occasions, aggregating to Rs. 5,00,000/-, thus violating the provisions of Sec. 40A(3) of the Income-tax Act, 1961 (hereinafter referred to as "the Act"). Therefore, the assessee`s case was re-opened u/s 147 of the Act, after obtaining necessary approval and notice u/s 148 of the Act was issued on 18/03/2020 asking her to file the ITR. However, the assessee did not file any return in response to the said notice. Subsequently, notice u/s 142(1) of the Act, was issued on 25/09/2020. On 16/02/2021, in response to the notice, the assessee submitted certain documents viz. copy of ITR -V of original return filed on 15/03/2016 along with Computation of Total Income, 26AS, Profit & Loss Account and Balance Sheet, Bank Statements. However, regarding copy of confirmation of Ledgers with M/s V M Barai & Co. for the F.Y. 2014-15, the assessee sought some time. The assessing officer issued further show cause notice to the assessee.
In response to the further show cause notice, dated 18/09/2021, assessee submitted the ledger of M/s V. M Barai & co. However, assessing officer was of the view that the assessee has deliberately shown the payments below the prescribed limit and therefore, the genuineness of the ledger furnished by the assessee is doubtful. The assessing officer also noticed that the assessee has furnished the purported ledger of M/s V.M. Barai & co, at the fag end of the assessment proceedings. Moreover, M/s VM Barai & Co, during the course of their assessment proceedings had not pointed out any deficiency or mistake in the ledger account of Bhartiben Gautamkumar Barai maintained in their books and it is clear from the ledger submitted by them that 5 cash payments were made on various dates. Hence, assessing officer observed that the ledger furnished by the assessee cannot be considered to be a genuine one and therefore, to be rejected. Considering the ledger submitted by the M/s V.M. Barai & Co, submitted during the course of their assessment proceedings for the A.Y. 2015-16, it was evident that during the relevant Financial Year, the assessee has made payments to M/s. V M Barai & Co. Therefore, the cash payments of Rs 5,00,000/- was added back u/s 40A(3) of the Act, to the total income of the assessee.
Aggrieved by the order of the Assessing Officer, the assessee carried the matter in appeal before the Ld. CIT(A), who has confirmed the action of the Assessing Officer. Before ld. CIT(A), the assessee submitted that the cash payments, as not involving any violation u/s 40A(3) of I.T. Act and thereby pleaded to delete the same. However, ld.CIT(A), on perusal of facts on record as brought out by AO in the assessment order, noted that the appellant is indeed involved in making cash payments for its transportation business to a recipient petrol bunk M/s V.M Barai & Co in excess of Rs.35,000/- as involving single payments at a time as observed as per the ledger of recipient during its scrutiny and thereby AO held appellant claims/contentions as involving mere after thought as explained in the assessment order. Accordingly, appellant is indeed involved in violation of provisions u/s 40A(3) of I.T. Act.
Aggrieved by the order of the ld.CIT(A), the assessee filed an appeal before the Tribunal.
At the outset, Ld. Counsel for the assessee, argued that assessee made the payment to the petrol pump, in cash and the payment is below Rs.20,000/-. The assessee has a business of transportation; therefore, the assessee regularly pays the amount to the petrol pump against the purchase of petrol. The all payments are below Rs. 20,000/-, hence provision of section 40A(3) of the Act, do not attract to the assessee under consideration.
On the other hand, the Ld. Senior DR for the Revenue has primarily reiterated the stand taken by the Assessing Officer, which I have already noted in earlier para of this order and is not being repeated for the sake of brevity.
I have heard both the parties and perused the material available on record. I have examined the paper book of the assessee and noted, that each payment is below Rs. 20,000/-, which does not attract the provision 40A(3) of the Act. I observed that issue under consideration, is squarely covered by the Co-ordinate Bench of ITAT, Rajkot in the case of Parsottam Madhavji Bhanushali, in vide order dated 18.09.2024, wherein the Tribunal has held as follows: “We have heard both the parties and carefully gone through the submissions put forth on behalf of the assessee along with the documents furnished and the case laws relied upon, and perused the facts of the case including the findings of the Id. CIT(A) and other material brought on record. We find merit in the submissions of ld. Counsel, to the effect that each purchase bill is below Rs.20,000/-, however, assessee has consolidated 7 to 10 bills of various customers, and entered in the books of accounts, therefore the consolidated amount is getting reflected, which is more than Rs.20,000/- although, each bill, of each customer, is below Rs.20,000/- which is, within the permissible limit of the provisions of section 40A(3) of the Act. We have gone through each bill of each customer in the paper book filed by the assessee, (vide paper book pages 26 to 269) and noted that none of the bill amount exceeds Rs.20,000/-therefore, we find that all payments were made by the assessee, within the permissible limit of the provisions of section 40A(3) of the Act, hence, based on this factual position, addition made by the assessing officer needs to be deleted.”
As the issue is squarely covered in favour of the assessee, by the decision of the Hon'ble ITAT, Rajkot, and there is no change in facts and law and the Revenue is unable to produce any material to controvert the aforesaid findings of the Hon'ble ITAT, Rajkot (supra). Respectfully following the binding judgment of the ITAT Rajkot, in the case of Parsottam Madhavji Bhanushali (supra), I find that each payment is below Rs.20,000/- and hence does not attract the provision of section 40A(3) of the Act and, therefore, I allow the appeal of the assessee.
In the result, appeal filed by the assessee is allowed.