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Facts
The Revenue appealed the deletion of additions made by the AO. One addition pertained to alleged violations of Section 40A(3) for freight payments exceeding ₹35,000/- to a single transporter in a day. The second addition was for unrecorded cash payments for machinery installation, based on WhatsApp messages retrieved during a survey.
Held
The Tribunal upheld the deletion of the Section 40A(3) addition, finding that payments were made directly to individual truck drivers within the prescribed limit and the AO had not appreciated the business realities. The Tribunal also upheld the deletion of the unrecorded cash payment addition, as it was based on unverified messages without independent inquiry or rejection of books.
Key Issues
Whether additions made for freight payments in violation of Section 40A(3) and unrecorded cash transactions for machinery installation were rightly deleted by the CIT(A).
Sections Cited
40A(3), 69C, 133A, 131, 145(3)
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Income Tax Appellate Tribunal, “B” BENCH, KOLKATA
Before: SHRI RAJESH KUMAR, AM & SHRI PRADIP KUMAR CHOUBEY, JM
This is an appeal preferred by the Revenue against the order of the Commissioner of Income-tax (Appeals), Kolkata 20, (hereinafter referred to as the “Ld. CIT(A)”] dated 10.07.2025 for the AY 2023- 24.
At the outset, we observe from the appeal folder that there is a delay of 31 days in filing the appeal by the department in support of which a condonation petition was filed by the Revenue. It was stated in the condonation petition that the delay has occurred due to obtaining of administrative approvals from the competent authorities, which took quite a long time and accordingly, the delay
The first issue raised by the Revenue is against the deletion of addition of ₹3,83,34,071/- by the ld. CIT (A) as made by the ld. AO on account of freight payment exceeding to ₹35,000/- to a single transporter in a single day in violation of Section 40A(3) of the Income-tax Act, 1961 (the Act).
3.1. The facts in brief are that during the course of assessment proceedings, the ld. AO noted that the assessee is a cement manufacturing flagship company of Srijan Group. Pertinent to state that survey was conducted on the assessee u/s 133A of the Act on 16.03.2023, during the course of which it was found that assessee has made payments in violation of Section 40A(3) of the Act exceeding to ₹35,000/- per transporter in a single day amounting to ₹3,85,65,679/-. Accordingly, the case of the assessee was selected for scrutiny and disallowance was made of ₹3,83,35,071/- by holding that the same was in violation of Section 40A(3) of the Act.
3.2. In the appellate proceedings, the ld. CIT (A) deleted the addition after taking into consideration the reply and submission of the assessee along with the evidences produced by observing and holding as under:-
“5.1 I have duly considered the fact of the case, assessment order and the submissions filed by the appellant. A survey operation u/s 133A of the Act was conducted in case of the appellant company on 10.03.2023. The appellant-company is a manufacture of cement. The assessee is in business of procurement of raw materials such as clinker, gypsum and slag which are the raw material to
The second issue raised by the Revenue is against the deletion of addition of ₹10 lacs by the ld. CIT (A) as made by the ld. AO on the basis of messages retrieved from the mobile phone of the directors for which corresponding entries were not made in the books of account.
4.1. The facts in brief are that during the course of survey, the survey team retrieved the WhatsApp Chats from personal iPhone 12 Pro Max, Model belonging to Shri Anil Agarwal, who received the cash transactions which were not recorded in the books of account. In the statement recorded of Shri Anil Agarwal, during the course of survey confirmed in the statement recorded u/s 131 of the Act that 4.2. In the appellate proceedings, the ld. CIT (A) deleted the addition after taking into account the submission and contention of the assessee by observing and holding as under:-
5.4 Similarly, the addition of ₹10,00,000/- u/s 69C on account of allege cash payment for pasta machinery is based solely on an unverified and unauthenticated social media message, without any independent inquiry, confirmation, invoice, or seized document from the assessee's premises. The AO has failed to discharge the burden of proof and has instead resorted to presumptive addition based on hearsay, which is impermissible under law, as held in C/T v. Durga Prasad More (82 ITR 540) and Teena Bethala (70 taxmann.com 379). In addition, the books of accounts were neither rejected under Section 145(3) nor were any defects pointed out by the AO. I find that the addition made by Assessing Officer of Rs.10,00,000/- is not sustainable in the eyes of law. Therefore, Assessing Officer is directed to delete the addition of Rs. 10,00,000/-.
4.3. After hearing the rival contentions and perusing the materials available on record, we find that the survey team though retrieved some WhatsApp messages which referred to payment of cash which was mentioned by the assessee in the statement recorded u/s 131 of the Act and was stated to have been made for the installation of Pasta Machine. On the second occasion the Anil Agarwal again
In the result, the appeal of the Revenue is dismissed.
Order pronounced in the open court on 20.01.2026.