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Facts
The Revenue appealed an order of the CIT(A) that deleted disallowances made by the AO. The AO had disallowed expenses, including advertisement and salary, claiming they were not for educational institutions or paid in cash. The CIT(A) found the expenses genuine and paid in cash to lower-level employees before the rule change.
Held
The Tribunal noted that the AO only disallowed salary expenses and allowed other revenue expenses. The CIT(A) had found that salary expenses were paid to lower-level employees before the effective date of the rule prohibiting cash payments. The AO had not made specific disallowances in the computation of total income for the disputed expenditures.
Key Issues
Whether the disallowances made by the AO for advertisement and salary expenses were justified, especially when the CIT(A) found them genuine and paid in cash before the relevant rule change.
Sections Cited
Section 40A(3) of the Income Tax Act (implied by cash payment of salary)
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Income Tax Appellate Tribunal, IN THE INCOME TAX APPELLATE TRIBUNAL,
O R D E R Per Bench
This is an appeal filed by the revenue against the order of the ld CIT(A). This is an appeal filed by the revenue against the order of the ld CIT(A). This is an appeal filed by the revenue against the order of the ld CIT(A). Jamshedpur dated 18.9.2019 in Appeal Jamshedpur dated 18.9.2019 in Appeal No.CIT(A),Jamshedpur/10041/2019 No.CIT(A),Jamshedpur/10041/2019-20 for the assessment year 2016 for the assessment year 2016-17.
Smt. Rinku Singh, Ld CIT DR appeared for the revenue and Shri Smt. Rinku Singh, Ld CIT DR appeared for the revenue and Shri Smt. Rinku Singh, Ld CIT DR appeared for the revenue and Shri Shravan Jha,ld AR appeared for the assessee. ld AR appeared for the assessee.
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It was submitted by ld CIT DR that the assessee is a trust which is running number of educational institutions. It was the submission that in the course of assessment, the Assessing Officer had called for the details of the various expenses, which have been claimed by the assessee as “application of income”. The ld CIT DR specifically drew our attention to the advertisement expenses to an extent of Rs.2,08,90,578/-. It was the submission that the assessee had on the last minute before the completion of assessment, provided a list of various advertisement expenditures incurred, the details of the same were not provided. It was the submission that a perusal of the limited details provided by the assesseehave also been examined by the Assessing Officer, it is found that many of the expenses did not relate to the institutions to which, the bills have been raised. It was the submission that similarly, the salary expenses have also been paid in cash. It was the submission that the Assessing Officer had consequently denied the assessee the exemption and had assessed the income of the assessee as “business income” and status of the assessee as “AOP”. It was the further submission that it was alsocategorically found by the Assessing Officer that TDS had not been made in regard to the advertisement expenses. It was the submission that the ld CIT(A) had deleted the disallowance by holding that the expenditures incurred by the assessee were genuine and the Assessing Officer had made the disallowance only in haphazard method. It was the submission that the disallowance as made by the Assessing Officer and deleted by the ld CIT(A) is liable to be reversed.
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In reply, ld AR drew our attention to page 33 of the assessment order. It was the submission that in the computation of taxable income, the AO had not made any disallowance in respect of the various expenses, which have been examined by the AO. It was the submission that the AO has only disallowed the salary expenses. It was the submission that the Assessing Officer having disallowed only salary expenditures and having specifically allowed the revenue expenses as claimed by the assessee, the appeal of the revenue is liable to be dismissed.
We have considered the rival submissions. A perusal of the assessment order at page 33 of the order shows that the AO has taken the total income of the assessee and has disallowed only salary expenses. The Assessing Officer has in the computation of income specifically allowed the revenue expenses of Rs.12,64,11,359/-. This clearly shows that even though the AO had discussion various expenses that he had proposed to disallowed, no specific disallowancehas been paid in cash. A perusal of the order of the ld CIT(A) clearly shows that the ld CIT(A) has examined the expenses and has also considered the submission and that of the assessee and that of the Assessing Officer. Ld CIT(A) has categorically given a finding that the expenses in respect of salary has been paid to the lower level employees. The requirement of not paying the salary in cash has come into effect w.e.f. 1.4.2017. A perusal of the facts in the present cash clearly shows that the assessment year involved is AY 2016-17. This being so, as the revenue has not been able to dislodge the findings as arrived at by the ld
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6.. In the result, appeal of the revenue is dismissed.
Order dictated and pronounced in the open court on 9/06/2025.
Sd/- Sd/- (RATNESH NANDAN SAHAY) (GEORGE MATHAN) ACCOUNTANT MEMBER JUDICIAL MEMBER Ranchi; Dated 09/06/2025 B.K.Parida, SPS (OS) Copy of the Order forwarded to : 1. The Appellant : ACIT, Exemption Circle, Ranchi 2. The Respondent: M/s. SitwantoDedvi Mahila Kalyan Sansthan,Suraj Path, BaridihBastikBaridih, Jamshedpur 3. The CIT(A)-Jamshedpur 4. Pr.CIT,Jamshedpur 5. DR, ITAT, Ranchi 6. Guard file. //True Copy// By order
Sr.Pvt.secretary ITAT, Ranchi
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