JVH TECHNOLOGIES PRIVATE LIMITED,AGRA vs. ITO WARD 2(1)(1), AGRA

At the outset, the Learned AR before me stated that Ground No. 2 raised by the assessee is not pressed as the Learned AO pursuant to the setting aside of the assessment by the Ld. CIT(A) had deleted this addition and accordingly there is no grievance left for the assessee. Considering the JVH Technologies Pvt. Ltd same, the Ground No. 2 raised by the assessee is hereby dismissed as not pressed.

The Ground No. 1 raised by the assessee is challenging the confirmation of disallowance made u/s 40A(3) of the Act in respect of salary paid to Directors Ms. Ruchi Bhatnagar and Mr Vivek Bhatnagar.

I have heard the rival submissions and perused the materials available on record. The assessee is a private limited company and had filed its return of income for the assessment year 2017-18 on 27-10-2017 declaring total income of Rs. 1,88,290/-. The case of the assessee was sought to be reopened vide issuance of notice under section 148 of the Act on 31.03.2021. Pursuant to the decision of the Hon’ble Supreme Court in the case of Ashish Agarwal, show-cause notice was issued u/s 148A(b) of the Act furnishing the reasons recorded for reopening and an order under section 148A(d) of the Act was passed on 30.07.2022. Thereafter, final notice under section 148 of the Act was issued to the assessee on 30.07.2022. No return of income was filed by the assessee in response to the said notice. However, the assessee submitted that the return filed originally on 27.10.2017 may be considered as a return in response to the notice under section 148 of the Act. The Learned AO noted that assessee had paid salary to Ms Ruchi Bhatnagar and Mr Vivek Bhatnagar in cash. The assessee clarified before the Learned AO that monthly salary payable to Ms. Ruchi Bhatnagar was Rs 25,000 and to Mr. Vivek Bhatnagar was Rs 30,000. Both are directors of the assessee company. Against the salary due, Rs 20,000 was paid to Ms Ruchi Bhatnagar monthly in cash and rest of the amount was paid through cheques. Similarly, against the salary due, Rs. 20000 was paid in cash to Mr Vivek Bhatnagar and rest paid through cheques. The assessee enclosed the ledger account of Ruchi Bhatnagar's JVH Technologies Pvt. Ltd salary account and Vivek Bhatnagar's salary account. The Learned AO ignored the contentions and made disallowance under section 40A(3) of the Act on the ground that assessee had made cash payment in excess of Rs 20,000 and completed the assessment. This action of the Learned AO was upheld by the Learned NFAC.