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Income Tax Appellate Tribunal, AMRITSAR BENCH, AMRITSAR
Before: DR. M. L. MEENA & SH. ANIKESH BANERJEE
IN THE INCOME TAX APPELLATE TRIBUNAL AMRITSAR BENCH, AMRITSAR BEFORE DR. M. L. MEENA, ACCOUNTANT MEMBER AND SH. ANIKESH BANERJEE, JUDICIAL MEMBER
I.T.A. No. 713/Asr/2017 Assessment Year: 2006-07
Varindera Overseas (P) Ltd. Vs. DCIT, Range-1, 851, Industrial Area –A, Jalandhar (Punjab) Ludhiana [PAN: AABCV 3723F] (Appellant) (Respondent)
Appellant by : None Respondent by: Sh. S. M. Surendranath, Sr. DR
Date of Hearing: 18.04.2022 Date of Pronouncement: 17.05.2022
ORDER Per Dr. M. L. Meena, AM:
This appeal has been filed by the Assessee against the impugned order dated 24.04.2017 passed by the Ld. Commissioner of Income Tax
(Appeals)-4, Ludhiana, in respect of the Assessment Year 2006-07.
The assessee has raised the following grounds of appeal:
2 ITA No.713/Asr/2017 Varindera Overseas (P) Ltd. v. Dy. CIT “1. Whether the Ld. CIT(A) was justified by upholding the order of DCIT on account of Ad-hoc disallowances @20% of cash payment towards local Admitted purchases of hosiery goods by invoking section 40A(3) even without appreciating the justification and necessity.
Whether the Ld. CIT(A) was justified by further suo-motto enhancing by 20% on further disallowances, after being deleting the entire additions on account of Ad-hoc cash purchases, without affording an opportunity of being heard.
That the appellant craves leaves to amend, alter or to raise any other ground at the time of hearing.”
At the outset, the ld. counsel for the assessee has submitted that the
disallowances made by the AO by invoking provisions of section 40A(3) by
way of estimating 20% of the expenditure towards cash purchases is not
justified under the provisions of section 40A(3) of the Act. The AO has to
point out specific transaction by way of cash payment exceeding Rs.
20,000/- which has been entered by the assessee in violation of provisions
of section 40A (3). There cannot be Ad-hoc addition u/s 40A(3) of the Act.
The ld. CIT(A) has merely mentioned that the assessee company has
made cash payments in violation of provisions of section 40A(3) of the Act
without specifying the transactions against which the cash payment has
been made and the name of the parties to whom the cash payment has
3 ITA No.713/Asr/2017 Varindera Overseas (P) Ltd. v. Dy. CIT been made. He has argued that the such disallowances made by the AO
and thereafter confirmed the ld. CIT(A) without cogent documentary
evidences, based on presumption and conjectures are against the law.
Accordingly, he pleaded that the additions sustained and confirmed by the
ld. CIT(A) u/s 40A(3) may be deleted.
Per contra, the ld. DR stand by the order of the ld. CIT(A).
We have heard the Ld DR and perused the material available on
records, grounds of appeal and the orders of the authorities below.
Admittedly, the ld. CIT(A) has confirmed the estimated additions towards
cash payment in violation of provisions of section 40A(3) of the Act. It is
seen that the ld. CIT(A) has not established that how the assessee has
violated the provisions of section 40A(3) of the Act. It is seen that neither
the AO nor the ld. CIT(A) has brought on record, single instant of the cash
transaction being executed by the assessee of an amount exceeding of Rs.
20,000/- in violation of provisions of section 40A(3) read with Rule 6DD by
way of bringing the documentary evidences on record. In our view, such
findings of the ld. CIT(A) confirming adhoc addition u/s 40A(3) of the Act, in
arbitrarily and mechanical manner is against the spirit of law.
4 ITA No.713/Asr/2017 Varindera Overseas (P) Ltd. v. Dy. CIT 6. In view of the Hon’ble Supreme Court observation in the case of
“Attarsingh Guru Mukh Singh Vs. ITO”, (1991) 191 ITR 667 and Amritsar
Tribunal in ITA Appeal No. 53/ASR/2015 in the “Royal Wood Furniture, the
authorities below have failed to established with documentary evidences
any violation of provisions of section 40A(3) of the act by the assessee. In
our view, such an addition is required to be deleted.
Accordingly, we set aside the order of the ld. CIT(A) sustaining Ad-
hoc disallowance of Rs.11,49,000/- u/s 40A(3) of the Act. Thus, ground of
appeal stands allowed.
In the result, the appeal filed by the assessee is allowed.
Order pronounced in the open court on 17.05.2022
Sd/- Sd/- (Anikesh Banerjee) (Dr. M. L. Meena) Judicial Member Accountant Member Date: 17.05.2022 Copy of the order forwarded to: (1) The Appellant: (2) The Respondent: (3) The CIT(Appeals) (4) The CIT concerned (5) The Sr. DR, I.T.A.T True Copy By Order