ITAT deletes Disallowance u/s. 40A(3) without appreciating Business expediency in payment towards Genuine Transaction [Read Order]

The Income Tax Appellate Tribunal (ITAT), Pune Bench held that disallowance u/s. 40A(3) of the Income Tax Act, 1961 without appreciating business expediency in payment towards genuine transaction.

The assessee, Shivaji Bhimaji Gaikwadhas challenged the action of CIT(A) in confirming the disallowance u/s. 40A(3) of the Act without appreciating the business expediency in payment of cash towards genuine transaction in the facts and circumstances of the case.

The assessee filed return of income declaring a total income of Rs.1,45,240/- and agricultural income at Rs.80,700/-. Under scrutiny notices u/s. 143(2) and 142(1) of the Act were issued. In response to the said notices, the assessee participated in the assessment proceedings. During the course of such assessment proceedings, the AO found that the assessee purchased a land for a total consideration of Rs.20,00,000/- and paid Rs.15,00,000/- in cash.

The AO invoked the provisions u/s. 40A(3) of the Act and requested the assessee to explain as to why an amount of Rs.15,00,000/- should not be disallowed for violation of payment of consideration in cash beyond the prescribed limit of Rs.20,000/- vide show cause notice.The CIT(A), NFAC, Delhi confirmed the view of AO in disallowing Rs.15,00,000/- u/s. 40A(3) of the Act. Aggrieved by the same, the assessee is in appeal before the Tribunal.

A Single Bench consisting of SS Viswanethra Ravi, Judicial Member held that “The contention of the assessee from the day one is that the sellers demanded the assessee to pay in cash which is part and parcel of total sale consideration. Further, there is no dispute with regard to identification of the sellers as well as their confirmations in respect of payment in cash from the assessee. It is also not disputed that the said cash payment is part and parcel of total sale consideration which is reflected in the purchase deed. Further, the sellers also admitted the payment of cash before the registering authority under due process.”

“Therefore, the ratio laid down by the Honourable Supreme Court in the case of Attar Singh Gurmukh Singh is applicable and the disallowance as confirmed by the CIT(A) in the handsof assessee on account of section 40A(3) of the Act is deleted” the Tribunal added.

To Read the full text of the Order CLICK HERE

Support our journalism by subscribing to TaxscanPremium. Follow us on Telegram for quick updates.