Non-Compliance With S.40A(3) in Cash Payments: ITAT Remands Case to CIT(A) With Rs.2,000 Cost [Read Order]

The Jaipur Bench of Income Tax Appellate Tribunal(ITAT) remanded the matter to Commissioner of Income Tax (Appeals) [CIT(A)] due to non-compliance with Section 40A(3) of Income Tax Act,1961 in cash payments, imposing a cost of Rs. 2,000.

Prithvi Steel Rolling Mills Private Limited,appellant-assessee, had appealed against the dismissal of its case by the CIT(A) under Section 250 of the Act. The CIT(A) agreed with the Assessing Officer(AO)’s decision to add Rs. 7,49,610 under Section 40A(3) due to non-compliance by the appellant during the appeal process.

The assessment order, passed on 17.12.2019 under Section 147 r/w Section 143(3), was based on the assessee’s failure to follow Section 40A(3). The assessee had made cash payments totaling Rs. 7,49,610 to a transporter, exceeding the Rs. 35,000 limit under Section 40A(3), which led to the disallowance.

The assessment added Rs. 7,49,610 to the appellant’s returned income of Rs. 2,76,31,880 for the assessment year 2012-13. The cash payments, listed in the cash book, were examined by the AO but were not reproduced in full in the order.

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The CIT(A),did not discuss the assessee’s claims or pass the order on merits. While several notices were sent to the assessee by the Department, no response was received. However, the Departmental Representative(DR) did not object to sending the case back to the CIT(A) for a fresh decision.

The two member bench comprising Narinder Kumar( Judicial Member) and Gagan Goyal(Accountant Member) noted that the assessee did not respond to notices dated 29.12.2020 and 25.07.2024. However, the assessee requested another chance to be heard before the CIT(A). The ITAT decided to send the case back to the CIT(A) for a fresh decision and allowed the assessee to participate in the proceedings.

Since the assessee did not respond to the notices, the bench imposed a cost of Rs. 2,000/-. The assessee was required to deposit this amount in the "Prime Minister’s National Relief Fund" and show the receipt to the CIT(A) before the remand proceedings started.

The appeal was disposed of for statistical purposes, and the case was sent back to the CIT(A) for a new decision. The assessee was to participate in the proceedings as directed.

To Read the full text of the Order CLICK HERE

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