The Income Tax Appellate Tribunal (ITAT), Kolkata ruled that the provisions of section 40A(3) of the Income Tax Act, 1961 cannot be attracted when there is not a single transaction exceeded the treshod limit of Rs. 20,000.
M/s Cellbiz Services, the assessee is a ‘single sim multi-recharge platform provider’ which means that the assessee provides a platform to numerous individual retailers who from one single sim can simultaneously recharge the mobile and DTH services of different telecom companies/service providers.
During the assessment proceedings, the Assessing Officer noted that the assessee had debited a sum of Rs.86,27,87,110/- under the head purchase. The Assessing Officer further noted that the assessee firm had made cash purchase of Rs.7,20,27,038/- against which payment of Rs.6,95,06,092/- was paid by cash and the difference of Rs.25,20,946/- was claimed to be the commission out of the above transaction. The Assessing Officer held that the assessee had violated the provision of section 40A(3) of the Act by making the aforesaid cash purchases amounting to Rs.7,20,27,038/-. Therefore, the Assessing Officer invoking the provisions to section 40A(3) of the Act, added back the said amount to the total income of the assessee.
A bench of Shri Sanjay Garg, Judicial Member and Shri Girish Agrawal, Accountant Member observed that there is no reason to interfere with the above order of the CIT(A).
“The ld. CIT(A) has categorically mentioned that the cash book, purchase register and all individual invoices where cash transaction had taken place have been thoroughly checked and it is found that not a single such transaction actually exceeded the threshold limit of Rs.20,000/-. In view of the aforesaid factual finding given by the CIT(A) after thoroughly checking the record and account of the assessee that not a single transaction actually exceeded the threshold limit of Rs.20,000/- and that there is no violation of the provisions of section 40A(3) of the Act, we do not find any reason to interfere with the order of the CIT(A) and the same is upheld,” the ITAT said.
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