Payments for Multiple Bills Below Rs. 20,000 Each Do Not Attract S. 40A(3) Disallowance: ITAT [Read Order]
Following a co-ordinate Bench ruling in a group case with identical facts, the ITAT deleted the addition, observing that the payments were made within the permissible limits and the earlier decision served as a binding precedent
Disallowance
Disallowance
The Rajkot Bench of Income Tax Appellate Tribunal ( ITAT ) ruled that payments for multiple bills, each below Rs. 20,000, do not attract disallowance under section 40A(3) of the Income Tax Act, 1961.
Harishkumar Mathuradas Barai, appellant-assessee, appealed against the order dated 06.02.2025, passed by Commissioner of Income Tax(Appeals)[CIT(A)]. The issue raised by the assessee was that the CIT(A) wrongly upheld a Rs. 6,00,000 addition made by the Assessing Officer ( AO ) under section 40A(3) of the Act.
The assessee counsel referred to the tribunal the order dated 18.09.2024 passed by the Co-ordinate Bench in ITA No. 390/RJT/2023, Parsottam Madhavji Bhanusali, for A.Y. 2015-16, where, on identical facts, the addition under section 40A(3) was deleted in favour of the assessee. He submitted that the present appeal was covered by the same decision and placed a copy before the Bench.
The Department counsel relied upon the lower authorities.
The two member bench comprising Dinesh Mohan Sinha (Judicial Member) and Dr.Arjun Lal Saini (Accountant Member) observed that there was no reason to take a view different from that of the Co-ordinate Bench in the group case of Parsottam Madhavji Bhanusali vs. ITO.
The appellate tribunal noted that each purchase bill was below Rs. 20,000, but the assessee had consolidated multiple bills in the books of accounts, which reflected an aggregate amount exceeding Rs. 20,000, although each individual bill remained within the permissible limit under section 40A(3) of the Act.
On examining the paper book, the tribunal found that no single bill exceeded Rs. 20,000 and that all payments were made within the prescribed limits.
It further observed that section 40A(3) applies to payments or aggregate payments made to a single person on a single day against a single bill exceeding Rs. 20,000, and not to the aggregate of different bills.
Payments made for multiple bills of different dates, each below Rs. 20,000, even if made together, did not attract the provisions of section 40A(3). Consequently, the tribunal held that the addition made by the AO was not tenable in law.
As the issue was squarely covered in favour of the assessee by the earlier decision and there was no change in facts or law, the bench, following the binding precedent of the Co-ordinate Bench, deleted the addition.
Accordingly the appeal was allowed.
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