2018 (12) TMI 1251 - AT - Income Tax

Addition u/s 40A(3) - cash payment exceeding permissible limit - Held that - AO/CIT(A) have not analysed this aspect of cash payments if they have exceeded 20, 000/- specified under the provisions of section 40A(3) of the Act. Therefore in the interest of administration of justice remand the issue to the file of AO for verification of the same and passing a speaking order on this issue. Needless to mention the AO shall give reasonable opportunity of being heard to the assessee in accordance with the set principles of natural justice. Accordingly the grounds raised by the assessee are allowed for statistical purposes.

Summary

Issues:
Appeal against order of CIT(A)-5, Pune for Assessment Year 2006-07 regarding addition of cash expenses under section 40A(3) of the Income Tax Act.

Analysis:
The appeal was filed by the Assessee against the order of CIT(A)-5, Pune for the Assessment Year 2006-07. The grounds raised by the Assessee primarily challenged the addition of ?5,72,431 made by the ITO, Ward-4(5), which was 20% of the total cash expenses of ?28,62,154. The Assessee argued that not all cash payments exceeded the limit of ?20,000 specified in section 40A(3) of the Income Tax Act, and requested a remand for verification. The AO had disallowed the amount due to lack of supporting evidence. The CIT(A) upheld the addition, considering the GP rate at 8% and sustaining the addition of ?5,72,431. The appeal was partly allowed by the CIT(A), leading the Assessee to appeal before the Tribunal against the 20% addition on cash payments.

In the Tribunal proceedings, the Assessee reiterated that individual cash payments did not exceed the ?20,000 limit under section 40A(3) and requested a remand for verification. The Revenue, represented by the Ld. DR, relied on the orders of the AO/CIT(A). The Tribunal observed that the AO/CIT(A) did not analyze whether the cash payments exceeded the specified limit under section 40A(3). In the interest of justice, the Tribunal remanded the issue to the AO for verification and to pass a speaking order on the issue, ensuring the Assessee is given a reasonable opportunity to be heard in accordance with principles of natural justice. The grounds raised by the Assessee were allowed for statistical purposes, and the appeal was ultimately allowed for statistical purposes.

In conclusion, the Tribunal's decision to remand the issue to the AO for verification of whether the cash payments exceeded the limit specified in section 40A(3) showcases a commitment to ensuring a fair assessment based on proper analysis and adherence to procedural justice. The Assessee's argument regarding the individual cash payments not exceeding the specified limit was considered valid, leading to the remand for further verification and a speaking order on the issue.