2019 (11) TMI 136 - AT - Income Tax

Addition u/s. 40A(3) - submission of the assessee that certain payments were made in non banking hours in the late evening and certain payments were made on a date when bank was closed and the hotel booking was urgently required - Also certain payments were made to a number persons where each payment was below ₹ 20,000/- - HELD THAT - In our opinion the Assessing Officer has not properly considered the factual aspect and has suddenly jumped to the conclusion for violation of section 40 A(3). Thus we deem it proper to restore the issue to the file of the Assessing Officer with a direction to go through the above details and decide the issue as per fact and law after giving due opportunity of being heard to the assessee. While doing so the Assessing Officer shall also consider the payments made on a day when the bank was closed or where the payments have been made to various persons where each payment is below ₹ 20,000/-. Grounds raised by the assessee is allowed for statistical purpose.

Summary

Issues:
Challenge to addition made under section 40A(3) of the IT Act.

Analysis:
The appellant, a tour and travel company, challenged the addition of ?13,71,338 made by the Assessing Officer under section 40A(3) of the IT Act. The Assessing Officer observed cash payments exceeding ?20,000, leading to the addition. The CIT(A) upheld the addition, stating the payments did not meet the exceptional circumstances criteria of Rule 6DD. The appellant argued the payments were necessitated by business requirements, but failed to provide sufficient evidence. The CIT(A) found no proof of payments being reimbursements to directors or meeting Rule 6DD(j) criteria for weekend or after-hours payments. Citing the Jhunjun Wala & Co. case, the CIT(A) upheld the disallowance due to lack of exceptional reasons for cash payments.

The appellant appealed to the Tribunal, presenting details of the payments made, such as hotel bookings, salary payments, and office expenses. The appellant claimed these payments were made under exceptional circumstances or to multiple recipients below ?20,000 each. The Tribunal noted the Assessing Officer's hasty conclusion and lack of proper consideration of the factual aspect. Consequently, the Tribunal decided to remand the issue back to the Assessing Officer for a detailed review, considering the circumstances of payments made outside banking hours or when banks were closed, and payments below ?20,000 to multiple recipients. The Tribunal directed the Assessing Officer to reevaluate the issue based on facts and law, granting the appellant a fair opportunity to present their case.

Ultimately, the Tribunal allowed the appeal for statistical purposes, emphasizing a thorough reassessment by the Assessing Officer. The decision aimed to ensure a just and fact-based resolution of the issue, highlighting the importance of considering all relevant factors before concluding on alleged violations of section 40A(3) of the IT Act.