2020 (9) TMI 1136 - HC - Income Tax

Disallowance u/s 40A(3) - CIT-A deleted the addition also confirmed by ITAT - Whether the Appellate Tribunal has erred in law and on facts in holding that the payments were covered by Rule 6DD(b) although the payments were made by the assessee to M/s. C.C.Gandhi Co. and not to the Government ? - HELD THAT - Having considered the concurrent findings, we do not find that, the Tribunal has erred in law and on facts in confirming the decision of CIT (A) deleting the disallowance made under Section 40A(3) of the Act. Hence, we find that, both the authorities have correctly deleted disallowance made by the assessing officer. No interference is called for. Therefore, we are not inclined to admit this appeal. Questions raised in the appeal are decided against the revenue and in favour of the assessee.

Summary

Issues:
Challenge to impugned judgment and order dated 04.12.2019 for assessment year 2010-11 under Section 260-A of the Income Tax Act, 1961. Disallowance of cash payment on account of legal expenses under Section 40A(3) of the Act. Appeal against CIT(A) order. Appeal before the Tribunal. Questions of law raised by the Revenue.

The judgment addressed the challenge to the impugned judgment and order dated 04.12.2019 for assessment year 2010-11 under Section 260-A of the Income Tax Act, 1961. The respondent, engaged in the business of construction, had filed an income tax return declaring total income as 'Nil'. The original assessment resulted in a total loss of ?68,02,400. Subsequently, the Revenue reopened the assessment and determined a total loss of ?63,67,400, disallowing an amount of ?4,35,000 under Section 40A(3) of the Act, related to cash payment for legal expenses. The CIT(A) considered the submissions and evidence, deleting the disallowance made by the assessing officer under Section 40A(3) of the Act. The Tribunal partly allowed the appeal on grounds of interest and ineligibility of appeal against the penalty initiation under Section 271(1)(c) of the Act.

The Revenue, aggrieved by the CIT(A) order, filed an appeal before the Tribunal. The Tribunal, considering the findings of the Appellate Authority, dismissed the appeal filed by the Revenue. The Revenue raised substantial questions of law in the appeal, primarily focusing on the disallowance of ?4,35,000 under Section 40A(3) of the Act. The Tribunal, after examining the concurrent findings, upheld the decision of the CIT(A) to delete the disallowance. Consequently, the Tribunal found no error in law or fact in confirming the decision of the CIT(A) and dismissed the appeal, deciding against the Revenue and in favor of the assessee.

In conclusion, the judgment provided a detailed analysis of the issues raised, including the challenge to the impugned judgment, disallowance of cash payment for legal expenses, appeals before the CIT(A) and Tribunal, and the substantial questions of law raised by the Revenue. The decision ultimately favored the assessee, upholding the deletion of the disallowance under Section 40A(3) of the Act.