2019 (1) TMI 1054 - AT - Income Tax

Addition u/s 40A - cash payments in excess of 20, 000/- - Held that - AO made addition of 11, 82, 240/- on account of non submission of certain bills incomplete details in some cases and violation of provision u/s 40A(3) on account of cash payments in excess of 20, 000/-. It is the case of the assessee as per grounds of appeal that all the payments were made through account payee cheques and therefore provision of section 40A(3) are not applicable. Considering restore the issue to the file of the AO with a direction to give one final opportunity to the assessee to substantiate its case by producing the relevant details. AO shall decide the issue as per fact and law after giving due opportunity of being heard to the assessee. The grounds raised by the assessee are accordingly allowed for statistical purposes. - Appeal filed by the assessee is allowed for statistical purpose.

Summary

Issues:
- Disallowance of business promotion expenses under Section 40A(3) of the Income Tax Act.

Analysis:
The case involves an appeal filed by the assessee against an order related to the assessment year 2014-15. The assessee, a company engaged in marketing/trading of medicines, declared income but faced scrutiny over claimed business promotion expenses amounting to ?4,72,89,613. The Assessing Officer disallowed ?11,82,240 (2.5% of total expenses) due to lack of bill verification and some expenses being personal or in violation of Section 40A(3). The CIT(A) upheld this decision, citing the appellant's failure to provide adequate justification for the expenses, especially regarding bills lacking signatures or cash payments exceeding ?20,000. The CIT(A) confirmed the disallowance, leading to the assessee's appeal.

In the appeal, the assessee argued that all payments were made via account payee cheques, negating the applicability of Section 40A(3). Upon review, the tribunal found merit in the assessee's argument and decided to give one final opportunity to substantiate the case with relevant details. The tribunal directed the Assessing Officer to reevaluate the issue based on facts and law, ensuring the assessee's right to be heard. Consequently, the tribunal allowed the assessee's grounds for statistical purposes, ultimately allowing the appeal.

In conclusion, the tribunal's decision revolved around the disallowance of business promotion expenses under Section 40A(3) of the Income Tax Act. The tribunal acknowledged the assessee's claim of payments being made through account payee cheques, leading to a direction to reevaluate the issue and provide the assessee with a final opportunity to substantiate the case. The appeal was allowed for statistical purposes, emphasizing the importance of adherence to legal provisions and due process in tax assessments.