2019 (7) TMI 752 - HC - Income Tax

Addition u/s 40A(3) - payments made by the assessee on a single day did not exceed twenty thousand rupees to a person - HELD THAT - The finding of fact has been recorded by two revenue authorities that the payments made by the assessee on a single day did not exceed ₹ 20,000/- to a person and if, that be so, there could not have been any disallowance under Section 40A(3). We do not find any error not to speak of any error of law in the impugned order passed by the Tribunal warranting any interference in this Tax Appeal.

Summary

Issues: Tax Appeal under Section 260-A of the Income Tax Act, 1961 against the order passed by the Appellate Tribunal regarding the disallowance under section 40A(3) of the Act for the Assessment Year 2011-12.

The judgment pertains to a Tax Appeal under Section 260-A of the Income Tax Act, 1961, filed by the Revenue against the order of the Appellate Tribunal regarding the disallowance under section 40A(3) of the Act for the Assessment Year 2011-12. The main issue revolves around whether the Appellate Tribunal erred in confirming the decision of the CIT(A) to delete the disallowance of a certain amount made by the Assessing Officer under section 40A(3) of the Act. The Tribunal considered the contentions raised by the appellant, focusing on the applicability of section 153A of the Act and the payment limits under section 40A(3). The appellant argued that no incriminating material was found during the search to justify the disallowance and that no payments exceeding ?20,000 in a day were made. The CIT(A) accepted these contentions and deleted the addition. The Tribunal also noted that the addition was based on books of accounts examined during assessment proceedings, not on seized documents. Additionally, it was found that none of the cash payments exceeded ?20,000 in a day, and the total payments for land purchase were made out of business expediency. The Tribunal held that the Assessing Officer was not justified in making the disallowance under section 40A(3) and accordingly deleted the addition.

Furthermore, the Tribunal analyzed the relevant clause of Section 40A(3) of the Act applicable for the Assessment Year 2011-12, which states that a disallowance could be made if payments exceeding ?20,000 in a day were made to a person. The Tribunal concurred with the CIT(A)'s finding that the payments made by the assessee did not breach the ?20,000 limit in a single day. Therefore, the Tribunal concluded that no disallowance under Section 40A(3) could be justified based on the facts presented. The Tribunal upheld the findings of the lower authorities and dismissed the Tax Appeal, as there was no error of law or fact in the impugned order that warranted interference.