2023 (5) TMI 997 - AT - Income Tax

Addition u/s 40A - cash payment to the third party - HELD THAT - The assessee has filed ledger extract of Sakthi Murugan Crusher in the books of the assessee as was filed before the Assessing Officer, the assessee could not demonstrate that the impugned expenditure was wholly and exclusively incurred for the purpose of its business or filed any corresponding evidences along with vouchers, details of sundry creditors with confirmation and sources for cash introduced were produced by the assessee. So far as case law relied on by the assessee in the case of Attar Singh Gurmukh Singh 1991 (8) TMI 5 - SUPREME COURT has no application to the facts of the present case for the reason that the assessee has not produced any evidence for the purchase in cash mode with third party or furnished any satisfactory explanation either before the AO or before the CIT(A) or even before the Tribunal and thus, the Assessing Officer has rightly invoked the provisions of section 40A(3) of the Act in the present case. Decided against assessee.

Summary

Issues Involved:
The issues involved in the judgment are the disallowance of cash payment under section 40A(3) of the Income Tax Act, 1961 and the confirmation of such disallowance by the Commissioner of Income Tax (Appeals).

Disallowance of Cash Payment under Section 40A(3):
The appeal was filed by the assessee against the order disallowing a cash payment of Rs. 10,00,000 made under section 40A(3) of the Income Tax Act, 1961. The Assessing Officer initiated action based on incriminating materials seized during a search, related to payments made by the assessee company to a third party. The assessee contended that the payment was for business purposes and not for any non-genuine transaction, citing various case laws to support their argument. However, the Department argued that the payment was unaccounted for and did not fall under any exemption as per the Income Tax Rules. The Tribunal examined the evidence and observed that the assessee failed to provide sufficient documentation and evidence to prove that the cash payment was wholly and exclusively for business purposes. The Tribunal upheld the disallowance under section 40A(3) as the assessee could not demonstrate that the expenditure was legitimate and incurred for business reasons.

Confirmation of Disallowance by CIT(A):
The Commissioner of Income Tax (Appeals) confirmed the disallowance made under section 40A(3) of Rs. 10,00,000. The CIT(A) noted that the assessee did not provide evidence to show that the cash payment fell under any exempt category as per the Income Tax Rules. Additionally, the assessee failed to demonstrate that the expenditure was wholly and exclusively for business purposes. The Tribunal upheld the CIT(A)'s decision, stating that the assessee did not present enough evidence to support their claim that the cash payment was legitimate and incurred for business reasons. The Tribunal rejected the case laws cited by the assessee, as they did not align with the facts of the present case. Consequently, the appeal filed by the assessee was dismissed, affirming the disallowance of the cash payment under section 40A(3).

Separate Judgment:
No separate judgment was delivered by the judges in this case.