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2023 (9) TMI 482 - AT - Income TaxAddition u/s 40(a)(ia) - HELD THAT - As assessee produced the relevant certificate, covering a sum of Rs. 26,84,153/-, and there is no dispute as on this aspect. We, therefore, modify the order of CIT(A) and direct the AO to delete the amount - In respect of the other sums, in the absence of any further evidence, we find it difficult to disturb the findings of the authorities below. Addition u/s 40A(3) - no ledger account regarding such expense was produced and the certificate issued by Santosh Service Station is not an authenticated one - HELD THAT - The substance of the judicial opinion is that the terms of section 40A(3) of the Act are not absolute and though certain circumstances are contemplated under rule 6DD of the Rules, they are not exhaustive. One such exception approved by the Hon ble Madras High Court 2020 (9) TMI 543 - MADRAS HIGH COURT is the incapacity of the assessee to make the payment through banking channel due to freezing of the bank account by order of Governmental agency, in that case, the ESI department. Assessee produced the copies of such attachments issued by the Income Tax Department by way of notice dated 12/08/2013, u/s 226(3) of the Act and prohibitory order dated 25/11/2013 by the Employee Provident Fund Organization. The view taken ATTAR SINGH GURMUKH SINGH VERSUS INCOME-TAX OFFICER, LUDHIANA 1991 (8) TMI 5 - SUPREME COURT and the Hon ble Madras High Court in the cases referred to above is applicable to the facts of the case. We are of the considered opinion that the addition under section 40A(3) of the Act is not sustainable. Consequently, we direct AO to delete the same. Appeal of the assessee is allowed in part.
Issues:
The issues involved in the judgment are the challenges to the additions made under section 40(a)(ia) and 40A(3) of the Income Tax Act, 1961. Section 40(a)(ia) Challenge: The assessee challenged the addition of Rs. 63,65,549/- under section 40(a)(ia) for not deducting TDS on interest and financial charges. The CIT(A) accepted certificates under proviso to section 201(1) amounting to Rs. 18,30,101/-. The ITAT directed the deletion of Rs. 26,84,153/- as the assessee produced relevant certificates covering this amount. Section 40A(3) Challenge: The addition of Rs. 2,62,06,238/- under section 40A(3) for making cash payments exceeding Rs. 20,000/- was contested. The assessee provided a certificate from Santosh Service Station explaining bounced cheques due to bank account attachment. Citing legal precedents, the ITAT held that genuine difficulty in making payments through banking channels due to bank account attachment exempts from disallowance under section 40A(3). The ITAT directed the deletion of this addition as the circumstances warranted it. Conclusion: The ITAT allowed the appeal in part, directing the deletion of Rs. 26,84,153/- under section 40(a)(ia) and the entire addition of Rs. 2,62,06,238/- under section 40A(3) based on the legal principles and evidence presented.
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