ITAT Sustains Disallowance As Cash Payment Exceeds Rs. 20,000 To Single Party In Single Day

The Chennai Bench of the Income Tax Appellate Tribunal (ITAT) has sustained the disallowance under section 40A(3) of the Income Tax Act as a cash payment exceeds INR 20,000 to a single party in a single day.

The two-member bench headed by Mahavir Singh (Vice President) and G. Manjunatha (Accountant Member) has observed that Section 40A(3), which has been amended w.e.f. 01.04.2009 by the Finance Act, 2008, provides that the provisions of sub-section (3) of Section 40A of the Act shall be attracted where the aggregate of the payments made to a single party otherwise by an account payee cheque drawn on a bank or an account payee bank draft exceeds Rs.20,000 in a day.

The appellant/assessee is a trader, i.e., a retail and wholesale trader of dhall and oil. The assessee also agreed that the assessee has made cash payments in excess of Rs. 20,000 towards the purchase of dhall.

The AO made total disallowance by invoking the provisions of Section 40A(3), amounting to Rs. 22,58,09,550. The assessee chose to appeal to CIT (A). The CIT (A) also confirmed the action of the AO.

According to Section 40A(3) of the Income Tax Act, if an assessee incurs any expense for which a payment or aggregate of payments was made to a person during a day in cash and the expenditure exceeds INR 10,000, the expenditure is not allowable as a deduction.

The tribunal, while confirming the disallowance, held that the provisions of section 40A(3) are very clear and the assessee was unable to prove that his case falls under any of the exceptions as provided under Rule 6DD of the Income Tax Rules, 1962.

Case Title: Shri Kalimuthu Harichandran Versus ACIT

Citation: ITA Nos.: 3497 & 3498/CHNY/2018

Date: 18.11.2022

Counsel For Appellant: Advocate I. Dinesh

Counsel For Respondent: CIT R. Mohan Reddy

Click Here To Read The Order