Section 40A(3) applicable to expenses made in cash not to the payment of advances-ITAT

Section 40A(3) applicable only when payment of expenses is made in cash exceeding specified sum and not to the payment of advances-ITAT

ABCAUS Case Law Citation:
ABCAUS 2434 (2018) 07 ITAT

The Appellant assessee had filed the present appeal against the order passed by CIT(A) inter alia in confirming the addition made by the Assessing Officer (AO) on account of violation of the provisions of section 40A(3) of the Income Tax Act, 1961 (the Act).

The assessee was an individual and engaged in the business of commission agent, servicing, trading & travel agency. During the course of assessment proceedings the AO found that the assessee had made payments without deducting TDS and as such disallowed amount by invoking the provisions of section 40A(3) of the Act.

The CIT-A did not consider this submission of assessee and confirmed the addition made by the AO.

The Tribunal observed that the assessee had made submissions that he made an advance payment to the party for conducting tours abroad on behalf of assessee, which were released by phase by phase on four occasion on different dates to the said entity. However, the allegation was that the payments made in cash exceeding the monetary limit prescribed u/s. 40A(3).

The Tribunal opined that the provisions of section 40A(3) are applicable only when payment of expenses is made in cash in the sum exceeding specified amount and not to the payment of advances. Therefore, that addition made u/s 40A(3) was totally unwarranted.

The addition as accordingly deleted.

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