Flint Power Tools (P) Ltd. Vs ACIT (ITAT Delhi)
Disallowance Based on Wrong Person’s Statement Cannot Stand: Delhi ITAT Deletes Sec.40A(2)(b) Addition on Director’s Salary
Assessee challenged disallowance of Rs.17,50,000/- made u/s 40A(2)(b) towards salary paid to its Director, Smt. Sonia Singla. AO claimed the salary was not genuine & relied on a statement reproduced in the assessment order as the “statement of Sonia Singla”. Tribunal noted from the reproduced text and the image on page 3 that the statement actually belonged to Smt. Priti Singla, not Sonia Singla. Tribunal held that reliance on the wrong person’s statement renders the entire disallowance unsustainable.
Assessee relied on the coordinate Bench ruling in L.S. Tools Pvt. Ltd. (ITA 5643/Del/2024, order dated 30.10.2025), where similar disallowance of salary paid to Priti Singla was deleted because a statement u/s 132(4) without corroboration cannot form the sole basis for an addition. Tribunal extracted large portions of that ruling, including judicial precedents from Delhi High Court (Pavitra Realcon, Moon Beverages), Gujarat High Court (Kailashben Manharlal Chokshi), & Delhi High Court (Harjeev Aggarwal), all holding that a standalone statement u/s 132(4) cannot justify an addition unless supported by incriminating material.
Tribunal also noted that Priti Singla’s remuneration had been consistently accepted in earlier years, proceedings u/s 148A were dropped after due inquiry, and payment of salary resulted in higher tax outflow in her hands compared to tax saving for the company—making the situation revenue neutral. All these facts were visible from the chart at page 3 of the file images, showing continuous salary received across multiple years.
