ITO Vs Satish Singh (ITAT Kolkata)
Rule 46A Not Attracted Where Evidence Was Already on Record: ITAT Upholds Deletion of ₹2.75 Cr Disallowance- High-Pitched 40A(3) Disallowance Rejected: Daily Cash Payments Within Limit Held Allowable
Kolkata ITAT ‘D’ Bench in ITO vs Satish Singh (ITA No.449/Kol/2025, AY 2018-19, order dated 23-12-2025) dismissed Revenue’s appeal and upheld deletion of ₹2.75 crore disallowance u/s 40A(3), holding that cash payments of salary and commission did not exceed the statutory per-day limit and that Rule 46A was not violated.
The assessee, an individual engaged as a commission agent for recovery of EMIs for banks and financial institutions, had paid commission of ₹93.07 lakh and salaries of ₹1.82 crore. AO disallowed the entire amount u/s 40A(3) on the assumption that payments were made in cash in excess of ₹10,000 per day, alleging lack of proper details.
Before CIT(A), the assessee produced date-wise individual ledger accounts, employee-wise details, and complete daily cash book, demonstrating that each actual cash payment to employees/recovery agents was below ₹10,000 on any single day. CIT(A) accepted the explanation, also noting that the assessment resulted in an abnormally high assessed income (nearly 95% of gross receipts), and deleted the disallowance by relying on Calcutta HC decision in S.K. Jaynal Abddin.
Revenue argued before ITAT that CIT(A) wrongly admitted additional evidence in violation of Rule 46A. The Tribunal rejected this contention, holding that the evidences were already available on record and were merely mis-appreciated by the AO, hence Rule 46A had no application. On merits, ITAT affirmed that section 40A(3) is attracted only when cash payment exceeds the prescribed limit per day, which was not the case here.
Accordingly, ITAT upheld the well-reasoned order of CIT(A) and dismissed Revenue’s appeal.
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