Kuppusamy Thankaraj Vs ITO (ITAT Chennai)
ITAT Chennai Deletes ₹77.95 Lakh Disallowance Under Section 40A(3): No Proof of Split Cash Payments
The Chennai Bench of the Income Tax Appellate Tribunal (ITAT) allowed the assessee’s appeal for AY 2018-19 and deleted the disallowance of ₹77.94 lakh made under section 40A(3) in respect of cash payments for purchase of firewood.
The Assessing Officer had alleged that the assessee deliberately split lump-sum cash payments into amounts not exceeding ₹10,000 per day per person to circumvent section 40A(3) read with Rule 6DD, and accordingly treated the books as unreliable. The CIT(A) affirmed the disallowance, also rejecting the assessee’s alternate plea that purchases of firewood fell within the exceptions under Rule 6DD.
The Tribunal observed that it was an undisputed fact that, as per the ledger accounts, no cash payment exceeded ₹10,000 per day per person, and the Revenue failed to bring any material on record to prove that actual lump-sum payments were made and artificially split in the books. In the absence of such evidence, section 40A(3) could not be invoked merely on suspicion or assumptions.
Accordingly, the ITAT held that the disallowance was unsustainable in law and directed its deletion. Consequentially, the stay application was dismissed as infructuous, and the appeal was allowed in full
FULL TEXT OF THE ORDER OF ITAT CHENNAI
