Non-Response to Notices cannot justify 40A(2)(b) disallowances: ITAT Mumbai

Precision Shapes Vs ITO (ITAT Mumbai) Mumbai ITAT has quashed a disallowance made u/s 40A(2)(b), holding that non-response to notices by related parties cannot be the sole basis for treating payments as excessive or unreasonable. The case relates to Precision Shapes vs. ITO (ITA No. 2299/Mum/2025, AY 2014-15, order dated 18.08.2025). Assessee, a partnership firm engaged in manufacturing, filed its return of income declaring ₹19,64,050/-. During scrutiny, AO observed payments of ₹22,91,477/- to related parties, as disclosed in the audit report. Notices u/s 133(6) were issued to related part...