Case Law Details
PCIT Vs Laukik Paper Industries Pvt. Ltd (Bombay High Court)
The case of PCIT Vs Laukik Paper Industries Pvt. Ltd. involves an appeal admitted by the Bombay High Court on October 4, 2025, concerning the deletion of an addition made under Section 40A(3) of the Income Tax Act, 1961. This section mandates the disallowance of expenditure exceeding a specified limit (formerly ) if paid in cash.
The High Court admitted two substantial questions of law. The first questions whether the Income Tax Appellate Tribunal (ITAT) was correct in deleting the disallowance by relying on the judicial precedent of CIT Vs. Purshottam Lal Tamrakar Unchehra when the factual matrix, particularly the application of the “net profit rate,” differed significantly from the current case. The second question challenges the ITAT’s decision to delete the addition despite evidence, including bank statements and statements from key personnel, showing the assessee, Laukik Paper Industries Pvt. Ltd., made cash payments to creditors exceeding the statutory limit. The appeal seeks to determine if the ITAT and the Commissioner of Income Tax (Appeals) were wrong in either reducing the disallowance on a percentage basis or deleting it entirely. The appeal is pending service on the respondents.
FULL TEXT OF THE JUDGMENT/ORDER OF BOMBAY HIGH COURT
1. Heard Mr. Akhileshwar Sharma for the Appellant.
2. We admit this Appeal on the following substantial questions of law:-
A. “Whether on the facts and in the circumstances of the case & in the law, the Hon’ble ITAT is correct in deleting the addition made on account of disallowance u/s 40A(3) relying upon the order of Hon’ble High Court in the case of CIT Vs. Purshottam Lal Tamrakar Unchehra when the facts of the relied upon case is different from the current case, in so far as in the case relied upon “net profit rate” was applied on the entire gamut of business whereas in the present case it is not so?”
B. “Whether on the facts and in the circumstances of the case & in the law, the Hon’ble ITAT is correct in deleting the addition when the assessee has made cash payments to the creditors in excess of Rs. 20,000/-, which is a fact evidenced from the bank a/c statements and statements of the key persons of the group companies in the enquiries and therefore, neither the Ld. CIT(A) was right in reducing the disallowance of the expenses u/s 40A(3) on percentage basis nor the ITAT, Pune in deleting the addition made on account of disallowance u/s 40A(3) of the T Act?”
3. Mr. Sharma states that steps would be taken to serve the Respondents and affidavit of service be also filed.
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