DCIT Vs Greyforce Industries Limited (ITAT Kolkata)
Section 40A(3) Disallowance on Freight Payments Set Aside: Cash Paid to Truck Drivers Within ₹35,000 Limit and WhatsApp Chats Cannot Sustain Addition
The Kolkata Bench of the ITAT dismissed the Revenue’s appeal and upheld the CIT(A)’s order deleting disallowances aggregating to ₹3.93 crore made during survey proceedings for AY 2023-24.
On the principal issue, the Tribunal held that the Assessing Officer wrongly invoked Section 40A(3) by treating freight payments as having been made to transporters in excess of ₹35,000 per day. The evidence on record showed that cash payments were made directly to individual truck drivers, none exceeding the statutory limit in a single day. Transport facilitators merely coordinated trucks and earned commission from drivers, not from the assessee. Affidavits, cash vouchers, builty slips, ledgers and even statements recorded under Section 131 supported this business reality. The ITAT observed that Section 40A(3) should not be applied mechanically to disallow genuine business expenditure incurred under commercial exigencies, particularly where identity of payees and genuineness of transactions are not in doubt.
On the second issue, the Tribunal upheld deletion of a ₹10 lakh addition made under Section 69C based solely on WhatsApp messages allegedly indicating cash payment for installation of a pasta machine. The ITAT agreed that uncorroborated digital messages and statements, without any independent enquiry, invoice, seized material, or rejection of books under Section 145(3), cannot justify an addition. In the absence of corroborative evidence, such presumptive additions were held to be unsustainable.
Accordingly, the ITAT found no infirmity in the CIT(A)’s findings and dismissed the Revenue’s appeal in entirety.
FULL TEXT OF THE ORDER OF ITAT KOLKATA
