|The Tax Publishers2020 TaxPub(DT) 5183 (Visakhapatnam-Trib)
INCOME TAX ACT, 1961
Where Revenue failed to establish that cash payments made by assessee to its sister concerns were related to purchases, thus, no expenditure was incurred and therefore, provisions of section 40A(3) could not be invoked in the instant case.
Business disallowance under section 40A(3) - Cash payments exceeding prescribed limit - Applicability of provisions - AO alleged that assessee made cash payments to its two sister concerns related to purchases
Assessee made cash payments to its two sister concerns. AO was of the view that the said payments made by assessee were related to purchases, therefore section 40A(3) would be applicable. However, the assessee submitted that there were no purchases from the said sister concerns, therefore, section 40A(3) had no application. Held: On perusal of the books of account, it was found that entries were cash payments by assessee to its sister concerns without any sales. Therefore, it was not correct to say that the payments represented purchases without any adverse material facts. Further, it was seen that the assessee had not claimed any purchases in P&L account with reference to the said two parties. In view of the same, it could be reasonably concluded that the assessee was correct and the AO was not having enough ground to invoke section 40A(3). Even before Tribunal, no material was placed by Revenue to prove that the payments made by assessee to its sister concerns were related to purchases. Thus, there was no expenditure incurred and therefore, provisions of section 40A(3) could not be invoked in the instant case.
FAVOUR : In assessee's favour.
A.Y. : 2009-10
IN THE ITAT, VISAKHAPATNAM BENCH
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