BINDU,PANIPAT V. ITO WARD-1, PANIPAT

ITA 53/DEL/2024

AI Insights

The case involves Bindu, an individual engaged in the business of liquor sale, who appealed against the order of the CIT(A) NFAC, Delhi, which arose from an assessment order passed by the AO, Delhi. The assessment order added Rs. 94,10,850 to Bindu's income, citing a violation of Section 40A(3) of the Income Tax Act, 1961, as the salaries were paid in cash exceeding the prescribed limit. The CIT(A) dismissed Bindu's appeal, agreeing with the AO's decision, which was based on the lack of satisfactory evidence to substantiate the claim that salaries were paid weekly in cash, thus avoiding the cash limit violation.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 669408 (ITAT-DELHI)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-06-2025
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: F
• Assessment Year: 2020-2021
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: HARPREET KAUR HANSRA
• Keywords: Principle of natural justice
• Section: 143(3); 40A(3)

Judgement Text

"P a g e | 1 ITA No. 53/Del/2024 Bindu (AY: 2020-21) THE INCOME TAX APPELLATE TRIBUNAL “F” BENCH, DELHI BEFORE MS. MADHUMITA ROY, JUDICIAL MEMBER & SHRI KHETTRA MOHAN ROY, ACCOUNTANT MEMBER ITA No.53/Del/2024 (Assessment Year 2020-21) Bindu W/o Sh. Mahavir Singh, H. No. 182, Ward No 18, New R.K Puram Panipat 132103 Vs. CIT(A) NFAC Delhi 110041 \u0001थायीलेखासं./जीआइआरसं./PAN/GIR No: CPOPB2129E Appellant .. Respondent Appellant by : None Respondent by : Ms. Harpreet Kaur Hansra, Sr. DR Date of Hearing 04.06.2025 Date of Pronouncement 25.06.2025 O R D E R PER KHETTRA MOHAN ROY, AM: The instant appeal preferred by the assessee is directed against the order dated 27.06.2023 passed by the Ld. National Faceless Appeal Centre (NFAC), Delhi, arising out of the Assessment Order dated 26.09.2022, passed by AO, Delhi, under Section 143(3) r.w.s 144B of the Income Tax Act, 1961 (hereinafter referred to as “the Act”) for the Assessment Year 2020-21. The following grounds were raised: P a g e | 2 ITA No. 53/Del/2024 Bindu (AY: 2020-21) 1. That the addition under the head salary A/c Rs. 9410850/- due to violation of the provision section 40A(3) of income tax act 1961, is wrong and unjustified 2. That the Ld. AO and Honable commissioner appeal (NFAC) Delhi has assumed the salary paid to employees as cash above the cash limit is wrong and justified. 3. That the total addition in assessment order is wrong & justified and against the natural justice 2. The assessee is an individual and engaged in the business of liquor sale. In the course of assessment the assessee submitted ledger copy of salary for Rs.94,10,850/- without any supporting document. The AO noted that the assessee paid salary to each employee ranging from Rs.15,000/- to Rs.22,000/- in cash. The assessee was so caused to explain that the violation of provision o f Section 40A(3) should not be placed against her. In the absence of satisfactory explanation the entire sum was added. 3. The assessee made detailed submission. During Appellate Proceedings the CIT(A) dismissed the appeal by holding as follows: “7.8 The provisions of section 40A deal with expenses or payments not deductible in certain circumstances. The very provision of section 40A(3) reads as follows: “Where the assessee incurs any expenditure in respect of which a payment or aggregate of payments made to a person in a day, otherwise than by an account payee cheque drawn on a bank or account payee bank draft, [or use of electronic clearing system through a bank account [or through such other electronic mode as may be prescribed], exceeds ten thousand rupees,] no deduction shall be allowed in respect of such expenditure.\" 7.9 It is undeniable fact that the appellant employer has paid salary of more than Rs. 10,000/- per month, totally in cash, to each employee. Hence, the above provision is attracted. In this scenario, it is a substantial question before this authority whether the appellant paid salary to her employees on weekly basis. P a g e | 3 ITA No. 53/Del/2024 Bindu (AY: 2020-21) 7.10 As regards with the above, I have carefully perused the ledger and wages register submitted by the appellant in respect of payment of salary to the employees. This ledger and wages register prepared by the appellant on computer cannot be a reliable document to substantiate payment of salary to the employees weekly in absence of daily wages register. The submitted wages register is self prepared on computer & self signed and without the signatures of the recipients-employees. The appellant has contended that he has paid weekly salary to the employees but he did not produce any documentary evidences where it is agreed to pay salary on weekly basis. On the submitted register, there is not signature of employees for taking payment on weekly basis. It is well settled law between employer and employees that payment is mostly distributed to the employees on the end of month or other day which is fixed by the employer and in other cases, proper documentation is required. Hence, merely on the basis of self signed table made on computer and ledger cannot be accepted as evidence without such reliable supporting documentary evidences as explained above. Hence, I am of the considered opinion that the AO was justified in disallowing the payment of salary paid in cash to the employee above Rs. 10,000/- in view of provisions of section 40A(3) of the Act read with section 6DD.” 4. Before us, there is no appearance by the assessee nor evidence whatsoever has been filed in support of the claim of the assessee. The same has pathetically failed to comply with the provisions of Section 40A(3) read with Rule 6DD to establish the business expediency and other relevant factors to make cash payment. The order of the CIT(A) needs not required interference, the appeal is dismissed. 5. In the result, the appeal of the assessee is dismissed. Order pronounced in the open court on 25.06.2025 Sd/- (Madhumita Roy) Sd/- (Khettra Mohan Roy) JUDICIAL MEMBER ACCOUNTANT MEMBER Dated 25.06.2025 Rohit, Sr. PS P a g e | 4 ITA No. 53/Del/2024 Bindu (AY: 2020-21) Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(Appeals) 5. DR: ITAT ASSISTANT REGISTRAR ITAT NEW DELHI "