GENESIS ADVERTISING PVT. LTD.,KOLKATA V. A.C.I.T., CC - 4(1), KOLKATA

ITSSA 84/KOL/2025

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Genesis Advertising Pvt. Ltd appealed against the orders of the Commissioner of Income Tax (Appeals)-27, Kolkata, which upheld the disallowance of business expenditure amounting to Rs.4,30,000/- for the assessment years 2019-20 and 2020-21. The disallowance was initially made by the Assessing Officer under section 40A(3) of the Income Tax Act, citing failure to substantiate cash payments exceeding Rs.10,000/- in a single day to a single person. The Tribunal, referencing decisions from the Supreme Court and the Calcutta High Court, found that the payments were made out of commercial expediency and were necessary for the business operations of the assessee, thus meriting the deletion of the disallowance.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 785653 (ITAT-KOLKATA)
• Duration Of Justice: 2 month(s) 22 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 27-10-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2020-2021
• Appeal Filed On: 05-08-2025
• Other Referred Cases: Attar Singh Gurmukh Singh vs. ITO, CIT vs. CPL Tannery
• Laws Referred To: Income Tax Act
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Business expenditure; Commercial expediency
• Section: 142(1); 153A; 40A(3)

Judgement Text

"आयकर अपीलȣय अͬधकरण, कोलकाता पीठ, कोलकाता IN THE INCOME TAX APPELLATE TRIBUNAL “B” BENCH KOLKATA Before Shri Rajesh Kumar, Accountant Member and Shri Pradip Kumar Choubey, Judicial Member IT(SS).A Nos.83 & 84/Kol/2025 Assessment Years: 2019-20 & 2020-21 Genesis Advertising Pvt. Ltd …………..…………………………….…….……Appellant 2A, Dwarka, 7 Sarat Bose Road, Kol- 700020. [PAN: AABCG0780D] vs. ACIT, Central Circle-4(1), Kolkata …………..………………...……...…..…..Respondent Appearances by: Shri S.K. Tulsiyan, Advocate & Jyoti Duggar, AR, appeared on behalf of the appellant. Shri P N Barnwal, CIT-DR, appeared on behalf of the Respondent. Date of concluding the hearing : October 14, 2025 Date of pronouncing the order : October 27, 2025 ORDER Per Pradip Kumar Choubey, Judicial Member: Both the captioned appeals have been preferred by the assessee for the assessment years 2019-20 & 2020-21 against separate orders dated 23.07.2025 & 25.07.2025 of the Commissioner of Income Tax (Appeals)- 27, Kolkata [hereinafter referred to as ‘CIT(A)’] passed u/s 250 of the Income Tax Act (hereinafter referred to as the ‘Act’) respectively. Since, the issues involved in both the appeals are common and relate to the same assessee, therefore, these appeals have been heard together and are being disposed of by this consolidated order. ITA No.83/Kol/25 is taken as lead case for the sake of convenience and narrations of facts. 2. ITA No.83/Kol/2025 – The ld. AR challenges the very impugned order thereby submitting that the ld. CIT(A) erred in having upheld the disallowance of business expenditure of Rs.4,30,000/- u/s 40A(3) of the Printed from counselvise.com IT(SS)A Nos.83 & 84/Kol/2025 Genesis Advertising Pvt. Ltd 2 Act alleging that the assessee’s failure to substantiate the cash payment more than 10,000/- in a single day to a single person ignoring the fact that the advance was given to the project managers acting as agents of the company at the project site for organizing exhibitions and for making payment to the parties who insisted cash payment which did not exceed the threshold limit. The ld. AR further submits that in fact the amount of Rs.4,30,000/- was handed over to the project manager appointed by the company. He has given a chart to submit that project managers made payment in cash on various expenses which are apparent from the ledger enclosed in the pages 1 to 5 of the paperbook. The ld. AR further submits that cash payment made in excess of Rs.10,000/- in a single day to a single person by the project manager which is reflected in the books of account enclosed at page no.6 of the paperbook. The ld. AR further submit that with reference to the cash payment more than Rs.20,000/-, the payments were made to different parties in cash out of commercial expediency as the parties refused to accept cheque payment and insisted for cash payments and further submits that payments in cash were made to those parties who resides in places where there were no proper banking facilities. The ld. AR brought a decision passed in Apex Court in the case of Attar Singh Gurmukh Singh vs. ITO reported in [1991] 59 taxman 11 (SC) and decision of Hon’ble Calcutta High Court in the case of CIT vs. CPL Tannery (2009) 318 ITR 179 (Cal). 3. Contrary to that, the ld. DR supports the impugned order of the ld. CIT(A) thereby submitting that the ld. CIT(A) has considered the ledger and bank account and thereafter, held that the suspense account was still maintained in tally once the books were already finalized. 4. Brief facts of the case of assessee are that assessee being a company filed its return of income declaring total income at Rs Printed from counselvise.com IT(SS)A Nos.83 & 84/Kol/2025 Genesis Advertising Pvt. Ltd 3 27,21,65,660/- under the normal provision, there after a search u/s 132(1) of the Act and survey operation was conducted in the case of Genesis group, and the assessee company was one of the related persons of the group. A notice u/s 153A of the Act was issued. In response to the notices AR filed details. The learned AO passed an assessment order where in disallowance of Rs 4,30.000/-was made u/s 40A(3) of the Act. Aggrieved by the order Assessee preferred appeal before Cit(A) where in appeal of the assessee dismissed. 5. Upon hearing the counsels of the respective parties and on perusal of the impugned order, we find that the assessee company is engaged in providing service of advertising, creation of advertising content and event management on behalf of clients in different parts of the country. It appears to us that the assessee company has also engaged in providing advertising services, creating different subject matter for advertising by shooting/filming the content required by the client at different locations. The materials required for making the pandals for events like hardware material, wooden materials, paints, plumbing materials and various other types of materials are sometimes required to be purchased in cash on the spot. Furthermore, the conveyance expenses, charges paid to local laborers for services received from the, the fooding expenses of the labourers are also required to be paid in cash. In this respect, the ld. AR given a chart which is as under: Date Head Amount (Rs.) 06.04.2019 Kranti Bhowmick Advance 50,000.00 25.09.2019 Saurabh Lal Advance 15,000.00 25.09.2019 Kranti Bhowmick Advance 20,000.00 09.10.2019 Suman Das Advance 2,00,000.00 Printed from counselvise.com IT(SS)A Nos.83 & 84/Kol/2025 Genesis Advertising Pvt. Ltd 4 17.10.2019 Soumyajit Dey Advance 35,310.00 24.12.2019 Suman Das Advance 59.000.00 04.11.2019 Suman Das Advance 1,38,500.00 11.11.2019 Suman Das Advance 20,000.00 07.12.2019 Suman Das Advance 1,00,000.00 07.12.2019 Kingshuk halder 1,00,000 07.12.2019 Biswajit Majumdar 1,00,000 07.12.2019 Kumaresh nandy 1,00,000 07.12.2019 Saurabh lal 1,00,000 5.1 A perusal of the ledger filed by the assessee in pages 1 to 2 of the paperbook, we find that the cash payments done Rs.10,000/- in many cases. On perusal of the ledger books and books of account, we find that the total cash payment of more than Rs.10,000/- during the year was Rs.1,96,583/- only and not Rs.4,30,000/- as mentioned in the notice u/s 142(1) of the Act. The ld. AR has also brought our attention to the ledger book in which we find that advance paid to the project manager, the intention of section 40A(3) of The Act is to only check unaccounted money and not to restrict the business activity of assessee. Section 40A(3) should be read in conjunction with Rule 6DD of the Rules. We have gone through the decision cited by the assessee and find that the Hon’ble Apex Court in Court in the case of Attar Singh Gurmukh Singh vs. ITO (supra) has held as under: “Section 40A(3) must not be read in isolation or to the exclusion of Rule 6DD. This section must be read along with the Rule 6DD and if read together it is clear that the provisions of the section are not intended to restrict the business activities. It only empowers the assessing officer to disallow the deductions claimed as expenditure in respect of which payment is not made by crossed cheque or crossed bank draft. The same is insisted only to enable the assessing authority to ascertain whether it was out of the income from disclosed sources and even the terms of section 40A(3) are not absolute. Considerations of business expediency Printed from counselvise.com IT(SS)A Nos.83 & 84/Kol/2025 Genesis Advertising Pvt. Ltd 5 and other relevant factors are not excluded, since it is open to the assessee to furnish the circumstances under which the payment was not practicable or would have caused genuine difficulty to the payee. Rule 6DD provides that an assessee can be exempted from the requirement of payment by a crossed cheque or crossed bank draft in the circumstances specified under the rule. Thus section 40A(3) and Rule 6DD are intended to regulate the business transactions and to prevent the use of unaccounted money or reduce the chance to use black money for business transactions. Moreover, while interpreting a taxing statute the Court cannot be oblivious of the proliferation of black money which is in circulation in our country. Thus any restraint intended to use or create black should not be regarded as curtailing the freedom of trade or business.” 5.2 We also find that in the decision of Hon’ble Calcutta High Court in the case of CIT vs. CPL Tannery (supra), wherein it was held that disallowance of expenditure u/s. 40A(3) is not justified where the genuineness of the transaction is not doubted. The relevant part of the decision is as under: “Rule 6DD was created to curve out exception of the rigours of section 40A(3) and such exceptions are to be understood in the background of commercial expediency and other relevant factors. This has been accepted by the CBDT by issuing press note dated 02.05.69 and the view that products otherwise covered under rule 6DD, when subjected to some processing should also qualify for exemption has been admitted. In this view of the matter and after considering the issue in great detail, we are of our considered view that the addition of Rs.2.50 lacs u/s 40A(3) is uncalled for and hence deleted. The first ground of appeal thus succeeds.” 6. Keeping in view the above discussions and considering the judicial precedents, we find substance in the argument of the ld. counsel of the assessee and the disallowance of Rs.4,30,000/- is hereby deleted. ITA No.83/Kol/2025 is allowed. 7. ITA No.84/Kol/2025 – Since the facts and issues involved in both the appeals are identical, therefore, our findings/directions given above in ITA No.83/Kol/2025 will mutatis mutandis apply to ITA No.84/Kol/2025. Hence, ITA No.84/Kol/2025 is allowed. Printed from counselvise.com IT(SS)A Nos.83 & 84/Kol/2025 Genesis Advertising Pvt. Ltd 6 8. In the result, both the appeals filed by the assessee are allowed. Kolkata, the 27th October, 2025. Sd/- Sd/- [Rajesh Kumar] [Pradip Kumar Choubey] Accountant Member Judicial Member Dated: 27.10.2025. RS Copy of the order forwarded to: 1. Appellant - 2. Respondent - 3. CIT(A)- 4. CIT- , 5. CIT(DR), //True copy// By order Assistant Registrar, Kolkata Benches Printed from counselvise.com "