SRIDHARAN RAJENDHIRAN,KANCHIPURAM V. ITO,NCW-15(1), CHENNAI

ITA 3343/CHNY/2024

AI Insights

The case involves Sridharan Rajendran, the proprietor of Sri Ram Industries, who appealed against the disallowance of Rs. 17,30,800 by the Income Tax Officer, Non Corporate Ward-15(1), Chennai. The disallowance was made under Section 40A(3) of the Income-tax Act, 1961, due to cash payments made as bonuses to employees, which exceeded the stipulated limit of Rs. 10,000 per transaction. The assessee argued that the payments were genuine and that the identity of the payees was not in question, citing Rule 6DD of the Income Tax Rules, 1962. However, both the Assessing Officer and the Commissioner of Income Tax (Appeals) found no applicable exceptions under Rule 6DD that would allow for the disallowance to be overturned. The Tribunal agreed with the lower authorities, emphasizing that the payments were made in cash despite the employees having bank accounts.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 396830 (ITAT-CHENNAI)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-05-2025
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2018-2019
• Laws Referred To: Income-tax Act, 1961, Income Tax Rules, 1962
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: GOUTHAMI MANIVASAGAM
• Assessee Lawyers: S. SRINIVASAN; C.A
• Section: 143(3); 40A(3)

Judgement Text

"आयकर अपीलीय अिधकरण, ‘बी’ \u0011ा यपीठ, चे\u0016ई। IN THE INCOME TAX APPELLATE TRIBUNAL ‘B’ BENCH: CHENNAI \u0019ी मनु क ुमा र िग र, \u0011ा ियक सद! एवं \u0019ी जगदीश, लेखा सद! क े सम( BEFORE SHRI MANU KUMAR GIRI, JUDICIAL MEMBER AND SHRI JAGADISH, ACCOUNTANT MEMBER आयकर अपील सं./ITA No.3343/Chny/2024 िनधा 8रण वष8 /Assessment Year: 2018-19 Sridharan Rajendran, No.40/2, Puthavedu Street, Moondram Kattalai Village, Kovur Kundrathur, Kanchipuram – 600 122. Vs. The Income Tax Officer, Non Corporate Ward-15(1), Chennai. [PAN: BJFPS 4041C] (अपीलाथ\u0007/Appellant) (\b यथ\u0007/Respondent) अपीलाथG की ओर से/ Appellant by : Shri S. Srinivasan, C.A IJथG की ओर से /Respondent by : Smt. Gouthami Manivasagam, JCIT सुनवाई की तारीख/Date of Hearing : 19.03.2025 घोषणा की तारीख /Date of Pronouncement : 27.05.2025 आदेश / O R D E R PER JAGADISH, A.M : Aforesaid appeal filed by the assessee for Assessment Year (AY) 2018-19 arises out of the order of Learned Commissioner of Income Tax (NFAC), Delhi [hereinafter “CIT(A)”] dated 13.11.2024 in the matter of assessment framed by the Assessing Officer [AO] u/s. 143(3) r.w.s 143(3A) & 143(3B) of the Income-tax Act,1961 (hereinafter “the Act”) dated 10.02.2021. ITA No.3343/Chny/2024 :- 2 -: 2. The effective ground of appeal in this appeal of assessee is against confirming disallowance of Rs.17,30,800/- made by the A.O u/s. 40A(3) of the Act. 3. The assessee is a proprietor of the business concern, namely Sri Ram Industries and engaged in the manufacturing of machinery components. During the course of assessment, the A.O found that the assessee has made cash payment of bonus to 84 employees totaling to Rs. 12,91,300/- and performance bonus to 42 employees amounting to Rs. 4,39,500/-, each exceeding Rs.10,000/- in violation to the provisions of Section 40A(3) of the Act. The A.O accordingly made disallowance of Rs.17,30,800/- u/s. 40A(3) of the Act. The assessee filed an appeal before the Ld. CIT(A) and argued that payments made to the workers were genuine and identity of the payee was not doubted and therefore, as per clause (j) of Rule 6DD of the Income Tax Rules, 1962 (hereinafter “the Rules”), no disallowance should be made. The Ld. CIT(A) after careful consideration of provisions of Section 40A(3) and Rule 6DD has noted the violation of provisions of section 40A(3) without any exception. The Ld CIT(A) also noted that the bonus and performance bonus was paid in cash, despite employee having the bank account and confirmed the disallowances. ITA No.3343/Chny/2024 :- 3 -: 4. The Ld. Authorized Representative (A.R) of the assessee reiterated that all the payments were made to genuine employees whose identity was not in question, and hence Section 40A(3) should not be invoked. The Ld. A.R also submitted that the assessee was under the bona fide belief that the upper limit for cash payments as per section 40A(3) was Rs.20,000/-, and therefore payment was made in cash up to Rs 20,000. It was further argued that prior to A.Y. 2018–19, the upper limit for cash payment limit was Rs. 20,000/-, and even the Ld. CIT(A) in the impugned order, referred to the threshold as Rs.20,000/-, thereby indicating potential ambiguity. On this basis, the Ld. A.R requested that the disallowance be deleted. 5. On the other hand, the Ld. Departmental Representative (D.R) relied on the findings of the A.O and the order of the Ld. CIT(A). 6. We have heard the rival submissions and perused the materials available on record. It is an undisputed fact that the assessee made cash payments totaling Rs.17,30,800/- towards bonus and performance bonus, in violation of the provisions of Section 40A(3) of the Act. The Ld. CIT(A) has clearly brought out that none of the exceptions listed under Rule 6DD of the Rules are applicable in this case. Moreover, it is evident that the payments were made in cash ITA No.3343/Chny/2024 :- 4 -: despite the fact that all the employees had bank accounts into which their regular salaries were credited. Therefore, we find no infirmity in the findings of the Ld. CIT(A) and dismiss the appeal filed by the assessee. 7. In the result, the appeal filed by the assessee is dismissed. Order pronounced on 27th May, 2025. Sd/- Sd/- (मनु क ुमार िग र) (Manu Kumar Giri) \u0011ाियक सद! / Judicial Member (जगदीश) (Jagadish) लेखा लेखा लेखा लेखा सद\u0011य सद\u0011य सद\u0011य सद\u0011य /Accountant Member चे\u0013नई/Chennai, \u0016दनांक/Dated: 27th May, 2025. EDN/- आदेश क\u0019 \bितिल प अ े षत/Copy to: 1. अपीलाथ\u0007/Appellant 2. \b थ\u0007/Respondent 3. आयकर आयु\u000f/CIT, Chennai 4. िवभागीय \bितिनिध/DR 5. गाड\u0018 फाईल/GF "