Text: Successful Appeal: Cash Payments Disallowed, RTGS Payments Upheld (3)

The appeal arose from disallowance under Sec. 40A(3) for cash payments exceeding the limit. The delay in filing was condoned due to the pandemic. The appellant, a textile firm, made payments to suppliers, resulting in disallowance. The CIT(A) deleted the disallowance for RTGS payments but upheld the rest. Upon review, it was found that payments were deposited into suppliers' accounts as requested. The genuineness was confirmed, leading to the deletion of the disallowance. The appeal was allowed, and the disallowance under Sec. 40A(3) was deleted based on documentary evidence.

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Issues: Disallowance u/s 40A(3) on account of cash payment exceeding specified limit

Analysis:
1. The appeal for Assessment Year 2016-17 arose from the order of the Commissioner of Income Tax (Appeals) regarding disallowance u/s 40A(3) on cash payments exceeding the specified limit to various suppliers.

2. The delay of 183 days in filing the appeal was condoned due to the Covid-19 pandemic situation, allowing the appeal to be admitted for adjudication on merits.

3. The disallowance under Sec. 40A(3) was challenged by the appellant, arguing that payments were directly deposited into the suppliers' bank accounts. The Revenue contended that the appellant violated the provisions of Sec. 40A(3) without any applicable exceptions.

4. The appellant, a resident firm engaged in textiles business, made cash payments to suppliers, resulting in a disallowance under Sec. 40A(3) as no deduction is allowed for such expenditures exceeding twenty thousand rupees made in cash.

5. The CIT(A) deleted the disallowance for RTGS payments but upheld the balance disallowance as the appellant failed to prove exceptional or unavoidable circumstances for cash payments, not falling under any exceptions in Rule 6DD of Income Tax Rules.

6. Upon review, it was found that the appellant did not make cash payments directly to suppliers but deposited the amounts into their bank accounts as per the suppliers' request for prompt receipt. The genuineness of payments and suppliers' existence were confirmed through detailed documentation, leading to the conclusion that the disallowance was unwarranted, resulting in allowing the appeal.

7. The appeal was allowed, and the disallowance under Sec. 40A(3) was deleted based on the documentary evidence provided by the appellant.

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