The assessee made cash payment for conversion work undertaken by a company (SLM) . The AO made an addition under section 40A(3) being 20 per cent of total cash payment. The disallowance was affirmed by CIT (A) . Tribunal allowed the appeal . On appeal by the revenue dismissing the appeal the Court held that banking facility was available but bank account of SLM could not be operated because of an order of attachment passed by ESI department and SLM requested to effect payment in cash. Accordingly the AO was not justified in making addition . (AY. 2005-06)
PCIT v. Sumukha Synthetics (2020) 275 Taxman 418 / 195 DTR 445 (Mad.)(HC)
S. 40A(3) : Expenses or payments not deductible – Cash payments exceeding prescribed limits – Bank account was attached – Disallowance of 20% is held to be not justified [ R.6DD(j)]