- (1.) The revenue has filed the present appeal under Section 260A of the Income Tax Act (for short "the Act") against the order dated 22-12-2006 passed by the Tribunal, Delhi Bench "E" New Delhi in ITA No. 5496/Del/2004 for the assessment year 1990-91, raising the following substantial questions of law for consideration of this Court: (a) Whether on the facts and in the circumstances of the case, the Hon ble Tribunal was right in law in deleting the disallowance of Rs. 19,31,000 made by the assessing officer under Section 40A(3) of Income Tax Act, 1961 particularly in view of the fact that auditor had himself pointed out in tax audit report filed with the return that assessee had made cash payments of Rs. 19.71 lacs in contravention of Section 40A(3) of Income Tax Act (b) Whether on the facts and in the circumstances of the case, the Hon ble Tribunal erred in law in confirming the finding of learned Commissioner (Appeals) that onus was on the assessing officer to prove that the entries originally made in the books were relating to payment on account of expenditure and not loans and advances ignoring the fact reported by the auditor in the tax audit report and the fact that the assessee contended first time before Tribunal only that these payments were of capital nature
(2.) The assessee is a company. It manufactures switches. In the assessment order passed for the assessment year 1990-91 under Section 143(3) of the Act, the assessing officer made an addition of Rs. 19,71,000 by invoking the provisions of Section 40A(3) of the Act. The assessee had made cash payments to M/s Asahi Alfa Ltd., M/s Niko Auto Ltd. and M/s Toyo Mirrors (P) Ltd. The disallowance made by the assessing officer was confirmed by the Commissioner (Appeals). On further appeal by the assessee to the Tribunal the issue was remanded to the assessing officer for a fresh adjudication. Before the Tribunal the assessee took a plea that the payment of Rs. 19.71 lakhs made to three parties which were disallowed by invoking Section 40A(3) were expenditure of capital nature and therefore was not covered under the provisions of Section 40A(3) of the Act. On such submissions the Tribunal remanded the matter to the assessing officer for fresh adjudication.
(3.) On such remand by the Tribunal the assessing officer again took up the issue of disallowance under Section 40A(3) of the Act for consideration. The assessee explained in the remand proceedings that the cash payments were made to the parties in question in respect of amounts standing as due and payable to them towards advances and that none of these payments was on account of revenue expenditure debited in the P&L a/c. The assessee also explained that the recipients of these payments had to make payment of dues to the Government, like excise duty, sales-tax and payment to workers. The necessary copies of the accounts of the recipient companies and the books of accounts of the assessee were produced before the assessing officer. According to the assessing officer there were several cuttings and over writings and erasers in the accounts and vouchers. He therefore, concluded that the entries in the books of accounts were manipulated. He therefore, concluded that the assessee failed to establish that the cash payments were made for capital expenditure or for repayment of loans. He therefore upheld the disallowance which were made in the original assessment proceedings.;