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2022 (2) TMI 422 - AT - Income TaxRectification of mistake u/s 154 - disallowing u/s.40A(3) of the assessee’s claim for deduction of bonus as stated to have been paid in cash, i.e., in excess of the prescribed limit of ₹ 20,000/- - HELD THAT:- Though Section 40A(3) contemplates disallowance of certain expenditure which is incurred by an assessee in cash beyond the prescribed limit, however, Rule 6DD of the Income Tax Rules, 1962 carves out a set of exceptions wherein the payments despite having been made in cash beyond the aforesaid prescribed limit are not to be disallowed. In the backdrop of our aforesaid observations, we are of a strong conviction, that no disallowance u/s.40A(3) of the Act, even in a case where the payments had been made by the assessee in cash beyond the prescribed limit could validly be made by invoking the provisions of Section 154 of the Act. In our considered view, as the AO had grossly erred in invoking the provisions of Section 154 of the Act for the purpose of disallowing the aforementioned amount u/s. 40A(3) of the Act, therefore, the order therein passed by him cannot be sustained and is accordingly liable to be vacated. We, thus, not being able to persuade ourselves to subscribe to the view taken by the lower authorities set aside the order passed by the CIT(A) and quash the order passed by the AO u/s.154 of the Act. Grounds of Appeal Nos.1 to 4 are allowed in terms of our aforesaid observations.
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