Pr. Commissioner of Income Tax-1 vs Mohd Ayaz — Income Tax | Allahabad HC (2025)

Pr. Commissioner of Income Tax-1 vs Mohd Ayaz — Income Tax | Allahabad HC (2025)

What the court decided

AI extract

Outcome

Appeal formally admitted on the five framed substantial questions of law; matter listed for hearing on January 29, 2026; counsel directed to file the paper book within six weeks. No merits determination or interim relief at this stage.

Issue for consideration

Whether the Income Tax Appellate Tribunal was justified in deleting the addition under section 40A(3) solely because the Assessing Officer had not identified specific instances of cash payments in violation of section 40A(3), despite the assessee's failure to produce corroborative documentary evidence. +4 more

Detailed headnote1 paragraphs

Allahabad High Court (Lucknow Bench), Court No. 3 — admission order dated December 10, 2025 in Income Tax Appeal No. 13 of 2025 (Pr. Commissioner of Income Tax-1 v. Mohd Ayaz), bench of Shekhar B. Saraf and Rajeev Bharti, JJ. The Revenue's appeal was admitted on five substantial questions of law arising from the Tribunal's deletion of an addition of Rs.6,68,97,549/- under section 40A(3) of the Income-tax Act, 1961: (i) deletion solely because the Assessing Officer identified no specific instances of cash payments in violation of section 40A(3), despite the assessee producing no corroborative documentary evidence; (ii) alleged perversity of the ITAT's finding that the AO carried out no exercise of identifying violations of section 40A(3); (iii) deletion despite the assessee's failure to establish Rule 6DD coverage through confirmations, invoices and documents; (iv) the ITAT's position that no addition under section 40A(3) can be made on an estimated basis notwithstanding the assessee's failure to discharge its onus, to be tested against Attar Singh Gurmukh Singh v. ITO (1991) 191 ITR 667 (SC); and (v) correctness of the deletion in light of Attar Singh Gurmukh Singh (supra) and Choudhary Transport Company v. ITO [2020] 426 ITR 289 (SC), given the object of section 40A(3) to curb unaccounted money and require strict application. Matter listed for January 29, 2026; paper book within six weeks. This is an admission-stage order only; no merits determination was made and no precedent was followed, relied upon or applied by this Court at this stage.

HIGH COURT OF JUDICATURE AT ALLAHABAD LUCKNOW

INCOME TAX APPEAL No. - 13 of 2025

Pr. Commissioner Of Income Tax-1

.....Appellant(s)

Versus

Mohd Ayaz

.....Respondent(s)

Counsel for Appellant(s)	: Kushagra Chitravanshi	Dikshit,	Neerav
Counsel for Respondent(s)	:

Court No. - 3

HON'BLE SHEKHAR B. SARAF, J. HON'BLE RAJEEV BHARTI, J.

Heard learned counsel appearing on behalf of the parties.

The appeal is admitted on the following substantial questions of law :-

"1. Whether, on the facts and in the circumstances of the case, the Ld. Income Tax Appellate Tribunal was justified in law in deleting the addition made under section 40A(3) of the Income-tax Act, 1961, solely on the alleged ground that the Assessing Officer had not identified specific instances of cash payments in violation of section 40A(3), despite the assessee's failure to produce corroborative documentary evidence to substantiate its claim.

2 Whether the finding of the Ld. ITAT that the Ld. AO during the assessment proceedings did not carry out the exercise of identifying violations of section 40A (3) is perverse and contrary to the categorical findings recorded by the Ld. AO in the assessment order.

Whether on the facts and in the circumstances of the case, the Ld. ITAT was justified in law in deleting the addition of Rs.6,68,97,549/- made under section 40A (3) by the Assessing Officer, ignoring the failure of the assessee to produce confirmations, invoices, and documentary evidence to establish that its case was covered under Rule 6DD.

Whether the Ld. ITAT erred in law in holding that an addition

IAPL No. 13 of 2025

2

under section 40A(3) cannot be made on an estimated basis, even where the assessee failed to discharge the onus cast upon it to prove that no payments in contravention of section 40A(3) were made, and whether such finding is contrary to the ratio laid down by the Hon'ble Supreme Court in Attar Singh Gurmukh Singh v. ITO (1991) 191 ITR 667 (SC).

Whether, in view of the judgment of the Hon'ble Supreme Court in Attar Singh Gurmukh Singh v. ITO (1991) 191 ITR 667 (SC) and Choudhary Transport Company v. ITO [2020] 426 ITR 289 (SC), the Ld. ITAT was correct in law in deleting the disallowance without appreciating that the object of section 40A(3) is to curb the circulation of unaccounted money and ensure transparency in business transactions, and that such provisions must be strictly applied."

List this matter on January 29, 2026 .

Counsel appearing on behalf of the parties are directed to file the paper book within six weeks.

December 10, 2025 cks/-

(Rajeev Bharti,J.) (Shekhar B. Saraf,J.)

Digitally signed by :- CHANDRA KANT SINGH High Court of Judicature at Allahabad, Lucknow Bench