No addition can be made on Expenses incurred for  Purchases of liquor from Licensed Suppliers :ITAT [Read Order]

The Delhi Bench of the Income Tax Appellate Tribunal (ITAT) ruled that no addition could be made on expenses incurred for purchase of liquor from liquor from licensed suppliers .

The assessee Shakti Singh Gulia  Ltd,engaged in the business of trading of liquor and also deriving income from salary/pension from Haryana Government. The assessee filed return of income at Rs.13,21,210/- which was subjected to scrutiny assessment. After the Scrutiny AO disallowed expenses incurred for  Purchases of liquor  from supplier and concluded that  payment made to them exceeded Rs.20,000/.

Therefore the AO found that  to be in contravention of provisions of Section 40A(3) of the Income Tax Act, 1961.

Aggrieved by the order, the assessee filed an appeal before the Commissioner of Income Tax (Appeal) (CIT(A)) who upheld the action of the Assessing officer. Hence the assessee filed a second appeal before the tribunal .

Meenakshi Dohare, the Department Representative submitted that the provisions of Section 40A(3) of the Income Tax Act imposing restrictions on cash payments would be triggered in the case of the assessee except in the circumstances listed under Rule 6DD of the Income Tax Rules, 1962.

Further, the assessee have not been shown to fall within any of the clauses of Rule 6DD of the Rules and therefore, the assessee is not entitled to any relief from the applicability of Section 40A(3) of the Income Tax  Act.

Manoj Kumar, the Counsel for the assessee submitted that  assessee that the business operates in a highly government regulated environment where the distillery companies are licensed suppliers as also its customers including the assessee who is also a permit holder for purchase of liquor bottles.

Moreover, the entire purchase transactions with these parties have been subjected to TCS as per the provisions of the Act.

After reviewing the facts and submissions, the two member bench of the tribunal comprising Pradip Kumar Kedia (Accountant Member) and Chandra Mohan Garg (Judicial Member) observed that the cash transactions, in any case, have been subjected to TCS collections and are thus duly made chargeable to tax in the hands of the recipient.

Further, no enquiries have been made on behalf of the Revenue to dislodge the bona fides of the cash purchases.  Also, the suppliers and recipients of cash are identified parties .

Thus, the bench allowed the appeal filed by the assessee.

To Read the full text of the Order CLICK HERE

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