DCIT, Bangalore V. M/s Sri. Lakshminarasimha Distilleries Pvt. Ltd., Bangalore

ITA 681/BANG/2014

• Counselvise Citation: 68121114 RSA 2014
• Duration Of Justice: 9 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-02-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 12-02-2015
• Assessment Year: 2006-2007
• Appeal Filed On: 19-05-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: P DHIVAHAR JT
• Assessee Lawyers: C RAMESH
• Keywords: Rejection of books of accounts
• Section: 40A(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH : BANGALORE BEFORE SHRI N.V. VASUDEVAN, JUDICIAL MEMBER AND SHRI ABRAHAM P. GEORGE, ACCOUNTANT MEMBER ITA NO.681/BANG/2014 ASSESSMENT YEAR : 2006-07 THE DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE 12(3), BANGALORE. VS. M/S. SRI LAKSHMINARASIMHA DISTILLERS PVT. LTD., 190, SANKEY ROAD, SADASHIVANAGAR, BANGALORE. PAN : AACCS 5003J APPELLANT RESPONDENT APPELLANT BY : SHRI P. DHIVAHAR, JT. CIT(DR) RESPONDENT BY : SHRI C. RAMESH, C.A. DATE OF HEARING : 12.02.2015 DATE OF PRONOUNCEMENT : 20.02.2015 O R D E R PER N.V. VASUDEVAN, JUDICIAL MEMBER THIS APPEAL BY THE REVENUE IS AGAINST THE ORDER D ATED 17.2.2014 OF THE CIT(APPEALS)-III, BANGALORE RELATING TO ASSESSM ENT YEAR 2006-07. ITA NO.681/BANG/2014 PAGE 2 OF 4 2. THE ONLY ISSUE THAT ARISES FOR CONSIDERATION IN THIS APPEAL IS AS TO WHETHER THE CIT(A) WAS JUSTIFIED IN DELETING THE AD DITION OF RS.20 LAKHS MADE TO THE TOTAL INCOME BY THE AO. 3. THE ASSESSEE IS A COMPANY. IT IS ENGAGED IN THE BUSINESS OF MANUFACTURING OF NEUTRAL SPIRIT, RECTIFIED SPIRIT A ND ARRACK. IN THE COURSE OF ASSESSMENT PROCEEDINGS, THE AO NOTICED THAT SEVERAL OTHER RECEIPTS AND PAYMENTS BY THE ASSESSEE WERE IN CASH AND WHEN THE SAME WAS POINTED OUT, THE ASSESSEE SUBMITTED THAT PAYMENT FOR PURCHA SE OF SPIRIT AND ARRACK HAVE TO BE MADE IN CASH TO THE STATE GOVERNMENT AS PER KARNATAKA EXCISE ACT. IT WAS ALSO POINTED OUT THAT PROVISIONS OF SE CTION 40A(3) ARE NOT ATTRACTED AS THE PAYMENTS ARE MADE TO THE GOVERNMEN T AS PER LAW PREVAILING IN THE STATE OF KARNATAKA. THE ASSESSEE ALSO POINTED OUT THAT CASH SALES AND CASH EXPENSES ARE INEVITABLE IN THE ASSESSEE'S LINE OF BUSINESS. 4. THE AO, HOWEVER, DISALLOWED A SUM OF RS.20 LAKHS OBSERVING AS FOLLOWS:- CONSIDERING THE CIRCUMSTANCES OF THE CASE AND ON E XAMINATION OF FACTS AS PRODUCED BEFORE ME AND AS THESE EXPENSE S IN CASH ARE INCURRED UNDER THE HEADS CARRIAGE INWARDS, OUTWARDS , LABOUR CHARGES, LOADING AND UNLOADING WHICH CANNOT BE VERI FIED AND CONSIDERING THE QUANTUM OF CASH EXPENSES, I AM OF T HE OPINION IT IS FAIR TO DISALLOW RS.20 LAKHS WHICH IS ADDED BACK IN THE HANDS OF THE ASSESSEE (ADDITION: RS.20,00,000/-). ITA NO.681/BANG/2014 PAGE 3 OF 4 5. ON APPEAL BY THE ASSESSEE, THE CIT(A) DELETED TH E ADDITION MADE BY THE AO FOR THE FOLLOWING REASONS:- 2.3 I HAVE CAREFULLY CONSIDERED THE ISSUE BEFORE M E. IT IS POINTED OUT BY THE AR OF THE APPELLANT THAT CASH EX PENSES ON CARRIAGE OUTWARDS, LABOUR CHARGES, LOADING AND UNLO ADING IS ONLY AN AMOUNT OF RS.21,15,150/- WHICH PERTAINS TO THE A RRACK DIVISION. AS REGARDS CARRIAGE INWARDS IT IS STATED THAT THIS IS PREDOMINANTLY PAID BY CHEQUES. LABOUR CHARGES AND CONNECTED EXPENDITURE IS TO THE TUNE OF RS.7,57,258/-. ASSES SEE HAS THEREFORE POINTED OUT THAT EXPENDITURE IN THE NATUR E OF CASH IS APPROXIMATELY RS.30 LAKHS WHICH IS CLAIMED AGAINST THE GROSS REVENUE OF RS.55.13 CRORES. AR OF APPELLANT HAS AL SO EMPHASIZED THAT THERE IS NO CONTRAVENTION OF THE PROVISIONS OF THE SECTION 40A(3). 2.4 IN MY CONSIDERED OPINION IN THE ABSENCE OF ANY FINDING THAT THE EXPENDITURE IS NOT GENUINE OR NOT HAS BEEN INCURRED FOR THE PURPOSE OF BUSINESS THERE IS NO JURISDICTION FO R DISALLOWANCE OF AN AMOUNT ON ESTIMATED BASIS. IT IS ALSO TO BE OBSERVED THAT AO HAS NOT REJECTED THE BOOKS OF ACCOUNTS AS UNRELI ABLE. AS POINTED OUT BY THE AR THE CASH EXPENSES HAVE CONTRI BUTED TO THE SUBSTANTIAL REVENUE. THE ACTION OF THE AO IS THERE FORE, NOT SUSTAINABLE. THE ADDITION MADE IS THEREFORE, DELET ED. 6. AGGRIEVED BY THE ORDER OF CIT(A), THE REVENUE HA S PREFERRED THE PRESENT APPEAL BEFORE THE TRIBUNAL. 7. WE HAVE HEARD THE SUBMISSIONS OF THE LD. DR, WH O RELIED ON THE ORDER OF AO. IN OUR OPINION, THE APPEAL FILED BY T HE DEPARTMENT IS WITHOUT ANY MERIT. A PERUSAL OF THE ORDER OF AO CLEARLY S HOWS THAT HE HAS ONLY EXPRESSED SOME DOUBTS ABOUT THE EXPENDITURE INCURRE D BY THE ASSESSEE FOR WHICH PAYMENTS WERE MADE IN CASH. HE HAS NOT CONCL UDED THAT THE EXPENSES WERE NOT GENUINE. THE BOOKS RESULTS OF TH E ASSESSEE HAVE NOT ITA NO.681/BANG/2014 PAGE 4 OF 4 BEEN REJECTED. THE QUANTUM OF CASH EXPENDITURE IS APPROX. RS.30 LAKHS AGAINST THE GROSS REVENUE OF RS.55.13 CRORES. THE ONLY REASON ASSIGNED BY THE AO FOR MAKING THE DISALLOWANCE IS THAT THE C ARRIAGE INWARDS, OUTWARDS, LABOUR CHARGES, LOADING AND UNLOADING CHA RGES CANNOT BE VERIFIED. PERUSAL OF THE ORDER OF ASSESSMENT SHOWS THAT THE AO DID NOT CALL FOR ANY EXPLANATION IN THIS REGARD OR POINT OUT AS TO WHICH OF THE EXPENSES COULD NOT BE VERIFIED. IN THE GIVEN CIRCUMSTANCES, THE AO COULD NOT HAVE MADE THE IMPUGNED DISALLOWANCE. THE DISALLOWANCE W AS RIGHTLY HELD TO BE NOT SUSTAINABLE BY THE CIT(A). WE THEREFORE CONFIR M THE ORDER OF CIT(A) AND DISMISS THE APPEAL BY REVENUE. PRONOUNCED IN THE OPEN COURT ON THIS 20 TH DAY OF FEBRUARY, 2015. SD/- SD/- ( ABRAHAM P. GEORGE ) ( N.V. VASU DEVAN ) ACCOUNTANT MEMBER JUDICIAL M EMBER BANGALORE, DATED, THE 20 TH FEBRUARY, 2015. /D S/ COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT, BANGALORE. 6. GUARD FILE BY ORDER ASSISTANT REGISTRAR / SENIOR PRIVATE SECRETARY ITAT, BANGALORE.