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2018 (7) TMI 1168 - AT - Income TaxDisallowance made u/s 40A(3) - purchases of country spirit in cash - revised procedure prescribed by the Excise Department, for lifting country spirit - Held that - There could be no disallowance u/s 40A(3) of the Act in the facts and circumstances of the case and accordingly we direct the ld AO to delete the same. We also find that this issue is recently decided in favour of the assessee by the Hon ble Jurisdictional High Court in the case of CIT vs Sri Ritwik Kumar Bera 2018 (7) TMI 1093 - CALCUTTA HIGH COURT . Addition towards difference in purchases and profit added thereon - Held that - AO based on the information obtained u/s 133(6) of the Act from M/s Asansol Bottling & Packaging Pvt Ltd wherein the total sales made to assessee was reflected at a higher figure by ₹ 79,104/- . No explanation was offered by the assessee before the AO. Hence the addition made towards unexplained purchases and consequential profit thereon was made. CIT-A had upheld the action on the ground that no arguments were advanced by the assessee before the ld CIT-A.
Issues Involved:
1. Delay in filing the appeal. 2. Disallowance under section 40A(3) of the Income Tax Act. 3. Addition towards difference in purchases and profit. Detailed Analysis: 1. Delay in Filing the Appeal: The assessee's appeal was delayed by 26 days. The tribunal reviewed the reasons provided in the condonation petition and found them convincing. Consequently, the delay was condoned, and the appeal was admitted for adjudication. 2. Disallowance under Section 40A(3) of the Income Tax Act: - Facts: The assessee, a partnership firm engaged in trading country spirit, made payments in cash to M/s IFB Agro Industries Ltd and M/s Asansol Bottling & Packaging Co. Pvt Ltd for purchases. These payments exceeded ?20,000, which led to a disallowance of ?76,50,083 by the Assessing Officer (AO) under section 40A(3) of the Act. This disallowance was upheld by the Commissioner of Income Tax (Appeals) [CIT(A)]. - Tribunal's Findings: The tribunal referred to a previous order in the case of Ramnagar Pachai & C.S. Shop vs ITO, where it was held that cash payments made directly into the bank account of the payee fall under the exceptions provided in Rule 6DD of the Income Tax Rules. The tribunal also reviewed the relevant provisions of The West Bengal Excise Rules 2005 and The Bengal Excise Act, 1909, which mandated such payments. - Conclusion: The tribunal concluded that the assessee's case fell under the exceptions in Rule 6DD(b) and Rule 6DD(k) of the Income Tax Rules. Therefore, no disallowance under section 40A(3) was warranted for payments made to M/s IFB Agro Industries Ltd and M/s Asansol Bottling & Packaging Co. Pvt Ltd. However, a disallowance for a payment of ?3,48,392 to M/s United Spirits Ltd was upheld as it violated section 40A(3). 3. Addition towards Difference in Purchases and Profit: - Facts: The AO made an addition of ?81,809 based on information obtained under section 133(6) from M/s Asansol Bottling & Packaging Pvt Ltd, which showed higher sales to the assessee by ?79,104. The assessee did not provide any explanation for this discrepancy. - Tribunal's Findings: The CIT(A) upheld the addition as the assessee did not present any arguments. Similarly, no arguments were advanced before the tribunal. - Conclusion: The tribunal dismissed the ground related to the addition of ?81,809 due to the lack of explanation and arguments from the assessee. Final Order: The appeal was partly allowed. The tribunal directed the AO to delete the disallowance under section 40A(3) for payments made to M/s IFB Agro Industries Ltd and M/s Asansol Bottling & Packaging Co. Pvt Ltd but upheld the addition of ?81,809 towards the difference in purchases and profit. Order Pronounced: The order was pronounced in the court on 13.07.2018.
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