2022 (8) TMI 1211 - AT - Income Tax

Disallowing the challan paid in the name of one employee disallowing the subvend fee paid - CIT-A deleted the addition - as submitted assessee has obtained liquor vend under reserve quota through his employee who was used as dummy bidder and the entire purchases and sale and expenditure was incurred by the assessee - HELD THAT - It is not in dispute that the liquor license has been issued in the name of one Mr. Harish Kumar who is only a sales man, whose income is below taxable. As per remand report the 26AS from of past 5 years show that no TCS has been collected against the PAN nor any TDS made and no refund was issued to Mr. Harish Kumar. During the appellate proceedings, the assessee was asked to furnish the indemnity bond of Mr. Harish to ensure that no such claim of expenditure incurred by him for licensee fee is made by him, but no such indemnity has not been given during the appellate proceedings in spite of the direction. Even in the absence of the indemnity, the Ld. CIT(A) has proceeded to delete the addition made by the A.O. It is also in dispute that the assessee is not the licensee to do the liquor business directly, the assessee has set up his staff who is eligible for the liquor license under reserve quota. But the entire business has been run by the assessee by using his staff Mr. Harish who is a dummy bidder. Since the said model of business itself is in violation of licenses issued by the Excise Department, the license fee paid by the assessee who is not the license holder cannot be treated as eligible expenses - Accordingly, we allow the Grounds of Appeal of appeal.

Summary

Issues:
Appeal against deletion of addition made by Assessing Officer for assessment year 2014-15.

Analysis:
1. The Revenue challenged the deletion of an addition of Rs. 1,52,11,000/- by the Commissioner of Income Tax (Appeals) (CIT(A)). The grounds included the disallowance of challan paid in the name of an individual and subvend fee paid during assessment proceedings. The CIT(A) deleted the addition based on the statement of the individual without verifying documentary evidence.

2. The Revenue contended that the expenses claimed were for an L1 license allotted to another person by the Excise & Taxation Department, Haryana, making them ineligible expenses for the assessee. The Revenue argued a violation of law and the CIT(A) erred in allowing the appeal without proper verification.

3. The assessee's return declared an income of Rs. 5,79,441/-, but the assessment order added Rs. 11,00,000/- for disallowance of subvend fee and Rs. 1,52,87,000/- for disallowance fee, resulting in a total income of Rs. 1,69,67,441/-. The CIT(A) later deleted the Rs. 1,41,11,000/- addition based on an individual's statement.

4. The Revenue appealed the CIT(A)'s decision, arguing that the entire approach was erroneous and the CIT(A) should not have allowed the appeal. The Revenue emphasized the ineligibility of the expenses claimed by the assessee.

5. The assessee's representative argued that the CIT(A) rightly deleted the addition as the individual's statement was supported by the assessee's books of accounts. The representative explained that the individual was a dummy bidder for the liquor vend obtained under reserve quota.

6. Upon review, it was found that the liquor license was in the name of an individual with no taxable income. Despite requests for an indemnity bond to verify expenditure claims, none was provided. The assessee, not the license holder, used a staff member as a dummy bidder, violating licensing regulations. Consequently, the license fee paid by the assessee was deemed ineligible expenses.

7. The Tribunal concluded that the Revenue's grounds of appeal were valid, setting aside the CIT(A)'s decision. The addition made by the Assessing Officer was upheld, and the Revenue's appeal was allowed.

8. Thus, the Tribunal allowed the Revenue's appeal, overturning the CIT(A)'s decision and sustaining the addition made by the Assessing Officer for the assessment year 2014-15.