2024 (7) TMI 782 - AT - Income Tax

Addition u/s 40A(3) - purchases exceeding INR 20,000/- made in cash - assessee vehemently argued that despite having noted that purchases were genuine, the lower authorities proceeded to make impugned addition in an arbitrary manner and contrary to the settled position of law - HELD THAT - The assessee was afforded sufficient opportunities to prove business expenditure and/or to demonstrate that his case falls into any exceptions. Ld. CIT(A) had examined all aspects of the matter and by way of well-reasoned order, he had declined to accept the contention of the assessee. Before us also, Ld. Counsel urged that the concerned parties had confirmed payments in cash. The TCS as per law had been deducted. In our considered view, the confirmation by seller and TCS at source ipso facto, would not be justifiable reason for making payment in cash. The assessee is required to prove that he had no option other than making payment in cash under the compelling, commercial expediency. In the present case, no such case is made out by the assessee. If we accept the contention of assessee that genuineness of expenditure is not in doubt hence, provision of section 40A(3) will have no application. In that event, it will render the provision of section 40A(3) of the Act as redundant. Decided against assessee. Addition in respect of cash deposited in the bank account - addition and treating the amount deposited as unexplained - HELD THAT - Law is well-settled that if any amount is found credited in the bank account of the assessee, it is incumbent upon him to prove the source of such credit. If he fails to do so, the authorities would be justified in drawing adverse inference against such credits. In the case in hand, the assessee could not prove the source of cash deposits neither before authorities below nor before this Tribunal. Therefore, assessee grossly failed to prove the source of the impugned cash deposit in bank account, we do not see any reason to disturb the findings of authorities below. Ground No.3 raised by the assessee is, therefore, rejected. Addition on account of license fee paid to Excise Department - AO was of the view that the assessee had claimed excessive sum - as argued assessee is that the payment was made to the Excise Department, Rajasthan and in support of the same, a receipt has been filed - HELD THAT - The assessee furnished some evidences to demonstrate that the payment was made to the Excise Department at Rajasthan. We find merit into plea of the assessee that AO failed to verify the correct facts regarding payment of fee made to Excise Department, Government of Rajasthan. This claim of the assessee needs to be verified at the end of the AO. We therefore, restore this issue to the AO for verification. Appeal of the assessee is allowed partly for statistical purposes.

Issues Involved:
1. Legality of the CIT(A)'s order.
2. Disallowance of INR 2,00,38,777/- on account of purchases under Section 40A(3) of the Income Tax Act.
3. Addition of INR 16,00,000/- on account of unexplained bank deposits.
4. Disallowance of INR 5,70,000/- on account of license fee paid to the Excise Department.

Detailed Analysis:

1. Legality of the CIT(A)'s Order:
The appellant contended that the order passed by the CIT(A) was erroneous both in law and on facts. However, this ground was general in nature and did not require separate adjudication.

2. Disallowance of INR 2,00,38,777/- on Account of Purchases Under Section 40A(3):
The appellant argued that the disallowance under Section 40A(3) was unjustified as the purchases were genuine, and the payments in cash were due to business expediency in the liquor trade. The appellant cited several judicial precedents to support their claim. However, the Tribunal found that the appellant failed to demonstrate any business expediency or fall under the exceptions provided in Rule 6DD of the Income Tax Rules. The Tribunal noted that the appellant did not provide any plausible reason for making cash payments exceeding INR 20,000/-, and merely confirming the transactions and TCS deductions were not sufficient to justify cash payments. Consequently, the Tribunal upheld the disallowance made by the CIT(A).

3. Addition of INR 16,00,000/- on Account of Unexplained Bank Deposits:
The appellant challenged the addition of INR 16,00,000/- as unexplained bank deposits. The Tribunal emphasized that the burden of proof was on the appellant to explain the source of such deposits. The appellant failed to provide any satisfactory explanation or evidence regarding the source of the cash deposits. Therefore, the Tribunal upheld the addition made by the CIT(A).

4. Disallowance of INR 5,70,000/- on Account of License Fee Paid to the Excise Department:
The appellant contended that the disallowance of INR 5,70,000/- was erroneous as the payment was made to the Excise Department, Rajasthan, and not Narnaul, as assumed by the AO. The Tribunal found merit in the appellant's argument and noted that the appellant had provided evidence of payment to the Excise Department, Rajasthan. The Tribunal remanded the issue back to the AO for verification of the payment details. If the payment was found to be made to the Excise Department, Rajasthan during the relevant year, the AO was directed to allow the claim and delete the disallowance.

Conclusion:
The Tribunal upheld the disallowance of INR 2,00,38,777/- under Section 40A(3) and the addition of INR 16,00,000/- on account of unexplained bank deposits. However, the disallowance of INR 5,70,000/- on account of license fee was remanded back to the AO for verification. The appeal was partly allowed for statistical purposes.

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