Case Law Details
ITO Vs D. D. & Company (ITAT Delhi)
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.
FULL TEXT OF THE ORDER OF ITAT DELHI
This appeal is filed by the Revenue for assessment year 2014-15 against the order of the ld. Commissioner of Income Tax (Appeals), Rohtak, dated 24.10.2019.
2. The Revenue has raised the following grounds of appeal:-
“1. On the facts and the circumstances of the case, the Ld. CIT(A) has erred in law and facts in deleting the addition of Rs. 1,52,11,000/- made by the A.O. (Rs.1,41,11,000/-on account of disallowing the challan paid in the name of Sh. Harish Kumar & Rs.11,00,000/- on account of disallowing the subvend fee paid.) during assessment proceedings. The Ld. CIT(A) merely considered the statement of Sh. Harish Kumar without verification of any documentary evidence and deleted the said addition without appreciating the facts of the case mentioned in detail in assessment order.
2. That there is violation of law evident from the facts of the case and the same cannot be regularized by any other law enforcing agency under the provision of any other statute. In this case assessee claimed expenses of L1 which was allotted to some other person by Excise & Taxation Department, Haryana and the same is not rightly an allowable expense of the assessee as he was not eligible for allotment of LI license.
3. That the appellant craves leave to add, amend or alter any of the grounds of appeal at the time of hearing of the appeal, if deemed necessary, in the interest of justice & equity.“
3. Brief facts of the case are that, the assessee has filed return declaring an income of Rs. 5,79,441/-. Case of the assessee was selected for scrutiny and an assessment proceedings have been initiated. The assessment order dame to be passed on 28/12/2016 against the assessee by adding a sum of Rs. 11,00,000/- on disallowance of sub vend fee and Rs. 1,52,87,000/- on account of disallowance fee. The total income of the assessee at Rs. 1,69,67,441/- as against the returned income of Rs. 5,79,441/-.
4. Aggrieved by the assessment order dated 28/12/2016, the assessee has preferred an Appeal before CIT(A). The Ld. CIT(A) vide order dated 24/10/2019 deleted the addition of Rs. 1,41,11,000/- made by the A.O based on the statement of Sh. Harish Kumar.
5. Aggrieved by the order dated 28/12/2016, the Revenue has preferred the present appeal on the grounds mentioned above.
6. The Ld. DR vehemently contended that the Ld. CIT(A) has erred in law and facts in deleting the addition of Rs. 1,52,11,000/- made by the A.O which is Rs. 1,41,11,000/- on account of disallowance Chalan paid in the name of Sh. Harish Kumar, Rs. 11,00,000/- on account of disallowance the sub vend fee paid. The Ld. DR further submitted that, there is a violation of law evident from the facts of the case and same cannot be regularized by L-1 under the provision of any other statute. The assessee has claimed expenses of L-1 which was allotted to some other person by the Excise and Taxation Department, and the same is not rightly eligible expense of the assessee as he was not eligible for allotment of L-1 license. Further contended that, the entire approach of the Ld.CIT(A) is erroneous. The Ld.CIT (A) has committed a grave error in allowing the Appeal of the assessee.
7. Per contra, the Ld. Counsel for the assessee submitted that, the CIT(A) has rightly deleted the addition made by the A.O one Mr. Harish Kumar has given categorical statement which is corroborated from the books of accounts submitted by the assessee during the assessment proceedings. The assessee has obtained liquor vend under reserve quota through his employee Mr. Harish Kumar who was used as dummy bidder and the entire purchases and sale and expenditure was incurred by the assessee. Therefore, submitted that, the order of the CIT (A) requires no interference.
8. We have heard the parties perused the material available on record and gave our thoughtful consideration. 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. In view of the above discussion, we are of the opinion that, the grounds of appeal of the Revenue deserves to be allowed. Accordingly, we allow the Grounds of Appeal.
9. In the result, the Appeal filed by the Revenue is allowed, the order of the CIT(A) is set aside and the addition made by the A.O shall stood sustained.
10. In the result, the Appeal filed by the Revenue is allowed. Order pronounced in the open court on 2nd August, 2022.
