Assessee's Appeal Partially Allowed: Additions under Section 40A(3) Deleted, Expense Disallowance Upheld

The Tribunal partly allowed the appeal of the assessee by deleting the additions made under Section 40A(3) and on account of alleged purchase out of books and undisclosed purchase. However, the Tribunal confirmed the disallowance of expenses due to lack of supporting evidence. The order was pronounced on 05-09-2018.

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Issues Involved:
1. Confirmation of addition made under Section 40A(3) of the Income Tax Act.
2. Confirmation of addition on account of alleged purchase out of books.
3. Confirmation of addition on account of undisclosed purchase.
4. Confirmation of disallowance of expenses.

Issue-wise Detailed Analysis:

1. Confirmation of addition made under Section 40A(3) of the Income Tax Act:
The appeal by the assessee concerns the confirmation of additions made under Section 40A(3) of the Income Tax Act. The assessee argued that the case falls under the exceptions provided in Rule 6DD(b) & 6DD(k) of the IT Rules. The Tribunal found that the issue was in favor of the assessee, as the payments made by the assessee, a retail vendor, to the wholesale agent (Principal, Govt. of West Bengal) fell under the exception provided in Rule 6DD(k). The Tribunal cited various case laws and noted that the genuineness of the transactions was not in doubt. The Tribunal emphasized that the intention behind Section 40A(3) was to curb tax evasion and ensure genuine transactions. Since the payments were deposited directly into the bank account of the wholesale licensee, the provisions of Section 40A(3) could not be applied. The Tribunal concluded that the assessee's case fell under the exceptions provided in Rule 6DD(b) and Rule 6DD(k) and deleted the disallowance made under Section 40A(3).

2. Confirmation of addition on account of alleged purchase out of books:
The assessee contended that the amount of Rs. 6,76,294/- paid to M/s. Bhattacharya Bottling Plant Pvt. Ltd. by one of the partners, Shri Sudip Kr. Chatterjee, was not out of books. The Tribunal found that the payments were made through the partner's individual account and were reflected in the bank statements. The Tribunal noted that the payments matched the cheque numbers and amounts as recorded in the ledger. It concluded that the payments were genuine and not out of books, thus setting aside the CIT-A's order and deleting the addition made by the AO.

3. Confirmation of addition on account of undisclosed purchase:
The assessee argued that the purchase amount of Rs. 28,81,522/- was reflected in the partner's Profit & Loss account and that TCS was collected during the assessment year. The Tribunal found that the payments made under the partner's PAN were genuine and supported by documentary evidence. The Tribunal noted that the partner was an authorized licensee to purchase liquor, and the payments were made from his individual account. The Tribunal concluded that the addition made by the AO and confirmed by the CIT-A was not justified and deleted the said addition.

4. Confirmation of disallowance of expenses:
The assessee claimed an expenditure of Rs. 68,522/- under various heads, which the AO disallowed at 20% (Rs. 13,704/-) for lack of supporting evidence. The CIT-A confirmed the disallowance. The Tribunal found that the assessee failed to produce any substantial evidence to support the claim of expenditure and noted that no books of account were produced before the AO. The Tribunal upheld the disallowance, finding no infirmity in the AO's order.

Conclusion:
The Tribunal partly allowed the appeal of the assessee. It deleted the additions made under Section 40A(3) and on account of alleged purchase out of books and undisclosed purchase, while confirming the disallowance of expenses due to lack of supporting evidence. The order was pronounced in the open court on 05-09-2018.

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