SAHKUMBARI ASSOCIATES,DEHRADUN vs. ACIT, CIRCLE-2, DEHRADUN

This appeal of the assessee arises out of the order of the Learned Commissioner of Income Tax (Appeals)-Dehradun

[hereinafter referred to as ‘Ld. CIT(A)’] in Appeal

No.10287/CIT(A)/DDN/2017-18 dated 31/10/2018 against the order passed by Assistant Commissioner of Income Tax, Circle-2,

Sahkumbari Associates vs. ACIT

Dehradun (hereinafter referred to as the ‘Ld. AO’) u/s 143(3) of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) on 15/12/2017 for the Assessment Year 2015-16.

“1. The learned assessing officer as also learned Commissioner of Income Tax (Appeals), Dehradun have erred in making and confirming a disallowance of Rs.91,08,000/- out of lottery expenses of Rs.1,19,88,000/- debited/claimed in the Profit & Loss Account of the business of the appellant. 2. The order passed is arbitrary, against the provisions of law and facts of the case. 3. Any other ground arising at the time or before hearing of appeal.”

The return of income for AY 2015-16 was filed on 29/09/2015 declaring NIL income. The Ld. AO observed that the assessee had Sahkumbari Associates vs. ACIT debited lottery expenses as application for bid of liquor shops to the extent of Rs.1,19,88,000/-. Complete details of members of AOP and details of lottery expenses were sought by the Ld. AO from the assessee. From the said details furnished by the assessee, the Ld. AO issued show cause notice that lottery expenses of Rs.87,51,240/-were not incurred in the name of the members of AOP and accordingly, why the same should not be disallowed. The assessee replied that out of 666 applications submitted by the AOP, 160 applications were made in the name of members of AOP and remaining applications were made on other names. The assessee also referred to CBDT Circular No.6/2007 dated 11/10/2007, which was issued in connection with expenses of harvesting and transportation of sugarcane as business expenses of sugar mills.

The Ld. AO disregarded the said Circular by holding that the said Circular relates to harvesting and transportation of sugarcane claimed by the sugar mills. These expenses were incurred by the sugar mills on behalf of the farmers who bring the sugarcane to the sugar mills for sugar production. But in the assessee’s case the expenses incurred for different purposes as the application money

Sahkumbari Associates vs. ACIT in the individual name has been paid to the Excise Department for allotment of liquor license and the assessee has claimed the said expenditure as business expenditure. The Ld. AO observed that the practice adopted by the assessee is “Benami” in nature as persons other than AOP Members were used as conduits for generating expenses that are not allowable. Accordingly, Ld. AO out of the total lottery expenses of Rs.1,19,88,000/- found that only a sum of Rs.28,80,000/- represent amounts spent in the name of AOP members and accordingly, proceeded to disallow the remaining sum of Rs.91,08,000/- (11988000 – 2880000) as non business expenditure debited to P&L Account. This action of the Ld. AO was upheld by the Ld. CIT(A) by following the decision of his predecessor in AY 2014-15.

Since, the Ld. CIT(A) in the year under consideration had merely

Sahkumbari Associates vs. ACIT followed his predecessor’s order for AY 2014-15 which stood subsequently quashed by the Tribunal, it goes to prove that reliance placed on AY 2014-15 of CIT(A)’s order would be no order in the eyes of law. Accordingly, he prayed for setting aside of this appeal to the file of Ld. CIT(A) for de-novo adjudication in accordance with law. When this was confronted to the Ld. DR, by the Bench, the Ld. DR agreed for the same. Accordingly, we deem it fit and proper to restore this appeal to the file of Ld. CIT(A) for de-novo adjudication in accordance with law to decide the appeal uninfluenced by earlier decision taken by the predecessor CIT(A). Accordingly, the grounds raised by the assessee are allowed for statistical purposes.

Order pronounced in the open court on 17th August, 2023.