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,

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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.”

Ld. CIT(A) was justified in confirming the disallowance of

Rs.91,08,000/- on account of lottery expenses in the facts and

circumstances of the instant case.

materials available on record. The assessee is an Association of

Persons (AOP) engaged in the business of retail trading of liquor.

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

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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

4 ITA No.7342/Del/2018 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.

return was taken up for limited scrutiny and the Tribunal quashed

the assessment on the ground that the Ld. AO cannot travel beyond

the issue that was sought to be examined in the limited scrutiny.

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

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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.

statistical purposes.

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

Sd/- Sd/- (SAKTIJIT DEY) (M. BALAGANESH) VICE PRESIDENT ACCOUNTANT MEMBER Dated:17/08/2023 PK/Ps

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