JASWANT SEHGAL,KARNAL vs. INCOME TAX OFFICER UNDER FACELESS ASSESSMENT UNIT, KARNAL

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ITA 6456/DEL/2026Status: DisposedITAT Delhi22 September 2026AY 2015-164 pages
AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that given the nature of the liquor sales business, which predominantly involves cash transactions, the cash payments made to M/s City Wines were duly explained. Therefore, the disallowance under Section 40A(3) was not justified.

What were the facts?

The assessee, a wine contractor, made cash payments to M/s City Wines. The Assessing Officer disallowed these expenses under Section 40A(3) of the Income Tax Act. The assessee argued that the payments were made in an unorganized sector involving cash sales.

What were the issues?

Whether cash payments made in the unorganized liquor sales business are disallowable under Section 40A(3) of the Income Tax Act.

Which sections of the Income-tax Act were involved?

Section 40A(3)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, DELHI BENCH ‘G’, NEW DELHI

Before: SHRI SATBEER SINGH GODARA & SHRI MANISH AGARWAL

For Appellant: CA Abhishek Agarwal
For Respondent: Shri Surbendu Thankur, Sr. DR
Hearing: 03.09.2026Pronounced: 03.09.2026

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH ‘G’, NEW DELHI BEFORE SHRI SATBEER SINGH GODARA, JUDICIAL MEMBER AND SHRI MANISH AGARWAL, ACCOUNTANT MEMBER ITA No. 6456/Del/2026 Assessment Year: 2015-16 Jaswant Sehgal, Vs Income Tax Officer under House No. 5, New Prem Nagar, Faceless Assessment Unit, Karnal- 132001 Karnal- 132001, Haryana Haryana (APPELLANT) (RESPONDENT) PAN No. ADMPS1921P Assessee by: CA Abhishek Agarwal Revenue by : Shri Surbendu Thankur, Sr. DR Date of Hearing: 03.09.2026 Date of Pronouncement: 03.09.2026 ORDER PER SATBEER SINGH GODARA, JM: This assessee’s appeal ITA No. 6456/Del/2026 for assessment year 2015-16, arises against the Commissioner of Income Tax (Appeals)/National Faceless Appeal Centre [in short, the “CIT(A)/NFAC”], passed in DIN & Order No. ITBA/NFAC/S/250/2026-27/1088405636(1), involving proceedings u/s 143(3) r.w.s. 263 r.w.s. 144B of the Income-tax Act, 1961 (hereinafter referred to as ‘the Act’); respectively.

Heard both the parties. Case file perused.

2.

We now advert to the sole substantive issue between the parties. The assesseee/appellant, engaged in the business of a wine contractor, appears to be aggrieved against both the learned lower authorities’ respective assessment and lower appellate findings invoking section 40A(3) expenditure disallowance amounting to Rs. 33,23,055/- which forms the sole subjective issue for the tribunal’s apt adjudication.

3.

That being the case, there is not much a dispute between the parties regarding the assessee’s cash payments made to M/s City Wines. We make it clear that although the assessee has claimed that the same do not exceed the statutory limit of Rs. 20,000/- a day; as it was applicable at the relevant point of time, the fact however remains that the learned Assessing Officer’s assessment order has duly prepared a tabulation chart of impugned cash payments. We thus see no merit in the assessee’s first and foremost argument raised during the course of hearing to the very effect.

4.

Next comes the assessee’s latter substantive ground/argument that keeping in mind the fact that he is engaged

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in liquor sales, we are of the considered view that the same indeed involves a predominantly unorganized sector involving cash sales which followed his cash payment made to M/s City Wines. It is in this factual backdrop that the Revenue vehemently quotes Attar Singh Gurmukh Singh Vs. ITO reported in (1991) 191 ITR 667 (SC) that the statutory restriction on the quantum of such cash expenses in a day is to control and curbing practice of ploughing of black money back in business transactions. It could hardly dispute that case law Anupam Tele Services v. Income Tax Officer (2014) 366 ITR 122 (Guj.) has settled the issue after considering hon’ble apex court’s preceding decision that the purpose of section 40A(3) of the Act is nowhere is to disallow the overwhelming genuine business payments of an assessee. We are accordingly of the considered view that given the fact that the assessee is engaged in unorganized liquor sales business mainly involving cash component receipts; his action making impugned cash expenses payments to M/s City Wine in the RAD mode could indeed be held as duly explained. We, accordingly find merit in his sole substantive ground/argument seeking to delete the impugned section 40A(3) disallowance of Rs. 3323055/-, in very terms. No other ground or argument has been pressed. 3 | P a g e

5.

This assessee’s appeal is allowed. Order is pronounced in open court on 03.09.2026 .

Sd/- Sd/- (MANISH AGARWAL) (SATBEER SINGH GODARA) ACCOUNTANT MEMBER JUDICIAL MEMBER Dated: 22.09.2026 *Pooja Mittal, Sr. PS* Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(Appeals) 5. DR: ITAT ASSISTANT REGISTRAR

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