INCOME TAX OFFICER, DELHI vs. DISCOVERY LIQOUR HOUSE, DELHI

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI (DELHI BENCH ‘G’ NEW DELHI)

BEFORE YOGESH KUMAR U.S., JUDICIAL MEMBER AND SHRI KRINWANT SAHAY, ACCOUNTANT MEMBER

PHYSICAL HEARING ITA No. 1842/DEL/2025 (A.Y. 2022-23)

ITO, Vs Discovery Liquor House, Delhi Delhi PAN: AAFAD7247N Appellant Respondent Assessee by Sh Suraj Bhan Nain, Advocate Revenue by Sh Manish Gupta, Sr.DR Date of Hearing 03/02/2026 Date of Pronouncement 04/05/2026

ORDER PER KRINWANT SAHAY, AM :

The present appeal is filed by the Revenue against the order of

Ld. Commissioner of Income Tax (Appeals), National Faceless

Appeal Centre (‘Ld. CIT(A)/NFAC’ for short), New Delhi dated

23.01.2025 for the Assessment Year 2022-23.

2 ITA No. 1842/Del/2025

Rs. 1,26,30,730/- made by the Assessing Officer by disallowing

theexpenditure of interest paid on loans. The Ld. CIT(A) in the

appellate order has given his findings as under:-

“I have gone through the submission and same has been perused carefully. It is pertinent to note that the

3 ITA No. 1842/Del/2025

appellant has claimed interest expenses of Rs. 1,26,30,730/- on loans. As per the Audited Balance Sheet as on 31.03.2022, the unsecured loans were of Rs. 23,42,04,718/-. It is also noted that one of the members of the assessee AOP, M/s Gannayak Associates had a debit balance of Rs. 5,36,22,623/- from the AOP and the appellant has not charged any interest. It is also fact that the appellant is having sufficient non-interest-bearing funds to give advance to its members without charging interest thereon. The appellant has been purchasing goods (i.e., liquor, wine, and beer) on credit for a reasonable time and most of the sales have been made on cash basis and only a small portion of sales have been made on credit. The appellant has also earned profit during the year on the sale of goods. The position of interest free funds available from sales made during the year. It is evidently clear that the assessee was having non-interest bearing funds morethan the amount of withdrawals by its members. Thus, the debit balance in the capital account of the members did not have any nexus with the interest- bearing unsecured loans. After considering the facts of the case, it is evident that the Assessing Officer was not justified in disallowing the entire expenses on account of interest of Rs. 1,26,30,730/-. The conclusion drawn by the Assessing Officer that the interestbearing funds of loans were not utilized for business purposes is not tenable. The Assessing Officer has not brought any material on record to establish the nexus that interest bearing funds were utilized for non-business purposes. Since, the Assessing Officer has not proved, by bringing any material on record, the nexus that interest bearing funds were directly utilized for withdrawals by its members, whereas in fact the interest bearing funds raised as loans were utilized by the appellant for its

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business purposes to make payments to Excise Department for Licence Fee and to creditors for purchases of goods for its business and further that there were sufficient interest free funds available with the appellant which were more than the debit balance in the capital account of its members, the Assessing Officer was not justified in disallowing the entire interest expenses of Rs. 1,26,30,730/-. The contention of the appellant is found tenable. Hence, the appeal is allowed.”

in the assessment order and the arguments of the ld. DR on this

issue. We have also considered the findings given by the Ld. CIT(A)

in the appellate order. We find that the Ld. CIT(A) has given very

clear cut findings on this issue by pointing out that the Assessing

Officer has not brought on record any material to establish the

nexus that interest bearing funds wereutilized for non-business

purposes which has also not been clearlyestablished by the

Assessing Officer that such funds were not utilized by the Assessee

formaking payments to excise Department for license fee or to

creditorsfor purchase of goods for the business as claimed by the

Assessee, therefore, in our considered view that the findings given

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by the Ld. CIT(A) on this issue are very clear and need no

interference. Accordingly, Revenue’s appeal on this issue is

dismissed.

evidence by the Ld. CIT(A) and deleting the addition to the tune of

Rs. 7,45,25,000/- added u/s 68 of the Income Tax Act, 1961 of

Rs. 1,15,79,384/- added as business income. The Ld. CIT(A) in the

appellate order has given a very exhaustive findings which is

reproduced as under: -

“I have gone through the submission and same has been perused carefully. It is pertinent to note that the appellant has taken unsecured loans of Rs. 7,00,00,000/- from Smt. Saroj Jain during the year. It is noted that the appellant received the amount of Rs. 6,00,00,000/- on 12.11.2021 (Rs. 48,00,000 x 12 = Rs. 5,76,00,000 + Rs. 24,00,000 = Rs. 6,00,00,000) and Rs. 1,00,00,000/- on 28.03.2022 (Rs. 40,00,000 + Rs. 40,00,000 + Rs. 20,00,000) through bank transfers from her HDFC Bank Account No. 50100046710486 to the Appellant credited in its HDFC Bank Account No. 50200048887325 and paid interest to Smt. Saroj Jain after duly deducted TDS on such interest. The net amount of interest paid/credited in her account was Rs. 4,43,835/- (Rs. 4,93,151 – TDS Rs. 49,316) and Rs.8,04,822/- (Rs. 8,94,247 – TDS Rs. 89,425). The appellant has also repaid an amount of Rs. 50,00,000/- to Smt. Saroj Jain in subsequent year on 07.09.2022. In

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respect of Shri Kasmiri Lal, appellant has not taken any fresh loan from Sh. Kashmiri Lal during the current previous year relevant to A.Y. 2022-23 under consideration. The appellant had in fact received a loan of Rs. 16,25,500/- from Sh. Kashmiri Lal on 10.09.2020 through NEFT from his PNB Account and credited in the bank account of the appellant maintained with Punjab National Bank, HisarHowever, by an inadvertent mistake the Accountant has made entry of this transaction in the ledger account of M/s Keshubhai Enterprises. When the mistake was noticed, it was rectified on 01.04.2021 and the amount was credited in the account of Sh. Kashmiri Lal in Hisar Branch of the Appellant by debiting the same amount wrongly entered in the account of M/s Keshubhai Enterprises. This amount was transferred to Head Office from Hisar Branch on 31.03.2022. There was an opening balance of unsecured loan of Rs. 44,50,000/- in the account of Sh. Kashmiri Lal as on 01.04.2021. Further, the amount of loan of Rs. 16,25,500/- received on 10.09.2020 from Sh. Kashmiri Lal, which was wrongly entered in the account of M/s Keshubhai Enterprises, has been corrected and entered in the account of Sh. Kashmiri Lal making the total at Rs. 60,75,500/- (Rs. 44,50,000 + Rs. 16,25,500). In respect of Subhas Bansal, the appellant received an unsecured loan of Rs. 29,00,000/- from Sh. Subhash Bansal on 02.04.2021 through RTGS. It is noted from the bank account statement of Sh. Subhash Bansal with Bank of India that he had received an amount of Rs. 29,00,000/- on 31.03.2021 through RTGS from M/s KLM Infotech Pvt. Ltd. wherein he is one of the directors. The assessee repaid an amount of Rs. 6,00,000/- to him on 29.05.2023 through RTGS from its bank account with ICICI. During the course of appeal proceedings, the appellant has submitted the supporting documents regarding the genuineness of these unsecured

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loans such as Bank statement, ITR copy, TDS certificate, confirmation letter and PAN copy. It is also noted that the said transactions related to loans were undertaken through a banking channels and TDS was deducted on the interest paid and credited to the Central Government as reflected in TDS certificates. In view of the above discussion and sincerely following the Hon’ble judiciary decision, in my considered opinion, it is established fact that this unsecured loan is a genuine transaction and addition made u/s 68 of the Act was not warranted on this account. The contention of the appellant is found tenable. Hence, the appeal is allowed.” 6. We have considered the arguments of the ld. DR on this issue

and findingsgiven by the Assessing Officer in the assessment order.

We have also considered the findings given by the Ld. CIT(A) on this

issue and the arguments of the Ld. Counsel for the Assessee. We

find that the findingsgiven by the Ld. CIT(A) on this issue are very

clear, logical and as per the provisions of the Act, therefore, it needs

no interference. Accordingly, Revenue’s appeal on this ground is

dismissed.

tune of Rs. 1,15,79,384/- as business income, the Ld. CIT(A) has

given his findings as under: -

8 ITA No. 1842/Del/2025

“I have gone through the submission and same has been perused carefully. It is pertinent to note that the appellant claimed gross purchases at Rs. 778,29,71,684/- as per the P&L Account for the said year. However, as per the statement of computation of income, tax collected at source (TCS) was claimed at Rs. 7,77,13,913/-. Accordingly, the total purchases are worked out at Rs. 777,13,92,300/- . Thus, there is a difference in gross purchases amounting to Rs. 1,15,79,384/-. During the course of appeal proceedings, the appellant stated that the appellant company has debited cost of purchases made during the year as per purchase invoices. The difference between the amount of purchases worked out based on TCS claimed in the return of income and purchases shown in Profit and Loss Account was due to the main reasons that some parties collected TCS after reducing rebate and discount allowed to the appellant on purchases and some of the parties have not collected TCS on sales made by them. The reasons for such difference and reconciliation are provided by the appellant in the supra. In view of the above discussion, it is pertinent to note that the appellant had debited purchases as per actual cost on the purchase invoices. There is no case of claiming excess expenditure on purchase of goods by the appellant. Therefore, considering the facts and circumstances of the case, the impugned addition of Rs. 1,15,79,394/- was not warranted. It is also fact that the assessing officer has not observed any excess expenditure on purchase of goods by the appellant during the course of assessment proceedings. The contention of the appellant is found tenable. Hence, the appeal is allowed.”

9 ITA No. 1842/Del/2025

in the assessment order and the arguments of the ld. DR on this

issue. We have also considered the arguments of the ld. Counsel

for the Assessee as well as the findings given by the Ld. CIT(A) on

this issue. We find that the Ld. CIT(A) has dealt with this issue in

the appellate order in a very detailed manner and after duly

considering and taking into view of all possible aspects on the

issue, he has concluded his findings. Therefore, we find to reason

to make interference in the findings given by the Ld. CIT(A).

Accordingly, appeal on this issue is dismissed.

Order pronounced in the open court on 04th May, 2026

Sd/- Sd/- (YOGESH KUMAR U.S.) (KRINWANT SAHAY) JUDICIAL MEMBER ACCOUNTANT MEMBER

Date:- 04 .05.2026 Rkk.R.N Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(Appeals) 5. DR: ITAT

10 ITA No. 1842/Del/2025

ASSISTANT REGISTRAR ITAT, NEW DELHI