M/S SADANA ELECTRIC STORE,LUCKNOW vs. DCIT RANGE-6, LUCKNOW

ITA 283/LKW/2024Status: DisposedITAT Lucknow30 September 2026AY 2014-1522 pages
AI SummaryPartly Allowed

What were the facts?

The assessee, M/s Sadana Electric Store, filed appeals against orders of the CIT(A) dated 22.02.2024. These orders partly allowed the assessee's appeals against assessment orders passed by the Assessing Officer (AO) under section 143(3) for Assessment Years (AYs) 2014-15 and 2015-16, dated 28.12.2016 and 5.12.2017, respectively. The appeals were heard together due to common issues of disallowances. The assessee contended that expenses claimed were business expenses, fully vouched, and additions made by the AO were without cogent reason. The AO had rejected books of accounts, deeming some vouchers 'unverifiable self-made vouchers'. The CIT(A) had upheld certain additions, including Rs. 20,19,251/- out of various expenses, restricted car running expenses by 20% for personal use, and confirmed an addition of Rs. 4,36,954/- related to commission income from M/s Bajaj Finance Ltd. The assessee also raised grounds regarding non-decision on penalty proceedings and interest levies.

What did the Tribunal hold?

The Tribunal decided on several issues. Regarding the addition of Rs. 4,36,954/- on account of commission income from M/s Bajaj Finance Ltd., the Tribunal found that this income was not reflected in the profit and loss account, despite the assessee claiming it was shown under 'incentive scheme'. As the assessee could not reconcile the accounts, the addition was confirmed. Concerning the addition of Rs. 3,60,000/- for salary to a partner, the Tribunal noted that a supplementary partnership deed dated 01.04.2013 had been examined by the AO in AY 2014-15 and the remuneration was allowed. Therefore, there was no reason for a departure in AY 2015-16, and the addition sustained by the CIT(A) was not maintainable. On showroom renovation expenditure of Rs. 18,38,594/-, the Tribunal, relying on ITAT Ahmedabad's decision in DCIT vs. Torque Automative Pvt. Ltd. and Supreme Court's decision in CIT vs. Associated Cement Co. Ltd., held that the expenditure was revenue in nature as it was not intended to provide an enduring benefit but to meet specific requirements of companies whose products the assessee distributed. The addition was deleted. Regarding the disallowance of Rs. 9,71,410/- for AC installation, the Tribunal observed that the disallowance was based on a misunderstanding; as these were concessional incentives for sales made to customers' residences, they constituted allowable business expenses and the addition was deleted. The ad-hoc disallowance of 5% on various maintenance expenditures was also deleted, as these were normal business expenses and nothing suggested they were not incurred. A 20% disallowance on vehicle running expenses was deleted for lack of evidence of personal use, especially as payments were made through banking channels. The Tribunal upheld the disallowance of Rs. 39,016/- under Section 40A(3) as the assessee could not deny the cash payment. The Tribunal expressly left undecided the grounds related to penalty proceedings and interest levies, as they were not decided by the CIT(A).

What were the issues?

1. Whether the Tribunal had to decide if the CIT(A) erred in partly allowing the appeal, considering the assessee's claim that all expenses were business expenses, fully vouched, and additions by the AO were without cogent reason, particularly concerning the rejection of books of accounts and the finding of 'unverifiable self-made voucher' (relates to Section 37(1)). 2. Whether the Tribunal had to decide if the CIT(A) erred in upholding the addition of Rs. 20,19,251/- out of various expenses claimed, on the ground that the assessee had not provided sufficient evidence, despite the assessee claiming the expenses were business expenses verifiable by vouchers. 3. Whether the Tribunal had to decide if the CIT(A) erred in restricting car running expenses by 20% for personal use, when the expenses were for diesel for a 'dala'/delivery van used for transporting goods and paid by cheque (relates to Section 37(1)). 4. Whether the Tribunal had to decide if the CIT(A) erred in confirming the addition of Rs. 4,36,954/- related to commission income from M/s Bajaj Finance Ltd., after allowing Rs. 10,59,252/-. 5. Whether the Tribunal had to decide if the CIT(A) erred in not deciding the ground regarding initiation of penalty proceedings under Section 271(9C) and levy of interest under Sections 234A, 234B, and 234C. Assessee's Contentions: - All claimed expenses are business expenses, fully vouched, and additions by the AO are without cogent reason. - AO erred in rejecting audited books of accounts; book results were progressive. - AO failed to consider prevailing circumstances and history before rejecting books. - CIT(A) erred in upholding addition of Rs. 20,19,251/- out of expenses, despite expenses being verifiable by vouchers. - CIT(A) erred in restricting car running expenses by 20% for personal use; the expenses were for a delivery van and paid by cheque. - CIT(A) erred in not allowing commission income from M/s Bajaj Finance Ltd. in full. - CIT(A) erred in not deciding penalty and interest grounds. - Addition of Rs. 3,60,000/- towards salary to partner was erroneous, considering a supplementary partner deed. - Addition of Rs. 3,212/- as interest on TDS is not allowable expenditure. - Disallowance of Rs. 18,38,594/- for showroom renovation was erroneous, as it was necessary for business and similar expenses were allowed earlier. - Disallowance of Rs. 9,71,410/- for AC installation was erroneous, as it was an incentive for sales to customers' residential premises. - Disallowance of Rs. 6,31,666/- under vehicle running and maintenance was erroneous. - Addition of Rs. 39,106/- under Section 40A(3) was erroneous. - Ad-hoc disallowance of 5% on repairs and maintenance, godown maintenance, and service maintenance was erroneous. Revenue's Contentions: - Not recorded in the judgment.

Which sections of the Income-tax Act were involved?

Section 40A(3),Section 37(1),Section 40(b)(i),Section 271(9C),Section 234A,Section 234B,Section 234C

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, LUCKNOW ‘B’ BENCH, LUCKNOW

Before: SH. KUL BHARAT & SH. NIKHIL CHOUDHARY

For Respondent: Smt. Pratibha Singh, Addl CIT DR
Hearing: 14.07.2026Pronounced: 30.09.2026

PER NIKHIL CHOUDHARY, A.M.: These two appeals have been filed by the assessee against the separate orders of the ld. CIT(A), both dated 22.02.2024, wherein the ld. CIT(A) has partly allowed the appeals of the assessee against the separate assessment orders passed by the ld. Assessing Officer under section 143(3) for the A.Ys. 2014-15 and 2015-16, dated 28.12.2016 and 5.12.2017, respectively. As both these appeals were heard together and relate to certain disallowances, they are clubbed together for the sake of convenience. The grounds of appeal in these two cases are as under: - “A. Because the learned Commissioner of Income Tax (Appeals) appeals h

The order continues below.

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