ITO, NEW DELHI vs. M/S. SPEEDNET CABLES (P) LTD., NEW DELHI

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ITA 5894/DEL/2014Status: DisposedITAT Delhi23 June 2016AY 2010-114 pages

In favour of the assessee: the Revenue's appeal was dismissed. From the AI summary of this appeal.

AI SummaryDismissed

What did the Tribunal hold?

The Tribunal held that the genuineness of purchases was not challenged and the fact that sales were in cash does not invalidate the business transactions. Since the carrying on of business was proved, expenses incurred for business purposes should be allowed.

What were the facts?

The assessee claimed expenses of Rs. 33,84,154/- against sales of Rs. 8,23,590/-. The AO disallowed the expenses as the assessee could not provide details of cash sales and sellers. The CIT(A) allowed the deduction.

What were the issues?

Whether expenses incurred for business purposes can be disallowed solely because sales were made in cash and details of sellers were not provided.

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, DELHI BENCHES : SMC-I : NEW DELHI

Before: SHRI R.S. SYAL

For Appellant: Shri B.L. Gupta, ITP
For Respondent: Shri Deepak Garg, Sr. DR
Hearing: 23.06.2016Pronounced: 23.06.2016

ORDER This appeal filed by the Revenue is directed against the order passed by the CIT(A) on 26.8.2014 in relation to the assessment year 2010-11.

2.

The only issue raised in this appeal is against the allowing of deduction of expenses amounting to Rs.33,84,154/- incurred by the assessee.

3.

Briefly stated, the facts of the case are that the assessee, inter alia, showed sale of Rs.8,23,590/-, against which the expenses amounting to Rs.33,84,154/- were claimed as deduction. On being called upon to furnish the evidence of purchase and sale, the assessee submitted detail of purchases, which has been set out in the assessment order. As the sales were made in cash, the assessee submitted that no record was maintained of the names of sellers. Since the assessee did not furnish such details, the AO held that huge expenses of Rs.33,84,154/- claimed in the Profit & Loss Account could not be allowed as deduction. The ld. CIT(A) overturned the assessment order on this point and allowed the deduction.

4.

I have heard the rival submissions and perusing the relevant material available on record. It is observed that the assessee made sales to the tune of Rs.8,23,590/- and gave details of purchases as has been recorded on page 2 of the assessment order. The genuineness of the purchases has not been challenged by the AO. The mere fact that the assessee made sales in cash, cannot be a reason to doubt the genuineness of the business transactions. This proves the carrying on of business.

Major part of expenses incurred by the assessee include directors’ remuneration, which payment was made after due deduction of tax at source. When the factum of the carrying on of the business is proved, there can be no reason to disallow the expenses incurred for the purpose of business. I, therefore, approve the view taken by the ld. CIT(A).

5.

In the result, the appeal is dismissed.

The order pronounced in the open court on 23.06.2016.

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