M/s. Amrut Distilleries Pvt. Ltd. vs DCIT

Parties Involved

Facts Summary

The case involves a search and seizure action conducted under section 132 of the Income Tax Act at the premises of M/s. Amrut Distilleries Pvt. Ltd. on 03.11.2016. Subsequently, a survey was conducted at the manufacturing unit in Palakkad, Kerala, under section 133A. The assessee was issued a notice under section 153A requiring it to file a return of income. During the survey, discrepancies in cash balances were noted, and the assessee explained that the difference represented advances paid to truck drivers through their unions for transportation charges. The Assessing Officer issued a show cause notice for disallowance under section 40A(3) for cash payments exceeding Rs. 35,000 per day. The assessee contested this, arguing that the payments were made to union representatives on behalf of the drivers, and thus fell under an exception to the disallowance rule.…

Legal Issues

• 1. Whether the additions made under Section 40A(3) are sustainable despite the material relating to the same not being unearthed during the search proceedings.
• 2. Whether the extrapolation of a few instances of alleged violation of Section 40A(3) to arrive at the disallowance sum is arbitrary and unreasonable.
• 3. Whether there was a contravention of Section 40A(3) warranting disallowance.

Judgment Outcome

Decided in favour of Assessee.

Precedents Relied Upon

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