2011 (11) TMI 673 - AT - Income Tax

Summary

Issues Involved:
1. Under valuation of work-in-progress.
2. Suppression in consumption of coal.
3. Disallowance of Vatav Kasar and discount expenses.
4. Disallowance of delayed payment of employees' contribution of ESI & PF.

Summary:

1. Under Valuation of Work-in-Progress:
The assessee challenged the addition of Rs. 1,82,338/- for alleged under valuation of work-in-progress. The CIT(A) had deleted the rejection of books of account u/s 145(3) but upheld the addition. The Assessing Officer (AO) had issued a show-cause notice and was not convinced by the assessee's valuation method, invoking section 145(3) and estimating the closing stock of work-in-progress at Rs. 2,74,298/-. The Tribunal, considering the hypothetical nature of the AO's estimation and the smallness of the quantum, granted 50% relief, reducing the addition to Rs. 91,170/-.

2. Suppression in Consumption of Coal:
The AO identified a shortfall in coal consumption for August and November 2004, adding Rs. 94,274/- to the assessee's income. The CIT(A) upheld this addition, noting the impossibility of a negative balance of coal. The Tribunal confirmed the addition, as the assessee failed to provide convincing reasons or material to counter the AO's findings.

3. Disallowance of Vatav Kasar and Discount Expenses:
The AO disallowed Rs. 2,24,230/- of Vatav Kasar and discount expenses due to lack of confirmations from some parties. The CIT(A) affirmed the addition except for Rs. 17,035/-. The Tribunal, considering the business practice and the details provided, directed to allow the expenditure, noting that the disallowance was unfairly applied to some parties but not others.

4. Disallowance of Delayed Payment of Employees' Contribution of ESI & PF:
The AO disallowed Rs. 33,790/- for delayed payment of employees' contribution towards PF and ESIC. The Tribunal referred to the decision in CIT v/s. Aimil Ltd. and other precedents, which held that contributions paid before the due date of filing the return are allowable. The matter was remanded back to the AO to verify the due date of filing the return and allow the claim accordingly.

Conclusion:
The appeal was partly allowed, providing relief on the under valuation of work-in-progress and Vatav Kasar and discount expenses, while confirming the addition for coal consumption and remanding the issue of delayed ESI & PF contributions for further verification.