2011 (1) TMI 1365 - AT - Income Tax

Summary

Issues involved: Department's appeal against deletion of addition on account of purchases from Nirav Traders and deletion of addition on labour payments; assessee's cross-objection against confirmation of addition of 10% of purchase from Nirav Traders; Department's appeal against deletion of penalty under Section 271(1)(c) of the Act.

Issue 1: Deletion of addition on account of purchases from Nirav Traders

The Department's appeal challenged the deletion of addition of Rs. 6,48,000 out of disallowance of Rs. 7,20,000 on purchases from Nirav Traders. The assessee's cross-objection contested the confirmation of addition of 10% of the purchase from the same party. The Tribunal had earlier set aside the CIT(A)'s order for reconsideration. The AO disallowed the purchase citing non-availability of the party and discrepancies in contact details. However, the CIT(A) accepted the genuineness of the purchases, noting payments through account payee cheques and reasonable purchase rates. The Tribunal upheld the CIT(A)'s decision, emphasizing the lack of evidence of funds returning to the assessee and the consistency of purchase rates with other traders. The Department's appeal and the assessee's cross-objection were dismissed.

Issue 2: Deletion of addition on labour payments

In the Department's appeal, the deletion of addition of Rs. 6,80,030 on labour payments was contested. The AO disallowed the payments due to non-compliance by certain parties. The CIT(A) found the transactions genuine based on detailed evidence provided by the assessee, including bank account statements and payment details. The Tribunal upheld the CIT(A)'s decision, noting the genuineness of transactions and payments through banking channels. No adverse material against the assessee warranted interference. Therefore, the Department's appeal on this issue was dismissed.

Issue 3: Deletion of penalty under Section 271(1)(c) of the Act

The Department challenged the deletion of penalty under Section 271(1)(c) based on the additions discussed in the appeals. The CIT(A) had cancelled the penalty considering the genuineness of transactions and deletions of additions. The Tribunal upheld the CIT(A)'s decision, stating that the additions did not indicate concealment of income or inaccurate particulars. Therefore, the penalty was cancelled. Consequently, the Department's appeals and the assessee's cross-objection were dismissed.