2011 (9) TMI 1050 - AT - Income Tax

Summary

Issues Involved:
1. Addition on account of non-supply of material.
2. Addition on account of capital gain.
3. Addition u/s 68.
4. Addition u/s 40(a)(ia).
5. Addition on account of low withdrawals.
6. Disallowance on account of miscellaneous expenses.
7. Disallowance on account of interest on car loan and depreciation on car.

Summary:

1. Addition on account of non-supply of material:
The AO made an addition of Rs. 4,70,072/- for the assessment year 2004-05, observing that the purchasing party did not show purchases of this amount. A protective addition was made for the assessment year 2005-06. The Tribunal found that the assessee had supplied material worth Rs. 49,07,504/- and received full payment, including Rs. 4,70,072/-. The Tribunal noted that the AO did not summon the purchasing party u/s 131 nor provided an opportunity for cross-examination. Therefore, the addition was deleted.

2. Addition on account of capital gain:
For the assessment year 2005-06, the AO made an addition of Rs. 1,25,830/- in capital gain, disallowing renovation expenses based on an Inspector's report. The Tribunal found that the enquiry was made at the wrong address and the report was not provided to the assessee for a reply. Thus, the addition was deleted.

3. Addition u/s 68:
The AO added Rs. 2,96,500/- u/s 68, stating the assessee failed to discharge his onus. The Tribunal noted that the assessee provided confirmations and affidavits of creditors and requested summons u/s 131, which the AO did not issue. Citing decisions from the Hon'ble Jurisdictional High Court and the Supreme Court, the Tribunal held the addition was not justified and deleted it.

4. Addition u/s 40(a)(ia):
The AO made additions on three counts: Shipping Commission (Rs. 47,392/-), Commission to NRI (Rs. 5,26,070/-), and Shipping Charges (Rs. 15,30,589/-).

- Shipping Commission: The Tribunal found that the amount was below the threshold for TDS u/s 194H and deleted the addition.
- Commission to NRI: The Tribunal held that the commission paid for services rendered outside India was not taxable in India, following a similar decision in M/s. Modern Insulator Ltd., and deleted the addition.
- Shipping Charges: The Tribunal noted that payments were made to foreign shipping companies through their agents, and as per Circular No. 723, no TDS was required. Thus, the addition was deleted.

5. Addition on account of low withdrawals:
For the assessment year 2005-06, the AO estimated household withdrawals at Rs. 8,000/- per month, adding Rs. 32,280/-. The Tribunal found the assessee's and his wife's withdrawals sufficient and reduced the addition to Rs. 10,000/-.

6. Disallowance on account of miscellaneous expenses:
This ground was not pressed by the assessee and was dismissed as not pressed.

7. Disallowance on account of interest on car loan and depreciation on car:
This ground was also not pressed by the assessee and was dismissed as not pressed.

Assessment Year 2007-08:
The appeal was filed late by three days, which was condoned. The Tribunal deleted the addition of Rs. 9,84,328/- u/s 40(a)(ia) and Rs. 21,290/- for low withdrawals, following the same reasoning as for the assessment year 2005-06. The ground regarding interest on car loan and depreciation on car was not pressed and dismissed.

Conclusion:
All appeals of the assessee were allowed in part. The order was pronounced in the open court on 23.9.2011.