2016 (2) TMI 1088 - AT - Income Tax

Addition on account of sundry creditors - Held that - Assessee has submitted the details of sundry creditors in the paper book at page 1 to show that in assessment year 2008-09, sundry creditors were of ₹ 90.28 lacs which is reduced to ₹ 29.34 lacs in the assessment year 2009-10 and in assessment year 2010-11, the sundry creditors are of ₹ 32,73,524/-. He has, therefore, submitted that sundry creditors have reduced from assessment year 2008-09 and this fact has not been examined by the AO. Therefore, the entire addition is wholly unjustified. The ld. DR also contended that this fact can be examined at the stage of AO. In view of the above, we set aside the orders of the authorities below and restore this issue to the file of AO with direction to re-decide this issue. Addition of purchase of fixed asset u/s. 68 - Held that - The assessee produced annexure to the audited accounts in respect of the above additions made to the fixed assets on which depreciation has been claimed. The audited account shows that the assessee made addition of ₹ 25,29,893/- to the fixed assets. It would, therefore, show that these purchases have been shown in the books of account and have specifically shown in the audited accounts. Therefore, the nature and source of the same have been explained by the assessee and as such could not be treated as unexplained investment made in the purchase of fixed assets. Therefore, no addition could be made u/s. 68. May be, for nonproduction of bills for assets purchased, the AO could have disallowed the depreciation but such an issue is not relevant to the addition made u/s. 68 Disallowance of provision of expenditure made, salary and wages, purchase and other Misc. expenses - Held that - Instead of making huge additions on account of disallowance, out of various expenses under the four heads as above, it would be reasonable and appropriate to make addition of ₹ 10,00,000/- in all to the income of the assessee to meet out the ends of justice and objections of the authorities below. In view of the above discussion, we modify the orders of the authorities below and instead of making addition on account of disallowance of various expenses in a sum of ₹ 29,60,560/-, ₹ 40,92,568/-, ₹ 29,72,852/- and ₹ 6,17,389/-, the authorities below shall restrict the addition to ₹ 10,00,000/- in all in respect of these additions. We accordingly, set aside the orders of the authorities below and restrict the addition to ₹ 10,00,000/- only under the disallowance of above expenditure under four heads. This ground of appeal of the assessee is partly allowed.

Summary

Issues Involved:
1. Challenge against addition of Rs. 1,64,46,783 under different heads in the assessment year 2010-11.

Detailed Analysis:

1. Addition on Account of Sundry Creditors:
The AO made an addition of Rs. 32,73,524 on account of sundry creditors as the assessee failed to produce complete details of the creditors. The CIT(A) confirmed the addition. The assessee contended that since the net profit rate was consistent with previous years, the addition was unjustified. However, the Tribunal rejected this argument, citing legal precedents. The Tribunal set aside the lower authorities' orders and directed the AO to re-examine the issue considering the reduction in sundry creditors over the years.

2. Addition of Purchase of Fixed Asset:
The AO added Rs. 25,29,893 under section 68 of the Act as unexplained investment in fixed assets due to lack of bill production. However, the Tribunal found the addition unjustified as the audited accounts clearly showed the additions to fixed assets with details for depreciation. The Tribunal deleted this addition, emphasizing that the purchases were duly recorded and explained in the audited accounts.

3. Disallowance of Various Expenses:
The AO disallowed expenses under different heads due to non-production of bills and vouchers. The assessee argued for consistency based on past decisions and the nature of the business. The Tribunal considered the history of the assessee and reduced the additions from Rs. 1,64,46,783 to Rs. 10,00,000. This decision was based on the unreasonable nature of the proposed additions and the overall circumstances of the case.

In conclusion, the Tribunal partly allowed the appeal, directing the AO to re-evaluate the sundry creditors issue, deleting the addition on fixed assets, and reducing the disallowances on various expenses. The decision was based on legal principles, consistency, and the specific facts of the case, ensuring a fair and just outcome for the assessee.