2014 (5) TMI 1150 - AT - Income Tax

Addition towards Transportation Charges - unserved notices as parties were not available on the addresses given by the assessee - genuine expenditure - Held that - It is not disputed that the assessee had furnished proof of actual performance of transportation work, lifting of waste, payments of TDS, full addresses of the parties, confirmation of account with PAN and mode of payment. By giving such details, in our opinion, assessee had discharged its initial burden of proof. If AO had doubt about the genuineness of transaction or payment, he should have made further inquiries and should have confronted the assessee with the result of such inquiries. Assessee was awarded contract by MCGM for lifting solid waste and was paid for it by the corporation. It had hired sub-contractors to carry out job assigned by the Municipal Corporation. As per the terms of contract assessee had to get the vehicles used for lifting wastage with RTO. Inquiry with RTO/ MCGM would have brought truth in light. It is true that letter issued by the AO remained unserved, but that factor alone should not result in addition of Rupees more than two crores. Non service of notices issued by the AO was the starting point to investigate the matter further. But, the AO chose to stop there and ignored the documentary evidences produced by the assessee. In these circumstan -ces, we are of the opinion that the order of the FAA does not suffer from any legal infirmity - Decided in favour of assessee Addition u/s. 68 - unexplained unsecured loans - establish the capacity, genuineness and proper identity of creditors - Held that - Two of the creditors not only had appeared before the AO, but had also admitted of giving loan to the assessee. AO has not pointed out any abnormality in their statements. In these circumstances, there was no reason to make addition for the sums appearing in their names. From the order of the FAA it is clear that Shantiben Shah and Charmi A Mehta had capacity of advancing loans to the assessee and they were regular tax payees. Thus, FAA has conclusively proved that identity of the creditors, genuineness of the transaction and capacity to advancing loan cannot be doubted. - Decided in favour of assessee

Summary

Issues Involved:
1. Deletion of addition towards Transportation Charges.
2. Deletion of addition towards unexplained unsecured loans under Section 68 of the Income-tax Act, 1961.

Issue-wise Detailed Analysis:

1. Deletion of Addition Towards Transportation Charges:
The Assessing Officer (AO) had added Rs. 2,31,39,030 towards Transportation Charges, citing that notices issued under Section 133(6) were returned unserved, and the assessee failed to produce the concerned parties for verification. The AO also noted the absence of basic information such as vehicle numbers, drivers' names, and routes.

In appeal, the assessee argued that the AO wrongly disallowed genuine expenditure based on unserved notices, ignoring factors like actual transportation work, proper TDS payment, and confirmation of accounts with PAN. The assessee provided details of payments made to twelve parties through account payee cheques, and the First Appellate Authority (FAA) noted that the assessee had furnished evidence of TDS deduction and full addresses of the parties. The FAA concluded that the AO should have investigated further rather than disallowing the expenditure based on non-service of notices alone. The Tribunal agreed with the FAA, stating that the assessee had discharged its initial burden of proof and the AO failed to make further inquiries. Thus, the deletion of the addition was upheld.

2. Deletion of Addition Towards Unexplained Unsecured Loans:
The AO had added Rs. 54,00,000 as unexplained unsecured loans under Section 68, claiming the assessee failed to establish the identity, capacity, and genuineness of six creditors. The AO noted that the assessee could not produce evidence for loans from M/s Mukti Exports, Samir Jayantilal Shah, Jayantilal P. Shah, Vijay D. Shah, Shantiben S. Shah, and Charmi A. Mehta.

In appeal, the assessee contended that all six parties were genuine, capable of giving loans, and regular income-tax payees. The assessee provided details such as PAN cards, income returns, balance sheets, and bank statements. The FAA found that the AO had doubted the veracity of the creditors without substantial evidence. For instance, M/s Mukti Exports had substantial business activities and bank transactions, and Samir Jayantilal Shah had appeared before the AO and provided detailed explanations. The FAA concluded that the AO's findings were baseless and the creditors' genuineness could not be doubted merely on presumptions. The Tribunal upheld the FAA's decision, noting that the AO failed to conduct further investigations despite the assessee providing substantial evidence.

Conclusion:
The Tribunal dismissed the appeal filed by the AO, confirming the FAA's order on both issues. The deletion of additions towards Transportation Charges and unexplained unsecured loans was upheld, as the assessee had provided sufficient evidence to discharge its initial burden of proof, and the AO failed to make necessary further inquiries.