2016 (6) TMI 1247 - AT - Income Tax

Disallowance u/s 40(a)(ia) - non deduction of tax at source - Held that - A.R. of the assessee, before us, has submitted that since the TDS was deducted by the concerned party/agent and some of the expenses were in the nature of reimbursement of actual expenditure; therefore, the disallowance was not warranted. He has submitted that he may be given an opportunity to demonstrate before the AO in this respect. Considering the above submissions of the Ld. A.R., we are of the view that interest of justice will be well served, if, the assessee is allowed an opportunity to demonstrate before the AO regarding the above submissions. We accordingly restore this issue to the file of the AO for consideration of the contentions of the assessee only in relation to payment made to M/s. J.N. Freight Forwarders Pvt. Ltd. However, the disallowances made in respect of the other two parties M/s. M. Liladhar and M/s. Lincs Cargo Pvt. Ltd. are hereby confirmed. Addition under section 69C - unconfirmed/unproved purchases - Held that - Where the assessee filed letters of confirmation of suppliers, copies of bank statement showing entries of payment through account payee cheques to suppliers and stock reconciliation statements, sale of purchased goods was not doubted, the transactions were supported with evidences and confirmations, in such an event merely because the suppliers have not appeared before the AO or the Ld. CIT(A), one can not conclude that the purchases were not genuine. We do not find justification for the addition made by the lower authorities in this respect. Hence, the additions made by the lower authorities on account of bogus purchases under section 69C of the Act are therefore ordered to be deleted. Additions made on account of excess stock - Held that - CIT(A) observed from the quantitative details of sales and purchases of the two items, that the entire quantity of the said two items was sold/exported during the relevant year under consideration and no closing stock of these items was left with the assessee at the end of the relevant accounting year. That the assessee had duly explained the mistake resulting in showing the excess stock and the said mistake was duly rectified by filing a revised return within the limitation period prescribed. On account of these facts and evidences, the Ld. CIT(A) held that the AO was not justified in rejecting the revised return filed by the assessee. He held that the mistake of wrongly showing the closing stock at the enhanced value of ₹ 80,98,900/- was fully verified and the same being inadvertent mistake apparent from record and the revised return being filed in time, the rejection of the said revised return by the AO was wrong. He directed the AO to accept the revised return and to delete the addition on account of excess stock of two items. No infirmity in the above order of the Ld. CIT(A) relating to the issue under consideration and the same is accordingly upheld.

Summary

Issues Involved:
1. Addition on account of non-payment of TDS under section 40(a)(ia).
2. Addition under section 69C on account of unconfirmed/unproved purchases.
3. Disallowance of legal and professional charges.
4. Acceptance of revised return and deletion of addition on account of excess stock.

Detailed Analysis:

Issue 1: Addition on account of non-payment of TDS under section 40(a)(ia)
The assessee contested the disallowance of ?23,91,398 under section 40(a)(ia) for non-deduction of TDS. The actual figure of disallowance was ?22,15,365. The assessee, an exporter, argued that the payments in question were reimbursements for expenses incurred by clearing and forwarding agents, and hence TDS was not required. The CIT(A) partially accepted the assessee's argument, allowing relief for payments made to M/s. Velji Dossabhai & Sons Pvt. Ltd. but upheld disallowances for other parties. The Tribunal restored the issue to the AO for further consideration regarding M/s. J.N. Freight Forwarders Pvt. Ltd., while confirming disallowances for M/s. M. Liladhar and M/s. Lincs Cargo Pvt. Ltd.

Issue 2: Addition under section 69C on account of unconfirmed/unproved purchases
The AO added ?25,68,750 under section 69C, considering purchases from five parties as bogus. The CIT(A) noted that the purchases were genuine but suspected cash purchases from the grey market. The Tribunal found that the purchases and corresponding sales were genuine, supported by documentary evidence, and the cash purchase theory had no corroborating evidence. The Tribunal cited case law from the Gujarat High Court and the Bombay High Court, concluding that the addition was unjustified and ordered its deletion.

Issue 3: Disallowance of legal and professional charges
The assessee did not press this ground of appeal, and it was dismissed as not pressed.

Issue 4: Acceptance of revised return and deletion of addition on account of excess stock
The original return filed by the assessee showed excess stock due to an unaccounted quantity of two export bills. The revised return, filed within the limitation period, corrected this mistake. The AO rejected the revised return, but the CIT(A) accepted it, noting that the mistake was apparent and the revised return was filed in time. The Tribunal upheld the CIT(A)'s decision, confirming the deletion of the addition on account of excess stock.

Conclusion:
The Tribunal allowed the assessee's appeal for statistical purposes, restoring certain issues to the AO for further consideration, and dismissed the Revenue's appeal, upholding the CIT(A)'s decisions on the acceptance of the revised return and deletion of additions. The Tribunal emphasized the importance of documentary evidence and legal precedents in determining the genuineness of transactions and the validity of revised returns.