2012 (6) TMI 681 - AT - Income Tax

Addition on account of bogus claim of expenditure and unexplained expenditure u/s 69C - Held that - As the assessee gave explanation reconciling the difference in the accounts pointed out by the AO along with the copies of account in the assessee s books of account, the AO without pointing out any defect in the maintenance of books of account or in the entries recorded therein and without rejecting the assessee s explanation reconciling the differences, which cannot be accepted - since the assessee has discharged his burden which was not controverted by the Revenue and in the absence of any material to show that the reconciliation/ explanation submitted by the assessee was not filed before the AO the additions made by the AO are need to be deleted - against revenue. Disallowance of sub-contractor expenses/purchases - Held that - As the assessee was able to produce confirmation from one sub contractor only along with TDS certificate, with no contrary material placed on record by the Revenue against the said confirmation and keeping in view that the said material was available before the AO even during the remand proceedings the assessee has fully discharged his burden to the extent of one sub-contractor - partly in favour of assessee. Disallowance being employer s contribution to provident fund - Held that - As decided in CIT Versus AIMIL Limited and others 2009 (12) TMI 38 (HC) that if the employee s share of contribution is paid before the due date of filing of the return u/s 139(1), then no disallowance can be made - as the assessee has deposited the amount of PF before the end of the financial year 2002-03 i.e. much before the due date of filing of the return - in favour of assessee. Charging interest u/s 234B and 234D - Held that - As the issue was not objected by the Ld. DR. AO is directed to allow consequential relief in respect of levy of interest - in favour of assessee.

Issues Involved:
1. Disallowance of labor expenses/purchases due to differences in balances.
2. Addition under Section 69 for unexplained expenditure.
3. Disallowance of sub-contractor expenses/purchases as bogus expenses.
4. Disallowance of employer and employee contributions to provident fund.
5. Charging of interest under Sections 234B and 234D.
6. Initiation of penalty proceedings under Section 271(1)(c).

Detailed Analysis:

1. Disallowance of Labor Expenses/Purchases:
The assessee contested the disallowance of Rs. 7,93,064/- for labor expenses/purchases due to discrepancies between the balances as per the appellant and the suppliers. The AO issued notices under Section 133(6) to various parties, revealing discrepancies. Despite the assessee's attempt to reconcile these differences, the AO added Rs. 7,20,228/- as bogus expenditure and Rs. 72,836/- under Section 69C for unexplained expenditure. The Tribunal found that the assessee had provided sufficient reconciliation and explanations, which were not adequately refuted by the Revenue. Consequently, the additions made by the AO and sustained by the CIT(A) were deleted, allowing the assessee's grounds.

2. Addition Under Section 69 for Unexplained Expenditure:
The Tribunal noted that the AO added Rs. 72,836/- as unexplained expenditure under Section 69C due to discrepancies in the accounts. The assessee provided reconciliation statements and explanations, which were not convincingly disputed by the Revenue. Therefore, the Tribunal deleted the addition, supporting the assessee's position.

3. Disallowance of Sub-Contractor Expenses/Purchases:
The AO disallowed Rs. 19,82,188/- as bogus expenses due to lack of confirmations from certain parties. The assessee provided confirmations from some parties, including Mayan Handicrafts, which were acknowledged by the AO in a remand report. The Tribunal accepted the assessee's explanations for Mayan Handicrafts and deleted the addition of Rs. 10,52,600/-. However, for other parties like Shri Devji Laxman, Sachin Construction, and Hariom, the assessee failed to provide sufficient evidence, leading the Tribunal to uphold the additions for these parties.

4. Disallowance of Employer and Employee Contributions to Provident Fund:
The AO disallowed Rs. 41,616/- for employer's contribution and Rs. 38,714/- for employee's contribution to the provident fund, citing late payment. The CIT(A) upheld this based on jurisdictional High Court decisions. However, the Tribunal referenced the Supreme Court decision in CIT v. Vinay Cement Ltd. and other precedents, ruling that payments made before the due date of filing the return should not be disallowed. Thus, the disallowance of Rs. 80,330/- was deleted.

5. Charging of Interest Under Sections 234B and 234D:
The assessee sought consequential relief from interest charged under Sections 234B and 234D. The Tribunal directed the AO to allow such relief, as there was no objection from the Revenue.

6. Initiation of Penalty Proceedings Under Section 271(1)(c):
The assessee did not press the grounds related to the initiation of penalty proceedings under Section 271(1)(c), and the Tribunal rejected these grounds.

Conclusion:
The Tribunal partly allowed the appeal, deleting several additions and disallowances made by the AO and CIT(A), while upholding some disallowances where the assessee failed to provide sufficient evidence. The order was pronounced in open court on 11.4.2012.

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