2012 (7) TMI 184 - AT - Income Tax

Addition on account of non production of purchase bills & vouchers - CIT(A) deleted the additions - Held that - it is seen that the Assessing Officer had made the addition because of one point and i.e. non production of bills and non appearance of suppliers u/s 133(6) and CIT(A) has rightly observed that un-served notice with the remarks party left means that earlier this party was there - AO in his assessment order has ignored to note That the payment of purchases were made through Account Payee cheques only,there was certificate from site In-charge certifying utilization of material and that out of six suppliers which were summoned u/s 133(6) only one supplier did not appear - if the information u/s 133(6) is not furnished, the claim of deduction cannot be denied only on the ground - in favour of assessee. Addition of Rs.3,00,000 on account of labour charges and verifiable expenses - Held that - AO had not made any specific finding to reach at the figure of disallowance as the addition is an ad hoc addition and while making the addition he had ignored the fact that percentage of labour charges to gross turnover had come down to 13.73% as against 16.99% in the preceding year - CIT(A) has rightly restricted the disallowance to 1.00,000 - in favour of assessee. Addition on account of random checking of vouchers from which he found that payments for an amount of Rs. 90,537/- were not available. The assessee had explained that due to work at various sites these might have been lost. The Assessing Officer had made a finding in respect of Rs. 90,567/- only in which the vouchers were not available. Therefore, Ld CIT(A) had rightly restricted the disallowance to Rs. 90,537 - in favour of assessee.

Summary

Issues:
1. Addition on account of non-production of purchase bills and vouchers.
2. Disallowance of labour charges and verifiable expenses.
3. Disallowance on account of unverifiable purchases.

Issue 1: Addition on account of non-production of purchase bills and vouchers:
The appellant appealed against the order of the Ld CIT(A) deleting the addition of Rs. 14,25,000, contending that the Assessing Officer had made the addition due to non-production of purchase bills, vouchers, and ledger account from the supplier. The appellant argued that the notice issued to the supplier returned un-served. The appellant provided evidence of payment through bank transactions, an affidavit, and a certificate from the site In-charge to support the genuineness of the purchases. The Ld CIT(A) relied on the appellant's submissions and deleted the addition, emphasizing that the appellant's accounts were audited, and no adverse inference could be drawn from the documents provided. The Tribunal upheld the Ld CIT(A)'s decision, noting that the Assessing Officer had overlooked crucial facts and that the addition was unjustified.

Issue 2: Disallowance of labour charges and verifiable expenses:
The Assessing Officer disallowed Rs. 3,00,000 on account of labor charges and wages due to discrepancies in the muster roll, self-generated vouchers, and cash payments. The appellant appealed, providing details of wage expenses and arguing that the disallowance was unwarranted. The Ld CIT(A) reduced the disallowance to Rs. 1,00,000, considering the decrease in the percentage of labor charges to gross turnover. The Tribunal upheld the Ld CIT(A)'s decision, stating that the Assessing Officer had not provided specific findings for the disallowance and had overlooked the decrease in labor charges percentage.

Issue 3: Disallowance on account of unverifiable purchases:
The Assessing Officer made an addition of Rs. 3,00,000 due to unverifiable purchases, noting missing purchase vouchers and lack of proper documentary evidence for some purchases. The appellant explained that the vouchers might have been lost due to work at various sites. The Ld CIT(A) restricted the disallowance to Rs. 90,537, considering the small amount and the audited nature of the appellant's accounts. The Tribunal upheld the Ld CIT(A)'s decision, stating that the Assessing Officer had only found issues with a specific amount and that the restriction of the disallowance was appropriate.

In conclusion, the Tribunal dismissed the revenue's appeal, upholding the Ld CIT(A)'s decisions on all three issues. The Tribunal found that the additions made by the Assessing Officer were not justified, considering the evidence provided by the appellant and the discrepancies in the Assessing Officer's findings. The Tribunal emphasized the importance of considering all relevant facts and evidence before making additions to the assessed income.