2012 (7) TMI 248 - AT - Income Tax

Trading Liability - job work payable of earlier year brought forward - addition made u/s 41 on presumption that assessee will not pay these amount in future also - Held that - Since expenditure does not pertain to this year, it cannot be disallowed. Further, the amount has not been written back to the P/L A/c. There is no cessation of liability merely because the assessee has not paid the amount till the completion of assessment. Only option before the AO is to consider the assessment of the years in which the amounts were debited to P/L A/c. No addition can be made in this year - Decided against Revenue Alleged bogus payments - CIT(A) deleted the addition on ground that payments have been subjected to TDS - Held that - No evidence exist on the record of the AO to show that tax has been deducted from payments made. Relied has been given by CIT(A) without obtaining any confirmed account from this party. The assessee has also alleged that Shri A has fled away with some third party cheques lying in his office. Therefore, there is something doubtful about the transactions with Shri A. Matter restored to the file of the AO to be examined fresh.

Summary

Issues:

1. Addition of payments made to Shri Kalim Akhtar Ansari and job work payable.
2. Deletion of both additions by Ld. CIT(A).
3. Dispute regarding non-cooperation of the assessee and logical conclusion of the case.
4. Restoration of the matter to the file of the AO for further examination.
5. Upholding the Ld. CIT(A) order on job work payable.

Analysis:

1. The Assessing Officer (AO) added a sum to the total income due to doubtful transactions with Shri Kalim Akhtar Ansari. The AO suspected that the payments were made to procure bills and receive cash in return. Additionally, another sum related to job work payable was disallowed under section 41(1) due to poor quality work and non-payment. However, the Ld. CIT(A) deleted both additions, stating lack of evidence and logical basis for the disallowance.

2. The Ld. CIT(A) found the AO's presumptions regarding non-payment and doubtful transactions to be unsubstantiated. All payments to Shri Ansari had tax deducted at the source, and the liability for job work payable was carried forward from the previous year. Thus, the deletions were justified as there was no concrete evidence supporting the AO's conclusions.

3. The issue of non-cooperation by the assessee during assessment proceedings was raised. The AO and Ld. CIT(A) differed in their approach to the case. The AO suggested that further examination was required, while the Ld. CIT(A) found in favor of the assessee. The matter was debated on the logical conclusion of the case and the need for a thorough examination of the issues.

4. The Tribunal decided to restore the matter to the AO for re-examination of the transactions with Shri Ansari. Lack of confirmed accounts and doubts regarding the transactions necessitated a fresh assessment. The assessee was directed to provide necessary evidence, failing which adverse inferences could be drawn by the AO.

5. Regarding the job work payable, the Tribunal upheld the Ld. CIT(A) decision, emphasizing that the expenditure was not related to the current year and had not been written back to the profit and loss account. The AO was advised to consider the relevant assessment years for any adjustments, concluding that no addition could be made in the present year.

In conclusion, the appeal was partly allowed for statistical purposes, with the Tribunal providing detailed reasoning for each issue raised in the case.