2013 (7) TMI 6 - AT - Income Tax

Disallowance of non-genuine brokerage expenses - Held that - AO had made a specific finding that an abnormal amount of commission was claimed in the month of March coupled with various other discrepancies which is required to be met out by the assessee. Payment of commission by cheque and deduction of TDS alone cannot establish by itself that the expenditure is genuine. Therefore, in the interest of justice, we remit this issue back to the file of the learned CIT(A) for de novo consideration. Thus, this ground is allowed for statistical purpose. Addition made u/s 68 and disallowance of interest expenses - Held that - CIT(A) rendered relief to the assessee by observing that the learned AO had given superficial reasons to treat the loan as unexplained which we find is not tenable. The learned AO had categorically mentioned that the assessee had not provided the correct address of the lenders to issue notice for summons. Therefore, in the interest of justice remit this issue also to the file of the CIT(A) for de novo consideration. Addition on Account of excess shortage - CIT(A) deleted addition - Held that - It is pertinent to note that the books of account maintained by the assessee have not been rejected. No defect has also been pointed out by the AO with respect to the books of account. No discrepancies with regard to shortage affecting the yield were also pointed out by the AO. Thus addition made by the AO based on 2% shortage cannot be sustained. Addition u/s 69B for stock difference - CIT(A) deleted addition - Held that - CIT(A) deleted the addition since the AO could not find any defect in the stock statement arrived at on the basis of physical verification. Further, AO had ignored the reconciliation statement for quantity difference submitted by the assessee. Thus it not necessary to interfere in the order of the CIT(A).

Summary

Issues:
1. Disallowance of non-genuine brokerage expenses
2. Unexplained cash credit and disallowance of interest expenses
3. Excess shortage in yield
4. Stock difference in books of account and bank statement

Issue 1: Disallowance of non-genuine brokerage expenses
The revenue appealed against the deletion of an addition of Rs.20,90,908 made on account of disallowance of non-genuine brokerage expenses. The AO noted discrepancies in commission payments, including large amounts without supporting sales bills, discrepancies in party details, and related parties involvement. The CIT(A) found the AO's grounds weak and superficial, stating the appellant provided proper explanations and evidence. The Tribunal remitted the issue back to the CIT(A) for further consideration, emphasizing that payment by cheque and TDS alone do not prove genuineness.

Issue 2: Unexplained cash credit and disallowance of interest expenses
The AO added Rs.13,00,000 as unexplained cash credit due to discrepancies in lender details and lack of supporting documents. The CIT(A) disagreed with the AO's reasoning, finding it insufficient. The Tribunal remitted this issue back to the CIT(A) for a fresh review, emphasizing the importance of correct lender details for verification.

Issue 3: Excess shortage in yield
The AO added Rs.37,35,148 for excess shortage in yield, questioning the explanations provided by the assessee regarding job worker control and average sale prices. The CIT(A) found the AO's grounds weak and lacking substance, noting better results in turnover and profits. The Tribunal upheld the CIT(A)'s decision, highlighting the absence of defects in the books of account and the lack of specific deficiencies pointed out by the AO.

Issue 4: Stock difference in books of account and bank statement
An addition of Rs.3,78,690 was made by the AO for stock difference between books of account and bank statement. The CIT(A) deleted this addition, noting the absence of defects in the physical verification-based stock statement. The Tribunal supported the CIT(A)'s decision, emphasizing the reconciliation statement submitted by the assessee and the lack of identified defects by the AO.

In conclusion, the Tribunal partly allowed the revenue's appeal for statistical purposes, remitting certain issues back to the CIT(A) for further consideration while upholding the CIT(A)'s decisions on other grounds.