2013 (8) TMI 556 - AT - Income Tax

Addition made on account of bogus purchases to the tune of Rs.17,59,225/- - Assessment order passed under Section 143(3) dated 30th of December, 2008 were that the assessee in individual capacity is a civil contractor. The allegation of the AO was that the assessee had made bogus purchases Held that - The commodity supplied were not subject to sales tax, therefore, the CST/ST number were not mentioned on the bills. Further, it has also been noted that in respect of some of the parties, the entire amount could not be paid during the year under consideration, therefore, the part of the amount remained outstanding which was paid in the subsequent year through account payee cheques Thus, purchases were not bogus Decided against the Revenue. Bad debts written off Held that - After considering the totality of the facts and circumstances of the case as also the case law cited of TRF Ltd. Vs. CIT 2010 (2) TMI 211 - SUPREME COURT we are not inclined to intervene with the factual as well as legal finding of learned CIT(A) on the issue of write off of sundry balance. In the result , no force in this ground of the Revenue. Hence dismiss. Disallowance made u/s 40(a)(ia) of the Act amounting to Rs.1,35,98,554/- without considering the fact that the payment of TDS was made into the government in contravention of the provisions of Section 200(1) of the Act, 1961 Held that - Relying upon the decision in the case of CIT Vs. Nestle India Ltd. 2005 (2) TMI 41 - DELHI High Court , wherein it was held that Where assessee had deducted tax at source from royalty payment in the same financial year and deposited the same in the next financial year within limitation prescribed under Chapter XVII-B r.w.s. 200(1), no disallowance of royalty payment could be made by invoking Section 40(a)(i) - As per the amended provisions, if the payments have made before the due date of filing of the return then the same is allowable, ld. CIT(A) has not examined the each and every detail of payment and the corresponding dates of the deposit of T.D.S. - Remanded back to CIT(A) for the limited purpose to examine the dates of the deposits of the T.D.S. and if the same is as per the law as pronounced in the case law cited above then the same should be allowed Decided against the Revenue.

Issues Involved:
1. Deletion of addition on account of bogus purchases.
2. Deletion of addition on account of sundry balance written off.
3. Deletion of disallowance made out of wages claimed.
4. Deletion of addition on account of unexplained creditors.
5. Deletion of disallowance made under Section 40(a)(ia) of the Income Tax Act.

Issue-wise Detailed Analysis:

1. Deletion of Addition on Account of Bogus Purchases:
The Revenue appealed against the deletion of an addition of Rs. 17,59,225/- made on account of bogus purchases. The Assessing Officer (AO) alleged that the assessee, a civil contractor, made bogus purchases of "Morum" and "sanitary wood" and "firewood" from two parties. The AO added the amount to the income as the assessee failed to substantiate the purchases. The CIT(A) examined the evidence, including party-wise details, bills, and PAN details, and concluded that the purchases were genuine. The Tribunal upheld the CIT(A)'s decision, noting that the commodities were not subject to sales tax and the payments were made through account payee cheques. The Tribunal confirmed the CIT(A)'s view and dismissed the Revenue's ground.

2. Deletion of Addition on Account of Sundry Balance Written Off:
The AO added Rs. 7,63,040/- to the income, questioning the write-off of sundry balances by the assessee. The AO argued that the assessee failed to establish that the debts had become bad. The CIT(A) allowed the claim based on the Supreme Court's decision in TRF Limited, which held that it is sufficient if the bad debt is written off in the accounts. The Tribunal agreed with the CIT(A) and found no force in the Revenue's ground, thus dismissing it.

3. Deletion of Disallowance Made Out of Wages Claimed:
The AO disallowed 15% of the wages expenditure, amounting to Rs. 20,49,400/-, citing the assessee's failure to produce the wage register. The CIT(A) noted that the AO's disallowance was based on surmises without any evidence. The CIT(A) found the assessee's justification for the expenses convincing and directed the deletion of the addition. The Tribunal affirmed the CIT(A)'s view, considering the nature of the expenditure and the increase in turnover, and dismissed the Revenue's ground.

4. Deletion of Addition on Account of Unexplained Creditors:
The AO added Rs. 67,29,633/- due to the assessee's failure to furnish confirmations from 51 creditors. The CIT(A) granted relief after examining the group-wise explanation provided by the assessee. The CIT(A) allowed relief for balances brought forward from the previous year, transactions of purchases, sub-contractors, and parties from whom the amount was received by cheques. The Tribunal upheld the CIT(A)'s decision, noting that the AO had made additions even when details of cheques were provided. The Tribunal affirmed the CIT(A)'s finding and dismissed the Revenue's ground.

5. Deletion of Disallowance Made Under Section 40(a)(ia):
The AO disallowed Rs. 1,35,98,554/- for non-compliance with TDS provisions. The CIT(A) directed the AO to delete the addition, following the decision of the Delhi High Court in CIT Vs. Nestle India Ltd., which held that no disallowance could be made if TDS was paid within the prescribed time. The Tribunal noted that the issue was settled and restored the ground back to the CIT(A) to examine the dates of TDS deposits. The Tribunal allowed this ground for statistical purposes only.

Conclusion:
The Tribunal partly allowed the Revenue's appeal, confirming the CIT(A)'s decisions on the issues of bogus purchases, sundry balance write-off, wages disallowance, and unexplained creditors, while remanding the issue of TDS compliance under Section 40(a)(ia) for further examination.

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