2014 (3) TMI 690 - AT - Income Tax

Validity of admission of additional evidence under Rule 46A Typographical error - Held that - The typographical mistake is inconsequential because it has not resulted into excess or inflated claim of purchase - the assessee has produced the reconciliation before the CIT(A) showing the discrepancy in the figure of only one party in question and all other purchases in respect of remaining parties were taken at correct figure and even this incorrect figure written in the details due to inadvertent typographical mistake have not resulted in any excess or inflated claim of purchase as debited in the P&L Account - when it is apparent by examining the detail already placed on record that it was only a typographical mistake and has not resulted in the excess claim and in the wisdom of CIT(A) it was not required to be investigated by the AO there is no illegality on the part of the CIT(A) - department has not pointed out as to why the reconciliation furnished by the assessee should not be accepted and the claim of purchases debited to the P&L Account is not as per the actual purchases and correct figure thus, there is no reason to interefere with the order of CIT(A). Deletion of labour charges Held that - The AO has not examined the issue from the angle that the labour charges claimed by the assessee are bogus but the adhoc disallowance was made on the ground that some of the vouchers are self made - in the nature of civil construction work, hiring of daily labourers on daily wages is inevitable thus, the adhoc disallowance made by the AO is without any finding of bogus claim is not justified thus, there is no error or illegality in the order of CIT(A) in deleting the addition Decided against Revenue. Penalty u/s 271(1)(c) of the Act Held that - In the quantum appeal on the issue of addition on account of bogus purchases the penalty would not survive thus, the order of CIT(A) is upheld deleting the penalty Decided against Revenue.

Summary

Issues:
1. Addition made on account of bogus purchases
2. Addition made on account of labour charges
3. Deletion of penalty on account of bogus purchases

Issue 1: Addition made on account of bogus purchases
The Assessing Officer (AO) noted an amount debited to the P&L account for purchases and made an addition of Rs. 25,72,999 due to discrepancies in the details provided by the assessee. The CIT(A) deleted this addition after the assessee explained a typographical error in the details. The Revenue contended that the CIT(A) admitted additional evidence without giving the AO an opportunity to respond, citing Rule 46A violations. The assessee argued that the error did not affect the total purchase amount debited to the P&L account. The ITAT found the typographical error inconsequential as it did not result in an inflated claim. The CIT(A) had examined the details and found no excess claim, hence upholding the deletion of the addition.

Issue 2: Addition made on account of labour charges
The AO disallowed Rs. 1,00,000 out of Rs. 7.33 crores debited towards labour charges, citing self-made vouchers. The CIT(A) overturned this disallowance after noting that the nature of civil construction work necessitates daily wage payments to laborers. The ITAT upheld the CIT(A)'s decision, stating that the adhoc disallowance lacked evidence of bogus claims and was unjustified.

Issue 3: Deletion of penalty on account of bogus purchases
The revenue challenged the deletion of penalty imposed by the AO for the addition on bogus purchases. The ITAT, considering the findings in the quantum appeal regarding the addition on bogus purchases, upheld the deletion of the penalty by the CIT(A) as the penalty would not survive based on the quantum appeal decision.

In conclusion, the ITAT dismissed both appeals of the revenue, upholding the decisions of the CIT(A) regarding the deletion of additions made on account of bogus purchases and labour charges, as well as the deletion of the penalty on account of bogus purchases.