2015 (4) TMI 540 - AT - Income Tax

Disallowance of processing charges paid to Shri Shivcharan Sharma - genuineness of expenditure - CIT(A) deleted the addition - Held that - Assessee's products can not be manufactured without preparation of gum. Assessing Officer has brought nothing on record to suggest that any other person was paid for preparation of gum so as to negate the version of assessee to establish that Shri Shivcharan Sharma was not paid for preparation of gum. Moreover, assessee also filed affidavit of Shri Shivcharan Sharma, wherein it has been deposed that total amount of ₹ 11,73,477/- was paid to him and he has filed corresponding return of income accordingly. The contents of affidavit filed on behalf of Shri Shivcharan Sharma could not be rejected without confronting the contents of deposition to the deponent. Moreover, stand of assessee has been that payments were made by cheques and TDS was deducted thereon and payments were made subsequent to raising of bills by Shri Shivcharan Sharma. Under these facts and circumstances, AO was not justified in negating the claim of assessee. Once a certain claim has been accepted adverse to the interest of assessee, same can be retracted by way of deposition in affidavit and Assessing Officer ought to have made further inquiries in respect of same. Without making further inquiries, contents of affidavit should not be rejected. In case before us, once statement was retracted by Shri Shivcharan Sharma by filing an affidavit, burden was upon revenue to establish that statement given earlier was correct. The evidence has been submitted by way of bills for purchase of gum, process of preparation of gum, bills for preparation of gum paid to Shri Shivcharan Sharma. Payment being made by cheque and making deduction thereon and finally, filing the return of income by Shri Shivcharan Sharma. All these evidences lead to conclude that above expenses were debited by assessee. Accordingly, CIT(A) was justified in deleting the addition - Decided in favour of assessee. Disallowance of production incentives - CIT(A) deleted the addition - Held that - It is evident from the assessment order that only one of the workers i.e. Jat Rampratap Chokaram has stated that he has not received production incentives, while other two have stated regarding themselves that they have not received more than stated above. So, it cannot be presumed that this one worker Jat Rampratap Chokaram was speaking on behalf of all other workers. There is no denial of the Fact that production incentives have been allowed in earlier year even when the papers were scrutinized as is evident from assessment order for Assessment Year 2003- 04. In view of above facts, it is a case where production incentives in case of above three workers who have denied to receive production incentives was liable to be disallowed and not for other workers. Assessee himself has staled that production incentives were not paid to three of them and also not claimed. Accordingly, Assessing Officer was not justified in making addition on account of rejecting production incentives to all and same was rightly directed to be deleted by CIT(A). This reasoned factual finding of CIT(A) needs no interference from our side.- Decided in favour of assessee.

Summary

Issues Involved:
1. Disallowance of processing charges.
2. Disallowance of production incentives.

Detailed Analysis:

1. Disallowance of Processing Charges:

In ITA No. 2144/Ahd/2008 for A.Y. 2004-05, the Revenue challenged the deletion of the addition of Rs. 5,73,477/- out of the processing charges claimed Rs. 11,73,477/- paid to Shri Shivcharan Sharma. The Assessing Officer (AO) disallowed the amount based on a statement from Shri Shivcharan Sharma, who claimed he received only Rs. 6.5 lakhs. The assessee argued that the total payment included charges for box packing, loading, unloading, and gum preparation, supported by bills and an affidavit from Shri Shivcharan Sharma. The CIT(A) deleted the addition, finding the assessee's evidence credible and noting that the AO did not sufficiently counter the affidavit or the evidence provided. The Tribunal upheld the CIT(A)'s decision, emphasizing that the AO failed to make further inquiries and that the affidavit and supporting documents substantiated the assessee's claim.

2. Disallowance of Production Incentives:

The AO disallowed Rs. 13,04,998/- claimed as production incentives based on statements from three workers who denied receiving such incentives. The CIT(A) granted relief to the assessee, noting that affidavits from other workers who claimed to have received incentives were not sufficiently countered by the AO. The Tribunal upheld the CIT(A)'s decision, stating that the AO's reliance on statements from only three workers was insufficient to disallow the entire claim. The Tribunal emphasized the need for further inquiries into the affidavits and noted that production incentives had been allowed in previous years.

Subsequent Appeals:

In ITA Nos. 678/Ahd/2011, 679/Ahd/2011, 681/Ahd/2011, and 682/Ahd/2011, the assessee appealed against the disallowance of processing charges and production incentives for different assessment years. The Tribunal consistently followed its reasoning from the A.Y. 2004-05 decision, directing the deletion of disallowances for processing charges and production incentives in all subsequent years. The Tribunal found that the facts and circumstances were similar across the years and upheld the assessee's claims, emphasizing the lack of sufficient counter-evidence from the AO.

Conclusion:

The Tribunal dismissed the Revenue's appeal and allowed the assessee's appeals for all years, directing the deletion of disallowances for both processing charges and production incentives. The Tribunal's decisions were based on the credibility of the assessee's evidence, the lack of sufficient counter-evidence from the AO, and the consistency of the assessee's claims with previous years' allowances. The judgments were pronounced in the open court on March 30, 2015.