2018 (12) TMI 1670 - AT - Income Tax

Addition on account of understated production/suppressed production - AO alleged that wide gap in the claim of burning loss, remained un-explained - HELD THAT - Assessee had supplied all the relevant details to the lower authorities such as register which are subject to regular check and subject to audit, Raw material Register, production register and audited books of account with tax audit report and there was specific no defect was found by the A.O. Therefore, in our considered opinion, ld. CIT(A) has rightly deleted the addition. Therefore, we do not want to interfere in the order passed by the ld. CIT(A). Disallowance of interest expenses u/s.36(l)(iii) - HELD THAT - As decided in BHOGILAL RAMJIBHAI ATARA 2014 (2) TMI 794 - GUJARAT HIGH COURT AO undertook exercise to verify records of so called creditors and found that creditors had no dealing with assessee - Assessing Officer further having found that debts were outstanding since several years applied section 41(1) and added above amount in income of assessee as deemed income - There was nothing on record to suggest that there was remission or cessation of liability that too during previous year relevant to assessment year Addition in respect of the old, brought forward liability - HELD THAT - Addition originally made by the A.O. in respect of the old, brought forward liability of this amount towards M/s. Om Steel, which was reflected in the books under the head Advance from custormers . The finding of judgment in the case of CIT vs. Bhogilal Ramjibhai Atara 2014 (2) TMI 794 - GUJARAT HIGH COURT will apply to this ground as well. Therefore, we allow this objection of the assessee. Unexplained expenditure for setting up shed - HELD THAT - For constructing a shed, assessee did not included the payment of labour charges and assessee did not submitted any evidence in support of its contention. Therefore, lower authorities rightly made the addition and same does not require any kind of any interference at our end and same is dismissed. Non deduction of TDS u/s. 194J - professional fees paid to Shri D.G. Sompura - HELD THAT - A.O. confronted the assessee about the issue of non deduction of TDS u/s. 194J of the Act and Authorized Representative agreed for such default as well as addition. So in these circumstances, ld. CIT(A) rightly confirmed the addition as same was agreed by the assessee before the lower authorities.

Summary

Issues:
1. Addition on account of understated/suppressed production
2. Deletion of interest expenses disallowance
3. Addition related to old liability towards M/s Om Steel
4. Addition for estimated expenditure on shed construction
5. Disallowance of depreciation on revenue expenditure
6. Addition for scrap value of replaced wire winding
7. Disallowance of professional fees for non-deduction of TDS

1. Addition on account of understated/suppressed production:
During the assessment, the Assessing Officer (A.O.) added a substantial amount on the grounds of understated production/suppressed production. The appellant contended that all relevant details were provided, including registers subject to audit. The Commissioner of Income Tax (Appeals) [CIT(A)] granted relief to the assessee, noting the adequacy of the information supplied. The Tribunal upheld the CIT(A)'s decision, stating that the A.O. did not identify any specific defects in the information provided, leading to the deletion of the addition.

2. Deletion of interest expenses disallowance:
The A.O. disallowed interest expenses claimed under section 36(1)(iii) of the Act, citing an advance granted without interest charges. The assessee argued that the advance was a carry-forward balance, not a new advance during the year. The Tribunal referred to a relevant High Court judgment and upheld the CIT(A)'s decision, stating the facts were akin to the cited case. Consequently, the appeal by the Revenue was dismissed.

3. Addition related to old liability towards M/s Om Steel:
The Tribunal dismissed the addition made by the A.O. concerning an old liability towards M/s Om Steel. Citing a previous judgment, the Tribunal allowed the objection raised by the assessee, leading to the dismissal of this ground.

4. Addition for estimated expenditure on shed construction:
The Tribunal upheld the addition made by the lower authorities for unexplained expenditure on setting up a shed. The assessee failed to provide evidence supporting the expenditure, resulting in the dismissal of this ground.

5. Disallowance of depreciation on revenue expenditure:
The Tribunal dismissed the claim related to the disallowance of depreciation on revenue expenditure, as the CIT(A) had already allowed the assessee's ground on this matter.

6. Addition for scrap value of replaced wire winding:
The Tribunal noted that the CIT(A) had already granted relief to the assessee regarding the addition made for the scrap value of replaced wire winding, leading to no further interference.

7. Disallowance of professional fees for non-deduction of TDS:
The disallowance of professional fees for non-deduction of TDS was confirmed by the Tribunal, as the assessee had agreed to the default before the lower authorities. The CIT(A)'s decision to uphold this addition was deemed appropriate, resulting in the partial allowance of the Cross Objection filed by the Assessee.

The Tribunal's detailed analysis and application of relevant legal precedents led to the dismissal of the Revenue's appeal and partial allowance of the Assessee's Cross Objection, resolving various contentious issues raised during the assessment and appeal proceedings.