2013 (1) TMI 1044 - AT - Income Tax

Summary

Issues Involved:
1. Disallowance of payment to subcontractors.
2. Disallowance u/s 40(a)(ia) for non-deposit of TDS.
3. Disallowance of manufacturing and administrative expenses.
4. Disallowance of transportation charges u/s 40(a)(ia).

Summary:

Issue 1: Disallowance of Payment to Subcontractors
The assessee contested the disallowance of Rs.86,643/- made by the AO, alleging that the creditors were not proved. The AO had issued notices and conducted investigations u/s 133(6) to verify the genuineness of subcontractors. The CIT(A) noted that for one party, Mr. Jethwa, records were claimed to be destroyed in a flood, and for another, M/s Pratik, the party denied transactions with the assessee. The CIT(A) upheld the disallowance of Rs.75,350/- and Rs.11,293/- as the assessee failed to establish the correctness of these payments. The Tribunal confirmed the CIT(A)'s findings and dismissed this ground.

Issue 2: Disallowance u/s 40(a)(ia) for Non-Deposit of TDS
The AO disallowed Rs.86,48,415/- u/s 40(a)(ia) for non-deposit of TDS within the prescribed time. The CIT(A) upheld this disallowance, noting that TDS was not deposited before the due date. The Tribunal, however, reversed this decision, noting that the TDS was paid on 24/05/2005, before the due date of filing the return, and allowed the assessee's appeal on this ground.

Issue 3: Disallowance of Manufacturing and Administrative Expenses
The AO disallowed 10% of manufacturing and administrative expenses due to lack of supporting bills/vouchers. The CIT(A) restricted the disallowance to Rs.5,33,909/- for which no supporting evidence was provided. The Tribunal affirmed the CIT(A)'s findings, noting that the assessee failed to substantiate the expenditure even at the second appellate stage.

Issue 4: Disallowance of Transportation Charges u/s 40(a)(ia)
The AO disallowed Rs.11,36,949/- for transportation charges due to non-deposit of TDS within the due date. The CIT(A) upheld this disallowance. The Tribunal, however, noted that the TDS was deposited on 24/05/2005, before the due date of filing the return, and directed to delete the addition, allowing the assessee's appeal on this ground.

Revenue's Appeal:
The Revenue contested the deletion of Rs.2,54,03,342/- out of the total disallowance of Rs.3,41,38,500/- for unexplained payments to subcontractors. The Tribunal dismissed the Revenue's appeal, noting that the genuineness of payments was verified, and TDS was deducted and deposited as required.

Conclusion:
The Tribunal partly allowed the assessee's appeal and dismissed the Revenue's appeal, providing relief to the assessee on several grounds, particularly concerning the timely deposit of TDS.