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2015 (11) TMI 1887 - AT - Income TaxAddition on account of trade creditors - Addition u/s 68 - HELD THAT - All the parties have confirmed these purchase transactions but the AO wanted their creditworthiness. These are simply trade creditors and all of them supplied machinery to the assessee. Supply of machinery is not in doubt. These are not unsecured loans. Once this is the position, the AO cannot invoke the provisions of section 68 - All the parties have confirmed having made sales to assessee in response to notice u/s. 133(6) - In the case of trade creditors, at the best, first of all, the AO has to doubt the purchases and sales and without going into these facts, the AO applied the provisions of section 68 of the Act in the absence of creditworthiness of these parties and made addition. No reason to sustain the same, as the very basis is not doubted by the AO, and assessee has discharged its onus by filing all the details before the AO. Accordingly, we confirm the order of CIT(A) and this issue of revenue s appeal is dismissed. Addition of unsecured loans - HELD THAT - As both the creditors have confirmed the transaction and also filed details of their assessment particulars and these credits are given out of their bank account but the AO did not carry out any exercise whatsoever to verify these unsecured loans as is clearly evidenced from the assessment order. Even CIT(A) s finding is that AO has not conducted any further enquiry despite the fact that assessee has discharged its onus by filling the details. Once this is the position, we have no hesitation in confirming the order of CIT(A) and this issue of revenue s appeal is dismissed. Addition on account of purchase of spare parts - HELD THAT - From the order of CIT(A), we find that complete details were available before him and on the basis of the same he has allowed the claim of the assessee. Even the sales arising out of the same purchases have not been doubted by the AO. Here in the present case only exception is M/s. Vishal Enterprises wherein it has not verified the veracity of the transaction. Hence, qua this only, we set aside the matter to the file of the AO so that assessee can prove the veracity of the transaction and for the balance purchases, we confirm the order of CIT(A) and this issue of revenue s appeal is partly allowed. Disproportionate payment of expenses made to persons specified u/s. 40A(2)(b) - HELD THAT - AO has just made ad-hoc disallowance without going into the expenses or the reasonableness of the payment as mentioned in the provision of section 40A(2)(b) - Assessee has produced complete supporting bills and vouchers to prove the genuineness of the claim of expenditure which is not doubted but he has made ad hoc disallowance for the reason that these payments are made to the persons specified u/s. 40A(2)(b) of the Act for invocation of provision of section 40A(2)(b) of the Act. First of all, there should be a finding recorded by the AO that the expenses are unreasonable and how? But from the order of the AO, it is not coming out that what is the basis for disallowance. Just simply ad hoc disallowance cannot be made. Accordingly, we confirm the order of CIT(A) deleting the addition. This issue of revenue s appeal is dismissed. TDS u/s 194C - disallowance on account of truck hire charges for non-deduction of TDS - HELD THAT - From the decision of Vipin Mehta 2011 (5) TMI 503 - ITAT MUMBAI and the fact in this case is that the assessee has received Form 15- I from the respective payees to whom truck hire charges were paid, the AO has no authority to make any disallowance for non deduction of TDS u/s 40(a)(ia) of the Act. Accordingly this issue of revenue s appeal is dismissed.
Issues Involved:
1. Deletion of addition on account of trade creditors. 2. Deletion of addition on account of unsecured loans. 3. Deletion of addition on account of purchase of spare parts. 4. Deletion of addition on account of payments to related persons under Section 40A(2)(b). 5. Deletion of addition on account of truck hire charges for non-deduction of TDS under Section 40(a)(ia). Issue-wise Detailed Analysis: 1. Deletion of Addition on Account of Trade Creditors: The Revenue challenged the CIT(A)'s decision to delete an addition of Rs.1,54,41,614/- made by the AO on account of trade creditors. The AO had added the amount under Section 68 of the Income-tax Act, 1961, citing the inability of the creditors to prove their creditworthiness despite confirming the transactions. The Tribunal noted that the assessee had provided complete details, including purchase bills, payments by cheques, and confirmations from the creditors. The Tribunal emphasized that these were trade creditors and not unsecured loans, and the AO's application of Section 68 was inappropriate. The Tribunal upheld the CIT(A)'s order, dismissing the Revenue's appeal on this issue. 2. Deletion of Addition on Account of Unsecured Loans: The Revenue contested the CIT(A)'s deletion of an addition of Rs.7,50,000/- related to unsecured loans. The AO had added the amount due to the assessee's failure to prove the creditworthiness of the lenders, despite confirmations from the creditors. The Tribunal found that the creditors had confirmed the transactions and provided their assessment particulars. The AO had not conducted any further inquiries to verify the loans. The Tribunal upheld the CIT(A)'s decision, stating that the assessee had discharged its onus, and dismissed the Revenue's appeal on this issue. 3. Deletion of Addition on Account of Purchase of Spare Parts: The Revenue appealed against the CIT(A)'s deletion of an addition of Rs.86,41,727/- made by the AO for purchases from three parties. The AO had added the amount due to a lack of evidence of the creditworthiness of the suppliers. The CIT(A) noted that the assessee had provided circumstantial evidence, including sales tax assessments and payments by account payee cheques. The Tribunal found that the AO had not conducted further inquiries despite having the necessary details. The Tribunal upheld the CIT(A)'s decision for most of the purchases but remanded the issue related to M/s. Vishal Enterprises to the AO for further verification. The appeal was partly allowed on this issue. 4. Deletion of Addition on Account of Payments to Related Persons under Section 40A(2)(b): The Revenue challenged the CIT(A)'s deletion of an ad-hoc disallowance of Rs.29,50,000/- made by the AO under Section 40A(2)(b) for payments to related persons. The AO had made the disallowance without examining the reasonableness of the expenses. The Tribunal noted that the AO had not provided a basis for the disallowance and had not doubted the genuineness of the expenses. The Tribunal upheld the CIT(A)'s decision, stating that ad-hoc disallowances cannot be made without proper findings. The Revenue's appeal on this issue was dismissed. 5. Deletion of Addition on Account of Truck Hire Charges for Non-Deduction of TDS under Section 40(a)(ia): The Revenue contested the CIT(A)'s deletion of an addition of Rs.31,96,956/- made by the AO for non-deduction of TDS on truck hire charges. The assessee had received Form 15-I from the recipients, exempting them from TDS. The AO disallowed the expense as the forms were not submitted to the CIT concerned. The Tribunal referred to a decision by the Mumbai Tribunal, stating that once Form 15-I is received, the payer is not obliged to deduct TDS. The Tribunal upheld the CIT(A)'s decision, dismissing the Revenue's appeal on this issue. Conclusion: The Tribunal's decision addressed each issue raised by the Revenue, providing detailed reasoning for upholding or partially allowing the CIT(A)'s orders. The Tribunal emphasized the importance of proper inquiries and evidence in making additions and disallowances under the Income-tax Act. The appeal was partly allowed concerning the verification of one party's transaction and dismissed on other grounds.
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