2016 (4) TMI 558 - AT - Income Tax

Disallowance of excavation charges - Held that - It is clear that only 30% of the diesel expenses of ₹ 27,00,090/- are attributable to the excavation activity and to that extent, the assessee would get relief. However, the CIT(A) has deleted the entire addition without considering the fact that addition of about ₹ 8 lakhs would be sustained, even if a proportionate 30% of diesel expenses is attributable towards excavation activity. Accordingly, we modify the order of the CIT(A) qua this issue and direct the AO to re-work the addition by allocating the diesel expenses between excavation activity and transportation activity in the ratio of 30 70.- Decided partly in favour of assessee Unexplained cash credit u/s 68 - CIT(A) deleted the addition - Held that - It is clear that the CIT(A) examined and verified the books of account and found that this amount was offered to tax on accrual basis in the earlier year. Even the said amount was shown as receivable from M/s Svs & Dvs (HUF), Goa in the balance sheet as on 1/4/2008 cannot be taxed because it was already offered to tax on accrual basis in the earlier year. Accordingly, we do not find any error or illegality in the impugned order of the CIT(A) qua this issue. - Decided in favour of assessee Disallowance made u/s 40(a)(ia)- Held that - TDS which was deducted by the assessee from the transport payment was deposited before the due date as per section 139(1). The CIT(A) has also placed reliance on the judgment of the Hon ble Calcutta High Court in the case of CIT vs. Virgin Creations (2011 (11) TMI 348 - CALCUTTA HIGH COURT ) as well as the decision of the coordinate bench of this Tribunal in the case of ACIT vs. M.K.Gurumurthy (2012 (6) TMI 293 - ITAT, Bangalore ). The revenue has not disputed the fact that TDS deducted by the assessee on transportation charges was paid along with interest within due date on filing of return of income u/s 139(1).- Decided in favour of assessee Addition u/s 68 - CIT(A) deleted the addition by nothing the fact that the assessee produced confirmation from the party - Held that - It is clear from the finding of the CIT(A) that the alleged confirmation was neither examined nor verified by the AO nor by the CIT(A). Once a document was available on record and it was not examined by the AO, it was incumbent upon the CIT(A) to get the said document verified from the AO by issuing remand order or examine by himself in the appellate proceedings. In the absence of examination and verification of the alleged certificate, we are not able to concur with the view of the CIT(A) on this issue. Accordingly, we set aside this issue to the record of the AO for proper verification of the confirmation from the creditor and then decide the same as per law.- Decided in favour of revenue for statistical purposes.

Summary

Issues Involved:
1. Disallowance of excavation charges.
2. Addition under Section 68 for unexplained cash credit.
3. Disallowance under Section 40(a)(ia) for non-deduction of TDS on transportation charges.
4. Addition under Section 68 for sundry creditors.

Issue-wise Detailed Analysis:

1. Disallowance of Excavation Charges:
The Assessing Officer (AO) found that the transport receipts of the assessee included excavation charges of ?36,70,787. The AO attributed the entire diesel expenses of ?27,00,090 to excavation activities, resulting in a disallowance of ?31,80,844. The assessee contended that the diesel expenses should be apportioned between excavation and hire activities in the ratio of 30:70. The CIT(A) accepted this bifurcation and deleted the addition. Upon review, it was decided that only 30% of the diesel expenses should be attributed to excavation activities, leading to a partial allowance of the revenue's appeal. The AO was directed to rework the addition accordingly.

2. Addition under Section 68 for Unexplained Cash Credit:
The AO added ?7,50,202 as unexplained cash credit from M/s SVS & DVS (HUF), Goa, due to lack of satisfactory explanation. The assessee argued that this amount represented receivables from the said entity against hire charges, which were shown on an accrual basis in the previous year and offered to tax. The CIT(A) verified the books of account and found the explanation satisfactory, leading to the deletion of the addition. The tribunal upheld the CIT(A)'s decision, confirming that the amount was already taxed on an accrual basis in the earlier year.

3. Disallowance under Section 40(a)(ia) for Non-Deduction of TDS on Transportation Charges:
The AO disallowed ?1,03,26,985 under Section 40(a)(ia) due to the belated payment of TDS. The assessee had paid the TDS along with interest before the due date for filing the return under Section 139(1). The CIT(A) allowed the claim based on judicial precedents, including the Hon'ble Calcutta High Court's decision in CIT vs. Virgin Creations, which held that the amendment allowing for deduction of TDS deposited before the due date of filing the return is retrospective. The tribunal upheld the CIT(A)'s decision, confirming that the TDS was deposited within the due date.

4. Addition under Section 68 for Sundry Creditors:
The AO noted an opening balance of ?60,06,599 from V.M. Salgaokar Sales International, for which no confirmation was provided. The CIT(A) deleted the addition for ?50 lakhs based on a confirmation letter from the creditor but sustained the addition for the remaining ?10,06,598. The tribunal found that neither the AO nor the CIT(A) had verified the confirmation letter. Therefore, the issue was remanded to the AO for proper verification of the confirmation from the creditor and subsequent decision as per law.

Conclusion:
The appeal of the revenue was partly allowed. The tribunal directed the AO to rework the addition related to excavation charges and verify the confirmation for sundry creditors. The decisions of the CIT(A) regarding the unexplained cash credit and TDS disallowance were upheld. The order was pronounced in the open court on April 12, 2016.