2016 (10) TMI 495 - AT - Income Tax

Unaccounted purchases - addition made by Assessing Officer from M/s Konked International which was not verified u/s. 133(6) - AO has made the addition on the ground that inspector could not trace the address of the party M/s KI and notice issued u/s. 133(6) of the Act was returned un-served - Held that - the payment was made by assessee through account payee cheque and that party was duly registered with Sales Tax Departments of Govt. of West Bengal. There was also no defect in the books of account of assessee. Therefore, we do not find any reason to interfere in the order of Ld. CIT(A) in granting relief to assessee Addition on account of outstanding liability in respect of M/s Bhart Somani - Held that - AO has made the addition on account of non-existence of the party however payment was made through account payee cheque, so the identity of the party cannot be doubted. Therefore, we do not find any reason to interfere in the order of Ld. CIT(A) and we also rely in the judgment of Hon ble jurisdictional High Court in the case of Diagnostics vs. CIT & ANR (2011 (3) TMI 15 - CALCUTTA HIGH COURT ). TDS u/s 194C - Non-deduction of TDS on transport charges - Held that - At the outset we find that the provisions of section 194C of the Act were made applicable to the individual assessee w.e.f. 1.6.2007 and it is admitted position that the matter relates to the assessment year 2006-07. Therefore in our considered view the assessee in the instant case was not liable to deduct TDS and accordingly there is no default for non-deduction of TDS. Bogus purchases - Held that - We find that AO has made the addition on the ground that there was bogus purchase in the books of the assessee. However the ld. CIT(A) deleted the same by observing that the all the transactions are genuine. From the facts we find that the lower authorities have not brought anything on record about the payment claimed by the assessee to the party. The payment was made through account payee cheque. The lower authorities have not confronted the reply received from the party under section 133(6) of the Act to the assessee. There was no defect in the bills of the purchases of the party. The ld. CIT(A) has given clear finding that the payment to the P. Beriwal has been made as authorized by the party M/s SE. The ld. DR has not brought anything on record contrary to the findings of ld. CIT(A). Hence we do not find any reasons to interfere in the order of ld. CIT(A). Hence this ground of revenue s appeal is dismissed. Addition on account of excess liability shown in the respect of ESS Refilling Station - AO has made the addition on account of the difference in the balance shown by the assessee and the party - Held that - The excess balance shown by the assessee in its books of accounts is balance sheet item and it has corresponding effect in the form of purchases which was shown in the profit & loss account of the assessee. In the instant case the AO has not brought any defect in the amount of purchases shown by the assessee in relation to the excess balance of the party. Therefore in our considered view the AO should have disallowed the amount of the purchases corresponding to the excess balance shown by the assessee. In the instant case before us the AO has admitted all the purchases as genuine in relation to the excess balance shown by the assessee for ₹ 90752.00. The AO has not taken into account the opening balance as shown by the assessee. All the transactions took place during the year are matching with the confirmation of the party as received in response to the notice issued under section 133(6) of the Act. The learned DR has not brought anything on record contrary to the finding of ld. CIT(A). We also find that the confirmation received by the AO in response to notice under section 133(6) of the Act have not been confronted to the assessee. In view of above we find no reason to interfere in the order of learned CIT(A). Hence this ground of appeal of the Revenue is dismissed. Short deduction of TDS under section 194-I viz a viz 40(a)(ia) - whether the expenses claimed by the assessee are allowable deduction though the TDS on such expenses has been deducted at the lower rate? - Held that -From the provisions of section 40(a)(ia) of the Act we find that it requires deduction of tax and deposit of tax in Government account. The provisions of section are silent to treat the assessee as defaulted in case of short deduction of TDS. Therefore, in our considered view of the action of AO for making the disallowance deserves to be deleted Decided in favour of assessee

Summary

Issues Involved:
1. Deletion of addition on account of unexplained purchase from M/s Konked International.
2. Deletion of addition on account of outstanding liability in relation to M/s Bharat Somani.
3. Deletion of addition on account of non-deduction of TDS on transport charges under section 40(a)(ia) of the Income Tax Act, 1961.
4. Deletion of addition on account of bogus purchases from M/s Sunidhi Enterprises.
5. Deletion of addition on account of excess liability shown in respect of ESS Refilling Station.
6. Deletion of addition on account of short deduction of TDS under section 194-I.

Issue-wise Detailed Analysis:

1. Unexplained Purchase from M/s Konked International:
The Revenue challenged the deletion of an addition of ?2,35,500/- made by the Assessing Officer (AO) due to unverified purchases from M/s Konked International. The AO had added this amount to the total income of the assessee as the notice issued under section 133(6) of the Income Tax Act was returned unserved. The Commissioner of Income Tax (Appeals) [CIT(A)] deleted the addition, citing that M/s Konked International was a registered dealer and payments were made through account payee cheques. The Tribunal upheld the CIT(A)'s decision, relying on the judgment in Diagnostics vs. CIT & ANR, where transactions made through account payee cheques were considered genuine despite the non-cooperation of the third party.

2. Outstanding Liability in Relation to M/s Bharat Somani:
The Revenue contested the deletion of an addition of ?4 lakhs on account of an outstanding liability to M/s Bharat Somani. The AO had added this amount as the notice issued under section 133(6) was returned unserved. The CIT(A) deleted the addition, observing that the payment was made through account payee cheques and the AO had made conflicting observations regarding the disallowance under section 40(a)(ia). The Tribunal upheld the CIT(A)'s decision, again relying on the precedent set in Diagnostics vs. CIT & ANR.

3. Non-deduction of TDS on Transport Charges:
The Revenue appealed against the deletion of an addition of ?25,32,484/- for non-deduction of TDS on transport charges. The AO had disallowed this amount, arguing that transport charges should have been included in the cost of materials. The CIT(A) deleted the addition, noting that the transport charges were part of the cost of raw materials and thus did not attract TDS under section 194C. The Tribunal upheld this view, stating that the assessee was not liable to deduct TDS as the provisions of section 194C were made applicable to individuals only from 1.6.2007, whereas the assessment year in question was 2006-07.

4. Bogus Purchases from M/s Sunidhi Enterprises:
The Revenue disputed the deletion of an addition of ?14,89,888/- for bogus purchases from M/s Sunidhi Enterprises. The AO had added this amount based on discrepancies in the payment records. The CIT(A) deleted the addition, stating that the payments were made through account payee cheques and the transactions were genuine. The Tribunal upheld the CIT(A)'s decision, noting that the AO had not confronted the assessee with the reply received from the party under section 133(6) and there was no defect in the purchase bills.

5. Excess Liability Shown in Respect of ESS Refilling Station:
The Revenue challenged the deletion of an addition of ?90,752/- for excess liability shown in respect of ESS Refilling Station. The AO had added this amount based on discrepancies in the balance confirmations. The CIT(A) deleted the addition, explaining that the difference was due to the opening balance not being included in the confirmation received from the party. The Tribunal upheld the CIT(A)'s decision, noting that the AO had not considered the opening balance and had not confronted the assessee with the confirmation received.

6. Short Deduction of TDS under Section 194-I:
The Revenue appealed against the deletion of an addition of ?17,30,671/- for short deduction of TDS on machine hire charges. The AO had disallowed this amount, arguing that TDS should have been deducted at 10% under section 194-I instead of 2%. The CIT(A) deleted the addition, stating that the provisions of section 40(a)(ia) do not apply to short deduction of TDS. The Tribunal upheld the CIT(A)'s decision, relying on the judgment in CIT vs. S.K. Tekriwal, which held that shortfall in TDS deduction does not attract disallowance under section 40(a)(ia).

Conclusion:
The Tribunal dismissed both appeals of the Revenue, upholding the deletions made by the CIT(A) on all grounds. The Tribunal's decisions were based on established legal precedents and the factual matrix of each case.