2017 (2) TMI 283 - AT - Income Tax

Addition to the income of the appellant in respect of the deductions made for the cost of the material supplied by them the deduction towards PF and medical and other expenses of the employees - Held that - The whole addition has been made by the Assessing Officer merely relying upon Form 26AS without making further enquiry. Whereas the ld CIT(A) has looked at the complete aspect of the contract and reconciliation of the assessee with respect to complete financial statements. In view of this we confirm the finding of the ld CIT(A) in deleting the addition - Decided in favour of assessee

Summary

Issues:
- Appeal against deletion of addition without documentary support
- Reconciliation of bank deposits and turnover
- Assessment of deductions made by the principal

Analysis:

1. The appeal was filed by the revenue challenging the deletion of an addition of ?92,63,310 by the ld CIT(A) for the Assessment Year 2009-10. The primary contention was the absence of sufficient documentary support for the amount in question.

2. The case involved discrepancies between the turnover declared by the assessee and the credit entries in the bank accounts, leading to the addition by the Assessing Officer. The assessee explained the difference as transfer entries between accounts and material received from the principal, among other deductions.

3. The ld CIT(A) deleted the addition after a detailed examination of the facts, including a remand report and submissions from both parties. The CIT(A) considered the nature of the appellant's contract work and the deductions made by the principal, U.B. Engineering Limited.

4. The CIT(A) observed that the appellant had provided evidence to support the deductions claimed, including certified copies of bills and vouchers from U.B. Engineering Limited. The CIT(A) found that the deposits in the bank were lesser due to deductions made by the principal, justifying the reconciliation provided by the appellant.

5. The Assessing Officer's reliance on Form 26AS for the addition was criticized, as the CIT(A) delved into a comprehensive analysis of the financial statements and reconciliation provided by the appellant. The CIT(A) concluded that the addition made by the AO was unjustified, leading to the deletion of ?92,63,310.

6. The ld DR failed to identify any flaws in the ld CIT(A)'s order, emphasizing the AO's lack of further inquiry beyond Form 26AS. The ITAT confirmed the CIT(A)'s decision to delete the addition, highlighting the thorough assessment of the complete financial picture by the CIT(A).

7. Consequently, the ITAT dismissed the revenue's appeal, upholding the CIT(A)'s decision to delete the addition of ?92,63,310. The judgment was pronounced on 03/02/2017.