2018 (5) TMI 53 - AT - Income Tax

Unexplained cash credit u/s. 68 addition - Held that - Assessee could not controvert the findings of the Commissioner of Income Tax (Appeals). The only submission by ld.AR is that the difference is on account of discounts received from suppliers. Merely on bald assertions the addition cannot be deleted. Accordingly ground No. 1 raised in appeal by assessee is dismissed. Additional ground to reduce the amount of discount offered by assessee in subsequent assessment years from taxable income - Held that - The addition of the discount in the assessment year under appeal would result in double taxation of the same amount. We find merit in the submissions made by ld. AR of the assessee. However this ground requires verification of facts. Accordingly we deem it appropriate to remit the additional ground raised by assessee in appeal to the file of Assessing Officer for verification of the facts. If the assessee has offered discounts in the subsequent assessment years the same may be reduced from taxable income of the respective assessment years in accordance with law. Accordingly additional ground raised by assessee is allowed for statistical purposes. Disallowance u/s. 40(a)(ia) - assessee has furnished Form-15G belatedly - Held that - We find that Pune Bench of Tribunal in the case of Smt. Anandidevi Gairola Vs. Commissioner of Income Tax (Appeals) (2013 (9) TMI 1214 - ITAT PUNE) has allowed the claim of assessee where Form-15G were furnished beyond the time specified under the Act. Thus disallowance is directed to be deleted. Disallowance u/s. 40A(2)(b) - Held that - The assessee is conducting its business from various places. The assessee has a shop near Kolhapur Municipal Corporation and three go-downs at Market Yard. The above said persons are helping the assessee in managing affairs of business efficiently. In so far as reasonability of expenditure is concerned assessee stated at Bar that all the three ladies are graduate. Taking into consideration entirety of facts we are of considered view that salary of 83, 200/- p.a. for each of the ladies appears to be reasonable. AO before making disallowance of 40% has not made any enquiries to find out the salary paid for conducting similar work. The Assessing Officer made ad-hoc disallowance and the CIT (Appeals) upheld the same in a mechanical manner. Disallowance u/s.40A(2)(b) is not warranted. Ad-hoc disallowance - Held that - The assessee has claimed total expenditure of 1, 05, 552/- on account of vehicle maintenance repairs etc. AO made ad-hoc disallowance of 15, 000/- as the expenses were supported by self made vouchers and on the premise that there is an element of personal expenditure. The disallowance of lump sum amount of 15, 000/- in the facts of the case appears to be reasonable and justified. We are therefore not inclined to interfere with the findings of AO/ CIT (Appeals). - Decided against assessee.

Summary

Issues Involved:
1. Addition on account of Unexplained Cash Credit under Section 68 of the Income Tax Act, 1961.
2. Disallowance under Section 40(a)(ia) of the Income Tax Act, 1961.
3. Disallowance of Salary Paid under Section 40A(2)(b) of the Income Tax Act, 1961.
4. Ad-hoc Disallowance of Various Expenditures.

Detailed Analysis:

1. Addition on account of Unexplained Cash Credit under Section 68:
The assessee contested the addition of ?41,25,640/- made by the Assessing Officer (AO) due to unexplained cash credit. The AO found discrepancies between the party’s accounts and the assessee’s books, attributing the difference to discounts given by suppliers. The assessee argued that these discounts were accounted for in subsequent years upon confirmation from suppliers. The Tribunal upheld the Commissioner of Income Tax (Appeals) [CIT(A)]'s decision, finding no credible evidence from the assessee to support the claim that these were discounts. The Tribunal dismissed the assessee's primary ground but allowed an alternate plea for verification by the AO to ensure no double taxation occurs, directing that if discounts were included in subsequent years, they should be adjusted accordingly.

2. Disallowance under Section 40(a)(ia):
The assessee challenged the disallowance of ?4,89,436/- for non-deduction of tax at source on interest payments. The disallowance was based on the delayed submission of Form-15G. The Tribunal referred to precedents where similar disallowances were deleted despite late submissions, emphasizing that the delay in filing Form-15G should not result in disallowance under Section 40(a)(ia). Consequently, the Tribunal directed the deletion of the disallowance.

3. Disallowance of Salary Paid under Section 40A(2)(b):
The assessee disputed the disallowance of ?99,840/- paid as salaries to three graduates assisting in business operations. The AO had disallowed 40% of the salary without any substantial basis, and the CIT(A) upheld this disallowance mechanically. The Tribunal found the salary reasonable given the qualifications and contributions of the employees and directed the deletion of the disallowance, finding the AO's actions unjustified.

4. Ad-hoc Disallowance of Various Expenditures:
The assessee objected to an ad-hoc disallowance of ?15,000/- from a total claimed expenditure of ?1,05,552/- on account of vehicle maintenance and other expenses. The AO made this disallowance citing the use of self-made vouchers and potential personal expenses. The Tribunal found the disallowance reasonable and justified, thus upheld the CIT(A)'s decision.

Conclusion:
The Tribunal partly allowed the appeal. The addition under Section 68 was remitted for verification to prevent double taxation. The disallowance under Section 40(a)(ia) was deleted, while the disallowance under Section 40A(2)(b) was also deleted. The ad-hoc disallowance of ?15,000/- was upheld. The general ground raised by the assessee required no adjudication.