2020 (1) TMI 79 - AT - Income Tax

Addition u/s 68 - survey u/s 133A was conducted on the business premises of the assessee in which, certain documents were found and impounded - HELD THAT - Land deal in question was made by the appellant. Mis SMV agencies is also a company in the same group and the entire management is made by the aforementioned two persons. There is no doubt that a substantial amount of on money was paid and these amounts are clearly written in cash in the papers referred to supra. Books of accounts and other documents of Mis SMV agencies are also prepared by the aforementioned persons and their subordinates in the appellant company. Therefore writing or entering the transaction in those books is entirely within the hands of the appellant. The evidence is compelling that the land deal was actually done by the appellant and the on money was also paid by the appellant and only the name of M/s SMV agencies was placed. Therefore addition confirmed - Decided against assessee Addition u/s 40(a)(ia) - Non deduction of TDS - CIT(A) correctly confirmed the addition made by the AO observing that these are long term leases and contracts on which TDS was to be deducted and the assessee agreed to the disallowance during the course of assessment proceedings. Addition on account of deferred market expenses - AO found that the assessee had claimed as business expenses, some amounts which it claimed to have paid to certain employees of its C F agents. The AO held that these were not business expense - CIT(A) correctly following the decision of the ITAT in assessee s own case for AY 2003-04, confirmed the addition made by the AO, as the ITAT has confirmed the similar disallowance in AY 2003-04. Disallowance towards PF and ESIC - assessee stated that the entire amounts should not be disallowed because the contributions of employers out of the above amounts are allowable deductions - CIT(A), correctly directed the AO to quantify any contributions of the employers in the aforementioned amounts and the same are to be allowed as deductions as per law.

Summary

Issues:
1. Non-appearance of the assessee during the appeal hearing.
2. Addition of income under section 69 of the Income Tax Act, 1961.
3. Disallowance of expenses under section 40(a)(ia) of the Act.
4. Treatment of deferred market expenses as business expenses.
5. Disallowance of PF and ESIC contributions.
6. Levy of interest under section 234C.

Issue 1: Non-appearance of the assessee during the appeal hearing

The appeal was filed against the order of CIT(A) for the AY 2006-07. Despite numerous adjournments and lack of compliance from the assessee, the Tribunal proceeded with the hearing due to the absence of any valid reasons for seeking adjournment. The Tribunal decided to proceed with the appeal on its merits in the absence of representation from the assessee.

Issue 2: Addition of income under section 69 of the Income Tax Act, 1961

The AO added an amount under section 69 based on a survey conducted on the business premises, revealing discrepancies in land purchase transactions. The CIT(A) confirmed the addition, emphasizing that the evidence indicated the land deal was executed by the appellant, justifying the addition as "income from other sources" under section 69.

Issue 3: Disallowance of expenses under section 40(a)(ia) of the Act

The AO disallowed an amount under section 40(a)(ia) due to lack of TDS details on lease charges for cooling equipment. The CIT(A) upheld the disallowance, citing the long-term nature of the leases requiring TDS deduction, which the assessee acknowledged during assessment proceedings.

Issue 4: Treatment of deferred market expenses as business expenses

The AO disallowed claimed business expenses related to payments to C&F agents' employees. The CIT(A) affirmed the disallowance, referencing a prior ITAT decision for AY 2003-04 that upheld a similar disallowance, leading to the confirmation of the addition by the CIT(A).

Issue 5: Disallowance of PF and ESIC contributions

The CIT(A) directed the AO to quantify employer contributions within the disputed amounts of PF and ESIC, allowing deductions for employer contributions as per the law, contrary to the initial disallowance by the AO.

Issue 6: Levy of interest under section 234C

The Tribunal directed the AO to address the levy of interest under section 234C as it was considered consequential in nature, ensuring appropriate action based on the provisions of the Act.

In conclusion, due to the absence of representation from the assessee and uncontroverted findings by the CIT(A), the Tribunal upheld the order of the CIT(A) and dismissed the appeal of the assessee, pronouncing the judgment on 4th December 2019.