2020 (3) TMI 1139 - AT - Income Tax

Short deduction of TDS - TDS u/s 194C or 194H - nature of contract payments - HELD THAT - in the case of many instances the tax has been deducted @1% or 2% as per Section 194C of the Act which is clear from the exact break up of TDS return. He has also deducted TDS @2% u/s.194C of the Act. Further on perusal of the copies of Income Tax Return produced by the assessee of Shri Khagesh Patel in the form of ITR-IV, It is clear that Shri Khagesh Patel has offered the amount received from the assessee company as per Section 44AD of the Act. Section 44AD of the Act relates to the civil contract works but not for the commission received. We noted from the documents and submissions of the assessee, there is contradictory in the submissions of the assessee as the assessee has taken plea before the authorities below that it is a commission payment towards selling of goods, whereas as per TDS return as well as copy of ITR-IV of Shri Khagesh Patel, which is in the nature of contract payments. Therefore, in our considered opinion, to avoid confusion we think it fit to send back this issue to the file of AO for finding out the correct nature of payments made to Shri Khagesh Patel by the assessee company after providing reasonable opportunity of being heard to the assessee and the assessee is also directed to provide the documents and avoid in taking unnecessary adjournments. Therefore, this ground of appeal of the assessee is allowed for statistical purposes. Additional evidence filed by the assessee denied - violation of Rule 46A of the Income Tax Rules, 1962 - HELD THAT - After hearing both the sides and perusing the entire material available on record, we noted that the documents provided by the assessee go to the root of the matter which are part of the records, therefore, the contention of the assessee is accepted and the matter is sent back to the file of AO for consideration of the documents and decide the issue as per law. The assessee is directed to cooperate with the department for early disposal of the case. This ground of appeal of the assessee is allowed for statistical purposes. Bogus purchases - assessee failed to produce copy of VAT return in the case of Asansol and Dhanbad purchase - VAT return was calculated at 12.5% on the purchased as shown by the assessee whereas as per the information of the AO which should have been calculated on the backward method - HELD THAT - As perusing the entire material available on record and the documents submitted by the assessee, which were filed before the AO and CIT(A) with proper documentary supports. Therefore, the documents filed by the assessee are hereby accepted and this issue is also sent back to the file of AO for proper adjudication of the issue. The assessee is directed to cooperate with the AO with necessary documents. This ground of appeal is allowed for statistical purposes.

Issues involved:
1. Nature of expenses - commission or contract work
2. Treatment of discount and sundry creditor
3. Rejection of additional evidence and disallowance for non-submission of VAT return
4. Addition of amount and remand for further investigation

Analysis:

Issue 1: Nature of expenses - commission or contract work
The appellant contested the CIT(A)'s decision regarding the nature of expenses paid under the head of commission instead of contract work. The AO observed discrepancies in TDS deductions and cash payments to the payee, leading to disallowances under various sections. The Appellate Tribunal acknowledged the contradictions in the submissions and documents provided by the appellant. Consequently, the issue was remanded back to the AO for a thorough examination to ascertain the correct nature of payments made to the payee, emphasizing the need for clarity to avoid confusion.

Issue 2: Treatment of discount and sundry creditor
The AO disallowed a claimed amount as discount based on discrepancies in VAT returns and ledger entries related to purchases. The CIT(A) dismissed the appeal due to the appellant's failure to provide VAT returns as additional evidence. However, the Appellate Tribunal accepted the documents submitted by the appellant as they were crucial to the matter at hand. The issue was remanded back to the AO for proper adjudication, emphasizing the importance of cooperation from the appellant for a fair resolution.

Issue 3: Rejection of additional evidence and disallowance for non-submission of VAT return
The AO added an amount to the total income due to the appellant's failure to produce VAT returns for specific purchases. The CIT(A) rejected the additional evidence filed by the appellant, citing non-compliance with providing necessary documents. The Appellate Tribunal disagreed with this decision, accepting the VAT return as essential and sending the issue back to the AO for further consideration, emphasizing the need for cooperation from the appellant.

Issue 4: Addition of amount and remand for further investigation
The AO made an addition to the total income based on discrepancies in raw material purchases, which the appellant failed to reconcile adequately. The CIT(A) dismissed the appeal, stating that crucial documents were not submitted before the AO. The Appellate Tribunal, after reviewing the documents provided by the appellant, accepted them as part of the record and remanded the issue back to the AO for proper adjudication, stressing the importance of cooperation from the appellant for a fair resolution.

In conclusion, the appeal of the appellant was allowed for statistical purposes, and the issues were remanded back to the AO for further investigation and resolution in accordance with the law.

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