2020 (3) TMI 1144 - AT - Income Tax

Addition being the provident fund amount paid as per arrangement between the assessee, a contractor under the principal Tata Refractory Ltd. - HELD THAT - Assessee has submitted plausible evidence in his command to show that the as agreed by the assessee-contractor and TRL-contractee, the amount of provident fund to be deducted was calculated and statement was submitted by the assessee to the financial department of TRL, obviously with an object to comply with the provident fund proceedings - there is no evidence either before authorities below or before the Tribunal to show that as per the instruction of the assessee, the TRL deducted the provident fund from the billing amount of the assessee for further depositing the same to the provident fund department/competent authority - restore the issue to the file of AO for limited verification as to whether the TRL has deducted the provident fund from the bill raised by the assessee for further depositing the same to the provident fund authority/competent authority. Accordingly, ground No.1 of the assessee is allowed for statistical purposes Bogus purchases - tentative and provision figures shown by the assessee as per the Sales Tax Department in absence of any verification or audit by the Sales Tax Department - HELD THAT - When the figures of purchase shown by the assessee in the profit and loss account are matching with the figures certified by the Sales Tax Department and VAT return filed by the assessee, then no addition can be made on the basis of earlier tentative figure shown by the assessee as per Sales Tax Department. Accordingly, ground No.2 of assessee is allowed

Issues Involved:
1. Confirmation of addition of ?2,25,254/- being the provident fund amount paid via Tata Refractories Ltd.
2. Confirmation of addition of ?30,76,893/- terming it as non-genuine purchase.

Detailed Analysis:

Ground No. 1: Addition of ?2,25,254/- (Provident Fund Amount)
The assessee contested the confirmation of the addition of ?2,25,254/- by the Commissioner of Income Tax (Appeals) [CIT(A)], arguing that this amount was the provident fund paid via Tata Refractories Ltd. (TRL) as per an arrangement between the assessee, a contractor, and TRL. The assessee claimed that the CIT(A) failed to appreciate the business practice and ignored the evidence provided. The Departmental Representative (DR) supported the assessment and the first appellate order, arguing that the assessee did not provide sufficient evidence to substantiate the expenditure on the provident fund. The DR suggested that the issue could be restored to the Assessing Officer (AO) for verification of whether TRL had deducted the provident fund amount from the bills raised by the assessee.

The Tribunal noted that the assessee had submitted month-wise statements of the provident fund to TRL, showing the total amount of the contractor’s contribution and the amount collected from provident fund members. However, there was no evidence to show that TRL had deducted this amount from the billing amount of the assessee for further depositing it to the provident fund authority. Consequently, the Tribunal decided to restore the issue to the AO for limited verification to confirm whether TRL had deducted the provident fund from the bill raised by the assessee and deposited the same with the provident fund authority. Accordingly, this ground was allowed for statistical purposes.

Ground No. 2: Addition of ?30,76,893/- (Non-Genuine Purchase)
The assessee challenged the confirmation of the addition of ?30,76,893/- by the CIT(A), who had termed it as a non-genuine purchase. The assessee submitted a certificate from the Deputy Commissioner of Sales Tax, which verified the total purchases and sales made during the financial year 2009-2010. The assessee argued that the CIT(A) did not consider this certificate due to the absence of an application under Rule 46A of the Income Tax Rules, 1962, and did not allow the assessee an opportunity to file such an application. The CIT(A) had observed that the certificate merely mentioned the purchases as per the revised return and no verification or inspection had been made by the sales tax department into the correctness of the purchases shown by the assessee.

The Tribunal noted that during the assessment proceedings, the assessee had submitted the purchase register and all relevant purchase bills for verification. The Deputy Commissioner of Sales Tax had issued a certificate confirming that the total purchase as per the revised VAT return matched the figures shown by the assessee in the profit and loss account. The Tribunal found that the CIT(A)’s observations were hypertechnical and lacked a solid basis. When the figures of purchase shown by the assessee in the profit and loss account matched the figures certified by the Sales Tax Department, no addition could be made based on earlier tentative figures.

Therefore, the Tribunal allowed this ground and directed the AO to delete the addition of ?30,76,893/-.

Conclusion:
The appeal of the assessee was allowed partly for statistical purposes. The issue of the provident fund amount was restored to the AO for verification, and the addition of ?30,76,893/- was deleted. The order was pronounced in the open court on 18/03/2020.

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