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2022 (7) TMI 1009 - AT - Income TaxDisallowance of bogus freight/transport expenses - HELD THAT - No doubt, the turnover of the assessee in AY 2008-09 being substantially lower than that of the year under consideration, we are of the view that it would not be fair and proper to take the figures for AY 2008-09 for comparison. Moreover, the issue before us is relating to the claim of the assessee on account of freight/transportation charges and it would, therefore, be fair and proper to consider and compare the freight expenses claimed by the assessee for the immediately succeeding two years i.e. AYs 2010-11 and 2011-12, wherein the turnover of the assessee was comparable to that of the year under consideration. As noted that the freight expenses claimed by the assessee for both these years were about 56% of the total turnover as against 66% of the total turnover as claimed by the assessee for the year under consideration. Based on this comparative analysis, the claim of the assessee for freight/transportation charges for the year under consideration thus was higher by 10% of the turnover; and, in our opinion, it would be fair and reasonable to disallow the claim of the assessee for freight/transportation expenses being about 10% of the total turnover of the assessee for the year under consideration. We accordingly modify the impugned order of the learned CIT(A) and restrict the disallowance made by him on account of freight/transportation charges - Decided against revenue. Bogus liabilities in respect of certain creditors - HELD THAT - The entire liability appearing in the name of the concerned four creditors was fully settled by the assessee in the subsequent year by making payments through proper banking channel and keeping in view this undisputed position, it was held by the learned CIT(A) that the genuineness of the said creditors could not be doubted merely because notices issued by the Assessing Officer to them under Section 133(6) of the Act could not be served. It is thus clear that this issue was decided by the learned CIT(A) in favour of the assessee on merit accepting the genuineness of the concerned four creditors; and, as an alternative, it was also held by him that this addition even otherwise was covered by the trading addition made by him by estimating the income of the assessee by applying net profit rate. Keeping in view all the facts of the case, we find no justifiable reason to interfere with the order of the learned CIT(A) on this issue and upholding the same, we dismiss Ground No.4 of the Revenue s appeal. Addition on account of unexplained gift - unexplained gift claimed to be received from own son - HELD THAT - CIT-A understood and appreciated the accounting entries made by the assessee for the relevant transactions in his books of account and after satisfying himself about the correctness of the same, he found that the objections raised by the Assessing Officer to treat the amount in question as unexplained were frivolous and unsustainable. The learned CIT(A) also found that all the corresponding cheques were duly cleared in the immediately succeeding year and since the identity and capacity of the donor as well as genuineness of the relevant transactions involving gift given by son to his father was duly found to be established, the learned CIT(A) deleted the addition made by the Assessing Officer on this issue. At the time of hearing before us, the learned DR has not been able to bring anything on record to rebut or controvert these findings recorded by the learned CIT(A) on appreciation of the details and documents furnished by the assessee and keeping in view the same as well as all the facts of the case, we do not find any justifiable reason to interfere with the impugned order of the learned CIT(A) giving relief to the assessee on this issue; the same is, therefore, upheld and Ground No.5 of the Revenue s appeal is dismissed. Unexplained cash credit - CIT-A deleted the addition - HELD THAT - On verification of the additional evidence filed by the assessee, the learned CIT(A) found that both the credits in question were duly cleared by the assessee by making payments through banking channel in the subsequent year. He also found that the issue was squarely covered by the decision in the case of Chandrashekhar Ayachi ( 2013 (12) TMI 372 - GUJARAT HIGH COURT cited on behalf of the assessee wherein it was held that where the repayment of loan was accepted by the Department in the subsequent year, no addition on account of the same could be made in the preceding year on account of unexplained cash credit. CIT(A) deleted the addition made by the Assessing Officer under Section 68 of the Act; and, keeping in view all the facts of the case, we find no infirmity in the impugned order of the learned CIT(A) on this issue warranting any interference. The same is accordingly upheld and the Ground No.6 of the Revenue s appeal is dismissed. Disallowance under Section 40(a)(ia) - Additional evidence was filed by the assessee to show that TDS was duly made from the payment of dumper hire charges and the same was also paid before the due date of filing of return - CIT-A deleted the addition - HELD THAT - It is observed that the tax at source from the payment of dumper hire charges in question was found to have been deducted and paid by the assessee before the due date of filing of return of income for the year under consideration and on the basis of this finding, CIT(A) deleted the disallowance made by the Assessing Officer under Section 40(a)(ia) of the Act by following the decision of Virgin Creations ( 2011 (11) TMI 348 - CALCUTTA HIGH COURT wherein it was held that the amendment made in Section 40(a)(ia) by the Finance Act, 2010 was applicable retrospectively. This issue thus is squarely covered by the decision Virgin Creations (supra), which has been followed by the Rajakot Bench of this Tribunal in various decisions to give relief to the assessee. We, therefore, find no justifiable reason to interfere with the impugned order of the learned CIT(A) and upholding the same, dismiss Ground No.7 of the Revenue s appeal.
Issues Involved:
1. Disallowance of alleged bogus freight expenses. 2. Addition on account of alleged bogus liabilities in respect of certain creditors. 3. Addition on account of unexplained gift. 4. Addition on account of unexplained cash credit. 5. Disallowance under Section 40(a)(ia) for non-deduction of TDS on dumper hire charges. Issue-wise Detailed Analysis: 1. Disallowance of Alleged Bogus Freight Expenses: The common issue in both appeals relates to the disallowance of Rs.1,22,57,102/- made by the Assessing Officer (AO) on account of alleged bogus freight expenses. The assessee, engaged in the transportation business, showed this amount as payable to various transporters. The AO found discrepancies in the confirmations and addresses of the transporters, leading to the disallowance of the entire amount. The CIT(A) upheld the AO's findings but reduced the disallowance to Rs.54,53,224/- by estimating a net profit rate of 4% due to unverifiable expenses. The Tribunal further modified this, restricting the disallowance to Rs.23,00,000/- based on comparative analysis with subsequent years. 2. Addition on Account of Alleged Bogus Liabilities in Respect of Certain Creditors: The AO added Rs.37,85,407/- to the total income, treating liabilities to four creditors as bogus due to unserved notices and lack of original bills. The CIT(A) deleted this addition, noting that the liabilities were settled through banking channels in subsequent years and that non-service of notices under Section 133(6) alone does not render creditors non-existent. The Tribunal upheld the CIT(A)'s decision, agreeing that the genuineness of the creditors was established. 3. Addition on Account of Unexplained Gift: The AO added Rs.3,01,49,768/- as unexplained income, questioning the genuineness of a gift received by the assessee from his son. The CIT(A) deleted this addition, explaining that the cheques for the gift were not deposited in the bank by the end of the financial year but were cleared in the subsequent year. The Tribunal upheld this decision, finding that the AO misunderstood the accounting entries and that the genuineness of the gift was established. 4. Addition on Account of Unexplained Cash Credit: The AO added Rs.22,56,838/- under Section 68, treating credits from two parties as unexplained due to lack of documentary evidence. The CIT(A) deleted this addition, noting that the loans were repaid through banking channels in subsequent years and that the AO failed to conduct inquiries. The Tribunal upheld the CIT(A)'s decision, citing the Gujarat High Court's judgment that repayment of loans in subsequent years negates the addition for unexplained cash credits. 5. Disallowance under Section 40(a)(ia) for Non-deduction of TDS on Dumper Hire Charges: The AO disallowed Rs.9,00,000/- for non-deduction of TDS on dumper hire charges. The CIT(A) deleted this disallowance, noting that TDS was deducted and paid before the due date of filing the return, following the amendment to Section 40(a)(ia) by the Finance Act, 2010. The Tribunal upheld this decision, referencing the Kolkata High Court's judgment in Virgin Creations, which applied the amendment retrospectively. Conclusion: The appeal of the assessee was partly allowed, and the appeal of the Revenue was dismissed. The Tribunal's detailed analysis upheld the CIT(A)'s decisions on several grounds, providing relief to the assessee while modifying certain disallowances based on comparative analysis and established legal precedents.
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