2012 (9) TMI 259 - AT - Income Tax

Addition of certain sundry creditors as unexplained on the ground that the assessee has not able to furnish addresses of the creditors and their confirmations during the assessment proceedings - Held that - It is observed that there was difference between the amount available in the ledger and the amount mentioned in the notice sent to the sundry creditors u/s.133(6) notice served but no reply received from certain Sundry Creditors and notice sent to certain sundry creditors returned unserved. Therefore CIT(A) held total amount of Rs. 34, 14, 368 remained unexplained after considering issue threadbare and also basing on the remand report submitted by the AO. No infirmity in the order of the CIT(A) Dis-allowance u/s 40(a)(ia) - payment after due date but before filing of the return - Held that - Amendment brought about by the Finance Act 2010 w.e.f. 1.4.2010 has to be treated as retrospective w.e.f. 1st April 2005, the date on which the Section 40(a)(ia) has been inserted by the Finance (No.2) Act, 2004. Therefore in view of payment before filing of return dis-allowance u/s 40(a)(ia) is unwarranted. Order of CIT(A) confirmed - Decided against Revenue

Summary

Issues:
1. Addition of sundry creditors by the Commissioner of Income-tax (Appeals)
2. Deletion of addition made under Section 40(a)(ia) by the Commissioner of Income-tax (Appeals)

Analysis:

Issue 1: Addition of Sundry Creditors
The Appellate Tribunal heard appeals filed by the assessee and the Department against the Commissioner of Income-tax (Appeals) order for the Assessment Year 2007-08. The assessee contested the addition of Rs. 34,14,368 of sundry creditors, arguing that the addition should have been fully allowed. The Department challenged the deletion of Rs. 1,78,43,679 made under Section 40(a)(ia) of the Income Tax Act. The Tribunal noted that the assessee, a company deriving income from Fabrication and Erection Contracts, had filed a return of income at Rs. 36,16,972. The Assessing Officer added Rs. 1,78,43,679 due to non-deposit of tax deducted at source and treated Rs. 1,46,64,896 of sundry creditors as undisclosed income. The Commissioner of Income-tax (Appeals) partially upheld the addition of sundry creditors but deleted the addition under Section 40(a)(ia).

Issue 2: Deletion of Addition under Section 40(a)(ia)
Regarding the addition under Section 40(a)(ia), the assessee argued that the deletion by the Commissioner of Income-tax (Appeals) was correct, citing retrospective effect of the amendment to the Act. The Department contended that the deletion was not sustainable. The Tribunal analyzed the CIT(A)'s order, noting that the amendment to Section 40(a)(ia) by Finance Act, 2010 was not applicable to the assessment year under consideration. Relying on various tribunal decisions and Supreme Court rulings, the Tribunal upheld the deletion of the addition of Rs. 1,78,43,679, as the TDS had been deposited before the due date of filing the return.

In conclusion, the Tribunal found no merit in the appeals of both the assessee and the Revenue, dismissing them accordingly. The decision was based on a thorough analysis of the facts, legal implications, and precedents cited during the proceedings.