2013 (10) TMI 276 - AT - Income Tax

Addition on ground of sundry creditors - Addition of amount of Rs. 62,97,788/- - Held that - Assessee had filed confirmations before Assessing Officer and had also furnished copies of ledger accounts - Assessing Officer has not disputed the purchases made by the Assessee from the aforesaid parties - Trade creditors were from purchases and full set off of purchase bills were produced before Assessing Officer No material evidence is produced to controvert these findings Decided against the Revenue. Addition of Rs. 26,03,728/- on account of capital introduction by the partners Held that - Assessee had furnished more than sufficient evidence to explain the source of funds introduced by the partners and had also furnished the copy of PAN numbers, Capital account, Balance sheet and returns of income Moreover, when cash is introduced into partners firm and if the partners are unable to explain the source of funds, in the assessment proceedings of the firm, no addition can be made in the hands of firm but the addition can be made in the hands of individual partner Decided against the Revenue. Addition of Rs. 1,12,80,134/- on account of non filing of details of TDS Held that - TDS was deposited with the prescribed time and thus there was no case of disallowance under 40(a)(ia) - Learned D.R. could not controvert the above findings nor could bring any contrary material on record Decided against the Revenue. Disallowance of Rs. 2,05,936/- - Assessee has incurred various expenses in cash - Assessee could not produce the vouchers, A.O. made an ad-hoc disallowance of 25% of Rs. 3,43,228/- and added to the income Held that - Appellant was unable to produce full set of vouchers for the expenditure during assessment proceedings. Therefore the AO was right in disallowing a part such expenditure. But 25 % disallowance for such expenditure is according to me on the higher side - Restricted the disallowance to 10 % of such expenditure Decided against the Revenue.

Issues Involved:
1. Addition of Rs. 62,97,788/- on account of sundry creditors.
2. Addition of Rs. 26,03,728/- on account of unexplained capital introduction.
3. Addition of Rs. 1,12,80,134/- on account of non-filing of details of TDS.
4. Reduction of disallowance by Rs. 2,05,936/- out of total addition of Rs. 3,43,228/- on account of non-production of cash vouchers.

Issue-wise Detailed Analysis:

1. Addition of Rs. 62,97,788/- on Account of Sundry Creditors:
The Assessing Officer (A.O.) added Rs. 62,97,788/- as unexplained cash credit under Section 68 because the Assessee failed to provide complete details, including addresses, PAN numbers, and creditworthiness of the sundry creditors. The CIT(A) deleted this addition, noting that the Assessee had submitted confirmations and ledger copies from 35 creditors during the assessment proceedings. The CIT(A) observed that the A.O. did not consider these confirmations and that the purchases from these creditors were not disputed. The Tribunal upheld the CIT(A)'s decision, finding no contrary material from the Revenue to challenge the CIT(A)'s findings.

2. Addition of Rs. 26,03,728/- on Account of Unexplained Capital Introduction:
The A.O. added Rs. 26,03,728/- to the firm's income, attributing it to unexplained cash introduced by two partners. The CIT(A) deleted this addition, stating that the Assessee had provided sufficient evidence, including PAN numbers, capital accounts, balance sheets, and returns of income of the partners. Furthermore, the CIT(A) emphasized that any addition for unexplained funds should be made in the hands of the individual partners, not the firm. The Tribunal agreed with the CIT(A), noting that the Revenue failed to provide any contrary evidence.

3. Addition of Rs. 1,12,80,134/- on Account of Non-Filing of Details of TDS:
The A.O. disallowed Rs. 1,12,80,134/- under Section 40(a)(ia) due to the Assessee's failure to submit TDS returns. The CIT(A) deleted this disallowance, noting that the Assessee had submitted TDS challans and other relevant details during the assessment proceedings. The CIT(A) found that the TDS was deducted and deposited within the prescribed time, and the Tax Audit Report confirmed no disallowance under Section 40(a). The Tribunal upheld the CIT(A)'s decision, as the Revenue did not present any evidence to contradict the CIT(A)'s findings.

4. Reduction of Disallowance by Rs. 2,05,936/- on Account of Non-Production of Cash Vouchers:
The A.O. made an ad-hoc disallowance of 25% of Rs. 3,43,228/- due to the Assessee's inability to produce cash vouchers. The CIT(A) reduced the disallowance to 10%, considering the higher percentage unreasonable. The Tribunal found no reason to interfere with the CIT(A)'s decision, as the factual aspects supported the reduction.

Conclusion:
The Tribunal dismissed the Revenue's appeal, affirming the CIT(A)'s decisions on all grounds. The Tribunal found that the CIT(A) had appropriately addressed the issues, and the Revenue failed to provide any substantial evidence to overturn the CIT(A)'s findings. The order was pronounced in open court on 04-10-2013.

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