2015 (4) TMI 178 - AT - Income Tax

Unexplained investment in building - difference in the cost of construction shown by the assessee and that determined by the D.V.O. on the basis of reference made u/s 142A - CIT(A) deleted the addition - Held that - No defect in the books of accounts has been pointed out by the department. The fact of assessee incurring expense of ₹ 10,35,797/- during the period 2007-08 & 2008-09 assessment years has not been factored in by the DVO. The finding on record in regard thereto has not been upset by the Revenue in any manner before us. The application of rate by way of applying CPWD rates which are applicable to First class godowns as opposed to the quality of construction supervised by the assessee being entirely different stand unassailed on record. Whereas the specific difference in regard to the quality of construction, number of bays, quality of rate proof platforms etc. which are considered in the case of godowns were found not applicable to the quality of construction of the assessee also remains unassailed - Decided in favour of assessee. Fall in G.P. rate - failure to furnish evidence for claim of production of chhilka and driage, fall in production of rice and under valuation of closing stock of bardana - CIT(A) deleted the addition - Held that - No good reason to interfere to the order of the CIT(A) where evidently books of accounts had not been rejected and no defect in the books of accounts maintained has been pointed out either by the AO or the Sr. DR in the present proceedings. In the afore-mentioned peculiar facts and circumstances, in the absence of any specific argument in the facts as they stand we dismiss the departmental ground. - Decided in favour of assessee. Non deduction of TDS as required u/s 194C - CIT(A) deleted part disallowance u/s 40(a)(ia) - Held that - CIT(A) correctly upheld the disallowance of the payment of ₹ 45,000/- as it was a payment against a single builty. However qua the payment of ₹ 36,000/- claimed by the assessee he found that it consisted of payment against three freight vouchers of ₹ 12,000/- each and hence consisted of three independent contracts consequently he concluded that TDS was not required to be deducted. - Decided in favour of assessee in part.

Summary

Issues Involved:
1. Deletion of addition on account of unexplained investment in building.
2. Deletion of addition on account of fall in G.P. rate and other discrepancies.
3. Reduction of addition made under Section 40(a)(ia) for non-deduction of tax at source.

Issue-wise Detailed Analysis:

1. Deletion of Addition on Account of Unexplained Investment in Building:
The Revenue challenged the deletion of an addition of Rs. 13,88,728/- made by the Assessing Officer (AO) on account of unexplained investment in building. The AO had referred the matter to the District Valuation Officer (DVO) under Section 142A of the Income Tax Act, who estimated the value of the investment at Rs. 42,69,877/- against Rs. 21,61,172/- shown by the assessee. The assessee objected, stating that detailed records and vouchers were maintained, and the DVO's valuation was based on estimates and higher specifications applicable to government godowns, which were not relevant to the assessee's construction. The CIT(A) found that the AO did not reject the books of accounts and that the DVO's report was flawed, containing unaddressed discrepancies and incorrect application of CPWD rates. The Tribunal upheld the CIT(A)'s decision, noting no defects in the books of accounts and the failure to consider the assessee's actual expenses and quality differences in construction.

2. Deletion of Addition on Account of Fall in G.P. Rate and Other Discrepancies:
The AO made a lump-sum addition of Rs. 25,000/- due to a fall in the Gross Profit (G.P.) rate from 36.71% to 27.88%, discrepancies in the production of rice, and under-valuation of closing stock of bardana. The CIT(A) deleted the addition, pointing out that the AO did not find any defects in the books of accounts, which were audited and produced during assessment. The Tribunal agreed with the CIT(A), emphasizing that no defects were pointed out in the books of accounts, and the addition was speculative without any basis.

3. Reduction of Addition Made Under Section 40(a)(ia) for Non-Deduction of Tax at Source:
The AO disallowed Rs. 81,000/- under Section 40(a)(ia) for non-deduction of tax at source on freight payments. This included Rs. 45,000/- paid in cash on a single occasion and Rs. 36,000/- paid in three installments of Rs. 12,000/- each. The CIT(A) upheld the disallowance of Rs. 45,000/- but allowed the Rs. 36,000/- as it was paid through three separate vouchers, thus not attracting TDS provisions. The Tribunal upheld the CIT(A)'s decision, noting that the facts were unassailed and the payments of Rs. 36,000/- were indeed made through three independent contracts.

Conclusion:
The Tribunal dismissed the Revenue's appeal, finding no errors in the CIT(A)'s conclusions. The Tribunal also dismissed the Cross Appeal filed by the assessee due to the absence of arguments from the Revenue. The decision was pronounced in the Open Court on 31st March 2015.