2016 (2) TMI 191 - AT - Income Tax

Addition on account of bogus/non existing liabilities - CIT(A) deleted the addition - Held that -CIT(A) while deleting the addition has noted that he has gone through the copies of truck rent payment and it mentioned the name of the persons, truck numbers, weight of material, amount paid to such persons and the complete details. He has also given a finding that on the verification of the LRs, he found them it to be duly stamped and acknowledged by the buyers of the material transported by the Assessee and vouchers were maintained in respect of payment to respective truck owners. He has further given a finding that the addition could not have been made either u/s. 68 or Section 41(1) of the Act as the provisions of those sections were not applicable to the facts of the case. Before us, Revenue could not controvert the findings of ld. CIT(A). See CIT vs. Bhogilal Ramjibhai Atara 2014 (2) TMI 794 - GUJARAT HIGH COURT wherein held Section 41(1) of the Act would apply in a case where there has been remission or cessation of liability during the year under consideration subject to the conditions contained in the statute being fulfilled Decided against Revenue. Addition of carting expenses - CIT(A) restricted the addition - Held that - CIT(A) while granting relief has noted the expenditure to be essential for the normal business activity of the Assessee and that the labour engaged in the process needs to be paid in cash and their names address and confirmations for the entire expenditure cannot be expected from the Assessee. He accordingly restricted the disallowance to ₹ 1 lac as against 3,62,785/- made by the A.O. Before us, no fallacy has been pointed out in the findings of ld. CIT(A). In view of these facts, we find no reason to interfere with the order of ld. CIT(A) Decided against Revenue. Addition on account of bogus purchases - CIT(A) deleted the addition - Held that - CIT(A) while deleting the addition has noted that Assessee had furnished the copy of purchase bills, the details of payment made to those parties and sales being made out of the said purchases. He has also noted that there is no evidence to suggest that the payments made were reverted back to the Assessee. He accordingly deleted the addition. Before us, no fallacy has been pointed out in the order of ld. CIT(A). We therefore find no reason to interfere with the order of ld. CIT(A) Decided against Revenue. Addition on account of difference in the balances - CIT(A) deleted the addition - Held that - We find that ld. CIT(A) while deleting the addition has noted that Atul Ltd. is a debtor and not a creditors in the books of Assessee and therefore no addition could be made merely because there was a difference between the account of two concerns. Before us, Revenue has not pointed out any fallacy in the order of ld CIT(A) Decided against Revenue.

Summary

Issues Involved:
1. Deletion of addition on account of bogus/non-existent liabilities.
2. Restriction of addition on account of disallowed carting expenses.
3. Deletion of addition on account of bogus purchases.
4. Deletion of addition on account of difference in balances.

Issue-wise Detailed Analysis:

1. Deletion of Addition on Account of Bogus/Non-existent Liabilities:
The Revenue challenged the deletion of Rs. 1,87,46,519/- by the CIT(A), which was added by the Assessing Officer (A.O.) as bogus/non-existent liabilities under "truck rent payable." The A.O. found the Assessee's submissions inadequate, citing the absence of confirmation letters and inability to provide addresses or telephone numbers of the truck rent payees. The CIT(A), however, observed that the liabilities included accepted liabilities from earlier years and noted that the income relating to these liabilities had already been taxed. The CIT(A) also remarked that the A.O. did not specify the provision under which the addition was made, and sections 68 and 41(1) of the IT Act were not applicable. The CIT(A) further noted the Assessee's maintenance of primary and secondary records and found no defects in the books of accounts. The Tribunal upheld the CIT(A)'s decision, agreeing with the findings and referencing the Gujarat High Court's ruling in CIT vs. Bhogilal Ramjibhai Atara, which emphasized that additions under section 41(1) require remission or cessation of liability within the relevant assessment year.

2. Restriction of Addition on Account of Disallowed Carting Expenses:
The A.O. disallowed 25% of the carting expenses amounting to Rs. 3,62,875/- due to the Assessee's failure to provide confirmation letters or addresses of the recipients. The CIT(A) restricted the disallowance to Rs. 1,00,000/- citing that such expenses are essential for the Assessee's business activities and are typically paid in cash, making it unreasonable to expect confirmations. The Tribunal found no fault in the CIT(A)'s reasoning and upheld the decision to restrict the disallowance.

3. Deletion of Addition on Account of Bogus Purchases:
The A.O. disallowed Rs. 2,39,958/- as bogus purchases from M/s. Khwaj Traders and Gupta Coal India Ltd., as notices sent to these parties were returned unserved and the Assessee could not provide new addresses or confirmation letters. The CIT(A) deleted the addition, noting that the Assessee had provided purchase bills, payment details, and evidence of sales against these purchases. The CIT(A) found no evidence suggesting that the payments reverted back to the Assessee. The Tribunal upheld the CIT(A)'s decision, finding no error in the deletion of the addition.

4. Deletion of Addition on Account of Difference in Balances:
The A.O. added Rs. 7,93,472/- due to a discrepancy in the balance with Atul Ltd., where the Assessee showed a nil balance, but Atul Ltd. showed an amount payable to the Assessee. Additionally, a minor difference of Rs. 539/- was noted with Agrawal Transport Corporation. The CIT(A) deleted the addition, stating that Atul Ltd. was a debtor, not a creditor, and discrepancies in debtor accounts do not warrant income addition. The minor difference with Agrawal Transport was deemed insignificant. The Tribunal upheld the CIT(A)'s decision, agreeing with the rationale provided.

Conclusion:
The Tribunal dismissed the Revenue's appeal, upholding the CIT(A)'s decisions on all grounds. The Tribunal found no errors in the CIT(A)'s reasoning and decisions, which were supported by detailed analysis and relevant legal precedents. The order was pronounced in open court on 01-01-2016.