2018 (5) TMI 1384 - AT - Income Tax

Addition on account of materials purchased - bogus purchases - Held that -Details of these parties were properly provided before the AO and the existence of those parties cannot be questioned. The statement made by the AO in this regard that the assessee did not furnish the evidence/bills and vouchers in respect of materials purchased is not tenable. In fact when the details of the required documents were furnished the disallowance of 20% of the total expenses claimed by the assessee considering this as bogus expenses is not justified. - Decided in favour of assessee TDS u/s 194C - addition on account of labour charges for non TDS deduction - disallowance u/s 40(a)(ia) - Held that - It appears from the register that the names and addresses of all 83 labourers are written serially in the register and all have received the money by putting thumb impression on the same. It is a fact that the labours are paid by the assessee directly and not through contract or sub-contract. Therefore section 194C of the Act is not attracted. We have also perused the profit and loss account for the year ended 31.03.2008 and the amount of works bill is of ₹ 1,37,60,588/- out of which labour charges are to the tune of ₹ 71,81,150/-. - Decided in favour of assessee Addition on account of sundry creditors - Held that - AO was not justified in treating the concerned creditors as bogus without doubting the genuineness of the corresponding purchases made by the assessee from the said creditors. On the basis of all these findings of fact recorded by him, CIT(A) treated the concerned creditors as genuine and deleted the addition made by the AO by treating the same as bogus. After having considered all the facts of the case as found by the ld. CIT(A) and remained uncontroverted by the revenue, we find no justifiable reason to interfere with the impugned order of the ld. CIT(A) - Decided in favour of assessee

Summary

Issues Involved:
1. Deletion of addition on account of materials purchased.
2. Deletion of addition on account of labour charges.
3. Deletion of addition on account of sundry creditors.

Detailed Analysis:

1. Deletion of Addition on Account of Materials Purchased:

The Assessing Officer (AO) disallowed ?10,37,732/- as bogus purchases due to the assessee's failure to furnish supporting evidence during scrutiny proceedings. The Commissioner of Income Tax (Appeals) [CIT(A)] opined that the AO made an abrupt ad-hoc disallowance of 20% without proper justification, terming the assessment as hurried. During remand proceedings, the AO's enquiries into 19 parties revealed that one notice was returned unserved, which the assessee clarified with a VAT registration certificate. The CIT(A) found the purchases substantiated and deleted the disallowance. The Tribunal upheld the CIT(A)'s decision, stating that the details of the parties were properly provided and the disallowance was unjustified, dismissing the revenue's ground.

2. Deletion of Addition on Account of Labour Charges:

The AO disallowed ?71,81,150/- for labour charges, citing the assessee's failure to produce supporting evidence or explain TDS deductions, concluding a violation of section 194C and section 40(a)(ia) of the Income Tax Act. The CIT(A) held that section 194C was not applicable as the assessee directly engaged labourers without any contract. The CIT(A) noted that sending letters to migratory labourers was impractical. The Tribunal found that the assessee maintained a weekly register of wages with thumb impressions of labourers, confirming direct payments and non-applicability of section 194C. The Tribunal upheld the CIT(A)'s order, dismissing the revenue's ground.

3. Deletion of Addition on Account of Sundry Creditors:

The AO treated ?53,15,886/- as bogus sundry creditors due to the assessee's failure to furnish details during scrutiny. The CIT(A) opined that the AO should identify specific doubtful purchases/expenses rather than making a blanket disallowance. During remand proceedings, the AO issued notices to creditors, with some returned unserved and minor balance differences noted. The CIT(A) found the existence of creditors substantiated by VAT registration and deemed the differences as minor reconciliation issues. The Tribunal agreed with the CIT(A)'s findings, noting that the AO did not doubt the genuineness of corresponding purchases. The Tribunal upheld the CIT(A)'s order, dismissing the revenue's ground.

Conclusion:

The Tribunal dismissed the revenue's appeal, upholding the CIT(A)'s deletions of additions on account of materials purchased, labour charges, and sundry creditors, finding the AO's disallowances unjustified and the assessee's claims substantiated.