2018 (9) TMI 1695 - AT - Income Tax

Bogus purchases - bills/vouchers for purchases of tyres and accessories not accepted - Held that - We find no reason for not accepting the bills/vouchers for purchases of tyres and accessories as submitted by the assessee before us which was already placed before the ld. CIT(A). The bills and vouchers and relevant documents in support of the claim of the assessee which were though placed before the CIT(A) but was not considered by him and confirmation of addition of ₹ 32,500/- on such account that no case has been made to admit those additional evidence and also on the ground that these evidences were not placed before the AO cannot be appreciated by us. We are satisfied with the evidences as submitted before us and on the basis of such documents against which the payment were made, we delete the addition. - Decided in favour of assessee. TDS u/s 194A - interest on unsecured loan taken from one Mr.Pawan Kr. Patni and paid to one Shri R.P,Bajoria and others (HUF) on identified purposes - non deduction of tds - According to the assessee since the parties have filed their income tax return within the due period and paid necessary taxes thereon section 40(a)(ia) will not be applicable in this case - Held that - Assessee has acted bona fide and there was no intention on its part to benefit the recipients of interest by way of not deducting tax from the interest so paid to these two parties. It appears that no reason has been assigned by the ld. CIT(A) while declining to apply the judgment of Right Address Ltd. Vs ITO TDS Ward-59(4) in favour of the assessee. He thus failed to distinguish the judgment on fact and on law while disapplying the same. Taking into consideration of the case made out by the assessee, the judgments as well, we allow the ground of appeal preferred by the assessee by deleting the addition as made by the authorities below. - Decided in favour of assessee.

Summary

Issues:
1. Validity of expenditure incurred towards cost of tyres and accessories as business expenditure.
2. Disallowance under section 40(a)(ia) on interest paid without deduction of tax at source.

Issue 1: Validity of Expenditure on Tyres and Accessories
The assessee challenged the denial of admissibility of expenditure on tyres and accessories as business expenditure due to lack of supporting documents. The CIT(A) upheld the disallowance citing failure to submit documents. However, during the appeal, the assessee presented bills and vouchers supporting the expenses. The ITAT found the bills were submitted before the CIT(A) but not considered. The ITAT accepted the evidence provided by the assessee and deleted the disallowance of ?32,500, as the bills supported the claim.

Issue 2: Disallowance under Section 40(a)(ia)
The assessee incurred interest expenses on unsecured loans without deducting tax at source. The AO disallowed the entire amount under section 40(a)(ia) for non-deduction of TDS. The CIT(A) confirmed the disallowance. The assessee argued that the recipients assured payment of taxes on the interest income and filed returns accordingly. The ITAT considered the assessee's good faith in not deducting TDS, citing a judgment where non-deduction of tax did not attract section 40(a)(ia) if the payee paid taxes. The ITAT referred to a proviso under section 40(a)(ia) and allowed the appeal, deleting the disallowance of ?1,00,028. The ITAT emphasized the bona fide actions of the assessee and the failure of the CIT(A) to distinguish relevant judgments, leading to the allowance of the appeal.

In conclusion, the ITAT allowed the appeal of the assessee, deleting the disallowances related to both expenditure on tyres and accessories and interest paid without deduction of tax at source. The judgment highlighted the importance of submitting supporting documents and acting in good faith regarding tax deductions to avoid disallowances under the Income Tax Act.