2018 (10) TMI 240 - AT - Income Tax

Disallowance on account of electric repair and maintenance expenses - Held that - Considering the nature of business of assessee these expenses are incurred on electrical repair and maintenance which are in nature and consumable expenses. The assessee has rightly treated the same as revenue expenditure. The A.O. has not pointed-out as to which capital have been generated by the assessee for purchasing tube rods electrical wires etc. In the absence of any specific finding against the assessee we set aside the Orders of the authorities below and delete the addition. Addition on account of car running and telephone expenses - Held that - We are of the view that addition is wholly unjustified. The assessee is a domestic company and as such there may not be any personal expenses incurred by the assessee company on account of car running and telephone expenses. It appears to be an adhoc addition made by the A.O. without pointing out any specific inadmissible expenses incurred by the assessee. In this view of the matter we set aside the Orders of the authorities below and delete the entire addition. Addition on account of fabrication charges - Held that - The details of expenses shows that the expenses are essentially incurred on fabrication charges consumption of indigenous consumable stores import of components and spare parts and cleaning and forwarding and freight. Thus for earning income assessee shall have to incur expenses on fabrication charges. In the absence of any specific defect pointed-out in the maintenance of the books of account there were no justification for the A.O. to disallow the entire amount of fabrication charges. CIT(A) also verified the details and the books of account and came to the finding that the assessee has maintained proper books of account and that there are no violation of TDS provisions. CIT(A) on proper appreciation of facts and verification of the record and the books of account produced by the assessee correctly deleted the addition - Addition deleted - Decided against revenue Addition u/s 68 - unexplained cash credit - Held that - No interference is called for in the matter. The assessee proved the identity of the investor its creditworthiness and genuineness of the transaction in the matter. Whatever documentary evidences were filed on record the A.O. did not make any efforts to summon the Investor and no efforts have been made to verify the documents from the Investor. There is no finding that material disclosed was untrustworthy. No evidence has been brought on record if investment made by the Investor Company actually emanated from the coffers of the assessee company so as to enable the total investments to be treated as undisclosed income of the assessee. - Decided against revenue

Summary

Issues Involved:
1. Disallowance of electrical repair and maintenance expenses.
2. Disallowance of car running and telephone expenses.
3. Addition under Section 14A of the Income Tax Act.
4. Acceptance of new evidence regarding payment to job workers.
5. Addition on account of fabrication charges.
6. Addition under Section 68 of the Income Tax Act.

Issue-wise Detailed Analysis:

1. Disallowance of Electrical Repair and Maintenance Expenses:
The assessee challenged the disallowance of ?1,53,072 on account of electric repair and maintenance expenses. The Assessing Officer (A.O.) noted that these expenses were for items like tube rods, electrical wires, condensers, and capacitors, which he considered capital items and allowed only 10% depreciation, adding ?1,37,765 to the income. The Commissioner of Income Tax (Appeals) [CIT(A)] confirmed this addition. However, the Tribunal found the addition wholly unjustified, noting that these expenses were consumable and revenue in nature, and thus deleted the addition.

2. Disallowance of Car Running and Telephone Expenses:
The assessee challenged the addition of ?1,81,937 on account of car running and telephone expenses. The A.O. disallowed 50% of these expenses due to the absence of a logbook and any cogent reply from the assessee, suspecting personal use. The CIT(A) upheld this disallowance. The Tribunal found this addition to be entirely unjustified, noting that the assessee is a domestic company and there was no evidence of personal expenses. The Tribunal deleted the entire addition.

3. Addition under Section 14A of the Income Tax Act:
The assessee did not press this ground, and it was accordingly dismissed.

4. Acceptance of New Evidence Regarding Payment to Job Workers:
The Revenue challenged the CIT(A)'s acceptance of new evidence regarding payments to job workers, alleging a violation of Rule 46A of the Income Tax Rules. The Tribunal found that the assessee had produced all necessary documents, including the cash book, before the A.O. at the assessment stage. The CIT(A) had called for the books of account for verification, which is permissible under Rule 46A(4). The Tribunal found no merit in the Revenue's contention and dismissed this ground.

5. Addition on Account of Fabrication Charges:
The A.O. disallowed ?7,58,31,017 on account of fabrication charges, noting incomplete details and non-compliance with TDS provisions. The CIT(A) deleted this addition after verifying the books of account and finding that the assessee maintained proper records and complied with Section 194C(5) of the Income Tax Act. The Tribunal upheld the CIT(A)'s decision, noting that the assessee provided detailed records and there was no violation of TDS provisions. The Tribunal dismissed the Revenue's appeal on this ground.

6. Addition under Section 68 of the Income Tax Act:
The A.O. added ?1,44,95,000 as unexplained cash credit under Section 68, questioning the creditworthiness of the lender, M/s. Shivam International Limited. The CIT(A) deleted this addition, noting that the assessee provided sufficient evidence, including confirmation, ITR, balance sheet, and bank statements of the lender. The Tribunal upheld the CIT(A)'s decision, citing that the assessee had proved the identity, creditworthiness, and genuineness of the transaction. The Tribunal dismissed the Revenue's appeal on this ground.

Conclusion:
The Tribunal allowed the assessee's cross-objection partly and dismissed the Revenue's appeal entirely. The Tribunal's order emphasized the importance of proper documentation and compliance with statutory provisions, rejecting arbitrary additions made by the A.O. without sufficient evidence.