2019 (1) TMI 1456 - AT - Income Tax

Addition on account of alleged discount received - CIT(A) confirmed this addition on the ground that the assessee should have reduced this amount from his purchases but had malafidely shown cash payments of equal amount to M/s. Dyechem International Pvt. Ltd. and has failed to prove the same with documentary evidence - Held that - During the course of hearing, the assessee had changed its stand and hence the ld. CIT(A) confirmed the addition in question. We find no infirmity in the same, and hence dismiss Ground No. 1 of the assessee. Addition of an unreconciled closing stock balance as on 31/03/2010 of a cash credit account with United Bank of India (UBI) - Held that - As assessee s contentions is that ₹ 8,00,000/-, was withdrawn in cash during the period and the money was not entered in the cash book resulting in the figures remaining unreconciled. It was submitted that such unreconciled amount would not result in any income. We find that no such contention has been raised before the lower authorities. In any event, we set aside the matter to the file of the Assessing Officer for fresh adjudication, in accordance with law. Disallowance u/s 40(a)(ia) - scope of amendment - retrospective effect - Held that - We set aside this matter to the file of the Assessing Officer for applying the judgment of the Hon ble Delhi High Court in the case of Commissioner of Income-tax-1 v. Ansal Land Mark Township (P.) Ltd. 2015 (9) TMI 79 - DELHI HIGH COURT where the Hon ble Court upheld the order of the Agra Bench of ITAT in Rajiv Kumar Agarwal v. ACIT (2014 (6) TMI 79 - ITAT AGRA) and held that the insertion of second proviso to Section 40(a)(ia) of the Act is declaratory and curative and hence retrospective in nature. Grounds of the assessee allowed for statistical purposes Disallowance under the head staff welfare expenses - amount was paid to one Mr. Md. Latif by way of two cheques - Held that - Mr. Latif is a local politician and subscription is given for local puja purposes and also the amount has been disallowed on the ground that no evidence has been produced by the assessee. We find no infirmity in the same and uphold the order of the ld. CIT(A) and dismiss this ground of the assessee. Addition of bogus purchase of diesel - assessee has moved an application for filing of additional evidence - Held that - CIT(A) has not confronted the assessee with the information, we admit the additional evidence filed by the assessee as the assessee had no opportunity before the ld. CIT(A) on this issue. As the Assessing Officer did not have an opportunity to verify all the bills as well as the additional evidence, we set aside the matter to the file of the Assessing Officer for fresh adjudication Disallowance on account of payments made to one Shri Moti Mondal, for purchase of diesel - Held that - The disallowance was made as the assessee could not produce any evidence in support of his claim. On these facts, we see no infirmity in the finding of the ld. First Appellate Authority. TDS u/s 194J - Disallowance u/s 40(a)(ia) - non deduction of tds on accounting charges - Held that - As the person whom the amount was paid was not a qualified professional and he was an accountant writing the accounts and hence 194J of the Act, does not apply. We agree with the submissions and deleted the disallowance made u/s 40(a)(ia) of the Act. Gross profits determination - Held that - After hearing rival submissions we direct the Assessing Officer to adopt gross profit @ 3.5% in place of 5% adopted by the ld. CIT(A), as in our view this would meet the ends of justice. In the result, this ground of the assessee is allowed in part.

Summary

Issues Involved:
Appeal against order of CIT(A) for AY 2010-11 on various grounds including addition of discounts, alleged bogus purchases, transportation charges, staff welfare expenses, and accounting charges.

Analysis:

Ground No. 1 - Addition of Discount:
The Assessing Officer added ?1,14,720 on account of alleged discount received from a company. The CIT(A) confirmed the addition as the assessee failed to prove the cash payments with documentary evidence. The Tribunal found no infirmity and dismissed this ground.

Ground No. 4 - Unreconciled Closing Balance:
An addition of ?7,99,800 was made for an unreconciled closing stock balance. The Tribunal set aside the matter to the Assessing Officer for fresh adjudication as the contention regarding cash withdrawal and non-entry in the cash book was not raised before lower authorities.

Ground Nos. 6 & 15 - Disallowance under Section 40(a)(ia):
The Tribunal set aside these grounds to the Assessing Officer for applying a judgment regarding the retrospective nature of the second proviso to Section 40(a)(ia).

Ground No. 7 - Disallowance of Staff Welfare Expenses:
The disallowance of ?1,50,000 under staff welfare expenses was upheld as the assessee failed to provide evidence for the payment made to a local politician.

Ground No. 8 - Disallowance of Staff Welfare Expenses:
This ground was dismissed as not pressed due to the smallness of the amount.

Ground No. 9 - Disallowance of Bogus Purchase of Diesel:
The Tribunal admitted additional evidence filed by the assessee and set aside the matter to the Assessing Officer for fresh adjudication due to lack of opportunity to clarify matters before the CIT(A).

Ground No. 10 - Disallowance of Payments for Diesel:
The disallowance of ?4,50,000 made for payments to a specific individual for diesel purchase was upheld due to lack of evidence.

Ground No. 11 - Disallowance of Accounting Charges:
The disallowance made under Section 40(a)(ia) for accounting charges was deleted as the person paid was not a qualified professional.

Ground No. 13 - Gross Profits Issue:
The Tribunal directed the Assessing Officer to adopt a gross profit rate of 3.5% instead of 5% as adopted by the CIT(A).

In conclusion, the appeal of the assessee was allowed in part by the Tribunal on various grounds.

This detailed analysis covers the issues raised in the appeal and the Tribunal's findings on each ground, providing a comprehensive understanding of the judgment.