2019 (10) TMI 1128 - AT - Income Tax

Bogus purchases - Assessment framed u/s 143(3) r.w.s. 153A - Addition of 25% of such purchases as bogus u/s 69C - HELD THAT - AO had made addition by merely relying on the statement of one Shri Rajendra Jain which cannot be termed as an incriminating material as said statement should have related to incriminating material found during the course of search or statement must be made relatable to material by subsequent enquiry/ investigation. Addition made by the AO @ 25% of alleged bogus purchases - CIT-A deleted the addition - In the present case, no opportunity to cross examine said Shri Rajendra Jain was provided by the Revenue authorities. Thus it was rightly held that not providing cross examination tantamount to denial of natural justice and does vitiate the assessment. CIT(A) has also considered that the AO himself had recorded in the assessment order that letter was issued to Custom Authorities SEZ-II, Sitapura Industrial Area, Jaipur to verify the said purchases and the AO has recorded a finding that SEZ authorities have confirmed that said purchases are genuine as duly recorded in their records. This itself cast a doubt on AO s conclusion that purchases made by the assessee were bogus. More particularly, when it is certificate from another Govt. Agency by certifying the genuineness of the purchases and it tilts preponderance of probability in favour of the assessee. It is pertinent to mention that the ld. CIT(A) has explicitly dealt with the issue and deleted the addition made by the AO giving full justification to the issue in question and we find no reason to interfere with the order of the ld. CIT(A) Delayed contribution of employees s contribution towards PF and ESIC - CIT(A) deleted the addition - HELD THAT - As decided in CIT Vs. State Bank of Bikaner Jaipur (2014) 2014 (5) TMI 222 - RAJASTHAN HIGH COURT where PF and/or EPF, CPF, GPF, etc., was paid after the due date under the respective acts but before filing of return of income u/s 139(1), it could not be disallowed u/s 43B or u/s 36(1)(va). - Decided in favour of assessee

Summary

Issues Involved:
1. Deletion of addition under Section 69C on account of bogus purchases.
2. Allowing deduction under Section 10AA/10A.
3. Deletion of addition under Section 36(1)(va) related to PF/ESI contributions.

Detailed Analysis:

Issue 1: Deletion of Addition under Section 69C on Account of Bogus Purchases

The Revenue challenged the deletion of additions made by the Assessing Officer (AO) under Section 69C for the assessment years 2010-11 to 2012-13. The AO had added amounts for bogus purchases based on statements from Rajendra Jain and Banwari Lal Jain, who allegedly provided accommodation entries. The CIT(A) deleted these additions, noting that the AO's additions were based solely on third-party statements without incriminating material. The CIT(A) relied on precedents such as Jai Steel Ltd. vs ACIT and Kabul Chawla vs ACIT, which state that no addition can be made in the absence of incriminating material during a search. The Tribunal upheld the CIT(A)'s decision, emphasizing that the AO failed to provide an opportunity for cross-examination and that the purchases were verified by SEZ authorities as genuine.

Issue 2: Allowing Deduction under Section 10AA/10A

The Revenue contended that deductions under Section 10AA/10A should not be allowed due to the application of Section 69C and Section 115BBE, which disallow deductions for expenditures made from untaxed income. The CIT(A) rejected this argument, stating that the additions made by the AO were not legally sustainable as they were not based on any incriminating material. The Tribunal concurred, noting that the AO's reliance on statements without corroborating evidence was insufficient and that the SEZ authorities had confirmed the genuineness of the purchases.

Issue 3: Deletion of Addition under Section 36(1)(va) Related to PF/ESI Contributions

For the assessment year 2012-13, the AO added amounts for delayed payments of employees' contributions towards PF and ESI, invoking Section 36(1)(va). The CIT(A) deleted this addition, citing decisions from the Rajasthan High Court, which held that contributions paid before the due date of filing the return under Section 139(1) cannot be disallowed. The Tribunal upheld the CIT(A)'s decision, referencing similar judgments from the Rajasthan High Court and the Supreme Court, which supported the view that payments made before the filing due date are allowable.

Conclusion:

The Tribunal dismissed the appeals filed by the Revenue for the assessment years 2010-11 to 2012-13, upholding the CIT(A)'s decisions to delete the additions under Section 69C and Section 36(1)(va) and allowing deductions under Section 10AA/10A. The Tribunal emphasized the importance of incriminating material in making additions and the necessity of providing an opportunity for cross-examination.