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2022 (8) TMI 352 - AT - Income TaxBogus purchases - disallowance of 91% of the purchase claimed in respect of project - HELD THAT - Addition was made fully depending on the available documents from the VAT authorities. No cross verification was allowed by the ld AO. The VAT authorities are generally examining the payment of VAT. The Sale Tax Department mostly concerned about the input tax credit availed by the party payment of output tax. The assessee had utilized this purchase for its working progress. The whole addition was made on borrowed satisfaction from VAT department. No proper cross verification was made by the revenue authorities. The ld DR also did not make any strong objection against the assessee. The stock was exhausted by the assessee during the year through sales. - Decided in favour of assessee.
Issues Involved:
1. Addition for late deposit of employees' contribution to PF and ESI. 2. Addition for cessation of liability. 3. Disallowance of purchases claimed as bogus. 4. Addition for interest on late deposit of TDS. 5. Disallowance under Section 40A(3). 6. Disallowance of donations and miscellaneous expenses. 7. Disallowance of bonus expenses. 8. Disallowance of depreciation. Issue-wise Detailed Analysis: 1. Addition for Late Deposit of Employees' Contribution to PF and ESI: The assessee contended that the contributions were deposited before the filing of the return of income, though after the due date specified under the respective Acts. The Tribunal referenced the case of Shashi Rajawat vs. ITO and ruled in favor of the assessee, directing the deletion of the addition of Rs. 10,649/- for A.Y. 2009-10 and Rs. 2,14,848/- for A.Y. 2010-11. 2. Addition for Cessation of Liability: The addition of Rs. 1,57,854/- related to the outstanding creditor "Saurabh Enviro Associates" was contested by the assessee. The Tribunal noted that the assessee had not pressed this issue before the CIT(A). However, since the assessee provided detailed documents and ledger accounts, the Tribunal set aside this issue to the CIT(A) for further adjudication, ensuring the assessee gets a reasonable opportunity to present its case. 3. Disallowance of Purchases Claimed as Bogus: For A.Y. 2009-10, the purchases amounting to Rs. 9,52,592/- from "Sivanmani Traders" and "Vinayak Trading Co." were disallowed by the Revenue as bogus. The Tribunal found that the Revenue did not complete proper verification and relied on the assessee's submissions and several judicial precedents to delete the addition. Similarly, for A.Y. 2010-11, the disallowance of 91% of purchases amounting to Rs. 62,32,777/- was also deleted, as the Revenue's addition was based on borrowed satisfaction from VAT authorities without proper cross-verification. 4. Addition for Interest on Late Deposit of TDS: The Tribunal upheld the addition for interest on late deposit of TDS amounting to Rs. 3,93,720/- for A.Y. 2009-10 and Rs. 2,05,630/- for A.Y. 2010-11, referencing the decisions in DNV GL AS vs. ADIT and M/s Jindal Aluminum Ltd. vs. DCIT, which supported the Revenue's stance that such interest is not allowable as a business expenditure. 5. Disallowance under Section 40A(3): The disallowance of Rs. 92,400/- under Section 40A(3) for A.Y. 2010-11 was not pressed by the assessee and thus dismissed by the Tribunal. 6. Disallowance of Donations and Miscellaneous Expenses: The assessee did not press the ground related to miscellaneous expenses amounting to Rs. 1,62,407/- for A.Y. 2010-11, leading to its dismissal by the Tribunal. 7. Disallowance of Bonus Expenses: The Tribunal did not specifically address the disallowance of bonus expenses of Rs. 65,417/- for A.Y. 2010-11, as it was not pressed by the assessee. 8. Disallowance of Depreciation: The Tribunal did not specifically address the disallowance of depreciation amounting to Rs. 3,65,527/- for A.Y. 2010-11, as it was not pressed by the assessee. Conclusion: In ITA No. 764/Mum/2022 for A.Y. 2009-10, the Tribunal allowed grounds 1, 3, and 4, set aside grounds 2 and 2.1 for further adjudication, and dismissed ground 5. Ground 6 was considered general in nature. In ITA No. 765/Mum/2022 for A.Y. 2010-11, the Tribunal dismissed ground 2, allowed grounds 3, 5, and 6, and noted that grounds 1, 4, 7, and 8 were not pressed. Ground 9 was considered general in nature. The appeals of the assessee were partly allowed.
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