9911796707
|
Home
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2023 (9) TMI 1674 - AT - Income TaxValidity of assessment u/s 153A - HELD THAT - As the assessment order passed u/s 143(3) r.w.s. 153A of the Act for all the assessment years under appeal are liable to be quashed in view of the decision of the Hon ble Supreme Court 2023 (4) TMI 1056 - SUPREME COURT as well as subsequent instructions notified by the CBDT Instruction No. 1 of 2023 dated 23.08.2023 vide letter F. No. 279/Misc./M-54/2023-ITJ. Accordingly the additional grounds raised by the Revenue for the assessment years 2010-11 2011-12 and 2012-13 are dismissed. Addition made towards disallowance of expenditure towards special salary commission charges - As we are of the opinion that the additions made by the AO are unwarranted which was rightly deleted by CIT(A). Thus we find no infirmity in the order of the ld. CIT(A) on this issue. Accordingly the ground raised by the Revenue is dismissed for the assessment years under appeal. Addition u/s 40(a)(ia) - Payment made to contractors w/o deducting TDS - assessee has submitted that the contract-labourers are in the muster roll of the assessee and are covered by the ESI/PF Act - HELD THAT - No incriminating material like contract agreement etc. was brought on record. CIT(A) has observed that the AO was misled by the statement given by Shri Murugesan as reported in the appraisal report and never bothered to examine the liability of the assessee to deduct tax at source independently with reference to the facts of the case. In view of the above undisputed facts the ld. CIT(A) has rightly deleted the disallowance made u/s 40(a)(ia) of the Act by holding that the assessee has directly engaged labourers borne in the Provident Fund records and made payments through the head labourer and therefore there was no liability to TDS. CIT(A) has rightly deleted the disallowance made under section 40(a)(ia). Addition on brought notes - purchases made through bought notes - HELD THAT - By considering the submissions that inasmuch as the entire amount was offered to tax as bought note purchases and the same was credited in the profit loss account which the Assessing Officer wrongly mentioned in the assessment order as Rs..1, 74, 32, 430/- thereby adding a further sum of (Rs..1, 74, 32, 430 1, 71, 32, 430) Rs..3, 00, 000/- was not called for. Considering the above facts we find that the ld. CIT(A) has correctly deleted the addition of Rs..3, 00, 000/- which was erroneously added to the total income of the assessee. Thus the ground raised by the Revenue is dismissed for AY 2011-12. Disallowance of expenditure by cash purchase - CIT(A) deleted addition - HELD THAT - We find that no cash payment was made by the assessee. Moreover all the purchase of copras are through agent and the payments were made to these agents through banking channel i.e. RTGS. No reason to interfere with the order passed by the ld. CIT(A) on this issue and accordingly the ground raised by the Revenue is dismissed for the assessment years under appeal. Disallowance of expenditure violating the provisions of Section 40A(3) and bogus purchase - HELD THAT - CIT(A) has noted from the assessment order that the AO has admitted the fact that payments were made through RTGS. AO has not made a mention in the assessment order that for the purchase of copra cash payments were made by the assessee and moreover the AO has also not disputed the purchase of copra. CIT(A) has rightly observed that the disallowance by treating the RTGS payments as cash payment was not correct and consequently deleted the addition for the assessment year 2012-13. AO failed to establish that the assessee made purchases by paying cash. It is a fact that the entire payments were made by the assessee through RTGS to its agent. It is a mere allegation by the Assessing Officer that the assessee purchased the copras by paying cash. The assessee in fact made payments through RTGS only. In turn the agents issued bearer cheques according to their convenience. Therefore AO was not justified in invoking the provisions of section 40A(3) in the case of the assessee - ground raised by the Revenue is dismissed. Addition made towards suppression of purchase along with estimated gross profit - HELD THAT - AO took the value of purchases as appearing in the SAP from May 2011 to March 2012 (i.e. for 11 months) and compared the figures of purchases as taken from the parties ledgers from April 2011 to March 2012 (12 months) In effect the Assessing Officer by mistake compared the 11 months figures of the assessee with that of 12 months figures of the parties. Naturally there is every likelihood of arriving at a variation. Based on this (wrong) methodology the AO arrived at the suppression of purchases. Thus CIT(A) has observed that the addition was due to erroneous adoption of purchase figures the AO made an huge unwanted addition and thus the CIT(A) was reluctant to sustain the addition. We also find that the AO was not able to establish suppression of purchases made by the assessee. Suppression of closing stock - HELD THAT - Assessee has duly submitted the reconciliation statement and reasons for the difference before the AO which was unfortunately not considered. Before the ld. CIT(A) the assessee has produced copy of the actual value of closing stock (with quantity) as furnished to the Central Excise Department. After considering the detailed written submission filed by the assessee as was submitted before the Assessing Officer which was not considered by him the ld. CIT(A) observed that the closing stock as on 31.03.2012 as reported in the return of income by the assessee do not warrant any further alteration and it shows the correct position as on that date. Accordingly the ld. CIT(A) deleted the addition towards suppression of stock correctly. - ground raised by the Revenue is dismissed.
ISSUES PRESENTED and CONSIDERED
The core legal questions considered in this judgment include: 1. Whether the additions made by the Assessing Officer (AO) under various heads such as special salary, commission charges, and contractual payments for want of TDS were justified. 2. Whether the deletion of additions by the Commissioner of Income Tax (Appeals) [CIT(A)] based on the absence of incriminating material was correct. 3. Whether the CIT(A) was correct in deleting the addition related to bought notes and disallowance of expenditure by cash purchase of copra. 4. Whether the CIT(A) was justified in deleting additions related to purported suppression of purchases and closing stock discrepancies. ISSUE-WISE DETAILED ANALYSIS 1. Additions under Special Salary, Commission Charges, and Contractual Payments The relevant legal framework involves the provisions of the Income Tax Act concerning the disallowance of claims and the requirement of TDS under section 40(a)(ia). The AO disallowed claims based on statements recorded from company directors and employees during a search operation. The CIT(A) deleted these additions, noting that the payments were reasonable, incurred due to business exigency, and not personal in nature. The CIT(A) observed that the AO made additions mechanically without independent application of mind or further inquiries. The Tribunal agreed with the CIT(A), emphasizing that additions based solely on statements without corroborating evidence are unwarranted. The Tribunal noted that the AO failed to provide evidence beyond the statements and that the CIT(A) correctly applied the law by deleting the additions. 2. Absence of Incriminating Material The CIT(A) deleted all additions made in assessments under section 153A, citing the absence of incriminating material found during the search. The Tribunal upheld this view, referencing the Supreme Court's decision in Abhisar Buildwell Pvt. Ltd., which clarified that in the absence of incriminating material, no additions could be made for completed or unabated assessments under section 153A. 3. Bought Notes and Cash Purchase of Copra The AO made additions based on discrepancies in bought notes and alleged cash purchases of copra. The CIT(A) deleted these additions, noting that the AO failed to provide the assessee an opportunity to cross-examine the third parties from whom the incriminating materials were seized. The Tribunal supported the CIT(A), emphasizing that evidence collected at the back of the assessee without cross-examination holds no evidentiary value. 4. Suppression of Purchases and Closing Stock Discrepancies The AO alleged suppression of purchases and discrepancies in closing stock based on differences between SAP and Tally accounting systems. The CIT(A) found that the AO mistakenly compared figures from different periods due to the company's switch from Tally to SAP. The Tribunal agreed with the CIT(A), noting that the AO's methodology was flawed and that the CIT(A) correctly deleted the additions. SIGNIFICANT HOLDINGS The Tribunal affirmed the CIT(A)'s decision to delete the additions made by the AO, emphasizing the following principles: - Additions cannot be made solely on the basis of statements without corroborating evidence. - In the absence of incriminating material found during a search, no additions can be made for completed or unabated assessments under section 153A. - Evidence collected at the back of the assessee without the opportunity for cross-examination lacks evidentiary value. - Methodological errors in comparing accounting figures can lead to incorrect conclusions about suppression of purchases or stock discrepancies. In conclusion, the Tribunal dismissed all appeals filed by the Revenue, upholding the CIT(A)'s deletions of the additions made by the AO for the assessment years in question.
|
