2024 (11) TMI 430 - AT - Income Tax

Addition u/s 68 - onus to prove - loan received by the assessee during the year under consideration - CIT(A) deleted addition - HELD THAT - There is no dispute regarding the fact that both parties, who have lent a loan to the assessee, have furnished their PAN, ITR acknowledgement and also complied with notice issued u/s 133(6) of the Act. Thus, we are of the considered view that identity in the present case of the loan lender cannot be doubted. As regards the allegation of the Revenue that the assessee failed to produce both parties for evidence, it is pertinent to note that both parties made due compliance and responded to the notice issued u/s 133(6) and filed the documentary evidence to prove their identity and creditworthiness and genuineness of the transaction. AO has merely raised doubt as regards the loan confirmation submitted by Mr. Mahesh Purohit only on account of a mismatch in signature, which we found to be only in respect of one out of three loan confirmations pertaining to the said transaction and in view of the fact that the said transaction is duly supported by the bank statement, such a doubt appears to be merely a pretext to doubt the transaction by the assessee without any substantial material being brought on record. In any case, the Revenue has not denied the submission of the assessee that the loan was ultimately repaid on 24/02/2014, i.e. in the year under consideration itself. Thus, we are of the considered view that in the present case, the assessee has discharged the initial onus of proving the identity and creditworthiness of the loan lenders and the genuineness of the transaction. Accordingly, we find no infirmity in the findings of the learned CIT(A) in deleting the addition. Disallowance of transport and hiring charges and reduction of disallowance on account of wage and labour charges - CIT(A) deleted addition - HELD THAT -It is evident from the record that the AO neither controvert any of these details furnished by the assessee nor examined the parties to whom payment was made despite the availability of PAN details and only on the basis that bills and vouchers have not been presented in respect of material and transport/hiring charges made the disallowance. It is further pertinent to note that the disallowance was only restricted to 10% of the expenditure and the entire expenditure of INR 1,13,90,636 as claimed by the assessee was not disallowed. At this stage, it is also relevant to note that in the year under consideration the assessee has shown a total sale of INR 12,16,47,493. Such being the facts, we find no infirmity in the impugned order in deleting the ad-hoc disallowance of 10% made on account of material, transport and hiring charges by the AO. For labour charges incurred by the assessee, we find that the assessee has merely provided the list of parties to whom such charges have been paid - We are of the considered view that even if these parties are daily wagers, the assessee being a contractor would have maintained a record having at least the details regarding the date of payment made to these parties and the work contract in respect of which these payments have been made. However, it is evident from the record that the said details were not provided by the assessee. It is evident from the record that the AO made a disallowance at 10% in respect of wage and labour expenses which has further been reduced by the learned CIT(A) to 2%. However, in view of the fact that the assessee is a registered civil contractor for MCGM and has undertaken various work contracts for authorities, it cannot be denied that the assessee would have incurred wages and labour charges for the purpose of its business. Therefore, in view of the peculiar facts and circumstances of the present case as noted above, we are of the considered view the disallowance @2% made by the learned CIT(A) on account of wage and labour charges is justified and thus the same is upheld.

Summary

Issues Involved:

1. Deletion of addition made under Section 68 of the Income Tax Act, 1961, regarding unexplained cash credit.
2. Deletion of disallowance of transport and hiring charges and reduction of disallowance of wage and labour charges.

Issue-wise Detailed Analysis:

1. Deletion of Addition under Section 68 of the Income Tax Act, 1961:

The Revenue challenged the deletion of an addition of INR 3,18,48,400 made under Section 68 of the Income Tax Act, 1961, treating it as unexplained cash credit. The Assessing Officer (AO) had initially added this amount, questioning the identity, creditworthiness, and genuineness of the loans received from two individuals, Mr. Mahesh Purohit and Mr. Ramesh Purohit. The AO noted discrepancies in signatures and insufficient income to justify the loan amounts.

The learned Commissioner of Income Tax (Appeals) [CIT(A)] deleted this addition, noting that the assessee provided adequate documentation, including confirmations, bank statements, and income tax returns of the lenders. Both lenders complied with notices under Section 133(6) after updated addresses were provided. The loans were short-term deposits for business obligations and were repaid within the same financial year. The Tribunal upheld the CIT(A)'s decision, finding that the assessee had discharged the onus of proving the identity and creditworthiness of the lenders and the genuineness of the transaction. The Tribunal found no infirmity in the CIT(A)'s findings and dismissed the Revenue's appeal on this issue.

2. Deletion of Disallowance of Transport and Hiring Charges and Reduction of Disallowance of Wage and Labour Charges:

The second issue pertained to the deletion of a 10% disallowance on transport and hiring charges and the reduction of a 10% disallowance on wage and labour charges to 2%. The AO had made these disallowances due to the assessee's failure to produce detailed bills and vouchers for the claimed expenses.

The CIT(A) deleted the disallowance on transport and hiring charges, finding that the assessee provided sufficient details, including party names and PAN numbers. The Tribunal agreed, noting that the AO did not dispute the details provided nor examined the parties despite having their PAN information.

Regarding wage and labour charges, the CIT(A) reduced the disallowance to 2% due to the lack of detailed supporting documentation. The Tribunal upheld this decision, acknowledging the nature of the assessee's business as a civil contractor necessitating such expenses. The Tribunal found the 2% disallowance reasonable given the circumstances and dismissed the Revenue's appeal on this issue as well.

Conclusion:

The Tribunal dismissed the Revenue's appeal, upholding the CIT(A)'s decisions on both issues. The Tribunal found the assessee had adequately demonstrated the genuineness of the transactions and the necessity of the expenses, thereby justifying the deletions and reductions made by the CIT(A). The order was pronounced in the open court on 07/11/2024.