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TMI Blog2012 (9) TMI 734X X X X Extracts X X X X X X X X Extracts X X X X ..... essee. Addition in respect of valuation of closing stock - partial relief by CIT(A)- Held that:- As the assessee had not considered stock of work in process while valuing the closing stock and the assessee has submitted that it does the job of dyeing and printing on job work charges and while valuing the closing stock, the stock of WIP is already included based on that CIT (A) has granted partial relief - As assessee here has not pin-pointed the working of valuation of closing stock which would show that valuation of work in process is also included in it & has also not been in a position to demonstrate as to what was the break up of own material and that received for processing on job work basis no reason to interfere with the order of CIT (A) - against assessee. Non deduction of TDS - Disallowance of labour charges u/s 40(a)(ia)- A.Y. 2006-07 - Held that:- As decided in M/s. Alpha Projects Versus DCIT, Ci rcle-1(1) [2012 (4) TMI 466 - ITAT, AHMEDABAD] since the TDS has been paid to the account of Govt. before filing of return of income, no disallowance is called for - as in this case assessee has credited the amount on 31-3-2005 and tax was also deducted on that date. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee preferred appeal before the CIT (A). CIT (A) partially allowed the appeal of assessee and therefore now the assessee is in appeal before us. 3 The first ground of appeal is with respect to the sustaining disallowance of transport and octroi charges amounting to Rs.5,80,537/- by invoking provisions of Section 40(a) (ia) of the Act r.w.s. 194C of the Act. 4. During the course of assessment proceedings, the A.O. noticed that the assessee has paid transport charges to M/s. Alpesh Roadways others without deducting TDS u/s.194C of the Act. The assessee s submission was that upto 1-10-2004 the assessee was not liable to deduct tax u/s. 194C since the payment was not in excess of Rs.20,000/- to a single person. After 1-10-2004 the law was amended to provide the deduction of TDS was to be made only when the credit value of contract exceeds Rs.50,000/- in a Financial Year. The assessee further submitted that section 40(a)(ia) is only applicable in respect of TDS defaults if the amount is payable. If the amount is actually paid and tax is not deducted as required by section 194C r.w.s. 40(a)(ia) is not applicable. In the case of assessee since the whole of the amount was paid as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee was not liable to deduct tax u/s. 194C, since none of the payment exceeded Rs.20,000/- to a single person. With respect to the payment made after 1-10-2004 it was stated that provisions of section 40(a)(ia) can be invoked only in respect of TDS default if the amount is payable as on last day of the year. In the case of assessee since the amount is actually paid before year end and though tax is not deducted, provisions of 40(a)(ia) are not applicable For this proposition the assessee relied on the decision of Special Bench of the Tribunal in the case of Merilyn Shipping. Thus the L.D. A.R. urged that the disallowance made u/s. 40(a)(ia) be deleted. 7. On the other hands, Ld. D.R. submitted that the amended provision requires the tax to be deducted u/s. 194C in case when the contract payment exceeds Rs.50,000/- in a Financial Year. It was further stated that the requirement of tax is with respect to aggregate payment and not with respect to each payment and each truck. The Ld. D.R. submitted that since the assessee has not deducted TDS, the disallowance u/s. 40(a)(ia) was rightly made by the A.O. He accordingly relied on the order of the Assessing Officer and CIT (A). 8. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e books of accounts. The Ld. A. R. placed on record the submission made before the CIT (A) wherein it was stated that in A.Y. 2004-05 wages expenditure were Rs.18,45,726/- and the turnover was Rs.1,89,59,946/- while in the assessment year under appeal, the wages was Rs.13,95,731/- and corresponding turnover was Rs.2,18,85,012/-. It was thus submitted that contrary to the finding of A.O. the expenditure had decreased and the turnover has increased. It was further submitted that the assessee has deducted P.F. and ESIC from the wages of the employees and paid to the concerned Govt. department. The Ld. A.R. thus urged that the disallowance made by the A.O. be deleted. 13. The Ld. D.R. on the other hand relied on the order of the A.O. 14. We have heard rival contentions, perused the material on record. We observe that the A.O. had not pin pointed any defect in wage register. He has merely disallowed the payment for the reason that there were no signatures of the recipient on revenue stamp in the wage register. He has further presumed that the assessee has inflated expenses on wages without pin pointing to any specific instance. We are of the view that unless and until any specific i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e CIT (A). 19. Before CIT (A), the assessee submitted that the A.O. has grossly erred in estimating the work in progress. It was submitted by the assessee that the process period was of 3 days as against process period of 5 days presumed by the A.O. The assessee submitted the working based on which the average cost of work in process worked out to Rs.1.12 per meter as against Rs.1.80 per meter considered by the A.O. CIT (A) held that since the A.O. had not given any working for arriving at the cost of Rs.3.60 per meter the working made by A.O. cannot be accepted but however, he directed that the disallowance be made on the basis of Rs.1.12 per meter as submitted by the assessee as against the basis of Rs.3.60 per meter. Accordingly, the disallowance made by the A.O. was restricted to Rs.1,08,503/-. Aggrieved by the order of CIT (A) the assessee is now in appeal before us. 20. Before us, the Ld. A.R. submitted that it does the job of Dyeing and Printing on job charges basis in which the grey cloth is supplied by the customers and therefore the cost of cloth should not be considered while calculating work in process. It was further submitted that while valuing closing stock it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tentions of the assessee and upheld the order of the A.O. by holding as under :- I have gone through the contention of the appellant and do not find any merit in its case. It is not in dispute that the said Hatex had carried out labour job through out the year and that as claimed he had passed the year end entry just to avoid the rigor of provisions of section 40(a)(ia) which nothing but after thought and not in accordance with the provisions of section 200(1) or for that matter 194C not is acceptable in accounting parlance since accounts should be maintained on day to day basis and hence where the work was carried out on regular basis the amount should have been credited from time to time and that merely by passing entry on 31-3-2005 appellant does not absolve himself from the liability of deductibility and payment thereof in accordance with the aforesaid provisions. Further merely because the said Hatex Prints was allowed lower deduction of tax also does not absolve the appellant from deduction of tax and payment thereof. In the instant case the A.O. has clearly pointed out that the appellant had not paid the tax deducted at source in accordance with the provisions of section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... been paid to the account of Govt. before filing of return of income, no disallowance is called for. We accordingly direct the deletion of the addition made by the A.O. This ground of appeal is therefore allowed. 31. Fifth ground is with respect to addition of Rs.4,33,130/- on account of inflated purchases. 32. During the course of verification of purchase register the A.O. noticed that the total purchases has been shown at Rs. 95,21,043/- whereas in the return of income total purchases was Rs.99,54,173/-. Before A.O. the Accountant of assessee also confirmed the entries. The A.O. was of the view that assessee had inflated purchases to the tune of Rs.4,33,130/-. A.O. also noticed that as compared to the earlier years there has been increase in purchases but no corresponding figure was noticed in the receipts of job charges. The assessee s contention that the difference was due to the totaling mistake was not accepted by the A.O. He treated the difference of Rs.4,33,130/- as inflated purchases and added to the total income. Against the addition made by A.O., the assessee carried the matter in appeal before the CIT (A). 33. Before CIT (A), the assessee submitted that upto Diwal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arges amounting to Rs.30,73,023/- by invoking the provisions of Section 40(a)(ia) of the Act. 39. A.O. on verification of P L account noticed that assessee has debited Noor and Octroi of Rs.31,14,974/-.The A.O. noticed that it included expenses incurred towards hamali / octroi / kanta service tax aggregating to Rs.2,41,951/- and the rest of the amount (net) of Rs.30,73,023/- was towards freight expenses. The assessee submitted that entire amount of Rs.30,73,023/- was paid to M/s. Ankesh Co., who on commission basis arranges for trucks for transportation. The assessee submitted that it had deducted TDS on commission payment to Ankesh Co. As far as payment of freight charges, it was submitted that as there was no privity of contract between the assessee and truck drivers, no TDS was required to be deducted. It was further submitted that the assessee had paid entire freight charges before 31-3-2006 and nothing was payable on 31-3-2006 and therefore provisions of sec. 40(a)(ia) was not applicable. The A.O. did not accept the contention of assessee and held that since the assessee has not deducted TDS while making payment to transporters u/s. 194C the expenditure is not al ..... X X X X Extracts X X X X X X X X Extracts X X X X
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