2012 (7) TMI 797 - AT - Income Tax

Tribunal upholds deletion of additions, dismisses assessee's cross-objection on TDS non-deduction

The Tribunal upheld the deletion of additions on account of work in progress, bogus purchases, and rebate and discount. Additionally, the Tribunal ... Addition made on account of work in progress - Held that:- As decided in CIT Versus MAHAVIR ALLUMINIMUM LTD. [2007 (11) TMI 41 - HIGH COURT, DELHI] whenever any adjustment is made in the valuation of inventory, this will affect both, the opening as well as the closing stock - thus it is evident that AO has not taken into account working of the opening stock of work in progress, therefore no merit into this ground of appeal of the Revenue against CIT(A)in deleting the addition - in favour of assessee. Addition on account of bogus purchases - Held that:- The material produced in the form copies of bills which were recorded into the books of assessee but were not recorded into the accounts of M/S Aggrawal Enterpries - that the assessee has submitted the copies of delivering challans and weighing slips it can be concluded that the assessee had shown all the purchase bills while M/S Aggrawal Enterprise has not shown all the purchases bills while M/S Aggrawal Enterprises has not shown cash sales - no proof of bogus purchases - in favour of assessee. Addition on account of rebate and discount - Held that:- Considering the contention of the assessee that such huge discount and rebate would not have been given as the seeing the value of material & CIT(A) has given a finding that M/S Aggrawal Enterprises has not recorded the correct transaction in his books of accounts. The Revenue has not brought any material to rebut the finding of CIT(A) - in favour of assessee. Disallowance on breach of sec.40(a)(ia) - non-deduction of TDS on transportation charges - Held that:- The sum credited or paid or likely to be paid are credited to the account of the contractor or the contractor if such sum exceed 20,000/- tax is deductible in terms of Section 194C(5) - Since the aggregate amount paid exceeds the limit prescribed under Section 194C(5) of the Act, therefore, first argument of the assessee is not acceptable - the opening line of Section 194(C)(1) makes it clear that the assessee was liable to deduct tax since it reads any person responsible for paying any sum to any resident. In this case admittedly the assessee was responsible for paying sum to the transporter - against assessee. Issues Involved:1. Deletion of addition on account of work in progress.2. Deletion of addition on account of bogus purchases.3. Deletion of addition on account of rebate and discount.4. Disallowance under section 40(a)(ia) for non-deduction of TDS on transportation charges.Issue-wise Detailed Analysis:1. Deletion of Addition on Account of Work in Progress:The Revenue contested the deletion of an addition of Rs. 1,24,012/- made by the Assessing Officer (A.O.) on account of work in progress. The A.O. had observed that the assessee did not show the closing stock of work in progress, which included expenses on color, chemical, wages, power, and fuel. The A.O. added this to the income without considering the opening stock of work in progress. The CIT(A) deleted this addition, referencing the Delhi High Court judgment in CIT Vs. Mahavir Aluminum Ltd., which mandates adjustments in both opening and closing stocks when any inventory valuation adjustment is made. The Tribunal upheld the CIT(A)'s order, finding no merit in the Revenue's appeal, as the A.O. failed to consider the opening stock of work in progress.2. Deletion of Addition on Account of Bogus Purchases:The Revenue challenged the deletion of Rs. 4,45,327/- added by the A.O. on account of bogus purchases from M/s Agrawal Enterprises. The A.O. noted discrepancies between the assessee's ledger and the confirmation from M/s Agrawal Enterprises. The CIT(A) deleted the addition, noting that the assessee provided delivery challans, weighing slips, and payment proofs, indicating genuine purchases. The Tribunal found that the CIT(A)'s findings were not controverted by the Revenue with substantial evidence and upheld the deletion of the addition.3. Deletion of Addition on Account of Rebate and Discount:The A.O. had also added Rs. 1,10,125/- on account of rebate and discount, which was reflected in M/s Agrawal Enterprises' confirmation but contested by the assessee. The CIT(A) deleted this addition, noting that such a large rebate and discount were unlikely given the value of the material. The Tribunal agreed with the CIT(A), finding the assessee's contention plausible and dismissing the Revenue's appeal on this ground.4. Disallowance under Section 40(a)(ia) for Non-Deduction of TDS on Transportation Charges:The assessee's cross-objection involved the disallowance of Rs. 2,64,101/- under section 40(a)(ia) for non-deduction of TDS on transportation charges. The A.O. observed that the assessee was liable to deduct TDS as the aggregate payments to transporters exceeded the threshold limit. The CIT(A) upheld the disallowance, rejecting the assessee's argument that there was no contract with the transporters and that individual payments did not exceed the limit. The Tribunal concurred, noting that the aggregate payments exceeded the prescribed limit and the assessee was responsible for paying the transporters, thus liable to deduct TDS under section 194C.Conclusion:The Tribunal dismissed the Revenue's appeal regarding the deletion of additions on account of work in progress, bogus purchases, and rebate and discount. It also dismissed the assessee's cross-objection concerning the disallowance under section 40(a)(ia) for non-deduction of TDS on transportation charges.