2012 (9) TMI 651 - HC - Income Tax

Tribunal Decision: Disallowance of Freight Charges Upheld, Sundry Creditors' Addition Dismissed, Advance Amounts as Cash Credits

The Tribunal upheld the disallowance of freight charges due to non-deduction of TDS as the assessee failed to provide evidence supporting their claim that ... Non deduction of TDS on freight charges - disallowance by invoking Section 40(a) (ia) - Held that:- The assessee had made the payment towards freight charges directly to the transporter and it was not a case where such payments were debited to the supplier's account - as the assessee had not produced any material to establish the contention of the assessee, but from making a bald assertion, thus the disallowance was on facts - against assessee Addition by Invoking Section 41(1) - Held that:- As with regard to the two sundry creditors where the assessee had not produced anything to show the subsisting liability towards the alleged creditors and there was no evidence placed with respect to the payments made and no consequent acknowledgment of such credits were proved by the assessee the said addition does not give rise to any question of law - against assessee Addition on cash credits - Held that:- As the assessee had contended the cash credits to be advances from customers who had made orders for specified goods but in the same breath contented that the details of the persons who made such advances were not known to them and the said advances were cash infused by the assessee into the business to make up the short fall in cash was found by the Tribunal to be a fact evident and emanating from the assessee's books of accounts - against assessee. Issues:1. Disallowance of freight charges for non-deduction of TDS.2. Addition of sundry creditors' amount to income.3. Treatment of advance amounts as cash credits under Section 68 of the Income Tax Act.Issue 1: Disallowance of Freight Charges for Non-Deduction of TDS:The assessee argued that since they had no direct contract with the transporter and the liability to pay freight charges was on the supplier, there was no obligation to deduct TDS. However, the Tribunal found that the assessee had paid the freight charges directly to the transporter and failed to provide evidence supporting their claim. The Tribunal concluded that no legal question arose from this issue as the disallowance was based on facts.Issue 2: Addition of Sundry Creditors' Amount to Income:The assessee did not provide any evidence to demonstrate the existence of liabilities towards the alleged creditors totaling Rs. 2,19,670. Lack of proof of payments made or acknowledgment of such credits led to the dismissal of this issue without raising any legal question.Issue 3: Treatment of Advance Amounts as Cash Credits:The assessee contended that the advance amounts received were from customers who had placed orders for specific goods, implying future product delivery. However, the lack of details about the customers making such advances weakened this argument. The Tribunal found that the advances were actually cash infused by the assessee to cover cash shortages, as indicated by the books of accounts. The disallowances were upheld by the Tribunal based on factual evidence, and no legal questions arose from these issues.The Tribunal's decision to reject the appeal was based on the failure of the assessee to substantiate their contentions with factual evidence before the lower authorities. The disallowances and additions to the income were deemed valid, as the Tribunal's findings were factually supported. Despite the vigorous arguments presented by the assessee's counsel, the court declined to exercise jurisdiction under Section 260A of the Income Tax Act, leading to the rejection of the appeal.