2014 (1) TMI 916 - AT - Income Tax

Tribunal upholds CIT(A)'s decisions on Revenue's appeal, rejecting additions for suppressed production and discount/rate difference expenses.

ITO, Ward-2(4) Surat Versus M/s. Asian Dyeing & Printing Mills

ITO, Ward-2(4) Surat Versus M/s. Asian Dyeing & Printing Mills - TMI Issues:1. Addition of Rs.8,85,249 on account of suppressed production.2. Deletion of the addition of Rs.18,80,685 made on account of disallowance of discount/rate difference expenses.Issue 1: Addition of Rs.8,85,249 on account of suppressed production:The Revenue appealed against the CIT(A)'s decision to delete the addition of Rs.8,85,249 due to alleged suppressed production. The Revenue contended that wages paid were not proportionate to production in February 2008 compared to other months. The assessee argued that wages were not linked to production and were paid on a per day basis, depending on various factors like work orders and material quality. The Tribunal found that the addition based on the comparison of monthly production and wages was not valid. The wages were paid daily and not tied to production levels. The Tribunal noted that the AO did not find any discrepancies in the wage register or accounts provided by the assessee. The Tribunal upheld the CIT(A)'s decision, stating that the AO's basis for the addition was unfounded, and no correlation formula between wages and production was sustainable.Issue 2: Deletion of the addition of Rs.18,80,685 on account of disallowance of discount/rate difference expenses:The Revenue challenged the CIT(A)'s decision to delete the addition of Rs.18,80,685 regarding disallowance of discount/rate difference expenses. The Revenue argued that there was no fixed criterion for providing discounts to customers, leading to the disallowance. The assessee explained that discrepancies arose when customer expectations did not align with the completed job work, resulting in claims against the assessee. The Tribunal found the AO's reasoning for disallowance insufficient, as the assessee had provided detailed information, including ledger entries and customer details, supporting the discounts given. The Tribunal noted that the AO did not reject the assessee's accounts or identify significant discrepancies. The CIT(A) emphasized that the AO cannot dictate how the assessee conducts its business. The Tribunal upheld the CIT(A)'s decision, confirming that the assessee had adequately substantiated the discount claims, and the method of accounting had been consistent over the years.In conclusion, the Tribunal dismissed the Revenue's appeal, upholding the CIT(A)'s decisions on both issues.