Tribunal orders re-examination of purchase genuineness, upholds deletion of late payment addition

The Tribunal directed the Assessing Officer to re-examine the genuineness of purchases from two suppliers and upheld the deletion of an addition for late ESI and EPF payments. The assessee's appeal was allowed for statistical purposes, while the Revenue's appeal was partly allowed.

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Issues Involved:
1. Disallowance of expenses related to electric repairs and purchases from Rajiv Electric Trading Co.
2. Disallowance of purchases from Krishna Hardware & Mill Store.
3. Disallowance of consumable account and depreciation of machinery.
4. Deletion of addition made on account of late payment of ESI and EPF.

Detailed Analysis:

1. Disallowance of Expenses Related to Electric Repairs and Purchases from Rajiv Electric Trading Co.:
The assessee claimed expenses under the head "electric repairs" amounting to Rs. 15,14,709, which was significantly higher than the previous year. The Assessing Officer (A.O.) questioned the genuineness of purchases from M/s Rajiv Electric Trading Co. due to discrepancies such as non-existence of the firm at the stated address, non-maintenance of books of accounts, and absence of sales tax returns. Consequently, the A.O. disallowed Rs. 7,76,915/- as bogus purchases. The CIT(A) allowed partial relief of Rs. 3,62,206/- based on proportionate increase in sales.

2. Disallowance of Purchases from Krishna Hardware & Mill Store:
Similar issues were observed with purchases from M/s Krishna Hardware & Mill Store. The A.O. found that the firm did not exist at the given address, and the transactions appeared to be sham. The A.O. disallowed Rs. 17,35,064/- and Rs. 4,80,125/- on account of depreciation. The CIT(A) allowed partial relief of Rs. 4,00,000/- based on proportionate increase in sales.

3. Disallowance of Consumable Account and Depreciation of Machinery:
The A.O. disallowed Rs. 17,35,064/- on account of consumables and Rs. 4,80,125/- for depreciation on machinery, citing lack of evidence for genuine purchases and consumption. The CIT(A) provided partial relief considering the proportionate increase in sales.

4. Deletion of Addition Made on Account of Late Payment of ESI and EPF:
The A.O. disallowed Rs. 1,49,429/- for late payment of ESI and EPF. The CIT(A) deleted this addition, referencing the ITAT Delhi Bench decision in Addl. CIT vs. Vestas RRB India Limited, which allowed such deductions if payments were made before the due date of return filing.

Conclusion:
The Tribunal set aside the issues related to the genuineness of purchases from M/s Rajiv Electric Trading Co. and M/s Krishna Hardware & Mill Store to the A.O. for fresh examination, directing the assessee to cooperate and provide necessary evidence. The deletion of the addition for late payment of ESI and EPF by the CIT(A) was upheld, finding no infirmity in the order.

Result:
- The assessee's appeal was allowed for statistical purposes.
- The Revenue's appeal was partly allowed for statistical purposes.
- The order was pronounced in the open Court on 27.11.2014.

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