2015 (2) TMI 947 - AT - Income Tax

Tribunal upholds CIT(A)'s decision, dismisses Revenue's appeal. Precedents, lack of evidence key.

The Deputy CIT Circle-16 (2) Hyderabad Versus. M/s. Meena Jewellers (P) Ltd., Hyderabad

The Tribunal dismissed the Revenue's appeal, upholding the CIT(A)'s decisions to delete disallowances and additions made by the AO. The judgments were ... Disallowance of employees' contributions to ESI and PF - whether amounts of ₹ 1,14,309 and ₹ 17,137 towards Provident fund and ESI respectively to the account of the employees before the due date for filing of return of income and the same should be allowed under section 43B - Held that:- There is no dispute with regard to the delay in the remittance of the above amounts to the concerned authorities by the assessee, but it is the contention of the assessee that since such remittances have been made before the filing of the return of income, it is an allowable expenditure and no addition is called for. See CIT V/s. Sabari Enterprises [2007 (7) TMI 169 - KARNATAKA HIGH COURT] & CIT V/s. AIMIL Ltd. [2009 (12) TMI 38 - DELHI HIGH COURT] - Decided in favour of assessee. Disallowance u/s. 40(a)(ia) - Non deduction of TDS on payments to contractors - CIT(A) deleted the disallowance - Held that:- As decided in DCIT vs. M/s. Liquidz India Pvt. Ltd [2015 (2) TMI 890 - ITAT HYDERABAD] the impugned amendment to section 40(a)(ia) permits remittance of TDS to the Central Government account on or before the due date of filing return of income u/s. 139(1) of the Act is retrospective in nature. Thus as the assessee having deposited TDS amount before the due date of filing the return u/s. 139(1) no disallowance can be made by invoking the provisions contained u/s. 40(a)(ia) of the Act - Decided in favour of assessee. Estimated profit on cancelled sales and sales returns - Held that:- The internal control system in the bills do not permit any corrections and the only way is to cancel and enter again. The bills have to be cancelled in case the bills which are entered in one firm's name are going to another concern's name due to technical snag. Sometimes, the quantities were entered wrongly and the invoices have to be prepared again reflecting the correct quantities. Name of the dealer/customer if entered wrongly is to be rectified for preparing the invoice in the correct name. in the absence of any evidence to prove that the assessee had tampered the bills to suppress gross sales the contentions of Revenue cannot be accepted. Further, the assessee has prepared the reconciliation and table the CIT(A) has stated as follows: 'Further, the appellant had also produced before the AO, copies-of individual cancelled bills along with copies of sales bills in support of the reconciliation statement. The very same reconciliation statement along with party-wise break up for cancelled bills which are filed before me are verified. The AO's rejection of appellant's explanation in this regard is not based on sound footing. - Decided in favour of assessee. Issues Involved:1. Disallowance of employees' contributions to ESI and PF.2. Disallowance of payments to contractors due to non-compliance with TDS provisions.3. Addition of profit on allegedly suppressed sales turnover and sales returns.Detailed Analysis:1. Disallowance of Employees' Contributions to ESI and PF:The Assessing Officer (AO) added Rs. 1,31,446 to the total income under Section 36(1)(va) of the Income-tax Act, 1961, due to delayed remittance of employees' contributions to ESI and PF. The assessee contended that these contributions were paid before the due date for filing the return under Section 139(1). The CIT(A) relied on precedents like CIT vs. Bharat Bamboo & Timber Suppliers and CIT vs. Assam Tribune, which allowed such contributions if paid before the filing deadline. The Tribunal found that similar issues had been resolved in favor of the assessee in cases like M/s. Vibrant Digital Ltd. vs. DCIT, where delayed remittances made before the filing deadline were allowable. Thus, the Tribunal dismissed the Revenue's appeal on this ground.2. Disallowance of Payments to Contractors:The AO disallowed Rs. 15,09,321 under Section 40(a)(ia) for non-compliance with TDS provisions. The assessee argued that the TDS was remitted before the filing deadline of the return under Section 139(1). The CIT(A) referenced the Calcutta High Court decision in CIT vs. Virgin Creations, which held that amendments to Section 40(a)(ia) permitting TDS remittance by the filing deadline were retrospective. The Tribunal noted similar decisions in DCIT vs. M/s. Liquidz India Pvt. Ltd. and upheld the CIT(A)'s decision to delete the disallowance, dismissing the Revenue's appeal on this issue.3. Addition of Profit on Allegedly Suppressed Sales Turnover and Sales Returns:During a survey, the AO found discrepancies between the turnover reported in the assessee's database and the turnover declared in the return, leading to an addition of Rs. 15,75,30,347 as profit on suppressed sales. The assessee provided a reconciliation statement and explanations for the discrepancies, citing technical snags and internal control systems that necessitated bill cancellations and corrections. The CIT(A) accepted these explanations, noting that the AO did not provide evidence of suppressed sales or unaccounted cash/purchases. The Tribunal found that the AO's conclusions were based on suspicion without concrete evidence and upheld the CIT(A)'s decision to delete the addition, dismissing the Revenue's appeal on this ground.Conclusion:The Tribunal dismissed the Revenue's appeal on all grounds, upholding the CIT(A)'s decisions to delete the disallowances and additions made by the AO. The judgments were based on established precedents and a lack of concrete evidence from the Revenue to support their claims.