2012 (8) TMI 1232 - AT - Income Tax

ITAT Remands Disallowance u/s 40(a)(ia); Upholds Additions for Unexplained Purchases and Salary Disallowance.

The ITAT dismissed both the Revenue's appeals and the assessee's cross-objections, except for the disallowance under section 40(a)(ia), which was remanded ... - Issues Involved:1. Whether the purchases made by the assessee were genuine or bogus.2. Whether the addition made u/s 40A(3) was justified.3. Whether the disallowance u/s 69C was appropriate.4. Whether the disallowance of salary paid to Mrs. Anjali Javalgekar was valid.5. Whether the disallowance u/s 40(a)(ia) was justified.Summary:Issue 1: Genuineness of PurchasesThe Revenue challenged the genuineness of purchases made by the assessee, a Private Limited company engaged in trading paper. The AO noted discrepancies in the purchases and payments, suspecting them to be bogus. The AO made an addition of Rs.1,01,50,000/- as unexplained investment/unaccounted purchases, rejecting the assessee's books u/s 145 and completing the assessment u/s 144. However, the CIT(A) deleted the addition, accepting the purchases as genuine based on statements from the supplier, the transporter, and the bank manager, as well as the report from the special auditor u/s 142(2A). The ITAT upheld the CIT(A)'s decision, finding no infirmity in the detailed order.Issue 2: Addition u/s 40A(3)The AO made an addition of Rs.19,97,986/- u/s 40A(3) for cash payments exceeding the limit. The CIT(A) confirmed this addition, and the ITAT found no infirmity in this decision, thus dismissing the assessee's CO on this ground.Issue 3: Disallowance u/s 69CThe AO made an addition of Rs.96,000/- u/s 69C for unexplained expenditure. The CIT(A) confirmed this addition, and the ITAT upheld the CIT(A)'s decision, dismissing the assessee's CO on this ground.Issue 4: Disallowance of SalaryThe AO disallowed Rs.20,000/- being salary paid to Mrs. Anjali Javalgekar. The CIT(A) confirmed this disallowance, and the ITAT found no infirmity in the CIT(A)'s decision, dismissing the assessee's CO on this ground.Issue 5: Disallowance u/s 40(a)(ia)The AO disallowed Rs.1,11,46,319/- u/s 40(a)(ia) for non-deduction of tax from freight payments. The CIT(A) upheld this disallowance. The ITAT restored the issue to the AO to verify the dates of payment and decide afresh in light of the Visakhapatnam Special Bench decision in Merilyn Shipping and Transport Vs. ACIT, which held that no disallowance is called for if payments are made before the close of the accounting year.Conclusion:The ITAT dismissed the Revenue's appeals and the assessee's CO, except for the issue of disallowance u/s 40(a)(ia), which was remanded to the AO for verification. The ITAT upheld the CIT(A)'s deletion of the addition on account of investment in unexplained purchases and confirmed other additions made by the AO.