2017 (9) TMI 843 - AT - Income Tax

Appeal partially allowed: hire charges & cash deposits accepted, expenses disallowance reduced.

Shri Vishwajit C Chindarkar Versus DCIT RG 22 (2), Mumbai

Shri Vishwajit C Chindarkar Versus DCIT RG 22 (2), Mumbai - Tmi Issues Involved:1. Disallowance of expenses on account of Hire Charges under Section 40(a)(ia) for non-deduction of TDS under Section 194C.2. Addition of cash deposited in the Shamrao Vitthal Co-operative Bank as unaccounted income.3. Disallowance of 10% of total expenses as bogus expenses.Issue-wise Detailed Analysis:1. Disallowance of Expenses on Account of Hire Charges under Section 40(a)(ia) for Non-deduction of TDS under Section 194C:The assessee, engaged as a contractor for BMC, claimed vehicle hire charges as an expense in the Profit & Loss account. The Assessing Officer (AO) disallowed these expenses under Section 40(a)(ia) for non-deduction of TDS, as required under Section 194C. The assessee contended that the vehicle owners did not own more than two vehicles, thus falling under the proviso of Section 194C, which exempts such payments from TDS. The assessee provided affidavits from the vehicle owners to support this claim. The Tribunal found that the assessee had complied with the proviso by obtaining Form No. 15-I from the sub-contractors, and therefore, was not liable to deduct TDS. Consequently, the disallowance under Section 40(a)(ia) was directed to be deleted.2. Addition of Cash Deposited in the Shamrao Vitthal Co-operative Bank as Unaccounted Income:The AO added Rs. 49,54,600/- to the assessee's income, citing cash deposits in the Shamrao Vitthal Co-operative Bank as unaccounted income. The assessee explained that these deposits were made from cash withdrawals from Bharat Co-operative Bank. The Tribunal reviewed the bank statements and the cash flow statement, confirming that the deposits were part of the cash flow and duly disclosed in the balance sheet. Thus, the Tribunal directed the AO to delete the addition, as the cash deposits were accounted for.3. Disallowance of 10% of Total Expenses as Bogus Expenses:The AO disallowed 10% of the total expenses amounting to Rs. 48,21,503/-, citing the assessee's failure to provide detailed bills and invoices. The assessee argued that all expenses were recorded in audited books and supported by documentation. The Tribunal, considering the nature and quantum of income and expenses, deemed it appropriate to reduce the disallowance from 10% to 5%. Thus, the Tribunal confirmed the disallowance to the extent of 5% of the total expenses.Conclusion:The appeal was allowed in part. The Tribunal deleted the disallowance of hire charges under Section 40(a)(ia) and the addition of cash deposits as unaccounted income, while partially upholding the disallowance of expenses by reducing it from 10% to 5%. The order was pronounced in the open court on 13/09/2017.