2018 (2) TMI 1710 - AT - Income Tax

Tribunal affirms CIT(A)'s decision on sundry creditors & expense disallowances, dismisses Revenue's appeal

The Tribunal upheld the ld. CIT(A)'s decision to delete the addition of Rs. 1,39,84,675/- on account of sundry creditors, emphasizing the genuineness of ... Addition on account of sundry creditors - no compliance of the notice u/s 133(6) - Held that:- No exercise has been done so as to virtually see what is the outcome of notice issued under section 133(6) nor any enquiry or possible efforts were made by the Assessing Officer regarding the same. The disallowance was made only for the reason that there was no compliance of the said notice under section 133(6) of the Act by M/s Larsen & Toubro Limited. We have also to understand the practical position of the fact that M/s Larsen & Toubro Limited doing huge business in India will always as expected to keep their books of account proper and transactions perfect. It is seen that all the transactions are made through banking channel. The Department has not doubted the genuinity of the transactions, therefore, we are of the considered view that as for the facts discussed hereinabove, there is no infirmity with the findings of the ld. CIT(A) in deleting the addition Disallowances of expenses claimed by the assessee under various heads - CIT-A restricted part disallownace - Held that:- Since the assessee is a proprietorship concern, the element of personal use of telephone and vehicle cannot be ruled out. But we find that the disallowances made by the Assessing Officer are on higher side and the disallowance restricted by the ld. CIT(A) to the extent mentioned above are quite reasonable and, therefore, we find no infirmity in the order of the ld. CIT(A) in restricting the disallowances to the extent mentioned. Revenue appeal dismissed. Issues:1. Deletion of addition of Rs. 1,39,84,675/- on account of sundry creditors.2. Restriction of disallowances of expenses claimed by the assessee under various heads.Deletion of Addition of Rs. 1,39,84,675/- on Account of Sundry Creditors:The Revenue appealed against the deletion of the addition of Rs. 1,39,84,675/- on account of sundry creditors and the restriction of expenses disallowances. The Assessing Officer completed the assessment at an income of Rs. 1,56,96,880/-, making various additions and disallowances. The ld. CIT(A) analyzed the facts and found that the addition was made due to non-compliance of notice under section 133(6) by sundry creditors. The appellant submitted the account copies of the parties, proving the transactions were through banking channels. The ld. CIT(A) referred to legal precedents and ruled in favor of the appellant, deleting the addition. The Tribunal upheld the ld. CIT(A)'s decision, emphasizing that the purchases and sales were verified, and no adverse inference was drawn regarding the correctness of the books of accounts.The Tribunal referred to a similar case and legal precedents to support the decision to delete the addition, stating that the sundry creditors' balances were adequately explained by the purchases made. The Tribunal highlighted that the genuineness of purchases was accepted, and no adverse inference was warranted. The Tribunal also noted that the Assessing Officer failed to conduct a thorough inquiry despite issuing notices under section 133(6). The Tribunal upheld the relief granted by the ld. CIT(A) in deleting the addition of Rs. 1,39,84,675/-, emphasizing the lack of infirmity in the ld. CIT(A)'s findings.Restriction of Disallowances of Expenses:Regarding the restriction of disallowances under various heads, the ld. CIT(A) observed that the Assessing Officer did not provide specific findings on unverifiable expenses. Considering the nature of the assessee's proprietorship business, personal expenses related to telephone and vehicle usage were acknowledged. The ld. CIT(A) restricted the disallowances under telephone and vehicle expenses to reasonable amounts, disagreeing with the higher disallowances made by the Assessing Officer. The Tribunal concurred with the ld. CIT(A)'s decision, finding the restricted disallowances reasonable and sustaining the order.In conclusion, the Tribunal dismissed the Revenue's appeal, upholding the decisions of the ld. CIT(A) regarding the deletion of the addition on account of sundry creditors and the restriction of disallowances on expenses. The Tribunal pronounced the order in favor of the assessee on 26/02/2018.