2020 (4) TMI 186 - AT - Income Tax

Tribunal upholds deletion of disallowed expenses & additions related to unexplained creditors.

The Tribunal upheld the deletion of the disallowance of advertisement expenses for failure to deduct TDS under section 194J of the Income Tax Act. ... TDS u/s 194J - advertisement expenses as the assessee failed to deduct TDS - HELD THAT:- As additions concerned for want of TDS, we find that the said payment was made for printing of leaflet and thus it is in the nature of purchase and VAT has been charged by the seller of the goods under Delhi VAT Act and therefore, the provisions of TDS are not applicable on such facts, no inference is called for. This ground is also dismissed. Addition u/s 68 - unexplained cash credit - HELD THAT:- All payments to creditor are through Account payee cheque only. As the appellant is a small customer to the creditor, it was not possible for the appellant to force the creditor to appear and get the statements recorded. However necessary documents for the genuine existence of the appellant and confirmation of accounts have been sent by the creditor which are on record Documents on record the Ld A.O. has neither disputed the genuine existence of the creditor nor has doubted the genuineness of the transactions of the creditor with the appellant - Decided against revenue. Issues:1. Disallowance of advertisement expenses for failure to deduct TDS under section 194J of the Income Tax Act, 1961.2. Addition of unexplained creditors under section 68 of the Income Tax Act, 1961.3. Evaluation of genuineness of transactions and creditors by the Assessing Officer and the Commissioner of Income Tax (Appeals).4. Application of the decision of the Hon'ble Supreme Court in M.A. Unneeri Kutti v. CIT regarding the onus of the assessee to establish the identity, capacity, and genuineness of creditors.Issue 1: Disallowance of Advertisement ExpensesThe Revenue challenged the deletion of an addition of Rs. 98,054 for failure to deduct TDS on advertisement expenses under section 194J of the Income Tax Act, 1961. The AO believed that such expenses were not allowable under section 40(a)(ia) of the Act due to non-deduction of TDS. However, it was argued that the payment was for printing leaflets and VAT was charged by the seller under the Delhi VAT Act, making TDS inapplicable. The Tribunal dismissed this ground, upholding the deletion of the addition.Issue 2: Addition of Unexplained CreditorsThe AO added Rs. 2,75,06,612 as unexplained creditors due to failure in proving the genuineness of transactions with creditors. The CIT(A) directed further inquiries and examination of creditors' books. After the remand report, the CIT(A) deleted the additions based on the genuineness established during the proceedings. The Tribunal upheld this decision, noting that the AO accepted the transactions' genuineness during the remand proceedings.Issue 3: Evaluation of Genuineness of TransactionsThe AO raised concerns about the genuineness of transactions with certain creditors, leading to additions under section 68 of the Act. The CIT(A) directed inquiries and examination of creditors, resulting in the deletion of additions based on the genuineness established during the proceedings. The Tribunal confirmed the CIT(A)'s decision, emphasizing the AO's acceptance of the transactions' genuineness in the remand report.Issue 4: Application of Legal PrecedentThe Revenue cited the decision of the Hon'ble Supreme Court in M.A. Unneeri Kutti v. CIT regarding the onus of the assessee to establish the identity, capacity, and genuineness of creditors. However, the Tribunal found that the genuineness of the creditors and transactions was established during the proceedings, leading to the deletion of additions. The Tribunal dismissed the appeal filed by the Revenue, confirming the findings of the CIT(A) and the deletion of the additions.This judgment highlights the importance of establishing the genuineness of transactions and creditors during assessment proceedings, as well as the relevance of legal precedents in determining the onus of proof on the assessee.