2020 (4) TMI 754 - AT - Income Tax

Tribunal partially upholds appeal, directs re-examination, and deletions

M/s Moraj Building Concepts Pvt. Ltd. Versus ITO-15 (2) (3), Aayakar Bhavan, Mumbai.

M/s Moraj Building Concepts Pvt. Ltd. Versus ITO-15 (2) (3), Aayakar Bhavan, Mumbai. - TMI Issues Involved:1. Addition/Disallowance of Rs. 38,319/- for suppressed profit element in purchases.2. Disallowance of Rs. 7,50,000/- on account of consultancy charges paid to Modern Line Distribution.3. Addition of Rs. 7,63,865/- on account of unexplained expenses.4. Disallowance of Rs. 55,00,000/- on account of payment made to Shri Sai Prerna Charitable Trust.5. Addition of Rs. 1,27,999/- for purchases from Satya Narayan Marble.6. Addition of Rs. 5,00,000/- u/s 68 on account of tentative buy price of a flat to R.A. Chug.7. Addition of Rs. 2,66,393/- for alleged discrepancy in cash in hand.8. Addition of Rs. 16,77,178/- on account of alleged untallied trial balance.Detailed Analysis:1. Addition/Disallowance of Rs. 38,319/- for Suppressed Profit Element in Purchases:The assessee challenged the addition of Rs. 38,319/- (12.5% of Rs. 3,06,555) made by the AO based on the information that M/s Khushi Enterprises issued bogus bills. The CIT(A) upheld this addition citing the decision in CIT v. Simit P. Sheth and Bholanath Polyfab Pvt. Ltd., estimating suppressed profit at 12.5%. The tribunal found that the CIT(A)'s order was based on proper appreciation of facts and law, and thus dismissed the appeal.2. Disallowance of Rs. 7,50,000/- on Account of Consultancy Charges Paid to Modern Line Distribution:The AO disallowed Rs. 15,00,000/- paid to Modern Line Distribution for non-deduction of TDS. The CIT(A) noted that only Rs. 7,50,000/- was paid and upheld the disallowance, adding it back to WIP. The tribunal directed the AO to re-examine the applicability of Article 14 of the DTAA with UAE and the necessity of TDS, thus allowing the appeal for statistical purposes.3. Addition of Rs. 7,63,865/- on Account of Unexplained Expenses:The AO added Rs. 7,63,865/- based on entries in impounded books related to purchases. The CIT(A) upheld this addition, noting the assessee's failure to prove the expenditure. The tribunal directed the AO to re-examine the evidence and allowed the appeal for statistical purposes.4. Disallowance of Rs. 55,00,000/- on Account of Payment Made to Shri Sai Prerna Charitable Trust:The AO disallowed Rs. 55,00,000/- added to WIP as donation to Shri Sai Prerna Charitable Trust. The CIT(A) upheld the disallowance, noting the lack of business connection and tax exemption certificate. The tribunal agreed with the CIT(A), confirming the reduction of WIP and higher profit in the completion year.5. Addition of Rs. 1,27,999/- for Purchases from Satya Narayan Marble:The AO disallowed Rs. 1,27,999/- as cash payment for defective goods return. The CIT(A) upheld this addition. The tribunal found that the goods were returned and no payment was made, thus deleting the addition and allowing the appeal.6. Addition of Rs. 5,00,000/- u/s 68 on Account of Tentative Buy Price of a Flat to R.A. Chug:The AO added Rs. 5,00,000/- based on entries in impounded documents. The CIT(A) upheld this addition. The tribunal found no evidence of actual payment and deleted the addition, allowing the appeal.7. Addition of Rs. 2,66,393/- for Alleged Discrepancy in Cash in Hand:The AO added Rs. 2,66,393/- for cash discrepancy during the survey. The CIT(A) upheld this addition, questioning the post-survey explanation. The tribunal found the explanation valid and deleted the addition, allowing the appeal.8. Addition of Rs. 16,77,178/- on Account of Alleged Untallied Trial Balance:The AO added Rs. 16,77,178/- for untallied trial balance. The CIT(A) upheld this, noting the lack of explanation. The tribunal found the discrepancy due to software transition and deleted the addition, allowing the appeal.Conclusion:The tribunal upheld some additions and disallowances while directing re-examination or deletion of others, thus partly allowing the appeal. The order was pronounced on 19/02/2020.