2022 (2) TMI 978 - AT - Income Tax

Tribunal directs deletion of fabricated charges, citing business necessity and lack of defects.

The Tribunal allowed the appeal, directing the AO to delete the addition of Rs. 10,80,754 made by the CIT(A) for fabrication charges. The Tribunal ... Addition being 6.5% of the cash payment against the job work on account of glaring discrepancies in the fabrication charges for which cash payments were made - HELD THAT:- We find, identical issue had come up before the Tribunal in assessee's own case for AY 2012-13 [2018 (10) TMI 240 - ITAT DELHI] wherein the Ld. CIT(A) deleted the entire addition which included an amount paid in cash for fabrication work. - Decided in favour of assessee. Issues:Appeal against CIT(A) order disallowing a sum paid as fabrication charges in cash due to unverifiable bills.Analysis:The appeal was filed against the CIT(A) order relating to AY 2014-15, where the assessee contested the disallowance of a sum paid as fabrication charges in cash. The AO disallowed an amount of Rs. 10,80,754 out of Rs. 1,66,26,991 paid towards job work, citing unverifiable bills. The CIT(A) upheld the AO's decision, noting discrepancies in bills and reasoning that the addition made was reasonable. The assessee argued that the addition was unjustified as audited books showed no mistakes, referencing a previous case where a similar addition was deleted. The Revenue, however, supported the AO and CIT(A) decisions, emphasizing the discrepancies in bills and the unique nature of each tax year.In the Tribunal's analysis, it was noted that the issue was similar to a previous case for AY 2012-13, where the entire addition for fabrication work was deleted. The Tribunal highlighted that fabrication charges were essential for the assessee's business, and no specific defects were found in the books of account. The Tribunal emphasized that expenses on fabrication charges were necessary for earning income, and there was no justification for disallowing the entire amount. The Tribunal also acknowledged that the CIT(A) had correctly deleted the addition after verifying the details and books of account. Consequently, the Tribunal set aside the CIT(A) order and directed the AO to delete the addition, ruling in favor of the assessee.Therefore, based on the precedent set in the previous case and the lack of specific defects in the books of account, the Tribunal allowed the appeal and instructed the AO to delete the addition of Rs. 10,80,754 made by the CIT(A), emphasizing the necessity of fabrication charges for the assessee's business operations.