2023 (7) TMI 1037 - AT - Income Tax

Tribunal allows appeal, deletes various additions by Assessing Officer. Payments believed, TDS issue sent back for verification.

The appeal was allowed for statistical purposes. The Tribunal ordered the deletion of various additions made by the Assessing Officer, including ... Disallowance of revenue expenditure - HELD THAT:- As assessee out of small turnover of Rs. 2.55 Cr has declared the profit of approximately Rs. 19 lacs which is 7.44% of the turnover. We do not find justification on the part of the lower authorities in disbelieving the small payments booked by the assessee to villagers/labour etc. during the execution of his work specially when execution of the work has not been doubted and the recipients were illiterate labourers/tractor operators etc. Therefore, the impugned addition agitated vide ground No. 2 is ordered to be deleted. Addition of cash credits - assessee claimed in respect of the aforesaid receipts that the same were business receipts - HELD THAT:- No justification on the part of the CIT(A) in confirming the impugned additions. The payment of Shri K.C. Sharma has been made by cheque and there is no denial that assessee has received the said payment from Shri K.C. Sharma. Even there is a cross-verification of the ledger/books of account of Shri K.D. Nirash and there is no denial that the assessee has carried out work from them and the payments were business receipts which have been duly accounted for towards the income of the assessee and due tax paid thereupon. Therefore, the impugned additions are not sustainable, same are, accordingly, ordered to be deleted. Addition u/s 40A(3) - assessee had made cash payments to the labourers, CIT(A) restricted the addition to 50% of the addition made by the AO - HELD THAT:- No justification on the part of the CIT(A) having admitted the contention of the assessee that the aforesaid payment was made out of compulsion to the labourers, therefore, the impugned addition is ordered to be deleted. Addition on account of non-deduction of tax at source (TDS) invoking the provisions of Section 40(a)(ia) - HELD THAT:- This issue is restored to the file of the AO to consider the contentions of the assessee and to verify that the aforesaid payments have been taken into consideration by the respective payees for the purpose of their computation of income and due tax, if any paid thereupon. Disallowance of notional interest - assessee had given certain interest free loans - HELD THAT:- Assessee has explained that the assessee had sufficient own funds to give interest free loan. This fact could not be rebutted by the ld. DR, therefore, the impugned addition is not sustainable. The same is ordered to be deleted. Issues Involved:1. Rejection of books of account and assessment under Section 144.2. Addition of Rs. 2,00,947/- as unexplained revenue expenditure.3. Addition of Rs. 3,02,450/- for alleged cash credits.4. Addition under Section 40A(3).5. Addition under Section 40(a)(ia).6. Disallowance of Rs. 51,732/- on account of notional interest.Summary:Issue 1: Rejection of Books of Account and Assessment under Section 144The assessee did not press this ground, and it was dismissed as not pressed.Issue 2: Addition of Rs. 2,00,947/- as Unexplained Revenue ExpenditureThe assessee, a Civil Contractor operating in remote areas of Himachal Pradesh, claimed certain business expenditures. The AO made an addition of Rs. 8,28,311/- due to unverified payments, which the CIT(A) reduced to Rs. 2,00,947/-. The CIT(A) confirmed the addition for some parties where notices were unserved or payments unverified but deleted it for others where vouchers were produced or transactions admitted. The Tribunal found the lower authorities unjustified in disbelieving small payments to villagers/labourers and ordered the deletion of the addition.Issue 3: Addition of Rs. 3,02,450/- for Alleged Cash CreditsThe CIT(A) confirmed additions for payments from Mr. K.C. Sharma and Mr. K.D. Nirash but deleted it for Mr. Dinesh Kumar. The Tribunal found that payments from Mr. K.C. Sharma were made by cheque and duly accounted for, and there was cross-verification of payments from Mr. K.D. Nirash. The Tribunal ordered the deletion of these additions.Issue 4: Addition under Section 40A(3)The AO made an addition for cash payments to laborers, which the CIT(A) reduced by 50%. The Tribunal found the payments were made out of compulsion in remote areas and ordered the deletion of the addition.Issue 5: Addition under Section 40(a)(ia)The AO made an addition for non-deduction of TDS. The Tribunal restored the issue to the AO to verify if the payees had accounted for the payments in their income and paid due taxes.Issue 6: Disallowance of Rs. 51,732/- on Account of Notional InterestThe AO disallowed notional interest for interest-free loans given by the assessee. The Tribunal found the assessee had sufficient own funds and ordered the deletion of the addition.General GroundsGrounds 7 and 8 were general in nature and did not require adjudication.ConclusionThe appeal was allowed for statistical purposes.