2023 (10) TMI 257 - AT - Income Tax

Tribunal dismisses Revenue's appeals, overturns disallowances, and finds no evidence of misconduct

The Deputy Commissioner of Income Tax, Central Circle 2, Madurai. Versus M/s. VVD & Sons (P) Limited

The Deputy Commissioner of Income Tax, Central Circle 2, Madurai. Versus M/s. VVD & Sons (P) Limited - TMI Issues Involved:1. Condonation of Delay2. Deletion of Additions Made by the Assessing Officer3. Disallowance of Payments to Contractors4. Alleged Excess Stock5. Disallowance under Section 40A(3)6. Bogus Purchase of Copra7. Difference in Closing Stock as per SAP vs. Return of Income8. Purchase from Market Committee9. Alleged On-Money Payment for Land Acquisition10. Cross Objections Regarding Non-Deduction of Tax at SourceSummary:1. Condonation of Delay:The appeals filed by the Revenue were delayed by three days. The Tribunal condoned the delay as the Revenue was prevented by sufficient cause. Similarly, the Cross Objections filed by the assessee were delayed by 11 days and were also condoned.2. Deletion of Additions Made by the Assessing Officer:The CIT(A) deleted the additions made under various heads such as special salary, additional salary, management salary, etc., as the Assessing Officer did not provide sufficient evidence that the remuneration paid was unreasonable or excessive. The Tribunal upheld the CIT(A)'s decision, noting that the Assessing Officer failed to discharge the burden of proof and made the additions mechanically.3. Disallowance of Payments to Contractors:The Assessing Officer disallowed payments to contractors due to non-deduction of TDS. The CIT(A) found that the laborers were regular workers and payments were made through head laborers, which did not warrant TDS. The Tribunal upheld the CIT(A)'s decision, stating that the payments were not contractual and thus did not require TDS.4. Alleged Excess Stock:The Assessing Officer added amounts for alleged excess stock based on adjustment entries. The CIT(A) deleted the addition, noting that the Assessing Officer did not prove that the excess stock was sold and unaccounted income was earned. The Tribunal upheld this decision.5. Disallowance under Section 40A(3):The Assessing Officer invoked Section 40A(3) for payments made through bearer cheques. The CIT(A) deleted the disallowance, stating that the payments were made through RTGS and the bearer cheques were issued by the Kerala supplier, not the assessee. The Tribunal agreed with the CIT(A).6. Bogus Purchase of Copra:The Assessing Officer added amounts for alleged bogus purchases due to rate variations. The CIT(A) deleted the addition, noting that the assessee needed to acquire high-quality copra, which justified the higher prices. The Tribunal upheld the CIT(A)'s decision, stating that the addition was based on suspicion and not concrete evidence.7. Difference in Closing Stock as per SAP vs. Return of Income:The Assessing Officer added amounts for discrepancies between closing stock as per SAP and the return of income. The CIT(A) deleted the addition, noting that the variation was due to the switch from Tally to SAP and the method of stock valuation. The Tribunal upheld this decision.8. Purchase from Market Committee:The Assessing Officer added amounts for alleged unaccounted purchases from the market committee. The CIT(A) deleted the addition, stating that the purchases were from traders and duly accounted for. The Tribunal upheld the CIT(A)'s decision.9. Alleged On-Money Payment for Land Acquisition:The Assessing Officer added amounts for alleged on-money payment for land acquisition. The CIT(A) deleted the addition, noting that the payment was accounted for in the books and there was no corroborative evidence of on-money payment. The Tribunal upheld this decision.10. Cross Objections Regarding Non-Deduction of Tax at Source:The assessee challenged the addition for non-deduction of TDS on payments to Mr. A. Chandrasekar. The Tribunal deleted the addition, stating that once the payment was declared in the recipient's return of income, the assessee was not liable for TDS, regardless of the return being filed belatedly.Conclusion:All the appeals filed by the Revenue were dismissed, and the Cross Objections filed by the assessee were allowed.