ACIT, Faridabad Vs M/s Presco Mec Autocomp Pvt Ltd (ITAT Delhi) –
1. Just because of vouchers being doubted by the AO and not coming to correct conclusions on them, as he has resorted to only arbitrations in so far as he has presumed the rates of loading and unloading charges without bringing any material on record in support of them. The ld.AR has sufficiently clarified that fluctuation in cartage is always involved due to time factor, urgency of material, varying waiting time in process for labour which has to be necessarily paid accordingly. It is not the straight-jacket or fixed rate on which any freight or cartage is to be paid according to the assessee’s whims or the AO’s whims. It is determined by the market fluctuations and contingencies. Therefore, the AO was not justified when all the expenses were fully supported by vouchers and other relevant details and evidences. The addition has been worked purely on assumptions and presumptions and surmises. Therefore both on law and facts, the addition of Rs.8,87,257/- has no merits and stands deleted.
2. It is well settled that the payment of contribution to EPF can be allowed even if the payment is made within due date of filing of the return of income applicable to the assessee’s case. The order of CIT(A) on this account is thus upheld. In the light of our decision above, the AO shall modify the assessment order accordingly.
3.In case of a company which is a separate entity and no dis allowance can be effected in the hands of a company for the personal use of the expenditure incurred by the company. But, at the most, it can be treated as a perquisite in the hands of the director.
4. The electrical equipments which were in the nature of automatic voltage stabilizers the respect of rate of depreciation prescribed is 80%. Therefore, the rate of depreciation applicable to the automatic voltage stabilizers would be 80%.
IN THE INCOME TAX APPELLATE TRIBUNAL, NEW DELHI
ITA No. 113/Del/2009
Assessment Year: 2005–06
Asstt.Commissioner of Income Tax Vs. M/s Presco Mec Autocomp Pvt.Ltd.
ORDER
C.L.SETHIPER J, :M
The Revenue is in appeal against the order dated 12.11.2008 passed by learned CIT(A) for the AY 2005-06.
2. Ground No.1 is directed against the CIT(A)’s order in deleting the addition of Rs. 8,87,257/- made by the Assessing Officer on account of dis allowance of freight and cartage charges.
3. In the course of assessment proceedings, it was found by the AO that the assessee claimed sum of Rs. 14,07,335/- on account of freight and cartage inward charges, 90% of which were found to be paid in cash. The AO scrutinized the vouchers and found certain discrepancies as mentioned in Item (a) to (e) in para 2(i) of his order. The AO also made local enquiry by issuing notice u/s 133(6) and by deputing the Inspector, and found that the rate of freight paid by the assessee company on the material purchased from Rakesh Steels should have been Rs. 50 per tonne and rate of loading and unloading should have been Rs. 10 per tonne. The AO was of the view that the rate found in force in the local market is also to be applied on the material or goods sent for cutting and the material received back after cutting from suppliers. AO then worked out the allowable expenditure and found that a sum of Rs. 6,19,351/- has been claimed in excess by the assessee. AO also found that, similarly the assessee inflated other freight and cartage payment, and he thus disallowed the amount to the extent of Rs. 2,67,906/-. Thus, the total dis allowance made by the AO was of Rs. 8,87,257/-.
4. On an appeal, assessee submitted a very detailed submission before the CIT(A) which has been reproduced by the CIT(A) in para 4 at pages 5 to 13 of his order. After considering the assessee’s submission and the AO’s finding, the learned CIT(A) deleted the dis allowance by observing and holding as under:-
“5. I have carefully considered the submissions of the ld.AR and perused the order of assessment. I have also gone through the documents submitted by the ld.AR to prove his case. It is found that on the very first page of his order, the AO has admitted that the books of account were produced and test checked. The AO only therefore proceeded to doubt the vouchers maintained by the appellant in respect of freight and cartage expenses. This means that the AO has not made any adverse comments about the books of account maintained by the appellant company. From the submissions of the ld.AR and the contents of the assessment order, it is found that the complete details of goods transport for loading and unloading charges paid were available on record. The discrepancy, if any, according to the A.O. found in the vouchers were not actually supplemented by any documentary evidences brought on record to prove their ingenuineness. It is found that out of 50% adhoc dis allowance at Rs.2,67,906/- out of the total of Rs.5,35,812/- are inclusive of payments by cheques and yet the A.O. has made the dis allowance summarily presuming them to be in cash. However if the nature of the job of the appellant company is concerned, there are valid justifications for the payments to be made in cash in respect of freight and cartage. This is the practical procedure to be acceptable in the normal course of business by any assessee in this line or in business. As far as the rates of freight and cartage doubted by the AO are concerned, the ld.AR has sufficiently explained their genuineness and necessity at particular times. The AO has travelled into the foot steps of the business-man which is not desirable as per law unless there is a clear-cut case of inflation of expenditure to bring down the profits of business undertaking. The comparative chart of the present business undertaking over the years shows that this year percentage of freight charges on sales was 0.88% compared to the maximum of 1.01% in the assessment year 2003-04, while on the other hand, the GP has been 18.43% compared to the last year 17.64% vis-a-vis, on the same percentage of freight on sales 0.88%. All the facts and figures regarding sales, gross profit, cartage, freight charges etc reveal consistency and the veracity of the manufacturing results of the appellant company which are not proved otherwise. Just because of vouchers being doubted by the AO and not coming to correct conclusions on them, as he has resorted to only arbitrations in so far as he has presumed the rates of loading and unloading charges without bringing any material on record in support of them. The ld.AR has sufficiently clarified that fluctuation in cartage is always involved due to time factor, urgency of material, varying waiting time in process for labour which has to be necessarily paid accordingly. It is not the straight-jacket or fixed rate on which any freight or cartage is to be paid according to the assessee’s whims or the AO’s whims. It is determined by the market fluctuations and contingencies. Therefore, the AO was not justified when all the expenses were fully supported by vouchers and other relevant details and evidences. The addition has been worked purely on assumptions and presumptions and surmises. Therefore both on law and facts, the addition of Rs.8,87,257/- has no merits and stands deleted.“
5. Rival contentions of both the parties have been considered and the material on record has been perused. In the light of the reasons given by the CIT(A) and considering the fact that AO has made disallowance purely on ad-hoc basis by applying certain rate which was found to be applicable in the market but no material was brought on record to falsify the claim made by the assessee either by examining the concerned parties or either by disputing that no amount was actually paid, we are of the considered opinion that learned CIT(A) has rightly deleted the addition. We are in full agreement with the reasons given by learned CIT(A) in deleting the addition. Thus, ground No.1 raised by the Revenue is rejected.
6. Next ground raised by the Revenue is directed against CIT(A)’s order in deleting the addition of Rs. 3,95,435/- made by the AO u/s 40(a)(ia) of the Act on account of assessee’s failure to deduct tax at source.
6.1 In the course of assessment proceedings, the assessee was asked by the AO to explain as to why tax at source was not deducted on the following payments made by the assessee :-
