ITO, WARD-1(3)(2), NEW DELHI vs. LAXMI ELECTRONICS, HARIDQAR

In ground No.1, the Revenue has challenged deletion of addition of Rs.2,57,71,163/- on account of unconfirmed purchases.

Briefly, the facts relating to this issue are, the assessee is a partnership firm stated to be engaged in the manufacturing of PCB/electronic items. In the assessment year under dispute, the assessee filed its return of income on 24.09.2009 declaring nil income after claiming deduction under section 80IC of the Income-tax Act, 1961. In course of assessment proceedings, while examining financial statements of the assessee, the Assessing Officer noticed that the assessee had shown purchases of Rs.15,62,09,848/-.

The assessee contested the aforesaid addition before learned Commissioner (Appeals). While deciding assessee’s appeal, learned Commissioner (Appeals) granted partial relief to the assessee.

We have considered rival submissions and perused materials on record. From the observations made by learned Commissioner (Appeals) in paragraph No. 5 and 5.1 of his order, it is very much clear that in remand proceedings, the Assessing Officer verified purchase bills/invoices and various other documents relating to the purchases made by the assessee. On verifying such evidences on test check basis, he has reported that the purchase transactions were found to be genuine and correct. That being the observation of the Assessing Officer in the remand report, we do not find any infirmity in the decision of learned Commissioner (Appeals) in deleting the addition. Ground raised is dismissed.

In ground No.2, Revenue has challenged reduction of disallowance made by the Assessing Officer under section 40(a)(ia) of the Act.

Briefly, the facts are, in course of assessment proceedings, the Assessing Officer noticed that the assessee has paid an amount of Rs.3,92,550/- towards freight and Rs.1,28,000/- towards job work expenses. Being of the view that payments made are covered u/s. 194C of the Act, thereby requiring the assessee to deduct tax at source, the Assessing Officer made disallowance under section 40(a)(ia) of the Act for an amount of Rs.5,20,550/-.

Contesting such disallowance, the assessee preferred appeal before learned Commissioner (Appeals) and ultimately, the Tribunal restored the issue back to the first appellate authority for fresh adjudication. In course of fresh proceedings before the first appellate authority, the assessee furnished certain documentary evidences, which were forwarded to the Assessing Officer for verification and report. After verifying the evidences furnished by the assessee, the Assessing Officer furnished a remand report, wherein, he accepted that most of the payments made were petty amounts below Rs.20,000/-. Only three payments towards job work expenses were exceeding the threshold limit of Rs.20,000/-.

In so far as said three payments exceeding Rs.20,000/- are concerned, though, the assessee urged before learned Commissioner (Appeals) that they were not covered under section 194C of the Act, hence, there was no obligation on the assessee to deduct tax at source, however, it is apparent, learned Commissioner (Appeals) did not accept the said submission of the assessee and sustained disallowance of Rs.1,08,000/-. Whereas, he deleted balance amount of Rs.4,12,550/-. Thus, from the facts discussed above, it is evident in the remand report, the Assessing Officer himself has admitted that except the amount of Rs.1,08,000/-, rest of the payments were of petty amounts below the threshold limit of Rs.20,000/-. That being the case, learned first appellate authority was justified in deleting the disallowance made under section 40(a)(ia) of the Act to that extent. Ground raised is dismissed.

In the result, appeal is dismissed.