2014 (8) TMI 938 - AT - Income Tax

Disallowance of Job work income - Held that - In the absence of any explanation about the difference of income credited in the books of accounts. A.O has considered the difference of job work charges as reflected in the Profit and Loss account and TDS certificate as income of the Assessee. Before us, the ld. A.R. has submitted the reconciliation statement of its income. - in the interest of justice and fair play, the reconciliation statement needs to be examined and we therefore remit the issue to the file of CIT(A) so that the issue can be reexamined at his end and thereafter he decides the issue as per law - Matter remanded back - Decided in favour of assessee.

Summary

Issues:
1. Addition of job work income of Rs. 7,30,022
2. Disallowance of Rs. 20,000 out of vehicle expenses

Analysis:

Issue 1: Addition of job work income of Rs. 7,30,022
The appeal was filed against the order of CIT(A) for the assessment year 2008-09. The Assessee, a trust and proprietor of a manufacturing business, declared a net loss in the return of income. During scrutiny, the Assessing Officer (A.O) observed a discrepancy in job work income between the Profit and Loss account and the TDS certificate. The A.O considered the shortfall as income due to the lack of explanation or reconciliation. The CIT(A) upheld the addition of Rs. 7,30,022, stating that the Assessee failed to provide a reconciliation statement despite multiple opportunities. In the appeal before the ITAT, the Assessee submitted the reconciliation statement for the first time. The ITAT remitted the issue back to the CIT(A) for reexamination, emphasizing the need for a fair assessment and granting both parties adequate hearing opportunities. The Assessee was directed to submit all necessary details promptly, failing which adverse inference could be drawn. The ITAT allowed this ground for statistical purposes.

Issue 2: Disallowance of Rs. 20,000 out of vehicle expenses
The second ground raised by the Assessee was regarding the disallowance of Rs. 20,000 out of vehicle expenses. During the hearing, the Assessee's representative did not press this ground, leading to its dismissal as not pressed. Consequently, the appeal was partly allowed for statistical purposes. The order was pronounced in open court on 5th August 2014.

This judgment highlights the importance of providing complete documentation and explanations during assessments to avoid adverse inferences. It also underscores the significance of actively participating in legal proceedings to ensure a fair evaluation of the issues at hand.