2012 (6) TMI 401 - AT - Income Tax

Addition on account of unaccounted sale Held that - sales tax and entry tax liability pertain to other years. Cess, duties and taxes cannot be reduced from the turnover pertaining to other years. The law provides for claiming of deduction u/s.43B as and when paid therefore cannot be subjected to reconciliation to determine the net sales as declared in the P and L account and the gross sales as per the books of account. - addition deleted. Disallowance u/s. 40(a) (ia) of the Income Tax Act Held that - assessee was entitled to make the payment of TDS till the due date of filing of the return when the due date of payment of TDS was the first week of the immediately proceeding month for the Assessment Year 2005-06. The books of account are audited and the financial statement and tax deducted at source payable were certified by the auditors having been paid prior to the due date of filing of the return. - CIT(A) therefore, misdirected himself to confuse between previous year and the assessment year under the mercantile system of accounting which we are inclined to vacate. The assessee had complied with the provisions of Section 40(a)(ia) was therefore entitled to claim deduction of these expenses which are directed to be allowed. Belated serving of order after a gap of two years Held that - assessee did not seek to find the delay in serving the order when the demand had already been informed to it. No purpose would be served for the Assessing Officer to create a demand and not inform the assessee when the learned CIT(A) on the basis of the demand notice agreed to hear the appeal u/s.246 of the I.T.Act. assessee had already filed returns for the Assessment Year 2006-07 and 2007-08 during the intervening period as were intimated to him therefore cannot held a grievance against the Assessing Officer for belatedly serving the same.

Summary

Issues:
1. Delay in serving the assessment order
2. Addition of unaccounted sales
3. Disallowance under Section 40(a)(ia) of the Income Tax Act, 1961

Issue 1: Delay in serving the assessment order

The assessee contested the order of the Commissioner of Income Tax (Appeals) regarding the delay in serving the assessment order, arguing that the order was received belatedly. The counsel for the assessee relied on a High Court decision to support their claim. The Department was expected to provide evidence of raising the demand within the specified limitation period under Section 143(2). The assessee's argument was based on the timing of payment of TDS and the due date of filing the return. The Counsel argued that the due date for TDS payment was before the due date of filing the return, as certified by auditors. The Tribunal found the delay in serving the order did not impact the appeal process, as the demand had been communicated earlier, and the assessee had filed returns for subsequent years during the delay period. The Tribunal concluded that the delay did not warrant challenging the Assessing Officer's actions.

Issue 2: Addition of unaccounted sales

The Assessing Officer disallowed expenses under Section 40(a)(ia) due to non-payment of TDS by the stipulated date and added unaccounted sales under Section 145A. The Commissioner of Income Tax (Appeals) confirmed these additions. The Counsel for the assessee argued that all TDS payments were made in compliance with the law and that the reconciliation of sales with taxes paid was incorrect. The Tribunal agreed with the assessee, noting that the expenses were allowable and the reconciliation of sales was flawed. Consequently, the Tribunal directed the deletion of these additions.

Issue 3: Disallowance under Section 40(a)(ia) of the Income Tax Act, 1961

The Assessing Officer disallowed expenses under Section 40(a)(ia) for non-compliance with TDS provisions, leading to interest charges. The Commissioner of Income Tax (Appeals) upheld this disallowance. The Tribunal, however, found that the assessee had complied with TDS provisions and was entitled to claim deductions for expenses. The Tribunal referenced relevant ITAT decisions to support its conclusion. The Tribunal ruled in favor of the assessee, directing the allowance of these expenses.

In conclusion, the Tribunal partially allowed the assessee's appeal, overturning the additions related to unaccounted sales and disallowances under Section 40(a)(ia) of the Income Tax Act, 1961. The Tribunal emphasized compliance with TDS provisions and the incorrect reconciliation of sales figures, leading to the deletion of these additions.