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2012 (9) TMI 617 - AT - Income TaxSuppression of income - Addition made due to difference in income shown in P&L and TDS certificate Assessee made freight payment on behalf of another person - Railway freight incurred by the assessee which was directly debited to the said person and when he paid the amount subject to deduction of tax at source u/s 194C Discrepancy was found due to reimbursement of expenses which was neither shown as income nor the payments made were shown as expenditure - Held that - The assessee cannot be said to have made the profit from railways insofar as due to provisions for Railways the freight has to be paid by the owner of goods and not the contractor. It was only a portion of the amount owed to the deductee which was paid to the Government Exchequer. The assessee could therefore only claim this amount back from deductor as adjustment of amount on account of railway freight to be borne by the deductor by filing its return under the provisions of the I.T.Act for claiming the tax paid as TDS has been noted by the AO. Appeal decides in favour of assessee
Issues Involved:
1. Whether the CIT(A) erred in confirming the AO's order that considered Rs. 36,33,642 as suppression of receipt being reimbursement of freight charges paid to the railway on behalf of M/s. Phoolchand Exports Ltd. Issue-Wise Detailed Analysis: 1. Confirmation of AO's Order on Suppression of Receipt: The assessee, an individual running a business under M/s Varsha Trading Co., filed a return for the Assessment Year showing a gross total income of Rs. 4,57,092. A search and seizure operation under Section 132 of the Income Tax Act, 1961, led to the filing of a revised return. The AO added Rs. 36,33,642 to the income, citing discrepancies between TDS certificates and the income shown. The reasons included: - No evidence supporting the claim that the assessee paid railway freight on behalf of M/s. Phoolchand Export Ltd. - The ledger account provided was self-serving without confirmation from M/s. Phoolchand Export Ltd. - Discrepancies between the freight charges debited and the claimed reimbursement. - No confirmation from M/s. Phoolchand Export Ltd. regarding the wrong TDS deduction. - The assessee claimed TDS credit on the entire receipt amount but only credited a part of it to the P&L Account. The AO concluded that the discrepancy of Rs. 36,33,642 was not disclosed in the P&L Account and thus added it to the total income without allowing any further expense deductions. 2. Appeal Before CIT(A): The assessee submitted a certificate confirming the reimbursement transaction, which could have been provided earlier if requested by the AO. Despite this, the CIT(A) confirmed the AO's order, noting: - A difference of Rs. 36,33,642 between gross receipts shown in the P&L A/c and TDS certificates. - The assessee claimed TDS credit on the entire receipt amount but credited a lower amount to the P&L A/c. - The ledger copy was deemed self-serving without confirmation from M/s. Phoolchand Export Ltd. - The burden of proof for exemption claims lies with the assessee, as per CIT v. Calcutta Agency Ltd. - Reimbursement of expenses does not attract Section 194J, as per ITO V. Dr. Willmar Schwabe India (P) Ltd. 3. Tribunal Appeal: The assessee argued that the discrepancy arose from reimbursement of expenses not shown as income or expenditure. The AR submitted details of railway freight payments and a confirmation letter from M/s. Phoolchand Exports (P) Ltd. The AR contended that the AO never requested confirmation during assessment and that the CIT(A) ignored the submitted confirmation and ledger copy. The AR also highlighted that the reimbursement was Rs. 35,00,387, while the difference was due to TDS on payments and an outstanding bill. 4. Tribunal's Findings: The Tribunal found that the AO's and CIT(A)'s conclusions were based on incomplete consideration of facts. The Tribunal noted: - The ledger account and financial statements indicated that the amount owed by M/s. Phoolchand Exporters Pvt. Ltd. tallied except for the TDS amount. - The reimbursement of railway freight was not part of the bill raised by the assessee. - The AO and CIT(A) erred in treating the reimbursement as income without considering the corresponding expenses. - The hypothetical income figure was unjustified as the TDS was on reimbursed expenses, not actual income. The Tribunal concluded that the addition of Rs. 36,33,642 was unjustified and directed its deletion. Conclusion: The appeal of the assessee was allowed, and the addition of Rs. 36,33,642 was deleted.
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