2013 (12) TMI 827 - AT - Income Tax

Undisclosed income - Held that - The assessee is maintaining its books of accounts on cash system of accounting - The entire fees are shown as income as and when they are received - The assessee might have claimed the credit of TDS without taking income into consideration for want of receipts of the income - The assessee is directed to once again file reconciliation statement showing unreconciled receipts as income of the subsequent years, in which the payment has been received by the assessee - The assessee is also directed to show that the TDS amount claimed by the assessee has been shown as its income during the year under consideration - The issue is restored for fresh adjudication. Credit of TDS - Held that - The assessee has not received the TDS certificate in physical form - He has claimed the credit only on the basis of Form 26AS - The issue is restored for fresh adjudication. Interest income understated - Held that - The addition has been made on the basis of AIR information disregarding the facts of interest shown in the books of account - The issue is restored for fresh adjudication. Remuneration to partners - Held that - The capital gains has not been considered for the purpose of computing the remuneration to partners in the computation of income - Interest on FDR, the assessee has been showing interest on fixed deposits as its business income since past years and no disturbance has been made by the AO - The same treatment has been followed - The AO is directed to verify whether the assessee has excluded the capital gains while computing the remuneration paid to the partners or not - The issue is restored for fresh adjudication.

Summary

Issues:
1. Addition of unreconciled amount as income.
2. Declining credit of TDS amount.
3. Addition of understated interest income on fixed deposits.
4. Disallowance of remuneration to partners.

Analysis:

Issue 1: Addition of unreconciled amount as income
The assessee, a firm of Chartered Accountants, challenged the addition of Rs.3,13,389, including an enhancement of Rs.31,921, based on the difference between income returned and data from AIR. The CIT(A) observed discrepancies in TDS claims and directed to treat Rs.31,921 as income. ITAT noted the cash system accounting of the assessee and ordered re-verification by the AO, directing submission of reconciliation statements for unreconciled receipts. Ground No.1 allowed for statistical purposes.

Issue 2: Declining credit of TDS amount
The AO declined credit of TDS amounting to Rs.28,493, based on Form 26AS. ITAT ordered re-verification by the AO, directing confirmation of TDS amount as income and allowing credit based on Form 26AS. Ground No.2 allowed for statistical purposes.

Issue 3: Addition of understated interest income on fixed deposits
The AO added Rs.21,009 as understated interest income based on AIR information. The CIT(A) upheld the addition. ITAT ordered re-verification by the AO, directing verification of actual interest paid by banks. Ground No.3 allowed for statistical purposes.

Issue 4: Disallowance of remuneration to partners
The AO disallowed Rs.31,852 from remuneration to partners, excluding certain incomes from book profits. The CIT(A) confirmed the disallowance. ITAT ordered re-verification by the AO, directing examination of capital gains and treatment of interest on fixed deposits. Ground No.4 allowed for statistical purposes.

In conclusion, the appeal of the assessee was allowed for statistical purposes, with various issues being remanded back to the AO for re-verification and necessary actions.