2014 (10) TMI 711 - AT - Income Tax

Suppressed income - undisclosed income towards collection of amount of service tax on taxable services Held that - The AO has made addition as regards the difference between the sum credited in the P&L account on account of commission received from M/s. PCPL and as per confirmation received from M/s. PCPL - The bill clearly shows that the amount of bill was ₹ 1,08,36,000/- and service tax component was ₹ 13,39,330/- and the total of the bill thus comes to ₹ 1,21,75,330 - This bill was also before the AO - AO clearly failed to appreciate the reason of the difference noted by him - the difference was on account of service tax is also supported by the service tax return and tax payment challan accepted by the CIT(A) there was no infirmity in the order of the CIT(A) Decided against revenue. Commission received from Platinum Hospitality Pvt. Ltd & Astek Infracom Ltd. Undisclosed income deleted Held that - Regarding the commission payment to M/s. AIL, the addition was solely on the basis of initial confirmation issued by M/s. Quantium Agencies Ltd. - CIT(A) observed that before the addition, it was necessary for the AO to ascertain the true and correct facts - The CIT(A) has noted that there was no material available in assessment record regarding the existence of M/s. Astek Infracom Ltd (M/s. AIL) - The initial confirmation of M/s. Quantium Agencies Ltd was later on explained by them as a clerical mistake as services were rendered in connection with M/s. PHSPL the order of the CIT(A) is upheld that there is no evidence on record that the assessee has rendered services in connection with arranging of bank loan to M/s. AIL Decided against revenue.

Summary

Issues Involved:
1. Deletion of suppressed income of Rs. 13,39,330/- by accepting it as service tax.
2. Deletion of addition of Rs. 92,80,472/- as undisclosed income from Platinum Hospitality Pvt. Ltd and Astek Infracom Ltd.
3. Admission of fresh evidence in violation of Rule 46A of the Income Tax Rules, 1962.

Issue-wise Detailed Analysis:

1. Suppressed Income of Rs. 13,39,330/- as Service Tax:
The Assessing Officer (AO) noted a discrepancy between the commission received by the assessee from Palladium Construction Pvt. Ltd (PCPL) and the amount shown in the accounts, leading to an addition of Rs. 13,39,330/- as suppressed income. The assessee explained that this amount represented service tax, which was accounted for separately and not routed through the profit & loss account. The Commissioner of Income Tax (Appeals) [CIT(A)] accepted this explanation, noting that the service tax component was correctly accounted for as per the Accounting Standards of the ICAI. The Income Tax Appellate Tribunal (ITAT) upheld the CIT(A)'s decision, finding no infirmity in the accounting treatment of the service tax component.

2. Undisclosed Income of Rs. 92,80,472/-:
The AO added Rs. 92,80,472/- to the assessee's income, alleging undisclosed commission from Platinum Hospitality Services Pvt. Ltd (PHSPL) and Astek Infracom Ltd (AIL). The assessee argued that services were rendered to both PCPL and PHSPL, but only PCPL was billed, as per mutual understanding. The CIT(A) found no evidence of an agreement requiring separate billing to PHSPL and deleted the addition. The ITAT noted the lack of documentary evidence supporting the mutual understanding claim and remitted the issue back to the AO for fresh examination. Regarding AIL, the CIT(A) found no evidence of services rendered or payments received from AIL, and the ITAT upheld the deletion of the addition based on the lack of material evidence.

3. Admission of Fresh Evidence in Violation of Rule 46A:
This issue was not separately addressed in the detailed analysis provided in the judgment. However, it can be inferred that the ITAT did not find any procedural violation significant enough to impact the outcome of the case, as the primary focus was on the substantive issues of suppressed and undisclosed income.

Conclusion:
The ITAT upheld the CIT(A)'s decision on the service tax issue, remitted the issue of undisclosed income from PHSPL back to the AO for further examination, and confirmed the deletion of the addition related to AIL due to lack of evidence. The appeal was partly allowed for statistical purposes.