2015 (2) TMI 771 - HC - Income Tax

Addition made under the head 'income of Electro Medical Maintenance Centre' - Tribunal restored the addition made by the Assessing Officer as assessee had agreed for the inclusion of income - Held that - As the assessee has now produced the assessment order for the assessment year 1998-99 wherein the assessee had offered the amount of ₹ 4,61,642/- as income and was assessed accordingly, issue remanded back to the Assessing Officer to verify and pass appropriate orders. - Decided in favour of assessee for statistical purposes. Addition made under the head 'service charges received' - Tribunal restored the addition as he assessee was following mercantile system of accounting and the service charges that had accrued and received by the assessee for the relevant year should be added to income - Held that - As the sum of ₹ 29,39,092/-, which is part of ₹ 24,08,748/-, which was omitted to be included in the return of income dated 16.11.1997, was offered as income in the assessment year 1997-98 by the assessee, issue remanded back to the Assessing Officer to verify and pass appropriate orders. - Decided in favour of assessee for statistical purposes. Addition made in respect of deposits in the current account in the Indian Overseas Bank - Tribunal restored the addition as the said income had not been offered as income in the original return as well as in the revised return - Held that - addition of ₹ 7,44,340/-, as has been clearly recorded by the Assessing Officer that this amount does not reflect as a trading receipt, but only as unexplained deposit coupled with the statement of Directors in the presence of Chartered Accountant that it was not offered as income of the said year, the Tribunal was justified in upholding the order of the Assessing Officer. The Commissioner of Income Tax (Appeals) was not correct in ordering remand for considering the issue, since it was neither canvassed by the assessee nor was the issue before the Commissioner of Income Tax (Appeals). - Decided in favour of the Revenue.

Summary

Issues:
1. Interpretation of service charges accrual and corresponding obligations during warranty period.
2. Consideration of unexplained expenditure under Section 69C.
3. Reversal of Commissioner's order on income accrual timing and unexplained expenses determination.

Issue 1 - Interpretation of Service Charges Accrual:
The case involved disputes over service charges accrual for installation and commissioning of equipment. The Assessing Officer added service charges to the income, while the Commissioner of Income Tax (Appeals) deleted the addition, stating that income could only be determined after the project's completion. The Tribunal, however, upheld the addition, emphasizing the mercantile system of accounting and the immediate accrual of service charges upon installation. The Court remanded this issue back to the Assessing Officer for further verification.

Issue 2 - Unexplained Expenditure under Section 69C:
The second issue related to unexplained deposits in the current account, treated as unexplained income. The Commissioner of Income Tax (Appeals) remanded the matter for determining unexplained expenses, which the Tribunal disagreed with, upholding the Assessing Officer's decision. The Court confirmed the Tribunal's decision, stating that the income was not offered in the original or revised returns, and the Commissioner had no basis to order a remand.

Issue 3 - Reversal of Commissioner's Order:
The Tribunal reversed the Commissioner's order on income accrual timing and unexplained expenses determination. The Court upheld the Tribunal's decision, stating that the Assessing Officer's findings were based on material evidence and the income had not been included in the returns. Therefore, the Court confirmed the Tribunal's decision, answering the third issue against the assessee and in favor of the Revenue.

In conclusion, the Court remanded the first and second issues back to the Assessing Officer for further verification. The Court confirmed the Tribunal's decision on the third issue, upholding the addition of unexplained deposits as income. The Tax Case (Appeal) was disposed of with no costs awarded.