2015 (10) TMI 744 - AT - Income Tax

Difference in job work receipts - comparison between Form No. 26AS and the amount reported as per P&L account - CIT(A) restricted part addition - Held that - It is noted that the difference as per Form No. 26AS and the amount reflected in P&L account is on account of bills pertaining to previous year, which have been booked in the current year by the principal company. Secondly, the bills of current year, which have been booked in the subsequent financial year by the principal company and thirdly rejection stock/debit notes, which have been received by the appellant during the year. It is also noted that the assessee has filed detailed reconciliation statement alongwith supporting documentation, which have been duly considered and examined in detail by the ld CIT(A). As many a times, the deductor either did not deduct the tax or accounted for the same in the subsequent year when the goods were lifted from the premises of the appellant company. It was not in dispute that the appellant company was following mercantile system of accounting and job receipts were accounted for in the books of account on accrual basis. The appellant company therefore declared the job receipts in the year of billing however the deductor/principal company accounted for part of job receipts in the subsequent year when the goods were removed from the premises of the appellant company. The mercantile system of accounting was consistently followed by the appellant company since last many years and it was clearly disclosed in the audited financial statements by the Auditors in scheduled 16, subpoint (A)(1) of the balance sheet. This disclosure was strictly in conformity with the applicable AS-1 issued by ICAI and GAAP also. Many a times, the job work receipts accounted by the appellant in one year were accounted for in the subsequent year by the principal company. As a result, TDS was also deducted by the principal company in that year and credit for the same appeared in Form No. 26-AS. - Decided against revenue. Addition on concealed sale of scrap on the basis of ER-1 return filed with the Excise Department - CIT(A) deleted the addition - Held that - It is undisputed fact that the scrap generated out of manufacturing was retained by the vendors and not returned back to the appellant company. The assessee company had paid excise duty on nonreturnable scrap retained by the vendors by taking its notional value or assessable value by the Excise authorities. ER-1 return not only include the goods sold but also goods removed out of factor. Therefore, it is but natural to have difference between sale figures reported by the assessee and figures disclosed in ER-1 return. The ld CIT(A) has thoroughly examined this issue, which has not been controverted by the ld Sr.DR during the hearing. The ld Assessing Officer had not verified from the books of account of the vendors whether same scrap has been disclosed in its sale or not. As per agreement made between the appellant and the vendors, the scrap is to be remained with the vendor and it could not be returned back to the appellant as per the terms and conditions of job work charges. The vendor is also assessed to tax and both the parties i.e. the appellant as well as the vendor are also under the excise net. Thus, we do not find any reason to intervene in the order of the ld CIT(A) - Decided against revenue. Addition on account of concealed sales being the difference in figures of sale as per P&L account and that declared in ER-1 filed with the Excise Department - CIT(A) deleted the addition - Held that - Whatever evidence filed by the appellant before the ld CIT(A) were not forwarded to the Assessing Officer during the appellate proceedings. The assessee filed explanation with evidence before the Assessing Officer on this point but whatever evidences narrated by the ld CIT(A) were not submitted before the Assessing Officer. The ld CIT(A) has coterminous power with the Assessing Officer. However, he has accepted the assessee s explanation without any verification from the third party, therefore, in the interest of justice, this issue required to be decided afresh by the Assessing Officer after providing reasonable opportunity of being heard and assessee also directed to cooperate with the Assessing Officer to produce all the evidences required by the Assessing Officer. Accordingly, this issue is set aside to the Assessing Officer. - Decided in favour of revenue for statistical purposes. Addition for late depositing ESI and PF dues received from the employees - Held that - Where the PF and/or EPF, CPF, GPF etc., if paid after the due date under respective Act but before filing of the return of income under Section 139(1), cannot be disallowed under Section 43B or under Section 36(1)(va) of the IT Act. See CIT Vs. State Bank of Bikaner & Jaipur (2014 (5) TMI 222 - RAJASTHAN HIGH COURT) - Decided in favour of assessee

Summary

Issues Involved:
1. Restriction of addition on account of difference in job work receipts.
2. Deletion of addition on account of concealed sale of scrap.
3. Deletion of addition on account of concealed sales.
4. Confirmation of addition on account of interest on FDR.
5. Confirmation of addition on account of late depositing ESI & PF dues.

Detailed Analysis:

1. Restriction of Addition on Account of Difference in Job Work Receipts:

The Assessing Officer (A.O.) added Rs. 27,27,293/- to the income of the assessee due to discrepancies in job work receipts. The discrepancies were identified through a comparison of Form 26AS and the Profit & Loss Account. The CIT(A) reduced this addition to Rs. 24,752/- after considering reconciliation statements and supporting documents provided by the assessee, which explained the differences due to previous year bills, current year bills not accounted for by the deductor, and debit notes/rejections. The Tribunal upheld the CIT(A)'s decision, agreeing that the reconciliation and explanations provided were satisfactory and supported by documentary evidence.

2. Deletion of Addition on Account of Concealed Sale of Scrap:

The A.O. added Rs. 1,15,59,814/- to the income of the assessee, alleging concealed sales of scrap based on ER-1 returns filed with the Excise Department. The assessee explained that the scrap generated at vendor premises was sold by the vendors and not returned to the assessee. The CIT(A) accepted the assessee's explanation, noting that the excise duty was paid on the notional value of the scrap and that the A.O. did not verify the vendors' accounts. The Tribunal upheld the CIT(A)'s decision, finding no real income to be taxed and agreeing that the addition was based on incorrect assumptions.

3. Deletion of Addition on Account of Concealed Sales:

The A.O. added Rs. 2,72,84,704/- to the income of the assessee due to discrepancies between sales figures in the Profit & Loss Account and the ER-1 return. The CIT(A) accepted the assessee's explanations regarding various adjustments, such as rate differences, short receipts, and export sales adjustments, supported by journal vouchers and RG-1 Register entries. The Tribunal, however, noted that the evidence submitted to the CIT(A) was not forwarded to the A.O. for verification. Therefore, the Tribunal set aside this issue to the A.O. for fresh examination and verification of the evidence.

4. Confirmation of Addition on Account of Interest on FDR:

The assessee did not press this ground, and it was dismissed as not pressed.

5. Confirmation of Addition on Account of Late Depositing ESI & PF Dues:

The A.O. added Rs. 1,37,927/- to the income of the assessee for late payment of ESI and PF dues, invoking Section 2(24)(x) read with Section 36(1)(va) of the Income Tax Act. The CIT(A) upheld this addition, stating that the payments were made beyond the due date. However, the Tribunal referred to the Hon'ble Rajasthan High Court's decision, which allowed such deductions if payments were made before the due date of filing the return under Section 139(1). Following this precedent, the Tribunal deleted the addition, allowing the assessee's claim.

Conclusion:

The Tribunal upheld the CIT(A)'s decisions on the restriction of addition for job work receipts and deletion of addition for concealed sale of scrap. The issue of concealed sales was remanded back to the A.O. for fresh verification. The Tribunal deleted the addition for late depositing ESI & PF dues, following the jurisdictional High Court's ruling. The appeal by the revenue and the cross-objection by the assessee were partly allowed.