2016 (2) TMI 120 - AT - Income Tax

Accrual of income - Addition on account of Tax Deducted at Source (TDS) certificate - Held that - AO at the time of assessment made reconciliation between income based on TDS certificates and the actual income offered to tax. The AO found the difference between the income as per TDS certificates and income shown by assessee. As per AO the assessee has declared less income and claimed the full credit of the TDS. Accordingly the AO has added the undisclosed income for the above stated amount. However, we find from the submission of Ld.AR that all the income having duly shown in the relevant year by assessee and tax thereon has been duly paid as per mercantile accounting system. The reason for the difference was mainly on account of interest income which the assessee has declared on the basis of mercantile accounting system and the payer deducted the TDS on the cash basis of accounting. The ld. AR has submitted sufficient number of documents in the form of the paper book and we found no ambiguity from the details submitted. In view of above, we reverse the orders of authorities below and delete the addition made by AO which confirmed by Ld. CIT(A). - Decided in favour of assessee.

Summary

Issues:
1. Addition of Rs. 28,30,098 on account of Tax Deducted at Source (TDS) certificate claimed by the assessee.

Analysis:
The appeal arose from the Commissioner of Income Tax (Appeals)-XIX, Kolkata's order confirming the addition of Rs. 28,30,098 on account of TDS certificate claimed by the assessee. The Assessing Officer (AO) found discrepancies between the income declared by the assessee as per TDS certificates and the actual income shown, resulting in the addition of the undisclosed income. The CIT(A) upheld the AO's action, stating that the explanation provided by the assessee regarding the income already offered for taxation in earlier years was unsubstantiated and an afterthought. The assessee then appealed, arguing that the addition was made based on the system of accounting followed consistently.

Regarding the TDS certificates issued by different entities, the assessee submitted detailed explanations and documents to support their claim. For instance, for the TDS certificate issued by ADMAAC, South West, the income was declared in a previous year based on the mercantile system of accounting, although the TDS certificate was issued in a subsequent year. Similar explanations were provided for TDS certificates issued by PNB, Kolkata, and SBI, Howrah. The assessee demonstrated that all income had been duly shown and taxes paid as per the mercantile accounting system, despite discrepancies arising from different accounting methods used by the deductors. The appellate tribunal, after reviewing the submissions and documents presented by the assessee, concluded that there was no ambiguity and reversed the decisions of the lower authorities, thereby allowing the appeal and deleting the addition made by the AO.

In conclusion, the appellate tribunal ruled in favor of the assessee, emphasizing that the differences in income declaration and TDS claims were primarily due to the variance in accounting systems followed by the assessee and the deductors. The detailed explanations and supporting documents provided by the assessee were deemed sufficient to justify the reversal of the addition made by the AO and upheld by the CIT(A). The tribunal's decision highlighted the importance of considering the accounting methods employed by the parties involved in TDS transactions to accurately reconcile income declarations and TDS claims.