2016 (3) TMI 48 - AT - Income Tax

Addition on account of suppressed/unaccounted turnover - Held that - The assessee has accounted all the receipts and reconciled the TDS certificate to the books of accounts and explained the reasons for the difference in turnover. The assessee further contended that the difference was accounted in the subsequent years and to this effect, filed necessary reconciliation statement. On verification of the paper book filed by the assessee, we find that the assessee has submitted accounts copies of each parties with a reconciliation statement which is available in paper book. On further verification of the reconciliation statement filed by the assessee, we find that the difference quantified by the A.O. is based on form 26AS. The assessee contended that she is following mercantile system of accounting and recognized the income on accrual basis. The A.O. has not pointed out any mistakes in the method of accounting followed by the assessee. He never rejected the books of accounts maintained by the assessee. The A.O. simply quantified the difference between books of accounts and form 26AS. The assessee has explained the difference by furnishing necessary reconciliation. Therefore, we are of the opinion that the A.O. was not correct in making additions, towards difference in turnover without pointing out any mistakes in books of accounts, that too based on form 26AS. Therefore, we direct the A.O. to delete the additions towards difference in turnover. - Decided in favour of assessee Disallowance u/s 40(a)(ia) - advertisement charges and finance charges for non deduction of tax at source - Held that - The revenue did not dispute the fact with regard to paid and payable. The CIT(A) has recorded finding of the fact that the expenditure incurred under these heads have been already paid during the financial year. Therefore, considering the facts and circumstances of the case we are of the opinion that no disallowance can be made on the payments which has been paid during the financial year. Therefore, we direct the A.O. to delete the additions made u/s 40(a)(ia) of the Act - Decided in favour of assessee

Issues Involved:
1. Validity of assessment proceedings.
2. Addition on account of suppressed/unaccounted turnover.
3. Disallowance under section 40(a)(ia) of the Income-Tax Act, 1961.

Detailed Analysis:

1. Validity of Assessment Proceedings:
The assessee challenged the validity of the assessment proceedings on the grounds that the assessment was not pending as of the date of the search and that the additions to the returned income were not based on any incriminating material. However, during the course of the hearing, the assessee's representative did not press these grounds. Consequently, the Tribunal dismissed these grounds as not pressed.

2. Addition on Account of Suppressed/Unaccounted Turnover:
The Assessing Officer (A.O.) added Rs. 10,12,490 to the income of the assessee, citing suppressed/unaccounted turnover based on the difference between the books of accounts and TDS certificates. The assessee contended that this difference arose due to advances received from customers, on which TDS was deducted as per Section 194C of the Act. The assessee, following the mercantile system of accounting, recognized income on an accrual basis when the bill was submitted, not when the advance was received. The Tribunal found that the A.O. did not point out any mistakes in the method of accounting followed by the assessee nor rejected the books of accounts. The Tribunal held that the A.O. was incorrect in making additions based on form 26AS without identifying errors in the books of accounts. Therefore, the Tribunal directed the A.O. to delete the additions towards the difference in turnover.

3. Disallowance under Section 40(a)(ia) of the Income-Tax Act, 1961:
The A.O. disallowed advertisement charges and finance charges for non-deduction of tax at source, as per Section 40(a)(ia) of the Act. The assessee argued that these expenditures were paid within the financial year and nothing was outstanding at the end of the balance sheet date. The Tribunal referred to the ITAT Visakhapatnam Special Bench decision in the case of M/s. Merilyn Shipping & Transports Vs. ACIT, which held that provisions of Section 40(a)(ia) cannot be applied to amounts already paid before 31st March. The Tribunal noted that the CIT(A) had recorded that the expenditures were already paid during the financial year. Hence, the Tribunal directed the A.O. to delete the disallowances made under Section 40(a)(ia) of the Act.

Separate Judgments:
The appeals for the assessment years 2007-08, 2008-09, and 2010-11 were clubbed, heard together, and disposed of by a common order for convenience. The Tribunal allowed the appeals filed by the assessee for all the assessment years, directing the A.O. to delete the additions and disallowances made.

Condonation of Delay in Filing Appeal:
For ITA No.1/Vizag/2014, the appeal was time-barred by 171 days. The assessee filed a petition for condonation of delay, citing reasons beyond her control and wrong advice from an expert. The Tribunal, exercising its power under Section 253(5) of the Act, admitted the appeal and decided the issues on merits, ultimately allowing the appeal.

Conclusion:
The Tribunal allowed the appeals filed by the assessee for all the assessment years involved, directing the A.O. to delete the additions on account of suppressed/unaccounted turnover and the disallowances under Section 40(a)(ia) of the Act.

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