2016 (5) TMI 1229 - AT - Income Tax

Addition of difference in form No. 26AS showing the gross hire charges and as per the books of accounts of the assessee - Held that - TDS were deducted by the recipient of service i.e. M/s Punj Lloyd Ltd amounted to ₹ 6,10,41,854/- whereas undisputedly, the assessee accounted only ₹ 5,56,09,575/- thereby resulting into short accounting of the said income to the tune of ₹ 54,32,279/-. The said difference was explained by the assessee to be on account of the reasons that the bills for hire charges were raised in the next year 2010-11 relevant to the AY 20011-12 whereas M/s Punj Lloyd Ltd accounted the expenditure in the current year i.e F.Y. 2009-10 relevant to AY 2010-11 and also deducted TDS thereon. We find merit in the arguments of the ld AR and also note that the whole exercise by the AO is neutral tax unit as the assessee had duly accounted for the difference of ₹ 54,32,279/- in the next financial year and also booked the corresponding expenditure in that year and the return of income was filed accordingly and was also accepted by the AO. We also find merits in the arguments of the ld. AR that the credit of service tax on the hire charges would not be available to the assessee had he booked the said hire charges under the current financial year. Looking to the totality of facts of the case , we are of he opinion that since the assessee has booked the full amount of hire charges as per Form No.26AS into two years and offered the same for taxation though the claim of TDS on the entire hire charges was made in the assessment year 2010-11. In any case, if the hire charges as mentioned in form No.26AS are to be considered in the current year then the corresponding income as shown in the next year with the relevant expenditure are to be deleted from the next year which seems to be meaningless and un-productive at this stage. Even worth noting is fact that the income has been accepted by the department in the subsequent year. We, therefore, are of the considered opinion that since the full amount of hire charges stood offered to tax by the assessee in two years , addition of ₹ 54,32,279/- can not be sustained as it will result in double taxation of the same income. Accordingly, we set aside the order of ld.CIT(A) and direct the AO to delete the addition - Decided in favour of assessee.

Summary

Issues involved:
Confirmation of addition of ?54,32,279 based on Form No. 26AS against books of accounts.

Analysis:
1. The appeal was filed against the order passed by the CIT(A) confirming the addition of ?54,32,279 by the AO based on the variance between the gross hire charges shown in Form No. 26AS and the books of accounts of the assessee for the assessment year 2010-11.

2. The AO observed a difference in the hire charges received by the assessee from Punj Lloyd Ltd as per Form No. 26AS and the books of accounts. The AO treated this difference as concealed income, despite the assessee's explanation that the variance was due to billing in the subsequent financial year and the corresponding expenditure was also accounted for in that year.

3. The CIT(A) upheld the AO's decision, emphasizing the consistency required in accounting methods between the assessee and Punj Lloyd Ltd. The CIT(A) rejected the assessee's argument that the billing was done in the subsequent year, citing discrepancies in the invoices and TDS certificates issued by Punj Lloyd Ltd.

4. The ITAT, after considering the submissions, noted that the assessee had accounted for the difference in the subsequent year, making the tax liability neutral. The ITAT found merit in the argument that booking the hire charges in the current year would have affected the availability of service tax credit. The ITAT concluded that since the income was accounted for in two years and accepted by the department in the subsequent year, sustaining the addition would result in double taxation.

5. Consequently, the ITAT allowed the appeal, directing the AO to delete the addition of ?54,32,279, as the full amount of hire charges had been offered for taxation in two years, preventing double taxation of the same income.

6. The ITAT's decision highlighted the importance of accounting consistency, the tax neutrality of the assessee's actions, and the prevention of double taxation, ultimately leading to the allowance of the appeal and the deletion of the addition made by the AO and upheld by the CIT(A).