2016 (8) TMI 412 - AT - Income Tax

Receipt of labour charges - difference in amount offered for taxation - assessee filed reconciliation - Held that - We find that during the assessment proceedings, the AO had observed that the assessee was in receipt of labour charges of ₹ 9. 35 crores for the year under consideration and had offered ₹ 9. 29 crores only for taxation, that the assessee filed reconciliation in that regard, that he directed the assessee to file further reconciliation of the receipts in the cases of NLL and HAJ(Rs. 4. 78 crores and ₹ 2. 47 crores, respectively), that the AO concluded that there was difference in the receipt to the extent of ₹ 33. 82 lakhs, that the assessee had argued before the FAA that the AO had wrongly considered the labour-charges-TDS certificates, that service tax, VAT were considered as income while calculating labour-charges receipts, that the assessee had filed detailed reconciliations before the FAA with regard to NLL and HAJ, that it had filed debited notes containing the details of service tax and TDS, that it had also explain as to how the retention money was affecting the bill amounts, that while deciding the appeal the FAA did not consider the debit notes and the Ledger accounts in proper perspective, that it had also explained as to why there was difference between the ledgers of both the parties and the ledgers maintained by it, that the FAA ignored the submissions made by it. In our opinion, the reconciliations submitted by the assessee along with the debit notes the Ledger accounts of NLL and HAJ and the final bills(page 109 of the PB. )have to be considered for arriving at final conclusion. Thus, there is a need of further verification of the matter under consideration. So, in the interest of justice, we are restoring back the issue to the file of the AO for fresh adjudication. He is directed to afford a reasonable opportunity of hearing to the assessee and to consider the material submitted by the it before us. - Decided in favour of the assessee in part.

Summary

Issues: Delay in filing appeal, Addition of income based on reconciliation statements

Delay in Filing Appeal:
The appeal was filed with a delay of 28 days, attributed to the illness of the accountant. The Director of the company stated that the delay was beyond their control. The Authorized Representative reiterated the same arguments during the hearing, supported by an affidavit and application for condoning the delay. Considering the circumstances and facts, the Tribunal decided to condone the delay in filing the appeal.

Addition of Income based on Reconciliation Statements:
The primary issue revolved around the addition of ?33.82 lakhs to the total income of the assessee. The Assessing Officer (AO) found discrepancies in the labour charges received by the assessee and the amounts declared for taxation. The AO directed the assessee to reconcile the differences, but upon review, found variations in the reconciliation statements submitted. The First Appellate Authority (FAA) also upheld the AO's decision, stating that the reconciliation statements were not credible and that the explanations provided were insufficient. However, during the appeal before the Tribunal, the assessee argued that the AO had wrongly considered certain elements like TDS and VAT as income, and had not properly evaluated the debit notes and ledger accounts. The Tribunal agreed that further verification was necessary and restored the issue back to the AO for fresh adjudication, directing a thorough consideration of the material submitted by the assessee.

In conclusion, the Tribunal partially allowed the appeal, deciding in favor of the assessee on the ground of addition of income based on reconciliation statements. The order was pronounced on 5th August 2016.