2017 (6) TMI 560 - AT - Income Tax

Undisclosed income as per TDS certificate - Held that - AR had not furnished any reconciliation for the difference in interest income even before us as rightly pointed out by the ld DR. AR had made merely made bald oral submissions without corroborating the same with material evidences. We find no additional evidence is also filed before us either in the form of proper explanation / reconciliation of the difference, so as to afford one opportunity to the ld AO for verification. Interest on income tax refund also has not been offered to tax by the assessee in the return of income. We find from the assessment order that the assessee is following mercantile system of accounting wherein interest income on deposits with banks are to be offered on accrual basis. Hence we are not inclined to agree to the argument of the ld AR that the said interest income on deposits were to be offered on receipt basis and hence the difference. In fact no evidence was furnished before us to prove the fact of those interest income being offered on receipt basis in the subsequent years. - Decided against assessee. Accrual of income - income from property development - Held that - Since no evidence has been produced before the lower authorities to prove the same, the addition was sustained by the ld CITA. The ld AR merely stated that in the appeal for the Asst Year 2004-05, the ld CIT-A had directed the ld AO to consider the revised return filed for the Asst Year 2004-05 wherein the entire income from property sale development have been claimed to be offered to tax on accrual basis. The said statement of the ld AR is reckoned as a statement given across the bar and accordingly, we deem it fit and appropriate, in the interest of justice and fair play, to avoid double taxation, to set aside this issue to the file of the ld AO to verify whether the said consideration has been offered to tax by the assessee in Asst Year 2004-05 and if found to be correct, then the same is to be deleted in the hands of the assessee in Asst Year 2005-06. Accordingly, the Grounds raised by the assessee are allowed for statistical purposes. Gains on sale of assets - Short term capital gain OR business income - Held that - We are not able to fully appreciate the various contentions raised by the assessee that the BIFR had passed an order directing the income tax department to treat the gains on sale of assets as business receipts so as to give the benefit of set off of the same with the brought forward business loss, in view of the fact that the copy of the BIFR order and its directions are not placed on record before us. Hence we are not in a position to appreciate the contentions of the ld AR in this regard. However, the same would be understood only from the language used by the BIFR in its directions and thereafter we need go into the binding nature of those directions. In the absence of the said order before us, it would be premature to get into those line of arguments advanced by the ld AR. However we find lot of force in the argument of the ld AR that the property at Deonar TDR Mumbai has been the subject matter of dispute in Ground No. 4 and we have already set aside the Ground No.4 to the file of the ld AO.

Issues Involved:
1. Disallowance of sundry debtors and loans/advances written off.
2. Taxation of write-back of provisions.
3. Addition of undisclosed income based on TDS certificates.
4. Addition of income from property development.
5. Classification of gains from the sale of assets as short-term capital gains versus business income.

Issue-wise Detailed Analysis:

1. Disallowance of Sundry Debtors and Loans/Advances Written Off:
The primary issue was whether the Commissioner of Income Tax (Appeals) [CIT(A)] was justified in upholding the disallowance made by the Assessing Officer (AO) on account of sundry debtors and loans/advances written off amounting to ?6,90,39,000/-. The assessee, a company engaged in manufacturing and property sales development, had written off these amounts as business losses. The AO disallowed the write-off, treating it as extraordinary items not in accordance with the law for income computation. The CIT(A) upheld this view, leading to the appeal. The Tribunal referred to its decision in the assessee's case for the previous assessment year (AY 2004-05), where similar issues were remanded to the AO for fresh adjudication. Following this precedent, the Tribunal set aside the issues to the AO for fresh examination and verification, directing that the assessee be given a reasonable opportunity to present its case.

2. Taxation of Write-Back of Provisions:
The second issue was whether the CIT(A) was justified in upholding the taxation of write-back of provisions amounting to ?3,92,47,000/-. The assessee had written back provisions made in earlier years for sundry debtors and loans/advances, which were disallowed in those years. The AO treated the write-back as taxable income, a view upheld by the CIT(A). The Tribunal, referring to its decision for AY 2004-05, remanded the issue to the AO for fresh adjudication, directing that the assessee be given a reasonable opportunity to present its case.

3. Addition of Undisclosed Income Based on TDS Certificates:
The third issue was whether the CIT(A) was justified in upholding the addition of ?2,06,151/- as undisclosed income based on TDS certificates. The AO found a discrepancy between the interest income shown by the assessee and the interest income reflected in the TDS certificates. The assessee failed to provide a satisfactory explanation or reconciliation, leading the AO to treat the difference as undisclosed income. The CIT(A) upheld this addition. The Tribunal found that the assessee had not provided any reconciliation or evidence to explain the difference, even before the Tribunal. Consequently, the Tribunal upheld the addition, dismissing the assessee's ground.

4. Addition of Income from Property Development:
The fourth issue was whether the CIT(A) was justified in upholding the addition of ?87,32,000/- as income from property development for AY 2005-06, which the assessee claimed to have offered to tax in AY 2004-05 on an accrual basis. The AO added this amount to the total income for AY 2005-06, as it was received during that year. The assessee argued that the entire sale consideration of ?401 lacs, including the disputed amount, was offered to tax in AY 2004-05. The CIT(A) upheld the addition due to lack of evidence. The Tribunal set aside the issue to the AO for verification, directing that if the amount was indeed offered to tax in AY 2004-05, it should not be taxed again in AY 2005-06.

5. Classification of Gains from Sale of Assets:
The fifth issue was whether the CIT(A) was justified in treating gains from the sale of assets amounting to ?15,69,91,197/- as short-term capital gains under Section 50 of the Income Tax Act, rather than as business income. The AO observed that the assets sold were depreciable assets, and thus, the gains should be treated as short-term capital gains. The assessee argued that the assets were sold as part of a rehabilitation scheme sanctioned by the BIFR and should be treated as business income. The Tribunal noted that the BIFR order and its directions were not on record, making it premature to decide on the binding nature of those directions. Given that the property at Deonar TDR was also under dispute in another ground, the Tribunal set aside the issue to the AO for fresh adjudication, allowing the assessee to present new evidence and arguments.

6. General Ground:
The sixth ground raised by the assessee was general in nature and did not require specific adjudication.

Conclusion:
The appeal was partly allowed for statistical purposes, with several issues remanded to the AO for fresh adjudication and verification, ensuring that the assessee is given a reasonable opportunity to present its case.

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