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2017 (8) TMI 414 - AT - Income TaxNon reconciliation of various items of income - difference between cumulative income as per TDS certificate and cumulative income offered to tax - Held that - The assessee had filed reconciliation in that matter,that same was not analysed properly by the AO/FAA,that there is no evidence on record that un-reconciled amount is more than ₹ 5.13 lakhs for the year under appeal.The AO has not given any finding about the balance amount.In these circumstances,we hold that the matter needs further verification and investigation.So,in the interest of justice,we are remitting back the matter to the file of the AO for fresh adjudication.He is directed to afford a reasonable opportunity of hearing to the assessee.First effective Ground of appeal(GOA- 2&3)is decided in favour of the assessee,in part. Credit notes issued to Reach Global Services Ltd (RGSL),an Associated Enterprise (AE) of the assessee - Held that - The assessee had filed copy of ledger accounts of RGSL considering credit note and final invoice vide letter dtd. 07/12/2011,copy of invoices,copy of credit note dtd. 6/04/2009 issued for ₹ 2,49,73,220/- and confirmation of accounts from RGSL for year under appeal. From the statement it is clear that RGSL had included the credit note of USD 5,53,232 in its books of account and working of final fees receivable from RGSL (Rs.13, 45, 69,123/-). We find that all the above facts were not analysed properly by the AO/ FAA during the assessment/appellate proceedings.Therefore,in the interest of justice,we are restoring back the issue to the file of the AO for fresh adjudication.He is directed to decide the issue after affording reasonable opportunity of hearing to the assessee.
Issues:
1. Discrepancy in income reconciliation between TDS certificates and income offered to tax. 2. Addition on account of credit notes issued to an Associated Enterprise. 3. Addition on account of credit notes issued to another party. 4. Shortfall in income offered to tax compared to AIR data. Issue 1: Discrepancy in income reconciliation between TDS certificates and income offered to tax: The assessee, engaged in internet and network support services, filed an appeal challenging the CIT(A)'s order. The primary issue was the difference between cumulative income as per TDS certificates and income offered to tax for FY 2005-06 to FY 2008-09. The AO directed the assessee to reconcile the income, which was submitted. The assessee argued that income as per TDS certificates had been offered to tax in different years due to credit notes issued. The AO made an addition to the income, which was upheld by the FAA. However, the ITAT remitted the matter back to the AO for further verification, as the un-reconciled amount was not adequately addressed. This issue was partly decided in favor of the assessee. Issue 2: Addition on account of credit notes issued to an Associated Enterprise: The second ground of appeal involved credit notes issued to an Associated Enterprise (AE). The AO disallowed the credit notes, alleging they were issued to suppress taxable income. The FAA upheld the AO's decision. The ITAT found that the AO and FAA did not properly analyze the facts presented by the assessee. Therefore, the ITAT remanded the issue back to the AO for fresh adjudication after affording a reasonable opportunity of hearing to the assessee. This issue was partly allowed in favor of the assessee. Issue 3: Addition on account of credit notes issued to another party: Two more grounds of appeal related to additions due to credit notes issued to another party and a shortfall in income offered to tax compared to AIR data. Both issues required further verification and investigation, as agreed by both parties during the hearing. The ITAT remitted these issues back to the AO for fresh adjudication, allowing the assessee a reasonable opportunity to present their case. These grounds were decided in favor of the assessee, in part. Conclusion: The ITAT partly allowed the appeal filed by the assessee, remanding several issues back to the AO for fresh adjudication. The discrepancies in income reconciliation, disallowed credit notes, and other related matters required further investigation to ensure a just decision.
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