2017 (9) TMI 371 - AT - Income Tax

Discrepancy in receipt as per TDS certificates and receipts booked by the assessee - Revision u/s 263 - CIT(A) granted relief to the assessee on the ground that the A.O. has not pointed out any discrepancy in the audited accounts which were audited u/s 44AB as well as the A.O. failed to make any enquiry with Provogue India Limited as no notice/summons u/s 133(6)/131 respectively were issued by the AO - Held that - As observed that the power of ld. CIT(A) is co-terminus with the power of A.O. and the ld. CIT(A) under these circumstances should have directed the A.O. to issue summons/notices u/s 131/133(6) of the Act to the M/s Provogue (I) Ltd. to verify this discrepancy in income or could have himself issued such notices/summons to Provogue India Limited for necessary verifications, the objective being to compute correct income chargeable to tax which is mandate of the 1961 Act. The primary onus is on the assessee to reconcile the income as is reflected in TDS certificates with books of accounts, as the said income stood credited in assessee s books of accounts which onus was not discharged by the assessee in the instant case. Hence, keeping in view the factual matrix of the case, we are inclined to set aside and restore this matter to the file of the A.O. for de novo determination of the issue on merit in accordance with law. The assessee is directed to file necessary evidences/explanations before the A.O. in the de novo proceeding to reconcile the difference between the income as is reflected in the books of accounts and TDS certificates w.r.t. Provogue India Limited. Infringement of Section 194C - payments being made without deduction of tax at source from labour payments - Held that - The assessee had made payments to the tune of ₹ 1,01,04,662/- and Rs. ₹ 7,64,497/- to various persons which was claimed by the AO to have exceeded threshold limits as stipulated u/s 194C of the 1961 Act and the assessee had made payments without deducting tax at source as stipulated u/s 194C which as per AO infringed provisions of Section 40(a)(ia). We find that the assessee had claimed that these payments were made to supervisors who distributed payment to labourers without retaining any income for themselves and hence no violation of Section 194C r.w.s. 40(a)(ia). The assessee set up this plea of making payment to supervisors who in turn made payments to labourers without retaining any profit for themselves, for the first time before ld. CIT(A) and learned CIT(A) did not called for any remand report from A.O. but accepted the plea of the assessee while granting relief to the assessee without any verification/ examination of the claim of the assessee. This new plea of the assessee that payments were made to supervisors who in turn distributed payments to labourers without keeping any income for themselves and hence no infringement of Section 194C r.w.s. 40(a)(ia) need verification by the AO. Thus, this matter needs to be set aside and restored to the file of the A.O. for denovo determination of this issue on merits, who will evaluate the contention of the assessee on merits in accordance with law.

Summary

Issues Involved:
1. Deletion of addition on account of discrepancy in receipt from M/s. Provogue (I) Ltd.
2. Deletion of addition on account of discrepancy in receipt from M/s. Catwalk World Wide Pvt. Ltd.
3. Deletion of addition made under Section 40(a)(ia) of the Income-tax Act, 1961.

Detailed Analysis:

1. Discrepancy in Receipt from M/s. Provogue (I) Ltd.:
The Assessing Officer (AO) observed a discrepancy between the TDS certificate from M/s. Provogue (I) Ltd. amounting to ?6,89,34,259 and the income booked by the assessee at ?6,30,28,377, leading to a short booking of ?59,05,882. After considering debit notes, the AO still found an unexplained short booking of ?19,59,538, which was added to the assessee's income. The CIT(A) deleted this addition, stating that the accounts were audited under Section 44AB and the AO failed to use his powers under Sections 131/133(6) to verify the discrepancy. The Tribunal noted that the CIT(A)'s powers are co-terminus with those of the AO and should have directed further verification. The matter was remanded back to the AO for de novo determination, directing the assessee to provide necessary evidence to reconcile the differences.

2. Discrepancy in Receipt from M/s. Catwalk World Wide Pvt. Ltd.:
The AO found a discrepancy of ?38,375 between the TDS certificate from M/s. Catwalk World Wide Pvt. Ltd. and the income booked by the assessee. The CIT(A) deleted the addition, considering the discrepancy as the amount of TDS. The Tribunal found that the assessee did not provide sufficient evidence to explain the difference and remanded the matter back to the AO for de novo determination, directing the assessee to furnish necessary explanations and evidence.

3. Disallowance under Section 40(a)(ia):
The AO disallowed ?1,01,04,662 and ?7,64,497 under Section 40(a)(ia) for failure to deduct TDS on labour payments exceeding ?50,000. The assessee argued that payments were made to supervisors who distributed them to individual labourers without retaining any income. The CIT(A) accepted this explanation and deleted the additions. The Tribunal noted that this plea was raised for the first time before the CIT(A) and was not verified by the AO. The Tribunal remanded the matter back to the AO for de novo determination, directing the AO to verify the assessee's claim regarding payments to supervisors and their compliance with Section 194C.

Conclusion:
The Tribunal set aside the CIT(A)'s order and remanded all issues back to the AO for de novo determination, directing the assessee to provide necessary evidence and explanations. The AO was instructed to provide the assessee with sufficient opportunity to be heard and to verify the claims in accordance with the principles of natural justice. The appeal of the Revenue was allowed for statistical purposes.