2019 (1) TMI 746 - AT - Income Tax

Accrual of income - Assessment of income of coupons and corresponding expenses - existence of element of profit - as during assessment year 2007-08 the assessee had already claimed TDS but the corresponding receipt was not incorporated in the income - allowing income aspect in earlier year and not allowing corresponding expenses in the same year - CIT(A) has held that the deductor Idea had duly deducted TDS and had issued credit notes in favour of the assessee, however noted that the assessee had duly claimed the recharged coupons as expenses when these were distributed by him in the next year - Held that - CIT(A), in his findings, has ignored the fact that assessee, on the one had had claimed expenses in the next year against the recharged coupons and therefore, there was no wrong on the part of the assessee in declaring the corresponding income in the next year. As find from the copy of ledger account,assessee had credited the income on account of coupons on 04/04/2007 to 05/04/2007 and has also claimed free of cost recharged coupons as expenses. The entries passed by the assessee in the succeeding year relate to recording of income as well as expenses. The action of authorities below by taking only the income aspect in earlier year and not allowing corresponding expenses in the same year is not justified. The addition, if sustained, will result into double addition as the assessee himself during succeeding year has credited the same amount in the books of account and therefore, the action of authorities below in making and sustaining the addition in the year under consideration is not justified. - Decided in favour of assessee.

Summary

Issues Involved:
1. Condonation of delay in filing the appeal.
2. Addition of unexplained income based on TDS reflected in Form-26 AS.
3. Treatment of free coupons received and corresponding expenses.

Issue-wise Detailed Analysis:

1. Condonation of Delay in Filing the Appeal:
The assessee filed appeals with delays of 872 days and 1662 days for the assessment years 2007-08 and 2008-09, respectively. The delay was attributed to the wrong advice from the counsel, leading the assessee to file an application under section 154 instead of appealing to the Tribunal. The Tribunal cited the case of Midas Polymer Compounds Pvt. Ltd. vs. ACIT, emphasizing that substantial justice should be preferred over technicalities. The Tribunal concluded that the delay was justified due to the counsel's incorrect advice and thus condoned the delay, allowing the appeals to be adjudicated on merits.

2. Addition of Unexplained Income Based on TDS Reflected in Form-26 AS:
During the assessment proceedings, the Assessing Officer (AO) made an addition of ?3,84,312/- for the assessment year 2007-08, based on the TDS reflected in Form-26 AS, which was not incorporated in the income despite the TDS claim of ?21,559/-. The CIT(A) upheld this addition, noting that the deductor, Idea, had issued credit notes and deducted TDS. However, the CIT(A) failed to consider that the assessee had accounted for these recharged coupons as expenses in the subsequent year. The Tribunal found that the assessee had credited the income and claimed the corresponding expenses in the next year, and thus, the addition would result in double taxation. Therefore, the Tribunal deemed the addition unjustified and allowed the appeal.

3. Treatment of Free Coupons Received and Corresponding Expenses:
The assessee, engaged in selling SIM cards, received free coupons from Idea Telephone Company, which were meant for distribution among retailers without generating income. The AO added the value of these coupons as income since they were reflected in Form-26 AS but not in the profit & loss account. The Tribunal observed that the assessee had credited the income from these coupons in the subsequent year and also claimed them as expenses. The Tribunal emphasized that the authorities below erred by only considering the income aspect in the earlier year without allowing the corresponding expenses. This approach would lead to double addition since the assessee had already accounted for these amounts in the subsequent year. Consequently, the Tribunal allowed the appeal, finding the addition unjustified.

Conclusion:
The Tribunal allowed both appeals, condoning the delay due to the counsel's wrong advice and finding that the addition of unexplained income based on TDS was unjustified due to the subsequent year's accounting of income and expenses. The Tribunal's decision emphasized substantial justice over technicalities, ensuring that the assessee was not unfairly taxed twice for the same income.