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2019 (7) TMI 1079 - AT - Income TaxChargeablity of corresponding receipts in 26AS as income to tax as per Sec. 199 - TDS deducted on advance subsequently returned due to cancellation of the agreement - TDS claimed - difference in gross receipt, as per Form 26AS and the profit loss account - HELD THAT - AO did not verify the work order given by the company to ascertain the factual position. The assessee also did not keep the amount idle and spent the same, which shows that the assessee spent the amount for the work done. The AO did not examine M/s.Varsity Education Management Pvt. Ltd., and the works carried on to the company during the period of operation of the work order. Neither AO nor AR placed the cancellation agreement, date of cancellation, reasons for cancellation, if the work was not executed by the assessee who has executed the work to Varsity Education during the period of April 2012 to February 2013 i.e till the date of repayment of the advance etc. The assessee also did not place any correspondence with regard to cancellation of the work order. All these issues required to examine in detail to ascertain the factual position to arrive at the logical conclusion to ascertain whether the payment received from M/S Varsity Education was income or only the advance amount. During the appeal hearing also the Ld.A.R did not furnish the details such as the date of cancellation, reasons for cancellation, whether work order has been executed till the date of cancellation, the charges received, the compensation payable in case of unilateral cancellation etc. Thus issue is required thorough examination with the books of account of the assessee as well as the company. Therefore, we remit the matter back to the file of the AO with a direction to re-examine the issue in detail and decide the issue afresh on merits. Thus, the appeal filed by the Revenue is allowed for statistical purpose.
Issues Involved:
1. Whether the advance received by the assessee from M/s. Varsity Education Management Pvt. Ltd. was taxable as income. 2. Whether the refund of the advance amount without interest was a prudent business practice. 3. Whether the TDS amount retained by the assessee should be treated as income. 4. Whether the cross-objection filed by the assessee should be entertained despite the delay. Issue-Wise Detailed Analysis: 1. Taxability of Advance Received: The primary issue was whether the advance of ?6,13,67,900 received by the assessee from M/s. Varsity Education Management Pvt. Ltd. should be considered as taxable income. The Assessing Officer (AO) observed that the assessee admitted gross contract receipts of ?34,89,17,821 but the contract agreements indicated a higher gross receipt of ?41,29,88,248, resulting in a discrepancy of ?6,40,70,427. The assessee contended that the advance was returned due to the cancellation of the agreement, supported by a confirmation letter from M/s. Varsity Education Management Pvt. Ltd. The AO, however, did not accept this explanation due to the lack of evidence of non-execution of the work and added the discrepancy amount as income. The CIT(A) partially upheld the AO's decision but only confirmed the addition of ?6,14,000, representing the TDS amount retained by the assessee. 2. Prudent Business Practice: The Revenue argued that advancing such a huge amount without executing any work and repaying it without interest was not a prudent business practice. The AO did not believe the unilateral cancellation of the agreement without any supporting evidence and considered the amounts received as revenue receipts. The Tribunal noted that the work order required payments based on the quantum of work and execution, with no clause for advance payment. The Tribunal found it necessary to re-examine whether the payments were indeed advances or payments for work done. 3. Treatment of TDS Amount: The CIT(A) confirmed the addition of ?6,14,000, representing the TDS amount retained by the assessee, as income. The Tribunal noted that the assessee claimed credit for the TDS in her return of income, which implied that the corresponding receipts should be chargeable to tax. The Tribunal directed the AO to re-examine the issue in detail, considering the factual position and the terms of the work order. 4. Cross-Objection by the Assessee: The cross-objection filed by the assessee was dismissed due to a delay of 17 days and the absence of a petition for condonation of delay. Conclusion: The Tribunal remitted the matter back to the AO for a thorough examination of the books of account of both the assessee and M/s. Varsity Education Management Pvt. Ltd. to ascertain the factual position and determine whether the payments received were income or merely advances. The Tribunal emphasized the need for detailed scrutiny of the work order, cancellation agreement, and other relevant documents to arrive at a logical conclusion. The appeal filed by the Revenue was allowed for statistical purposes, and the cross-objection by the assessee was dismissed.
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