2021 (5) TMI 634 - AT - Income Tax

Addition as bills recoverable during the year - HELD THAT - As the assessee has failed to prove that the amount is bills receivable during the year under consideration, therefore, the authorities below treated the same undisclosed bills receipts and added the same to the income of the assessee. Now, it is the contention of the assessee that the amount as already formed part of gross receipts disclosed as the same amount was received in subsequent year. Even otherwise, the contention of the assessee is that a profit percentage may be determined for the undisclosed receipts - we find force in the submission of ld. A.R. of the assessee that the profit percentage embedded the undisclosed receipts is to be taxed. To meet the ends of justice, if the profit percentage @ 5% on the undisclosed receipts is taxed in the hands of the assessee.. Therefore, direct the AO to determine the net profit @ 5% of the undisclosed receipts. Accordingly, this ground is partly allowed. Disallowance of 3.5% of the expenses - HELD THAT - On perusal of the orders of lower authorities, find that since the assessee failed to submit the ledger accounts for expenses supported with bills vouchers to the extent of ₹ 84,60,600/-, and considering the fact that the assessee has shown net profit @ 1.6% of the expenses, the AO disallowed the same on estimate basis @ 3.5% of ₹ 84,60,600/-, which comes to ₹ 2,96,121/-. The contention of assessee is that the percentage of profit determined by the AO is on higher side and requested to reduce the profit percentage. Ld. A.R could not explain as to why the assessee failed to furnish supporting bills and vouchers before the lower authorities and before the Tribunal. Therefore, CIT(A) has considered the issue correctly, which do not require any interference. Hence, this ground is rejected. Addition regarding deduction of TDS - HELD THAT - CIT(A) has directed the AO to verify the claim of TDS and allow the credit as per law, as per the submission of the assessee. It was the submission of ld. D.R. that no credit can be allowed on the basis of TDS certificate without being demonstrated in the TDS portal. Hence, direct the AO to verify from the TDS portal and if the contention of the assessee is correct that TDS has been deducted, then same should be allowed.

Summary

Issues:
1. Addition of bills recoverable as undisclosed receipts.
2. Disallowance of expenses on estimate basis.
3. Disallowance of salary paid to partners.
4. Confirmation of addition regarding deduction of TDS.

Analysis:

Issue 1: Addition of bills recoverable as undisclosed receipts
The appeal concerned the addition of ?5,11,550 as bills recoverable during the year, treated as undisclosed receipts by the Assessing Officer (AO). The Appellate Tribunal noted that the assessee failed to prove the amount as bills receivable, leading to its treatment as undisclosed receipts. The Tribunal acknowledged the argument that the amount was part of gross receipts disclosed in a subsequent year. Considering the profit percentage embedded in the undisclosed receipts, the Tribunal directed the AO to tax the profit percentage @ 5% on the undisclosed receipts of ?5,11,550. Consequently, the ground was partly allowed.

Issue 2: Disallowance of expenses on estimate basis
The next issue involved the disallowance of 3.5% of expenses totaling ?2,96,121 on an estimate basis by the AO. The Tribunal observed that the assessee failed to provide ledger accounts for expenses supported by bills and vouchers. Despite the request to reduce the profit percentage, the Tribunal upheld the CIT(A)'s decision, as the assessee could not justify the absence of supporting documents. Therefore, the ground was rejected.

Issue 3: Disallowance of salary paid to partners
Regarding the disallowance of ?48,000 paid as salary to partners, the Tribunal found no infirmity in the CIT(A)'s order, as the appellant could not challenge the findings. Consequently, the order was confirmed, and the ground was dismissed.

Issue 4: Confirmation of addition regarding deduction of TDS
The final issue pertained to the confirmation of the addition of ?2,19,824 regarding the deduction of TDS. The Tribunal directed the AO to verify the TDS claim and allow credit as per law, emphasizing the need to validate the claim through the TDS portal. If the TDS of ?2,19,824 was indeed deducted, the AO was instructed to allow the same. As a result, the appeal of the assessee was partly allowed.

In conclusion, the Tribunal addressed various issues related to undisclosed receipts, expense disallowance, partner salary disallowance, and TDS deduction, providing detailed analyses and directives for each matter. The judgment was pronounced on 12/5/2021.