2018 (12) TMI 898 - AT - Income Tax

Addition towards suppressed sales - estimation of profit - assessee has offered income on estimated basis - Held that - The total turnover from each project was shown in the revised return and the same was accepted by the Assessing Officer in his remand report - the assessee estimated income @ 8% of the total turnover, including the turnover which was not routed through the books of account - once the A.O. estimates the income, separate addition on the suppressed turnover is not maintainable and at best the suppressed turnover has to be taken into consideration for the purpose of estimating the profit. No contrary decision was placed on record by the Revenue. Under these circumstances, we are of the view that the CIT(A) was justified in holding that the separate addition towards suppressed sales is not maintainable. Applicability of provisions of section 197A(IA) - TDS on interest - disallowance u/s 40(a)(ia) - non furnishing of details to indicate that the assessee has forwarded Form 15G to the CIT - Held that - It is mandatory on the part of the assessee to furnish the details to the Commissioner, though not within the stipulated time but atleast before the completion of assessment of the assessee. In the instant case, no details were furnished to indicate that the assessee has forwarded Form 15G to the CIT. Under these circumstances, we are of the view that the assessee committed an error in making the payment without deducting the tax at source and consequently the provisions of section 40(a)(ia) are applicable. The case of the assessee is that in the case of estimate of income after rejecting the book results, there cannot be any independent disallowance u/s 40(a)(ia). This issue was discussed in K VENKATARAJU VERSUS ADDL COMMISSIONER OF INCOME TAX 2013 (11) TMI 409 - ITAT VISAKHAPATNAM observed that a disallowance is a technical disallowance and more precisely deferment of allowance, which is linked with the compliance of TDS provisions and hence even if the business income is estimated disallowance can be made u/s 40(a)(ia) independently. A.O. has correctly applied the provisions of section 40(a)(ia). However, if the assessee is able to prove that the declaration in Form 15G was submitted before the CIT before completion of assessment for the year under consideration, the A.O. may reconsider the issue in accordance with law. - decided against assessee.

Issues Involved:
1. Applicability of Section 40(a)(ia) for disallowance of ?2,94,633.
2. Justification of additional income declaration of ?50 lakhs for A.Y. 2012-13 and ?1 crore for A.Y. 2013-14.
3. Estimation of income and separate addition of suppressed turnover.
4. Disallowance under Section 40A(3) for cash expenditure exceeding ?20,000.
5. Penalty proceedings under Section 271A(2)(f).

Issue-wise Detailed Analysis:

1. Applicability of Section 40(a)(ia) for disallowance of ?2,94,633:
The assessee did not deduct tax at source on interest payments amounting to ?2,94,633. The AO invoked Section 40(a)(ia) for disallowance. The assessee argued that obtaining Form 15G suffices compliance, even if not submitted to the CIT. The CIT(A) initially agreed with the assessee, but the Tribunal held that forwarding Form 15G to the CIT is mandatory. The Tribunal ruled that the AO correctly applied Section 40(a)(ia) but allowed the assessee to prove submission of Form 15G to the CIT before the assessment completion for reconsideration.

2. Justification of additional income declaration of ?50 lakhs for A.Y. 2012-13 and ?1 crore for A.Y. 2013-14:
During a survey, the assessee admitted undisclosed income of ?50 lakhs for A.Y. 2012-13 and ?1 crore for A.Y. 2013-14. The AO added these amounts as additional income. The assessee contended that the actual undisclosed turnover was only ?34,84,000 for A.Y. 2012-13 and ?26,75,000 for A.Y. 2013-14. The CIT(A) found the AO's addition based on rough notings unsupported by material evidence. The Tribunal upheld the CIT(A)'s view that suppressed turnover should be included in total turnover for profit estimation, not separately added.

3. Estimation of income and separate addition of suppressed turnover:
The AO added ?61,59,000 for A.Y. 2012-13 and ?1,32,33,000 for A.Y. 2013-14 as suppressed turnover. The assessee argued that income should be estimated on total turnover, including suppressed receipts. The CIT(A) agreed, noting the total sale value was not disputed. The Tribunal upheld the CIT(A)'s decision, referencing multiple case laws that only profit from suppressed turnover should be taxed, not the entire suppressed amount.

4. Disallowance under Section 40A(3) for cash expenditure exceeding ?20,000:
For A.Y. 2013-14, the AO disallowed ?21,33,022 for cash expenditure exceeding ?20,000 under Section 40A(3). The CIT(A) upheld this disallowance, noting the assessee failed to provide details supporting business expediency or exceptional circumstances. The Tribunal did not find any error in the CIT(A)'s decision, thus maintaining the disallowance.

5. Penalty proceedings under Section 271A(2)(f):
The CIT(A) directed the AO to initiate penalty proceedings under Section 271A(2)(f). The assessee contested this in their cross-objection. The Tribunal set aside this direction, stating the issue should be reconsidered by the AO in light of the main issue being remanded.

Conclusion:
The Tribunal concluded that the CIT(A) was correct in estimating income based on total turnover, including suppressed receipts, and not making separate additions for suppressed turnover. The disallowance under Section 40(a)(ia) was upheld but allowed for reconsideration if Form 15G was submitted to the CIT. The disallowance under Section 40A(3) was maintained, and the direction for penalty proceedings under Section 271A(2)(f) was set aside for reconsideration. The appeals were partly allowed for statistical purposes.

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