2022 (4) TMI 1174 - AT - Income Tax

Addition being the difference arising from VAT return in the computation of taxable total income as disclosed in the return of income - Assessee before us pleaded that the assessee has collected some evidences in regard to the difference in purchases and VAT credit claimed on the same and the same may kindly be remitted back - HELD THAT - We noted that the plea of the assessee is reasonable and hence, we direct the AO to allow one more opportunity to reconcile the difference - Accordingly, this issue is remitted back to the file of the AO. Disallowance of job work charges for non-deduction of TDS by invoking the provisions of section 40(a)(ia) - HELD THAT - We noted that now the ld.counsel for the assessee made only submission that the second proviso to section 40(a)(ia) of the Act, which is retrospective, the assessee should be allowed to take the benefit of the same - assessee stated that the requisites as noted in the CBDT circular and rules relating to second proviso to section 40(a)(ia) is ready to fulfill as he has gathered information that the recipient parties has already declared the job work charges in their respective returns of income. The ld. Counsel stated before us that the job work payments were made only to one party i.e., VRV Zips Process. The ld. Senior DR has no serious objection in setting aside the matter. As the assessee claimed that the recipient party has disclosed the income in their return of income, in view of second proviso to section 40(a)(ia) of the Act, we remit this issue back to the file of the AO. This issue of assessee s appeal is allowed for statistical purpose.

Summary

Issues:
1. Addition of difference in VAT return to taxable income.
2. Disallowance of job work charges for non-deduction of TDS.

Analysis:

Issue 1:
The first issue pertains to the addition of a difference in VAT return to the taxable income of the assessee. The CIT(A) partly sustained the addition of ?2,19,909, which was the variance between purchases shown in the profit & loss account and the VAT return. The AO added this difference as the assessee failed to reconcile it fully. However, the assessee later provided additional reconciliation details, which led to the identification of certain VAT credits and reversals that explained a portion of the difference. The CIT(A) directed the AO to delete ?4,79,583 from the addition, confirming the balance of ?2,19,909. The assessee requested another opportunity to reconcile the remaining difference, which the ITAT allowed, remitting the issue back to the AO for further examination.

Issue 2:
The second issue concerns the disallowance of job work charges amounting to ?92,104 for non-deduction of TDS under section 40(a)(ia) of the Income Tax Act. The CIT(A) upheld this disallowance. However, the assessee argued that the second proviso to section 40(a)(ia) should apply retrospectively, as the recipient parties had declared the job work charges in their income tax returns. The ITAT found merit in this argument and decided to remit the issue back to the AO for reconsideration. As the recipient party had disclosed the income, the ITAT allowed this issue in favor of the assessee for statistical purposes.

In conclusion, the ITAT Chennai allowed the appeal filed by the assessee for statistical purposes, remitting both issues back to the AO for further examination and consideration in light of the additional information and legal provisions presented during the proceedings.