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TMI Blog2017 (8) TMI 441X X X X Extracts X X X X X X X X Extracts X X X X ..... CIT(A) is contrary to the facts of the case and against the provisions of law and has been passed with pre-conceived notions and is based on conjectures and surmises and is therefore liable to be quashed. 2. That the assessment order has been passed by Deputy Commissioner of Income-tax, Circle 3(1), New Delhi ('learned AO') under section 144 read with section 143(3) of the Act in absolute haste and arbitrary manner without giving an opportunity to the Appellant to justify the false and unjust allegations made in the assessment order which is bad in law and learned CIT(A) has erred in holding such order as valid. 3. That the learned CIT(A) has erred on facts and in law by rejecting the contention of the Appellant that it acts as agent of its clients and disregarding the net basis method of accounting followed by the Appellant which is in accordance with the Accounting Standard ('AS') 9 "Revenue Recognition" as recommended by ICAI and now also prescribed by Central Government as part of Companies (Accounting Standards) Rules, 2006. 4. That the learned CIT(A) has erred on facts and in law in confirming an addition of Rs. 65,52,74,478 being the amount paid/pay ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 0(a)(ia) of the Act, no such disallowance made by learned CIT(A) under section 40(a)(ia) of the is uncalled for. 14. Without prejudice to the above grounds, the benefit of second proviso to section 40(a)(ia) of the Act should be allowed in the year in which TDS is deemed to be deducted and paid. 15. Without prejudice to the above, learned CIT(A) has erroneously computed additional income as Rs. 1,54,98,15,194 instead of Rs. 90,08,18,069. 16. That the learned CIT(A) has erred on facts and in law in upholding the addition made by the learned AO of Rs. 3,01,15,968 on account of decrease in the net profit ratio based on presumptions, assumptions conjecture and surmises and without giving adequate opportunity to Appellant to support its claim. 17. That the learned CIT(A) has erred on facts and in law in directing learned AO to initiate penalty proceedings under section 201 (1) of the Act 18. That the learned CIT(N has grossly erred on facts and in law by completely ignoring the provisions of law, submissions made by the Appellant, evidences placed and the material available on record and has passed a perverse order in utmost haste without giving adequate opportunity of be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arties to the appeal, gone through the documents relied upon and orders passed by the revenue authorities below in the light of the facts and circumstances of the case. GROUND NO.1 7. Ground No.1 is being general in nature needs no specific adjudication, hence decided accordingly. GROUND NO.2 8. Ground No.2 is not pressed by the ld. AR for the assessee company, hence same is determined against the assessee company. 9. The contention of the ld. DR that assessee is a sub-contractor and not agent is not tenable as this issue has already been determined by the coordinate Bench of Tribunal in assessee's own case qua AY 2005-06 and 2010-11. GROUNDS NO.3, 4, 5, 6, 7, 8 & 18 10. First challenge made by assessee that AO erred in treating the difference between revenue disclosed by the assessee in P&L account and the amount of the receipts shown in Form No.26AS as deemed income. Undisputedly, assessee company disclosed its revenue in P&L account at Rs. 31,70,10,89/- whereas as per Form No.26AS, the total receipts were Rs. 163,17,01,764/-, which excludes receipt from income from other sources and resultantly shown less income of Rs. 131,46,91,575/-. 11. Ld. AR for the assessee cont ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n Rs.) Pass through cost 152,15,74,483 (less) confirmed transaction 38,76,11,081 Balance 113,39,63,402 (Less) Unconfirmed transaction 65,52,74,478 Balance 47,86,88,924 15. No doubt, AO issued notice u/s 133 (6) of the Act to 22 vendors of the assessee on random basis to confirm the transaction entered into between the assessee and the vendors out of which 10 vendors have responded and again out of 10 vendors, 8 vendors have confirmed the transaction with the assessee. However, in case of 2 vendors, amount confirmed did not match with the amount claimed by the assessee. 16. On the basis of confirmations received by the AO, forwarded to ld. CIT (A), the CIT (A) has tabulated the confirmation/nonconfirmation as under :- A.Y.2011-12 Sl. No. Name of the Vendors Payment made as per appellant Confirmation received Confirmation not received Remarks 1. TLG India Ltd. 100037369 Confirmation received - Confirmation received 2. Bates India Ltd. 196120891 - Confirmation not received The unconfirmed amount of Rs. 196120891 is disallowed. 3. Platinum 108749269 37210001 71539268 The Communication Pvt. Ltd. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2,74,478/- is treated as unexplained and disallowed as unexplained income u/s 68 of the Act and considered the expenditure/pass through cost shown from unconfirmed parties as bogus. 18. Again, the issue in controversy has already been dealt with by the ITAT, Delhi Bench 'B', New Delhi in ITA No.6184/Del/2014 for AY 2010-11 dated 17.08.2016 in assessee's own case vide which the matter was restored to the file of the AO for deciding this issue afresh after seeking details from the assessee and vendors. For facility of reference, operative part of the order passed in assessee's own case for AY 2010-11 is reproduced as under :- "8. We have heard the rival submissions and perused the relevant material on record. The assessee is carrying on the business of doing advertisement mainly for Samsung group of companies in print and electronic media. This work is outsourced from vendors. The vendors raise bill on the assessee for the amount payable to them and the assessee raises bill for the amount payable to vendors plus its remuneration on its clients. The assessee drew its Profit & Loss Account, a copy of which is available on page 64 of the paper book, by showing its remuneration as rev ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... amount to under-statement of income. This issue requires to be determined on the basis of factual and legal position applicable in this case and by following the order dated 17.08.2016 (supra) passed by the coordinate Bench for AY 2010- 11, applicable to the identical facts of this case, the impugned order is set aside and the matter is restored to the AO for deciding this issue afresh after providing an opportunity of being heard to the assessee. In case, the payment is actually made by the assessee to the vendors in terms of the Agreement then no addition can be made otherwise addition on account of alleged payment can be made. 20. The next question arises for determination in this case is as to making ad hoc addition of Rs. 23,93,44,462/- being 50% of the amount paid/payable to the vendors to whom no notices were sent by the AO u/s 68 of the Act, is concerned, when no notice has been sent to the vendors to whom the payments have been made by assessee by raising bills to his clients along with its remuneration, no ad hoc addition can be made. We are of the considered view that this issue is also required to be restored to the AO to decide afresh after issuing notice and procuri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ded that first of all, CIT (A) has no power to enhance the assessment by discovering new source of income which were not considered by the ITO in the order appealed against. However, this contention of the assessee has already been rejected by coordinate Bench of the Tribunal in ITA No.6184/Del/2014 for AY 2010-11 (supra) in assessee's own case by relying upon the judgment rendered by Hon'ble Delhi High Court in Gurinder Mohan Singh Nindrajog vs. CIT - 248 ITR 170 (Del.) and concluded that the CIT (A) was empowered to enhance an assessment qua the net assessed sum u/s 251(1)(a) of the Act. 25. However, when we examine the issue on merit the disallowance of payment of Rs. 27,50,306/- to its vendors for supply of material without deduction of tax at source u/s 40(a)(ia) of the Act has not made on the sole ground that the service element was involved in the copy of invoices furnished by the assessee on sample basis. First of all, as discussed in the preceding paras, while determining grounds no.3 to 8, all the vendors have not come up before the AO and out of 22 vendors, only 8 vendors have confirmed the receipt and such an addition cannot be made by randomly picking up the facts. Se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 0,347,767 24.43 2012-13 425,600,413 13,880,227 439,480,640 157,243,886 35.78 2013-14 640,623,649 50,173,602 690,797,251 250,276,456 36.23 0. Bare perusal of the comparative chart of GP and NP rates for AY 2007-08 and AY 2013-14 goes to prove that net profit ratio in the instant case has never been consistent and even otherwise, it cannot be consistent as it depends upon numerous reasons. When the audited books of account have not been rejected, merely making an addition on ground of fall in NP ratio is not sustainable in the eyes of law. 31. Moreover, the assessee has duly explained the reasons for fall in the net profit ratio in AY 2011-12 viz. fall in service income; increase in personnel expenses; and increase in depreciation charges which have been reproduced by the ld. CIT (A) at pages 21 to 23 of the impugned order but has not preferred to assign any reason for not accepting the contentions raised by the assessee. So, in view of the facts and circumstances of the case, we are of the considered view that in the absence of any cogent reasons, addition on the basis of fall in net profit ratio, that too without rejecting the books of account, is not sustainable, he ..... X X X X Extracts X X X X X X X X Extracts X X X X
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