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TMI Blog2023 (7) TMI 1087X X X X Extracts X X X X X X X X Extracts X X X X ..... r them before. This fact ought to have been verified by the lower authorities before proceeding to reject books of accounts. Law is well-settled that the AO while resorting to estimation should consider all aspects surrounding the transactions. Merely because there is a fall in gross profit rate would not ipso facto be the reason for rejection of book results. Therefore, considering the material placed on record, the impugned order is hereby, set aside and the issue is restored to the file of AO for deciding it afresh. The AO is hereby, directed to verify the correctness of the claim of the assessee regarding mismatch of figure in Form 26AS arose because of booking of income by the assessee in the year under appeal and by recipient of services in next year. He would decide the issue in accordance with law. Thus, Ground Nos. 2 3 raised by the assessee are allowed for statistical purposes. Addition made on account of difference between Form 15CA and Tax Audit Report - contended on behalf of the assessee that the difference arose because of the fact that the amount was paid post negotiation which resulted into decrease in payment - HELD THAT:- Before Assessing Authority, no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2. At the time of hearing, Ld. Counsel for the assessee submitted that she does not wish to press Ground No.4, the same is hereby, dismissed as not pressed. 3. Ground No.5 raised by the assessee is general in nature, needs no separate adjudication hence, dismissed. 4. Ground Nos. 1 to 2 raised by the assessee are against the addition of INR 54,514/- made u/s 69C of the Income Tax Act, 1961 ( the Act ) as unexplained expenditure. 5. Ground No.3 raised by the assessee is related to addition made by applying gross profit ratio on gross receipts amounting to INR 54,514/-. 6. Apropos to these grounds of appeal, Ld. Counsel for the assessee reiterated the submissions as made in the written submissions. For the sake of clarity, the relevant contents of the written submissions are reproduced as under:- 1. The assessee Company is in appeal before this Hon. Court against the order passed u/s 250(6) of the Act dt. 22.08.2019 for Assessment Year 2011-12 by the Ld. First Appellate Authority on the following additions made by the Ld. A.O. a) Addition amounting to Rs. 54,10,404/- rejecting the books of the assessee and considering GP at the rate of 22.47% on the basis of av ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Addition amounting to Rs. 54,10,404/- rejecting the books of the assessee and considering GP at the rate of 22.47% on the basis of average GP rates of the preceding years. 145(3) 54,10,404/- 2. Addition amounting to Rs. 54,514/- on account of difference in Form 15CA and Tax Audit report. 69C 54,514/- Total 54,64,918/- 8. The brief contentions of the assessee are enumerated hereinafter: 9. The additions amounting to Rs. 1,08,04,598/- were made by the Ld. Assessing Officer by grossly misinterpreting the factual information which was provided to him during the course of Assessment Proceedings. The assessee was asked to link the payment made to various contractors with the revenue received against those contracts. For this purpose the assessee filed a chart before the Ld. Assessing Officer a copy of which is being enclosed here along with on page no. 50 of this paperbook. A brief explanation and the misunderstanding of the Ld. A.O. is given hereunder: 10. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fference of Rs. 1,08,04,598/- is due to double addition of the amounts by the Ld. A.O. which was subsequently deleted by the Ld. CIT(A). Nonetheless, Ld. CIT(A) sustained the addition of Rs. 54,10,504/- on account of fall in GP rate without understanding the submissions and nature of business of the assessee. 12. The reconciliation of gross receipts of a professional with the information contained in form 26AS is always problematic and difficult. The reason being the recognition of the expense by the principal in one year and deduction of TDS on the same on due basis. On the contrary the recipient of Income in the case of professional is generally on cash basis whereas in the case of contractors is in accordance with the percentage completion method as prescribed by AS-9 of the Accounting Standards issued by ICAI. The assessee in this particular case is a contractor and recognizing Income in its books of accounts on the basis of execution of the said contracts. Whereas the principals for whom the said assessee is working record the transactions in the books of accounts on due basis and also deduct tax on payment or on recording of the said transaction in the books of accounts ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e termed as an intention to invade taxes as the same is only a matter of reconciliation and general business norm of the assessee company. 14. It is a settled principle of law that every year of assessment is a separate year and has its own specific and peculiar transactions. While making assessment in particular year assessing officer cannot resort to make additions on account of fall in GP without having any basis of the same situation having been prevailed in the other Assessment Year. Therefore, addition by taking average GP of two preceding years cannot be made on the basis of merely fall in GP ratio in one year. The assessee places reliance on the following rulings:- a) Ruling of Hon'ble High Court of Gujarat in the case of Commissioner of Income-tax-IV vs. Symphony Comfort System Ltd., [2013] 35 taxmann.com 533 (Gujarat). b) Ruling of Hon'ble ITAT Ahmedabad Bench in the case of Century Tiles Ltd. vs. Joint Commissioner of Income-tax, [2014] 51 taxmann.com 515 (Ahmedabad - Trib.). c) Ruling of Hon'ble ITAT Jaipur Bench (Third Member) in the case of Deputy Commissioner of Income-tax, Circle-2, Alwar vs. British Health Products (1) Ltd. 15. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 000/- Deleted after examining the evidences as produced by the assessee - 6. Disallowances of Accounting Charges 40a(ia) 3,60,000/- The Ld. CIT(A) allowed the expenses subject to verification of Ld. A.O. and the Ld. A.O. allowed the same after verification. - 1,26,36,713/- 17. As is evident from the above table, the Hon'ble CIT(A) directed Ld. A.O. in his orders to verify the expenses in relation to the accounting charges amounting to Rs. 3,60,000/-. The Ld. A.O. subsequently verified all the bills and has allowed the deduction to the assessee. In other words, both Ld. A.O. as well as Hon'ble CIT(A) have allowed the expenses of the assessee after verification of the bills but has rejected the books on mere discrepancies in accounting which were eventually explained by the assessee which is highly injudicious, unwarranted and bad at law. 18. Without prejudice to the aforesaid, the assessee Compa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... b. AID Singapore reimbursement of Expenses 3,46,690/- Total (a+b) 7,12,596/- Difference (1-2) 54,414/- 24. As is evident from the aforesaid table that the amount of Rs. 7,67,010/- was claimed as expenses in Form 15CA however, the actual payment made for the same was of Rs. 7,12,596/- as reflected in the Tax Audit Report. 25. Moreover, during the assessment proceedings the assessee had duly submitted the reconciliation as well as explained that reimbursement of expenses was to be made to AID Thailand and Singapore and accordingly Form 15CA was prepared. The assessee made payment at a later stage which led to difference of Rs. 54,514/-. 26. The aforesaid orders passed by the Hon'ble First Appellate Authority suffers from various infirmities the appellant has accordingly taken following grounds of appeal against same:- i. Under the facts and circumstances of the case, the Ld. First Appellate Authority as well as Ld. A.O. have grossly ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Ld. A.O. is given hereunder: 32. The assessee was executing a project for M/s GMR airport developers which had a total gross revenue of Rs. 30,60,405/-. To execute the said project the assessee had engaged various sub-contractors, the detail of which has been provided in the aforesaid chart. On the said project Deolalikar Consultants Private Limited and N Dimpu Singh were engaged for executing a part of that particular project. As a result this gross revenue sum of Rs. 30,60,405/- appeared twice in third column of the said chart. Similarly the project being executed for Sunair Hotels amounting to Rs. 4,624,947/- is also appearing twice in the said column, the gross project value of Interglobe Hotel amounting to Rs. 4,891,485/- is also appearing twice in the said list. The same is the case with many other project which are appearing repeatedly in the said list as different subcontractors were working on the same project. The Ld. Assessing Officer made the total of that particular list by including the project receipts multiple times and thereby rejected the books of accounts of the assessee and made grossly unwarranted additions in the case of the assessee. Needless to say ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... said transaction in the books of accounts whichever is earlier. Moreover, a number of times mistakes committed by the deductor of Tax while feeding the information in their TDS returns results in mismatch. In spite of the best efforts and with no intent to evade Tax, there are differences which remain between the books of accounts and 26AS which is derived from various TDS returns filed by the principal with respect to the payments made or due to the concerned assessee. Some small differences at times remain due to communication gap between the contractor and the principal but the same may not necessarily have any revenue implications for the purpose of Income Tax. It needs to be understood that a contractor does not have a long term relationship with the principal firms they are working with and there are instances where post-completion of the project due to various issues or disputes between the two parties they do not cooperate with each other. As a result there can be some small differences in 26AS and the revenue which has been recognized by a contractor but the same cannot be a basis for out rightly rejecting the books of accounts of the contractor or for making unwarranted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ase of Commissioner of Income-tax-IV vs. Symphony Comfort System Ltd., [2013] 35 taxmann.com 533 (Gujarat) wherein it was held as under: .2........ The AO merely gone by the fact that there was a fall in the gross profit rate as compared to the preceding assessment year which itself is no ground to reject the books of account of the assessee. No specific defect in the maintenance of the books of account by the assessee has been pointed out AO.......... In the absence of any specific defect pointed out in the books of account and the records maintained on computer, the AO was not justified in rejecting the books results, or to enhance the gross profit rate. Accordingly, there is no merit in this ground of appeal of the revenue. The same is accordingly, dismissed. Copy of the said ruling is enclosed on page no. 51 to 52 of this paperbook for your kind perusal. b. Ruling of Hon'ble ITAT Ahmedabad Bench in the case of Century Tiles Ltd. vs. Joint Commissioner of Income- tax, [2014] 51 taxmann.com 515 (Ahmedabad - Trib.) wherein it was held as under: 23. In the instant case, we find that the Assessing Officer could not bring any material on record to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce between Form 15CA and Tax Audit Report the same is tabulated as under: S. No. Particulars Amount (In Rs. ) 1. Reimbursement of Expenses as per Form 15CA 7,67,010/- 2. Reimbursement of Expense as per Tax Audit Report a. AID Thailand reimbursement of Expenses 3,65,906/- b. AID Singapore reimbursement of Expenses 3,46,690/- Total (a+b) 7,12,596/- Difference (1-2) 54,414/- 41. The aforesaid difference is due to the fact that the said amount was paid post negotiations which led to decrease in payment. However, while filing Form 15CA those negotiations were taking place therefore the amount of Rs. 7,67,010/- was filed. 42. During the assessment proceedings the assessee duly submi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on the other hand, Ld.CIT(A) reduced the addition by taking into account double addition made by the AO of the same item. Ld.CIT(A) after considering the submissions decided the controversy by observing as under:- A perusal of the aforesaid details shows that there is weight in the submission of the AR. Clearly, the AO has erred in adding the receipts pertaining to projects vis- -vis the professional expenses paid as each professional is working on more than one common project. So details of projects against professionals would mean an overlap of projects as also receipts. To making professional payments to consultants the basis of the project receipts of the appellant concern would result in a double addition on account of the same project. To further substantiate the correctness of the total receipts, the AR produced job work invoices, copies of service tax returns, copies of contracts etc. In the light of the above details discussion, I direct the AO to delete the addition made on account of such purported discrepancy. It is however, pertinent to remember that this addition of Rs. 1,08,04,598/- includes the addition of Rs. 54,10,504/- on account of addition on fall in GP ra ..... X X X X Extracts X X X X X X X X Extracts X X X X
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