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TMI Blog2024 (7) TMI 1088X X X X Extracts X X X X X X X X Extracts X X X X ..... on of facts on record. The CIT(A) has thus rightly removed the absurdity committed by the AO and correctly accepted the audited turnover as declared by the assessee. As following the mercantile method of accounting, the assessee has also recognized the income received in the earlier year but accrued in this year as the taxable income of this year. Likewise, coaching fee received in this year but services rendered in the next year has been proportionately carried forward for taxation in next year since a component of fee received did not accrue in this year. Such amount of fee was carried forward and recognized in the subsequent year as per the rudimentary principles of accounting. Noticeably, the accounts have been subjected to statutory audit without any qualifications. Furthermore, the sales/turnover recorded by the assessee in the books is found to be in conformity with the service tax return. The addition made by the AO on the other hand is plaughed with wild and creative accounting giving rise to absurd results. We can effortlessly see complete absence of any semblance in the action of the AO. The process of reasoning adopted by the CIT(A) to reverse such addition is based on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... with the view taken by the CIT(A) is called for. Additions on account of rent charges on the ground that rent agreements of some property have not been provided - AO doubted the genuineness and correctness of rent charges and disallowed 10% of the total rent amount on estimated basis - CIT(A) deleted addition - HELD THAT:- The rent agreements were uploaded in respect of halls booked on the website of the Income Tax together with PAN of the landlords. A comprehensive detail of rent paid along with TDS, nature of payment, name of the party, PAN, amount paid/credited, property number and address of the land and landlord was also submitted. The relevant facts were also concurrently produced before the CIT(A) as recorded by the CIT(A). Before us as well, the documentary evidences have been adverted the course of hearing. In the backdrop of facts noted above, the estimated disallowance of 10% of rent payment is wholly incomprehensible and uncalled for. The CIT(A), in our considered view, has rightly appraised the facts in perspective. The findings of the CIT(A) is self speaking and does not require further elaboration. We thus see no reason to interfere with the findings of the CIT(A). A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case, the Ld. CIT(A) erred in deleting the addition of Rs. 1,66,64,284/- made on account of rent charges on the ground that the assessee has failed to furnish copies of rent agreements of all properties. 5. Whether on the facts and circumstances of the case, the Ld. CIT(A) erred in deleting the addition of Rs. 5,38,57,551/- made on account of payment to contractors as they have not filed their return of income. 3. Briefly stated, the assessee is engaged in the business of running coaching centers at various locations in India primarily in the State of Delhi, Haryana, Rajasthan, Jharkhand, Bihar, Uttar Pradesh, Madhya Pradesh, etc. The assessee filed return of income on 31st October, 2017 declaring a loss of Rs. 2,02,23,664/-. The case was selected for scrutiny assessment. The AO made various additions and disallowances to the returned income including Mismatch in tuition fee receipts of Rs. 21.97 crore; Investment in Property Rs. 0.53 crore; Unexpired Fee of Rs. 7.66 crore; estimated additions towards Rent charges paid Rs. 1.67 crore; payment to contractors of Rs. 5.39 crore. 4. The CIT(A) in the first appeal analyzed the factual matrix in length and found that the impugned additi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt in the total receipts (-) 6,31,70,843/- Less: Inter-bank transfers 0 10,85,01,000/- (-)10,85,01,000/- Less: Cheques/ RTGS returns 3,20,521/- 32,93,493/- (-) 36,14,014/- Less: Cheques received from Smt. Neetu Singh 48,22,500/- (-) 48,22,500/- Less: Income tax refund 10,45,000/- (-) 10,45,000/- Less: Refund of the security deposits against rent 18,24,509/- (-) 18,24,509/- Add: Amount not deposited in bank and spent in cash for expenses (+) 1,13,99,484/- Receipts as per P L Account 42,28,22,245/- Thus, the finding given by the Assessing Officer is incorrect. Even when the remand report was called for from the A.O. nothing adverse has been commented upon and there was no response from the A.O. Following observations are thus made: (a) The figure taken by the AO as supposedly reflecting in the IDBI Bank account of the appellant is incorrect as the actual amount credit to the bank account of the appellant during the year under consideration as is evident from the bank certificate issued by IDBI Bank (annexed at Page 387 of the paper book) shows that the total credit is of Rs. 47,88,33,969/- instead of Rs. 52,69,24,105/-. Therefore, the excess addition of Rs. 4,80,90,136/- is deleted. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ght of the above observations, the addition to the tune of Rs. 21,96,68,518/- thus made by the Assessing officer stands deleted. The ground of appeal is allowed. 7. We have perused the first appellate order, the assessment order, paper books filed on behalf of the assessee and the extensive arguments lead on behalf of the assessee to defend the action of the CIT(A). The Revenue has relied upon the assessment order. 8. It is contended on behalf of the assessee that the nomenclature towards excess cash deposits in bank account itself is misleading and contrary to the facts on record. The additions of such whopping amount was carried out most casually and in nonchalant manner dehors the facts on record. A show cause notice was issued on a different figure and additions were made in complete disregard of show cause notice without giving any opportunity to the Assessee to explain the alleged difference in revenue income which was non existent. While drawing assessment order, the under-reporting of revenue from operations was alleged at Rs. 21,96,68,518/- based on aggregate credit entries in the bank accounts and consequently addition to this extent was carried out on the grounds of mism ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Assesse. The assessment order was passed on 31/12/2019 where the AO simply aggregated all credit entries in the respective banks as a cavalier exercise and compared it with the turnover declared. The AO aggregated the bank statement credit entries as turnover at Rs. 64,24,90,763/- [ICICI Bank credit entries Rs. 11,55,66,658 + IDBI credit entries Rs. 52,69,24,105/-] and proceeded to make high pitched additions. To assail the action of AO before CIT(A), the Assessee filed reconciliation between the credit entries in the bank and corresponding turnover declared in the profit loss statement along with corroborative evidence to establish the correctness of revenue income reported by the assessee. Detailed and threadbare reply was filed in this regard which is also reproduced in the first appellate order. The reply and evidences were confronted to the AO by way of remand which remained uncontroverted by the AO. 10. It is seen from the first appellate order that the CIT(A) has taken into account the pin point reconciliation of credit (date-wise) entries in both bank accounts vis- -vis the gross turnover figure reported by the Assessee and found gross misdemeanor on the part of AO in ad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... perverse and also smacks of gross violation principles of natural justice. We fail to understand as to how all the credits appearing in the bank account of an assessee can be assumed as turnover of that assessee without appreciating the nature of entries. The additions made by the AO is prima facie in contravention of rudimentary principles of accounting and grossly unreasoned. The arbitrary action of the AO has been rightly set aside by the CIT(A). Significantly, following the mercantile method of accounting, the assessee has also recognized the income received in the earlier year but accrued in this year as the taxable income of this year. Likewise, coaching fee received in this year but services rendered in the next year has been proportionately carried forward for taxation in next year since a component of fee received did not accrue in this year. Such amount of fee was carried forward and recognized in the subsequent year as per the rudimentary principles of accounting. Noticeably, the accounts have been subjected to statutory audit without any qualifications. Furthermore, the sales/turnover recorded by the assessee in the books is found to be in conformity with the service t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd in the facts and circumstances, the appellant herein cannot be held as owner of the property in question. In light of the above facts, the addition made by the A.O to the tune of Rs. 52,96,000/- under 69A of the Act stands deleted. The ground of appeal is allowed. 15.2. As pointed out to the Tribunal, the AO has made additions towards undisclosed investment in undisclosed property of Rs. 52,96,000/- on the basis of some inaccurate information gathered in SFT-12 in form 26AS. With reference to alleged investment in property, the assessee has taken a clear stand that it has not made any purchase or investment in immovable property. Rather, the assessee has taken the property at lease/rent for which copy of lease/rent agreement was produced before the AO as well as before the CIT(A). An affidavit to the effect that assessee did not purchase any property during the year under consideration was also placed before the lower authorities. The copy of ledger account of security deposit with the landlord in relation to the impugned property, rent paid to landlord in relation to property vindicates the stand of the assessee. The AO, on the other hand, has not brought any concrete evidence ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... icy of the appellant, the AO has not rejected the books of accounts of the appellant and has further failed to point out any violation of accounting principles and accounting standards by the appellant. If the AO has disallowed this unexpired fees then the AO was expected to have reduced the unexpired fees shown by the appellant carried over from the previous A.Y 2016-17. The Assessing Officer cannot approbate and reprobate in the same breath, therefore the addition to the extent of Rs. 7,66,29,091 stands deleted. The ground of appeal is allowed. 16.2. The AO made additions under the head unexpired fee of Rs. 7,66,29,091/- alleging that the unexpired fee, in the nature of income, has been shown on the liability side of the balance-sheet. It is the case of the assessee before the AO as well as the CIT(A) that the assessee has been regularly maintaining its books of account on mercantile basis. The statutory auditors in their audit report (Notes of Account) have duly explained the nature of unexpired fee. It was brought to the notice of the AO that similar sum of Rs. 6,33,40,126/- was unexpired fee relating to preceding year which has been recognized as revenue in the current year on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... provided to support the allowability. It was stated that the rental premises were used wholly and exclusively for coaching purposes and the payments towards rent have been paid through banking channel. 17.1. The CIT(A) considered the submissions made and perused the evidences adduced and found merit in the plea. The CIT(A) reversed and cancelled the additions made by the AO as per the findings noted below: 5.7.2 The Assessee has filed the rent agreement with 54 parties with electricity bills relating to the properties. It can be seen from the preceding paragraph that the same were part of submission made before the AO as well. The AO has failed to take the same on record while passing the assessment order. The appellant has also filed the comprehensive details of rent expenses with TDS certificate. The appellant has further filed FORM 3CD. It is also appearing from the record that the appellant is running a coaching business for which the appellant rents various premises across India. The said premises are wholly and exclusively used for coaching purposes against which appellant has made payment of rent from banking channel. I find no reasoning to sustain the ad-hoc addition made ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ant in order to remain relevant and to focus on its objective in the business procure these services from different contractors. The AO has failed to demonstrate that these expenses are not related to the business of the appellant, rather, as can be seen from the paper book filed by the appellant that these expenses have been incurred wholly and exclusively for the purposes of the appellant business. The appellant has also filed the details of contractors along with FORM 3CD. The appellant has also filed the sample bills in his paper book. These expenses are duly vouched for made through banking channels and confirmed by the parties. Therefore, the addition made by the AO has no basis. In light of the aforementioned finding, the addition of Rs. 5,38,57,551/- stands deleted. The ground of appeal is allowed. 18.3 The AO made additions on account of payment to contractors of Rs. 5,38,57,551/- alleging that assessee has provided a chart of 46 contractors including the nature of payments, name of the party, PAN, total amount paid/ credited and TDS deducted but no details of address of the contractors, confirmation, copy of agreements, etc. were furnished. The assessee filed a comprehens ..... X X X X Extracts X X X X X X X X Extracts X X X X
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