2015 (10) TMI 2490 - AT - Income Tax

Tribunal remands service charges issue, upholds process loss addition to income, dismisses inadequate opportunity claim

The Tribunal remanded the issue of disallowance of service charges for raw material procurement due to non-deduction of TDS for further examination by the ... Disallowance of service charges paid for procurement of raw material - no TDS was deducted from the said amount - Held that:- In view of the certificate of the accountant under first proviso to subsection (1) of section 201 certifying furnishing of return of income and payment of tax, etc, we remand this issue to the file of the ld. Assessing Officer to examine the factual matrix and then decide in accordance with law. The assessee be given opportunity of being heard. Even otherwise, insertion of second proviso to section 40(a)(ia) with effect from 01/04/2003 is declaratory and curative in nature with retrospective effect from 01/04/2005, inserted by Finance (No.2) Act, 2004, thus, the Assessing Officer is directed to examine the claim of the assessee whether the said amount has been included as income of the payee. Suppression of sales - Addition on process loss - Held that:- The Assessing Officer noticed that Tijiya Steel debited the amount of commission on sale of 400 kgs ascorbic acid vide letter dated 15/08/2008 and 1000 kgs on 12/08/2008, whereas, in the case of standard pharmaceutical, 500 kgs in the month of August and 750 kgs in the month of September. The assessee did not show any purchases in the month of August and September of ascorbic acid. The Assessing Officer found defects in the books of accounts as there was suppression of sales in comparison to raw material purchased, therefore, the books were rejected, being, found unreliable. From the quantity details filed by the assessed, there is a clear difference/shortage of material. Even the assessee admitted before the Assessing Officer that there was shortage of the yield/end product. Therefore, we find no infirmity in the conclusion drawn by the ld. Commissioner of Income Tax (Appeals) and the factual finding recorded in the assessment order. So far as, the contention of the ld. counsel for the assessee that proper opportunity was provided to the assessee, is concerned, we find no merit in the contention as sufficient opportunity was provided to the assessee during assessment proceedings as well as during first appellate stage. Even it is presumed that lesser time was provided during assessment proceedings, nothing prevented the assessee to file necessary details before the ld. Commissioner of Income Tax (Appeals) as well as before this Tribunal. The assessee is merely harping that proper opportunity was not provided. The assessee has to explain as to how opportunity was not provided. The facts, clearly indicates that the assessee was unable to substantiate its claim with documentary evidence, thus, we find on infirmity in the conclusion drawn by the ld. Commissioner of Income Tax (Appeals) - Decided against assessee Issues:1. Disallowance of service charges for procurement of raw material due to non-deduction of TDS.2. Non-granting of opportunity of being heard and addition of process loss to the income of the assessee.Analysis:1. The first issue revolves around disallowing service charges paid for raw material procurement due to the absence of TDS deduction. The appellant argued that a certificate of the accountant was furnished certifying the return of income and tax payment in certain cases. The Tribunal remanded the issue to the Assessing Officer for examination, considering the retrospective effect of the second proviso to section 40(a)(ia). The ground was allowed for statistical purposes, emphasizing the need for a thorough review by the Assessing Officer.2. The second issue involved the non-granting of an opportunity to be heard and the addition of process loss to the assessee's income. The Assessing Officer raised concerns about discrepancies in raw material consumption and finished goods, leading to a substantial loss percentage. Despite the appellant's challenges and claims of no suppressed sales, the Tribunal found discrepancies in the details provided by the assessee, indicating unreliable books of accounts. The Tribunal upheld the conclusion of the Commissioner of Income Tax (Appeals) regarding the shortage of material and lack of substantiating evidence by the assessee. The Tribunal dismissed the contention of inadequate opportunity provided to the assessee, highlighting that ample chances were given during assessment proceedings and appellate stages. The appeal was partly allowed for statistical purposes, affirming the factual findings and conclusions drawn by the authorities.In conclusion, the Tribunal addressed the issues of TDS deduction and process loss addition meticulously, emphasizing the importance of substantiating claims with documentary evidence and availing opportunities provided during assessment proceedings. The judgment highlights the significance of thorough examination by the Assessing Officer and upholding factual findings in determining the tax implications for the assessee.