2016 (6) TMI 107 - HC - Income Tax

Commissioner revises assessment order based on TDS certificates, Tribunal upholds cash accounting, rejects double taxation.

The Commissioner revised the assessment order to add income based on TDS certificates, leading to a challenge before the Income Tax Appellate Tribunal. ... Difference in brokerage receivable shown in the assessee’s accounts and sellers accounts - Addition to the income returned by the assessee on the ground that the amounts correspond to the TDS certificates having been offered for tax - method of accounting followed - Held that:- CIT(A) while accepting the claims of the assessee with regard to the returned incomes for th years under appeal, also held at the same time that the assessee is eligible to claim credit for TDS only in respect of income offered for tax in the relevant year. In that process, the CIT(A) also upheld the view taken by the Assessing Officer that the assessee cannot claim credit for the TDS unless and until the income in relation to which TDS, was made was offered to tax in the relevant year. Since the assessee is found to be a del cre dere agent, the role of the asessee, as observed by the CIT(A) in the impugned order, does not cease simply on booking the order for the seller or the delivery of goods to the purchaser, but extents till the time the sale proceeds are realized by the seller from the buyer. Considering the nature of the assessee’s business, as a del cre dere agent, in which actual receipt of the brokerage would depend on the actual realization of the sale proceeds by the seller from the purchaser, as claimed by the assessee and accepted by the CIT(A), assessee is justified in following cash system of accounting, finding it to be appropriate for its business. When the assessee claims to be following that method of accounting consistently, and it has been recognized by the statute, there is no justification for the Assessing Officer to disturb the book results disclosed by the assessee. - Decided against revenue Issues involved: Assessment order revision, addition of income, TDS certificates, double taxation, cash system of accounting, challenge before the Income Tax Appellate Tribunal, credit for TDS, del credere agent, perversity of decision.Assessment Order Revision and Addition of Income:The Commissioner revised the assessment order, adding a sum to the income returned by the assessee based on TDS certificates offered for tax. The first appellate authority addressed the addition in detail, highlighting a difference in brokerage receivable shown in the assessee's accounts and sellers' accounts. The appellate authority agreed with the appellant that the addition amounted to double taxation, as the amounts were debited on account of non-payment by buyers, not paid to the assessee. The AO's error in ignoring debits made to the assessee's account was noted, and the addition was deleted.Challenge Before the Income Tax Appellate Tribunal:Before the Tribunal, no challenge was made to the fact that the assessee did not receive the sums for which TDS was made, emphasizing the cash system of accounting followed by the assessee for these transactions. The Tribunal acknowledged this aspect, stating that TDS certificates alone were not conclusive evidence of assessable income. It upheld the view that the assessee, as a del credere agent, was justified in following the cash system of accounting, as the actual receipt of brokerage depended on the realization of sale proceeds by the seller from the buyer.Credit for TDS and Cash System of Accounting:The Tribunal affirmed the CIT(A)'s decision that the assessee could claim credit for TDS only in respect of income offered for tax in the relevant year. Recognizing the nature of the assessee's business as a del credere agent, the Tribunal upheld the cash system of accounting, finding it appropriate. The consistency in following this method, recognized by the statute, justified not disturbing the book results disclosed by the assessee.Perversity of Decision:Although a challenge of perversity was raised, no material was presented to take a contrary view and overturn the Tribunal's finding. Consequently, the Court found no question of law requiring an answer and dismissed the appeal without costs, closing any pending miscellaneous petitions.