2016 (10) TMI 4 - AT - Income Tax

Tribunal allows appeal, directs deletion of addition for alleged sales, approves bad debts claim.

The Tribunal partially allowed the appeal, directing the deletion of the addition of Rs. 33,80,000/- related to alleged sales to DLF Services Limited and ... Addition in respect of alleged sales to DLF Services Limited - amount as per TDS not disclosed - addition in this case has been made by the AO on the basis of AIR information which shows that the amount of ₹ 33,80,000/- was paid/credited in favour of the assessee on a/c of sale of advertisement pace by the assessee and accordingly TDS of ₹ 76,591/- was also shown to be deducted - Held that:- The said amount of TDS was also claimed by the assessee which was reversed after the AO asked the assessee to reconcile the AIR information. The ld. AR of the assessee argued before the AO as well as before the ld.CIT(A) that the assessee entered into a contract with the DLF Services Limited for supply of space for advertisement which never materialized and consequently not shown in the income of the assessee. We are convinced with the arguments of the ld AR that sale which has not taken place as the contract for sale of space was cancelled and thus never materialized can not be said to have accrued to the assessee and therefore cannot be considered as income of the year under consideration regardless of the facts that the TDS was deducted by M/s DLF Services Limited. In the present case before us, we find that the AO has not bothered to further verity the facts qua the entries in AIR information whereas the information as regards M/s DLF Services Limited were available with the AO and he proceeded to rely on the AIR information solely without further verification. The addition on the basis of entries in AIR as the these entries are made by the parties other than the assessee and can not be sustained In this case, the assessee claimed to have not executed contract and claimed that the income never materialized and therefore cannot be form part of income in the books of account which was not verified by the AO at all. Similarly the ld CIT(A), the ld.CIT(A) confirmed the action of the AO on the ground that the TDS of ₹ 76,591/- was deducted on the sales of ₹ 33,80,000/- which proved that the assessee had made the sale to M/S DLF Services Ltd is also wrong.In view of these facts as discussed above, we are of the considered opinion that the order by the ld. CIT(A) cannot be sustained and we ,therefore, set aside the order of ld. CIT(A) and direct the AO to delete the addition.- Decided in favour of assessee Addition on provisions for sundry balances written off - Held that:- The details of miscellaneous expenses reveals that 9th item of the above details represented Sundry debits balances written off which adequately proved beyond doubt that the assessee has not claimed the provisions of sundry balances written off but actual wrote off in the books and the said amount, therefore, in our view, admissible under the provisions of Act. Accordingly we set aside the order of ld CIT(A) and direct the AO to allow the claim of the assessee for bad debts of ₹ 6,22,705/-. Issues Involved:1. Confirmation of addition of Rs. 33,80,000/- related to alleged sales to DLF Services Limited.2. Confirmation of addition of Rs. 6,22,705/- related to provisions for sundry balances written off.Issue-wise Detailed Analysis:1. Confirmation of Addition of Rs. 33,80,000/-:During the assessment proceedings, the Assessing Officer (AO) discovered through AIR information that an amount of Rs. 33,80,000/- was credited to the assessee by DLF Services Limited, with corresponding TDS of Rs. 76,591/-. The assessee had claimed the TDS but did not show the receipt as income. The AO issued a show cause notice, and the assessee replied that the TDS was claimed by mistake on a contract that was never executed and ultimately canceled. However, the assessee failed to provide a confirmation letter from DLF Services Limited to support this claim. Consequently, the AO added Rs. 33,80,000/- to the assessee's total income.On appeal, the CIT(A) upheld the AO's decision, stating that the assessee's claim of TDS indicated that the corresponding income had accrued. The CIT(A) noted that the assessee did not provide provisional bills or any documents to substantiate that the contract was canceled and no services were rendered. The CIT(A) emphasized that the mere claim of TDS without corresponding income could not be justified.The Tribunal found that the AO relied solely on AIR information without further verification. The Tribunal agreed with the assessee's argument that income from a canceled contract could not be considered as accrued income. The Tribunal noted that the AO did not verify the claim with DLF Services Limited and that the TDS claim was reversed by the assessee upon reconciliation. Thus, the Tribunal set aside the CIT(A)'s order and directed the AO to delete the addition of Rs. 33,80,000/-.2. Confirmation of Addition of Rs. 6,22,705/-:During assessment proceedings, the AO found that the assessee had debited provisions for sundry balances written off amounting to Rs. 6,22,705/- in the profit and loss account, which were not added back in the return of income. The assessee admitted this mistake and offered the amount to be added to the income. However, on appeal, the assessee claimed that the amount was not a provision but actual bad debts written off due to non-payment of service tax by ONGC and RBI.The CIT(A) dismissed the appeal, noting that the assessee provided contradictory statements and failed to furnish complete supporting documents, including accounts of ONGC and RBI. The CIT(A) held that the AO's decision to add the amount was justified as the assessee's explanations were inconsistent.The Tribunal examined the details provided by the assessee, including the audited balance sheet and the schedule of operating and general expenses. The Tribunal found that the amount of Rs. 6,22,705/- was indeed part of miscellaneous expenses and represented actual bad debts written off, not provisions for doubtful debts. Consequently, the Tribunal set aside the CIT(A)'s order and directed the AO to allow the claim of bad debts amounting to Rs. 6,22,705/-.Conclusion:The Tribunal partly allowed the appeal, directing the deletion of the addition of Rs. 33,80,000/- and allowing the claim of bad debts of Rs. 6,22,705/-. The order was pronounced in the open court on 16.08.2016.