2022 (1) TMI 963 - AT - Income Tax

Tribunal partially allows appeals, limits additions, upholds relief. Re-examines sec. 40(a)(ia) applicability.

HP India Sales Pvt. Ltd. Versus JCIT (LTU), Bengaluru And Addl. CIT (LTU) Bangalore Versus HP India Sales Pvt. Ltd.

HP India Sales Pvt. Ltd. Versus JCIT (LTU), Bengaluru And Addl. CIT (LTU) Bangalore Versus HP India Sales Pvt. Ltd. - TMI Issues Involved:1. Validity of reopening of assessment2. Direction issued by Ld. CIT(A) with regard to the pre-sale and post-sale discount3. Disallowance of other reconciliation items Rs. 167.58 crores4. TDS credit5. Addition relating to miscellaneous accrual entries amounting to Rs. 88.01 croresDetailed Analysis:1. Validity of reopening of assessment:The ground relating to the validity of reopening of the assessment was kept open as requested by the appellant's representative. No further arguments or decisions were made on this issue during the hearing.2. Direction issued by Ld. CIT(A) with regard to the pre-sale and post-sale discount:This issue was dismissed as not pressed by the appellant during the hearing. Hence, no detailed analysis or judgment was provided on this matter.3. Disallowance of other reconciliation items Rs. 167.58 crores:The main issue under consideration was the disallowance of 'other reconciliation items' amounting to Rs. 167.58 crores. The assessee had reconciled the turnover reported in sales tax and service tax returns with the turnover reported in the income tax return, deducting Rs. 167.58 crores from the sales turnover reported in the VAT return to arrive at the sales turnover figure as per books of account. The AO had asked for details relating to this amount, and upon the assessee's failure to furnish evidence, assessed it as income. The Ld. CIT(A) confirmed this assessment.The assessee furnished explanations and partial details, amounting to Rs. 159.56 crores, before the AO and Ld. CIT(A). The AO's remand report indicated a difference of Rs. 10.21 crores, but the Ld. A.R. argued that the actual difference was Rs. 8.02 crores due to the passage of time. The Tribunal found that the Ld. CIT(A) was not justified in confirming the entire disallowance of Rs. 167.58 crores and directed the AO to restrict the addition to Rs. 9,88,29,444/- for which details could not be furnished.4. TDS credit:This issue was also dismissed as not pressed by the appellant during the hearing. Hence, no detailed analysis or judgment was provided on this matter.5. Addition relating to miscellaneous accrual entries amounting to Rs. 88.01 crores:The revenue appealed against the Ld. CIT(A)'s decision to delete the addition of Rs. 88.01 crores relating to accrual entries. The AO had disallowed this amount, considering it contingent liabilities and noting that the assessee should have deducted tax at source under section 40(a)(ia) of the Income-tax Act. The assessee argued that Rs. 81.02 crores out of Rs. 88.01 crores represented reclassification of expenditure, and only Rs. 6.98 crores related to year-end accrual adjustments.The Ld. CIT(A) deleted the disallowance, noting that the amount had already been disallowed in the determination of taxable income for AY 2008-09, thus avoiding double disallowance. The Tribunal found that the Ld. CIT(A) did not properly appreciate the facts and partially confirmed the order, restoring the matter relating to the applicability of provisions of sec. 40(a)(ia) on Rs. 6.98 crores to the AO for further examination. The relief granted by Ld. CIT(A) was sustained to the extent of Rs. 81.02 crores.Conclusion:The appeals filed by both the assessee and the revenue were partly allowed. The Tribunal directed the AO to restrict the addition related to other reconciliation items to Rs. 9,88,29,444/- and to re-examine the applicability of sec. 40(a)(ia) on Rs. 6.98 crores of accrual entries. The relief granted by Ld. CIT(A) for Rs. 81.02 crores was sustained. The issues relating to the validity of reopening of assessment and TDS credit were kept open and dismissed as not pressed, respectively.