TaxTMI 
TaxTMI 
2015 (2) TMI 947
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....,347 3. The first ground raised in this appeal by the Revenue is general in nature which needs no adjudication. Accordingly, this ground is dismissed. 4. The second ground raised by the Revenue relates to disallowance of employees' contributions to ESI and PF of Rs. 1,31,446. The AO, during the assessment proceedings, observed that Provident Fund contributions of Rs. 1,14,309 and ESI contributions of Rs. 17,137 received from the employees for the months of April, 2008 to March, 2009 had not been credited to the employees' account on or before the due dates and accordingly held that these amounts were not allowable u/s 36(1)(va) of the Act. The total amount of Rs. 1,31,446 (Rs. 1,14,309 + Rs. 17,137 ) was added to the total income. During the appeal proceedings, the assessee's AR has contended that the impugned amounts have since been paid to the account of the employees before the due date for filing of return of income u/s. 139(1) of the Act for the year under consideration and hence the addition of Rs. 1,31,446 deserves to be deleted. Following are the important portions written submissions of the assessee before the CIT(A), in this regard: "In this connection, ....
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....ure and no addition is called for. In support of this contention, reliance is placed on the following decisions- (a) ACIT V/s. Shakti Bhog Foods Pvt. Ltd. (ITA No. 2777 to 2781/Del/2010) (b) ACIT V/s. Ranbaxy Laboratories limited (ITA No.3599/Del/2009 (c) CIT V/s. Sabari Enterprises (298 IUTR 141)-Kar. (d) CIT V/s. AIMIL Ltd. (1887 Taxman 265)-Del. 4. On careful consideration of the rival submissions on this issue, we find that the issue under consideration, is covered in favour of the assessee by the decision of the Karnataka High Court in CIT V/s. Sabari Enterprises and of the Delhi High Court in the case of AIMIL Ltd. (supra). The Hon'ble Karnataka High Court in the case of Sabari Enterprises (supra), has dealt with this issue and decided the same in favour of the assessee in the following manner- "7. After hearing the learned Counsel for the parties, we have carefully examined the above statutory provisions of the Act including definition of Section 2(24)(x) and Sections 36(1)(va) and 43B(b), which read thus: 2(24) 'Income' includes (x) any sum received by the assessee from his employees as contribution to any PF or superannuation fund or any fund set ....
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....sessee on or before the due date applicable in this case at the time of submitting returns of income under Section 139 of the Act to the revenue in respect of the previous year can be claimed by the assessees for deduction out of their gross income. The Above said statutory provisions of the Income Tax Act abundantly make it clear that, the contention urged on behalf of the revenue that deduction from out of gross income for payment of tax at the time of submission of returns under Section 139 is permissible only if statutory liability of payment of PF or other contribution funds referred to in Clause (b) are paid within the due date under the respective statutory enactments by the assessees as contended by the learned Counsel for the revenue is not tenable in law and, therefore, the same cannot be accepted by us. 8. The learned Counsel Sri Parthasarathy and Dr. Krishna, appearing for respondents, also drew our attention to the deletion of second proviso to Section 43B of the Income Tax Act by Finance Act, 2003 which provision has come into force, with effect from 1-4- 2004. The reliance placed upon the decision of the Apex Court in Allied Motors (P) Ltd. v. CIT (supra) and also....
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....upreme Court, this court cannot decide otherwise." 9. The CIT(A) held at paras 6.3 and 6.4 as follows: "6.3 I have carefully considered the facts of the case and gone through the appellant's submissions in this regard. The Honourable ITAT Bench "B", Hyderabad in the case of Sri Madineni Mohan, Hyderabad vs. ITO, Ward-1, Suryapet vide their order in ITA No. 762/Hyd/2012 dated 31.05.2013 while relying on the judgment of the Calcutta High Court in the case of CIT vs. Virgin Creations in ITA No. 302 of 2011, GA 3200/2011 held as under: "In the facts of the present case, there is no dispute that the assessee has deposited TDS amount before the due date of filing the return u/s. 139(1) of the Act. Hence, in view of the ratio laid down by the Calcutta High Court in the case of CIT vs. Virgin Creations (Supra) and decisions of the different benches of Income Tax Appellate Tribunal, we hold that the assessee having deposited TDS amount before the due date of filing the return u/s. 139(1) no disallowance can be made by invoking the provisions contained u/s. 40(a)(ia) of the Act ... " 6.4 Fact remains that the TDS amount had been remitted into Government account before the due da....
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....company for the year under consideration. During the scrutiny proceedings, the AO worked out difference in sales at Rs. 71,54,99,763 by comparing the turnover as per the 'Data base' with the turnover admitted in the return of income for the assessment year under consideration. When asked to explain the difference, the assessee vide its letter dated 26.3.2013 submitted that there was no difference in the turnover. In support of its contention, the assessee filed the following "Reconciliation Statement" before the AO. Meena Jewellers Pvt. Ltd : Reconciliation Statement Amount (Rs.) Particulars As per IT Department MPLA Database (Head Office) 520,46,78,838 MEJA Database (Branches Hyderabad) 14,63,13,477 535,09,92,315 Turnover as per Return 463,54,92,552 Difference 71,54,99,763 Less: Cancelled Bills - MPLA Data 70,41,89,293 Less: Cancelled Bills - MPLA Data 67,23,792 Less: Cancelled Bills - MPLA Data 45,86,678 71,54,99,763 &nbs....
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....sessee-company has submitted that some of the bills pertaining to M/s. Meena Jewels Exclusive and M/s. Meena Jewels and Pearls were wrongly billed in the name of the assessee-company which were subsequently cancelled and accounted in the names of the respective firms and accordingly produced respective sales bills as evidence. To verify the above claim, the assesseecompany during the proceedings was requested to produce daily stock movement register maintained by the above mentioned firms & company and explain entry wise reconciliation and consequent reversal of the entries. The assessee-company submitted that neither the firms nor the company maintains any daily stock movement register and hence expressed its inability to produce the same. Hence in absence of daily stock movement register the entry wise reconciliation and consequent reversal of the entries made cannot be found out. Hence the above claim of the assessee-company that they found reflected in the firms books of accounts is accordingly not acceptable. Further in respect of the above, it is not clear why regularly a large number of bills are raised in the name of the sister concerns by the assessee-company which are sub....
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....ed bill found in the MEJA Database (Branches Hyderabad) the assessee-company has not produced any evidence but simply submitted that they are cancelled bills. The above submissions of the assessee-company cannot be accepted since it has failed to explain entry wise reconciliation and consequent reversal of the entries as reflected in its books of accounts especially with reference to stock register and Cash & Bank book maintained by it. In the case of the Sales returns amounting to Rs. 45,86,678 the assessee-company during the course of proceedings was not able to substantiate its claim nor was able to state to which firm or company accounts the above sales returns are reflected and explain entry wise reconciliation and consequent reversal of the entries as reflected in the books of accounts especially with reference to stock register and Cash & Bank book maintained by it. In view of the above of the above discussion and also during the course of survey large numbers of sales bills were found which were not accounted in the regular books of accounts. Further during the course of assessment proceedings the assessee-company raised the contention that these bills were cancelled bills ....
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....unt (Rs.) MPLA Database (Head Office) 520,46,78,838 MEJA Database (Branches Hyd) 14,63,13,477 Total Turnover 535,09,92,315 Turnover as per ROI 463,54,92,552 Difference 71,54,99,763 In this connection, it is submitted that the difference of Rs. 71, 54, 99, 763/- in turnover as mentioned above between the total turnover as per the database and turnover as per the return of income is explained by the reconciliation statement as under: Particulars Amount(Rs. As per IT Department MPLA Database (Head Office) 520,46,78,838 MEJA Database (Branches Hyd) 14,63,13,477 535,09,92,315 Turnover as per Return 463,54,92,552 Difference 71,54,99,763 Less Cancelled Bills - MPLA Data Cancelled Bills - MEJA Data Sales Return Bills 71,54,99,763 Difference Nil From the above table, the detailed submission in respect of the cancellation bills and sales returns is made as under: • Estimation of income on Cancelled bills of Rs. 71,09,13,085/-. ....
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....t details and each cancellation bill is supported by a corrected bill raised and the corrected bill is included in the turnover of the appellant company. This fact can be appreciated by referring page nos. 7 to 113 of volume 1 of the paper book filed on 17.04.2013. In this connection, it is further submitted that the appellant company is engaged in the business of jewellery and in order to maintain effective internal control, it is using customized accounting package for accounting of sales. The accounting package is designed in a way so as to have effective and efficient internal control system. The following are the reasons for cancellation of the above shown sale bills: 1. Once the bills are entered and saved on the system, the same cannot be altered further and the only option available is to cancel them and enter again. 2. Due to a technical snag, certain bills entered in the name of one firm are being entered in the other concern's name which resulted in more cancellation of sales. 3. Certain sales bills were cancelled because of wrong entries in weight, quantities, amount and were accordingly corrected. 4. Because of wrong entry of name of the customer/dealer....
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....o as to estimate any profit on it for both the years under consideration. The AO is not entitled to make any guess work while making the addition without reference to any evidence or any material at all. There must be something more than bare suspicion to support the addition. In this connection, it is submitted that the AO is not entitled to make any guess work while making the addition without reference to any evidence or any material at all. There must be something more than bare suspicion to support the addition. In support of this preposition, the appellant relies on the judgment of the Supreme Court in the following cases 1. Dhakeshwari Cotton Mills Ltd vs. CIT reported in 26 ITR 775 (S.C.). 2. Umacharan Shaw & Bros. v. CIT, 37 ITR 271 (SC) 3. Larchand Bhagat Ambica Ram v. CIT, 37 ITR 288 (SC) 4. Dhirajlal Girdharil.al v. CIT, 26 ITR 736 Maintenance of Daily Stock Movement Register: While making the impugned addition towards "Unaccounted Sales" for Rs .15,75,30,347/-, the assessing officer heavily ruled on the fact that the appellant had neither maintained nor produced "Daily Stock Movement Register". In this connection, it is submitted that the following are only....
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....sessing officer has concluded by stating vide page 6 of the assessment order that it is an afterthought by the appellant company--------. The assessing officer has not considered the fact that the appellant company is maintaining all the relevant details in respect of the sales made during the year under consideration. This fact can further be appreciated by referring to page 196 to 415 of volume 2 of paper book filed on 17.04.2013 which are the copies of sales register and stock register for the year 2009-10. Further, the assessee is a company registered under "The Companies Act, 1956" and books of accounts have been mandatorily audited by a certified Chartered Accountant and the tax audit u/s 44AB of The Income Tax Act, 1961 has also been carried out. The profit arrived at is as per Part I and II of the Schedule VI to the Companies Act,1956 basing on audited books of account. In regard to this we would like to submit the following a. As stated above, the assessee is a private limited company registered under the provisions of The Companies act, 1956 and is deriving its income from the business of civil contracts. Thus, it gets its accounts audited under The Companies act, 1956....
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....respect of sale it would either increase the cash/bank balance or would turn into debtors. But in the appellant case, there is no finding by the assessing officer in respect of either increase in cash/bank balance or debtors. Further, when comparing with the bank/cash and debtor balances with the earlier year there is no huge variation which could otherwise establish that there is suppression of turnover by the appellant company. b. The appellant company has filed the Monthly VALUE ADDED TAX return for the year 01.04.2009 to 31.03.2010 declaring the turnover Rs. 456,74,05,179/- and accordingly paid Rs. 4,56,74,052/- towards VAT. This amount of Rs. 461,30,79,231/- was declared as turnover in the return of income by the appellant company. The fact can further be appreciated .by referring to the page 183 to 415 of volume 2 of the paper book filed on 17.04.2013. As there is no difference between the turnover declared by the appellant company in the return of income and the turnover declared in the Monthly VAT return, the assessing officer cannot conclude by treating the difference in turnover between the turnover found in the database and the turnover admitted in the return of incom....
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....wise breakups for the cancelled bills apart from filing paper book on 17.4.2013. 17. The CIT(A) held as follows: "7.4 I have carefully considered the facts and evidence, The appellant uses customised accounting package for accounting of its sales which include sales made to its own Branches as well as other customers. In every trade, sales returns and cancellation of sale bills is a common phenomenon. The appellant company is engaged in jewellery business which involves customer choice where in there are fair chances that the customer would return the sale, if the product is not made as per specifications of the customer. In the case on hand, such sales returns and sales as per cancelled bills amounted to Rs. 71,54,99,763/- for the year under consideration. Admittedly, during the course of assessment proceedings, the appellant filed a reconciliation statement before the AO showing that there was no difference between the Turnover found in database which was retrieved from the hard disk and the Turnover declared by the appellant company in its return of income. Further, the appellant has explained that as per the internal control system of the assessee, if any corrections are ....
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....ver or profit for the year under consideration. 7.6 There is no dispute with regard to the maintenance of Sales Register and Stock Register by the appellant. But so far as maintenance of "Daily Stock Movement Register is concerned, I am in agreement with the appellant that Daily Stock Movement Register is neither a specified register as per the provision of sec. 44AA nor a register prescribed by the Board in this regard. But the AD heavily relied on non maintenance of this register while rejecting the appellant's reconciliation statement. I am of the view that non-maintenance of 'Daily Stock Movement Register per se cannot become a ground for rejection of appellant's reconciliation statement with regard to turnover of the appellant for the year under consideration. 7.7 After considering the appellant's explanation with regard to the reasons for the impugned Cancelled Bills of Sales, Sales Returns and the Reconciliation Statement on Turnover for the year under consideration, I agree with the appellant explanations in respect of the cancelled bills and I hold that the impugned Cancelled Bills and Sales Returns totalling to Rs. 71,54,99,763/- do not form part of ....
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....categories: i) Difference of Bill No. in the cancelled bills having not similar Bill no. as in original one. ii) Difference in the quantity and, iii) Difference in the amount. 3. The reasons given in the last column of the statement the assessee has accepted because their reasons have not been corroborated with any possible cogent documentary evidences. Therefore, the reasons shown are nothing but after thought. Further, for such cancelled bills there were no reasons given but know from the assessee himself. 4. In the table, the quantity and quality of the sales in the reconciled chart is not properly got reconciled. Even these bills have difference in the quality and amount and difference in bill no. should not be treated a suppressed sales. 5. Customized accounting package (Akshya) used for deleting sales bills systemically was found during the survey. MPLA Data Base, MEJA Data Base and Cancelled Bills: The sale bills data was collected from back-end of the accounting package maintained in computer year and concern wise and compared with the gross sales shown in return of income, A huge difference was observed. The assessee could not explain the difference and a....
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....ence for cancellation of bills due to customers' denial or any other reasons. The statement table submission of the assessee is nothing but a complete articulated home work to escape from the taxation ambit. From the extract of the statement given by Sri Umesh Jethwani during the Survey Proceedings it is clear mentioned in Q. No. 12 that the Software "Akshya" developed by M/s. Giritech Technologies stated in his statement that he used to prepare software which are customized which can suppress the gross receipts. They also further stated that their specially designed package will allow customer to hide or delete certain gross receipts entries. Hon'ble Tribunal may kindly reject assessees' submission." 19. The learned counsel countered the above by giving explanation regarding cancelled bills as under: "EXPLANATION REGARDING CANCELLED BILLS 1. As per the internal control system, in the bills which are entered and saved on the system, if any corrections are required, it will not be permitted. The only way is to cancel and enter again. This is one of the reasons for more cancellations. 2. The bills which are entered in one firm's name are going into another co....
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....ur: a) The reasons shown by the assessee are nothing but afterthought. b) The assessee has tampered the sale bills to suppress the gross sale systematically. c) The assessee fails to explain why these cancelled bills should not be treated as suppressed sales In this connection, we would like to submit that the learned CIT(A)-V, Hyderabad in his order dated 31.10.2013 has already examined the explanations with respect to the cancelled bills and the reconciliation statement and found that there are no suppression of sales. The relevant para no. 7.4 of the order of CIT(A) dated 31.10.2013 is extracted below: "The AO's rejection of appellant's explanation in this regard is not based on sound footing. Having disbelieved the cancelled sales and sales returns, the AO has not made any attempt to establish that they formed part of turnover of the appellant for the year under consideration by making further enquiries with the parties concerned. It is not the case of the AO that the parties concerned have admitted the impugned sales in their books of account for the year under consideration. There is no material available on record to prove that the turn over admitted by the ....
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....oftware is prepared by Chennai based company on our request. By executing the commands given by my Head Office, we have made certain changes in the data base. Because of that the old data i.e. data relevant to F.Y. 2010-11 has been deleted. The above work is done as per the directions of my employer Sri Umesh Jethwani." As can be seen from the above statement, the question is relating to the visiting of braches with assistant Koushik Vinay and configuration changes by using certain commands and the answer to this question is relating to backup of data and changes in the configuration. The learned DR has made misinterpretation ofthe statement recorded from Sri N.B. Gopinath. Further, the assessee has never been confronted with the statement of the accountant. The Statement has been recorded at the back of the assessee and without any knowledge of the assessee. The learned DR has adopted the cherry picking approach while making the extract of the statement of Sri Umesh Jethwani in his submissions before your honours. He has picked up the question without making complete analysis of the answer given to the question. For the sake of clarity, we are extracting the relevant extract of th....
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.... heard both the parties. We note the following: a) The internal control system in the bills do not permit any corrections and the only way is to cancel and enter again. b) The bills have to be cancelled in case the bills which are entered in one firm's name are going to another concern's name due to technical snag. c) Sometimes, the quantities were entered wrongly and the invoices have to be prepared again reflecting the correct quantities. d) Name of the dealer/customer if entered wrongly is to be rectified for preparing the invoice in the correct name. 21. We also note from the statement made by Sri N.B. Gopinath in reply to question No. 5 that certain changes in the data base were made as per the direction of his employer Sri Umesh Jethwani. Further the extract of statement of Sri Umesh Jethwani has been reproduced, from which we find that the statement of Giritech Technology was put as question to Sri Umesh Jethwani. We note that Giritech Technology were developing various software and it was stated by them that they were not preparing software which would suppress the gross receipts on the request of the assessee. The statement of Giritech Technology was....