TaxTMI 
TaxTMI 
2015 (2) TMI 947
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.... 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, it is submitted that the assessee company has paid ....
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.... 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 up under the provisions of the Employees State Insurance Act, 1948 (34 of 194....
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....tting 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 on the decision in General Finance Co. v. CIT (supra) in respect of applicabil....
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.... 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 date of filing the return in the case on hand. Respectfully following the order of the Juri....
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....ence 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 Difference 14. Th....
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....ssessee-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 subsequently cancelled for which neither any reconciliation nor any explanation with regard to the reversal of such entries as reflected in respective books of accounts o....
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....e 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 and are raised in the name of the sister concern. But it has not explained why at regular intervals such large numbers of bills were raised and cancelled. Further it i....
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....nection, 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/-. * During the year under consideration, the bills of Rs. 71,09,13,085/- were cancelled by the assesseecompany. The break-up of the cancellation bills of Rs. 71,54,99,763 is presented as under: Sl. No. Particulars Amount (Rs.) Sl. No. Particulars Amount (Rs.) A Cancelled Bills at Basheerbagh 70,41,89,293 B Can....
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....ed 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, the sale bills which were wrongly entered were cancelled. From the above, it is crystal clear that the sale bill once entered cannot be either altered or changed. Due to this, it will result in increase in the portion of cancelled bills. The appellant is maintaining all the details of cancelled bills which have been submitted during the course of assessment proceedings. But the assessing officer has suspected certain cancelled bills and has made the estimation by applying the gross profit ratio as declared by the appellant. This ....
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....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 the specified books of account and other documents referred to in section 44AA of the Act read with Rule 6F of the IT Rules, 1962 that are required to be maintained in the appellant's case. "2) The books of account and other documents referred to in sub-rule (1) shall be the following, namely:- (i) a cash book; (ii) a journal, if the accounts are maintained according to the mercantile system of accounting; (iii) a ledger; (iv) carbon copies of bills, whether machine numbered or otherwise serially numbered, wherever such bills are ....
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....stered 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, by a certified Chartered Accountant year after year. In this regard, we wish to submit that for the period under consideration, no adverse findings regarding books of accounts were reported in the statutory audit report conducted under Companies Act, 1956. On the other hand full quantitative details were furnished along with audited financial statements. b. The assessee company is subject to the provisions of section 44AA & 44AB of The Income Tax Act, 1961 and the books of accounts are maintained following the uniform accounting policies and practi....
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.... 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 income as 'Suppressed Sales'. c. During the course of survey performed on 02.08.2001 by the ITO, Ward - 5(3), Hyderabad, has not found any unaccounted cash which could otherwise establish that there is suppression of sale by the appellant company. The assessing officer's view merely involves guess work in making the addition which is without any reference to any evidence or any material at all. It is a true fact that if such large amount of Rs. 71,54,99,763/- in respect of turnover is suppressed there must be corresponding unaccounted purchase. The assessin....
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....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 required in the bills which are entered and saved on the system, it will not be permitted and the only way is to cancel and enter again. This is one of the reasons for more cancellations. The appellant has explained that the bills which are entered in one firm's name are going into another concern's name due to a technical snag. This has also resulted in more cancellations. The appellant has also explained that there were also cases where sales for which the quantities / amounts were entered wrong and these were rectified in the same concern, by preparing the inv....
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....ntenance 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 Turnover of the appellant for the year under consideration. Accordingly, the AO is directed to delete the addition of Rs. 15,75,30,347/- being the profit estimated on Rs. 71,54,99,763/-. Thus the grounds of appeal in this regard are allowed. 18. The learned DR filed written submissions which are as follows: "Ground No. 3: AO has made an addition of Rs. 15,75,30,347/- towards Disallowance of Unaccounted sales. During the course of survey u/s. 133A it is noticed that there was a discrepancy found in the total turnover pertaining to M/s. Meena Jewellers Pvt. Ltd for the F.Y. 200....
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....ot 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 asked to explain during the post survey proceedings. Subsequently, the assessee has submitted the details of MPLA data base and MEJA data base found in back-end of accounting package and the assessee explained as head office data and branches data respectively. The assessee explained the differences as these are the cancelled bills and picked up by the system when data was corrected from the back-end. He also submitted the cancelled bills for all concern for F. Y. 2010-11. After verification of cancelled bills it was revealed that the same bill no. was issued in different date and one bill is in sale register and another....
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.... 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 concern's name due to a technical snag. This has also resulted in more cancellations. 3. There were also cases where sales for which the quantities / amounts were entered wrongly. These were rectified in the same company, by preparing the invoice with correct quantity and amount. 4. Name of the dealer/customer in the bill was entered wrongly. These were rectified by preparing the invoice in the correct name. The learned DR without appreciating the above explanations, has concluded that the designed package will allow to hide /delete certain gross receipt entries. We would like to submit the following explanations in response ....
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....f 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 appellant is suppressed" The learned DR has made allegations without any basis and only on suspicion and surmises. There has been no material on record to show that whether the assessee has tampered the bills or the reasons shown by the assessee are afterthought. We would like to submit that, consequent to the survey proceedings conducted on 02.08.2011, the Income Tax Officer, Ward 5(3), Hyderabad has completed the assessment for the A.Ys. 2010-11 and 2011-12 in one of the group cases of the assessee Meena Jewellers wherein he has accepted the assessee's explanation with respect to cancelled bills relating to internal transaction. The ....
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....nt 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 the above said statement as under: "Q 12. M/s. Giritech Technologies stated in his statement that he used to prepare softwares 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 receipt entries. The same were found out from your systems. What do you say? Ans. May be they were preparing such type of software but we were never demanded for such type of software which suppress the gross receipts. Q 13. It has been observed from your computer that packages that the actual sale receipts were available only with the back end ....