2016 (3) TMI 48

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..... Consequent to the search, the assessee's case was notified to Central circle vide notification no. F.No. CIT(C)/CR/VSP/Centralization/2010-11 dated 18.2.2011. Consequent to the search, notice u/s 153A of the Income-Tax Act, 1961 (hereinafter called as 'the Act') dated 29.12.2010 was issued to the assessee calling for return of income for the assessment year 2008-09. In response to notice, the assessee filed her return of income on 14.2.2011 declaring total income of Rs. 20,96,140/-. The case was selected for scrutiny and accordingly notice u/s 143(2) of the Act dated 16.6.2011 was issued. In response to notice, the assessee's authorized representative appeared from time to time and filed information called for. During the course of assessment proceedings, the A.O. noticed that the assessee has admitted short receipts of Rs. 25,53,769/-.Therefore, issued a show cause notice and asked to explain why the same should not be treated as income of the assessee. In reply, the assessee submitted that the excess turnover quantified by you is because of the difference between the turnover accounted in the books of accounts and turnover as per the TDS certificates. The assessee further submi....

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.... of the Act. However, the assessee is following mercantile system of accounting, wherein she is accounting income on accrual basis as and when the bill is submitted and advance from customer has been recognized as income in the year in which bill is raised. To this effect furnished partywise reconciliation statement, explaining the reasons for difference. Similarly, as far as the disallowance u/s 40(a)(ia) of the Act is concerned, the assessee contended that the amounts incurred under these heads has been already paid during the same financial year and nothing is payable at the end of the balance sheet date. Therefore, no disallowance can be made u/s 40(a)(ia) of the Act as held by the ITAT, Visakhapatnam bench in the case of M/s. Merilyn Shipping & Transports (supra). However, the CIT after considering the explanations offered by the assessee partly allowed the appeal filed by the assessee. While doing so, the CIT(A) observed that as far as the difference in turnover is concerned, out of the additions of Rs. 25,53,769/- an amount of Rs. 15,41,279/- has been deleted and the balance amount of Rs. 10,12,490/- has been sustained. Similarly, the CIT(A) deleted the additions under the h....

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....and expenditure on accrual basis. The difference represents advance, received from customers which was accounted in subsequent years. Therefore, the same cannot be considered as income for the year. On the other hand, Ld. D.R. strongly supported the order of the CIT(A). 8. We have heard both the parties, perused the materials available on record and gone through the orders of the authorities below. The A.O. made the additions towards suppressed/unaccounted turnover based on difference between books of accounts and TDS certificates. It was the contention of the assessee that the difference is mainly on account of advance received from the customers which was not recognized as income for the year. The assessee further submitted that it is the usual practice that the customers have paid advance and deduct TDS on such advances. The assessee is following mercantile system of accounting wherein she is accounting all receipts and expenditure on accrual basis as and when bill is raised. The assessee has accounted all the receipts and reconciled the TDS certificate to the books of accounts and explained the reasons for the difference in turnover. The assessee further contended that the d....

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....inance charges u/s 40(a)(ia) of the Act, for non deduction of TDS. The A.O. was of the opinion that the above expenditure attract TDS, but the assessee has failed to deduct TDS, therefore, disallowed the amount. The contention of the assessee is that the expenditure incurred under these heads has been paid during the same financial year and nothing is outstanding at the end of the balance sheet date and hence no disallowance can be made u/s 40(a)(ia) of the Act. Ld. A.R. during the course of hearing submitted that the issue involved in this appeal is squarely covered by the ITAT, Visakhapatnam special bench decision in the case of M/s. Merilyn Shipping & Transports Vs. ACIT (2012) 136 ITD 23 and also the decision of Mukundara Engineers and Contractors Vs. ACIT in ITA No.657/Vizag/2014. We have examined the coordinate bench decision relied upon by the assessee in the light of the facts of the present case. We, find that the coordinate bench of this Tribunal in the case of Mukundara Engineers and Contractors Vs. ACIT in ITA 657/Vizag/2014 has considered the issue, and after considering the revenue objection with regard to special bench decision of M/s. Merilyn Shipping & Transports (....