TaxTMI 
TaxTMI 
2019 (8) TMI 1050
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....Appellate Tribunal, Mumbai (hereinafter called "the tribunal"), reads as under:- "1) The learned Commissioner of Income Tax (Appeals) failed to consider that the notice under section 143(2) of the Act issued by the Assessing Officer was time barred, and hence, the order passed under section 143(3) of the Act was illegal and bad in law. 2) The learned Commissioner of Income Tax (Appeals) erred in confirming the addition of Rs. 1,80,57,980/-, being income corresponding to alleged unreconciled TDS Rs. 18,05,798/-, as per the Form 26AS. 3) Having regard to letter dated February 24, 2017 filed with the Assessing Officer during remand proceedings, remand report dated March 24, 2017 and letter dated April 10, 2017 filed with the Commissioner of Income Tax (Appeals) during appeal proceedings, the Appellant submits that the finding of the Commissioner of Income Tax (Appeals) that some amount of TDS is unreconciled is perverse, and contrary to facts on record. 4) In any event, the Appellant Company submits that the addition of Rs. 1,80,57,980/- is highly excessive and arbitrary, and the same requires to be reduced substantially.In any event, the alleged di....
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....iss this Ground No. 7 raised by assessee in memo of appeal filed with the tribunal as not being pressed. We order accordingly. 6. It is then brought to the notice of the Bench during the course of hearing that now there are only two effective issues which need to be adjudicated by tribunal, wherein Ground no. 2 to 4 raised by assessee in memo of appeal field with tribunal represent one effective issue concerning additions made on account of mismatch of Income-tax deducted at source(TDS) as per books of accounts maintained by the assessee with the TDS credit as is appearing in Form no. 26AS information per income-tax data base. It was then submitted that second effective issue in this appeal filed by assessee is covered by Ground No. 5 and 6 raised by assessee in memo of appeal filed with tribunal which concerns itself with ad-hoc disallowance of expenses @10% amounting to Rs. 2,76,51,835/- out of aggregate expenses to the tune of Rs. 27,65,18,354/- claimed by assessee under various heads of expenses. 7. During the course of assessment proceedings conducted by the AO u/s 143(3) read with Section 143(2) of the 1961 Act, the AO observed that the assessee has claimed TDS of Rs. 6....
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..... The AO had observed that assessee had failed to give documentary evidences and details with respect to these expenses to substantiate these expenses. It was also observed by the AO that complete details were not submitted by the assessee during assessment proceedings and under these circumstances it could not be established that these expenses were incurred wholly and exclusively for the purposes of business of the assessee and also it could not be concluded whether these expenses are revenue in nature. The AO also observed that in absence of aforesaid details, it could not be established that proper income-tax was deducted by the assessee while making payments for these expenses as is mandated under Chapter XVII-B of the 1961 Act which led AO to make additions to the tune of Rs. 2,76,51,835/- being ad-hoc disallowance @ 10% of the expenses aggregating to Rs. 27,65,18,354/- of the total expenses incurred by assessee under various heads of income as are enumerated in details in assessment order dated 29.01.2014 passed by the AO u/s 143(3) of the 1961 Act. 9. The assessee being aggrieved by additions made by the AO vide assessment order dated 29.01.2014 passed u/s 143(3) of the ....
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....DCIT whether the appellant is required to file the details as per earlier notice (dated 24 September 2013) and the details as per the new notice dated 18 December 2013. The staff of the learned DCIT informed that the earlier notice dated 24 September 2013 can be ignored and asked the appellant to file the details as requested in the new notice dated 18 December on 26 December 2013, on the basis of which the assessment will be completed, Further, the staff of the DCIT also informed that hence forth the appellant has to file the details / discuss the case with him, and only at the time of finalising the assessment order, the learned DCIT will take the hearing. 8. Accordingly, the appellant compiled and filed around 65% of the details requested in the notice dated 18 December 2013 vide its letter dated 26 December 2013. The appellant submits that during the current year there was change in the Financial Controller and new Financial Controller has assumed the office only in the month of October 2013. Further, in the accounts team of the company, there were few changes and some of the old staff had left the organisation. Due to these problems, the appellant was taking ....
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.... are professional services and provisions of Section 194J are applicable which contemplate deduction of income-tax at source @10% and an amount of Rs. 3,08,86,060/- stood added to income of the assessee by the AO by extrapolating the income accordingly. The assessee claimed that it was not provided with AIR information by the AO during the course of assessment proceedings. The assessee also claimed before learned CIT(A) that proper and adequate opportunity of hearing was not provided by the AO during the course of assessment proceedings. The assessee submitted that the AO‟s observations that the assessee has not submitted explanation and reconciliation of TDS is not correct. The assessee prayed that these additions be deleted. The assessee also submitted that at the time of filing of return of income, it claimed credit of TDS based on original TDS certificates available with it even though income offered by the assessee was much more than the claim for credit of TDS.. The assessee submitted that it claimed TDS credit of Rs. 6,02,54,624/- based on original TDS certificates available with it at the time of filing of return of income but Revenue gave credit of TDS of Rs. 5,99....
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....delete the additions. The assessee also claimed that this differential of TDS of Rs. 30,88,606/- is mainly due to error made by one of the clients of the assessee namely Tilaknagar Industries Limited wherein PAN number of the assessee was mentioned instead of PAN number of their client to whom income was paid, while filing their TDS return with Revenue. The assessee produced evidences by way of emails exchanged with said Tilaknagar Industries Limited to prove that error took place while filing TDS returns by said Tilaknagar Industries Limited. The revised TDS return filed by said Tilaknagar Industries Limited correcting said mistake in PAN was also filed. The ledger account of said Tilaknagar Industries Limited in assessee‟s books of accounts was also produced. This error had an implication of TDS amount of Rs. 27,64,023/- which was rectified by Tilaknagar Industries Limited by filing revised TDS return. The impact on income due to the aforesaid error was Rs. 2,76,40,230/- computed keeping in view TDS rate u/s 194J on professional/technical services is @10% by extrapolating income, out of total additions to the tune of Rs. 3,08,86,060/- made by the AO while framing assessm....
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.... remained unreconciled. The TDS amount appearing in the latest 26AS is said to be Rs. 6,15,37,261/- as against the original amount of Rs. 6,33,43,059/- thereby resulting in difference of Rs. 18,05,798/-Considering the AO's stand in making the extrapolated computation of the receipts, it has to be now worked out with the latest unreconciled figure of Rs. 18,05,798/-.The AO's findings are upheld to that extent and addition is restricted to Rs. 1,80,57,980/-. The AO is therefore directed to recompute the income accordingly. This ground is partly allowed." 9.5 Thus as could be seen from above, additions to the income of the assessee to the tune of Rs. 1,80,57,980/- were upheld by learned CIT(A) on the grounds that the assessee was not able to finally reconcile the differential in TDS amount as per Form No. 26AS per income-tax department data base and as claimed by assessee in its return of income filed with Revenue, to that extent. So far as an error which crept in Form No. 26AS owing to quoting of wrong PAN by Tilaknagar Industries Limited while filing its TDS return to the tune of Rs. 27,64,023/-, the same stood accepted by learned CIT(A) as the said company Tilaknagar Ind....
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.... etc. e) Miscellaneous expenses of Rs. 1,33,65,339: These expenses mainly include expenditure incurred on festival and gift expenses, recruitment expenses, bank charges, insurance, octroi / freight charges, rates and taxes, exchange differences, office expenses, fees to directors, audit fees expenses, etc. f) Repairs and maintenance-building of Rs. 78,71,119: This include amenities charge, house-keeping charges, municipal charges, electricity charges, water charges, security charges repairs and renovation charges etc. in connection with the rented premises occupied by the appellant. g) Repairs and maintenance-others of Rs. 1,15,42,538: This include expenditure incurred for repairs cost of office equipment's, furniture, plumbing charges, purchase of laptop battery, mouse, etc. and charges in relation to SAP maintenance payable to TUV Nord Services GMBH. h) Staff training expenses of Rs. 21,74,773: This include expenses in relation to workshops attended by the employees, training fees, etc." 10.2 The explanations offered by assessee did not found favour with Ld. CIT(A) who rejected the contentions of the assessee vide appellate order dated 05.09....
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....es. The learned counsel for assessee explained before the Bench that the assessee is a service provider engaged in the certification work. It was explained that additions to the tune of Rs. 3,08,86,060/- were made by the AO to the income of the assessee on account of mismatch of TDS to the tune of Rs. 30,88,606/- between the books of accounts maintained by the assessee and Form No. 26AS per income tax department data base. It was submitted that AIR information was not provided to the assessee by AO during the course of assessment proceedings. It is submitted by learned counsel for the assessee before the Bench that AO in its remand report has stated that AIR information was not provided to assessee at the time of framing of assessment. Our attention was drawn to page no. 7 of the paper book wherein Profit and Loss Account of the assessee is placed for the impugned year under consideration and it was submitted that the total income / fees received by assessee from services were tune of Rs. 72.84 crores.Our attention was also drawn to page no. 33 of the paper book and it was submitted by learned counsel for the assessee that the assessee has declared income of Rs. 22,17,31,420/- in i....
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....partment data base and return of income filed with Revenue is placed. With respect to second issue also, the assessee claimed before the Bench that it has given/written complete details of the expenses incurred against which adhoc disallowances were made by the AO @10% of various expenses leading to disallowance of Rs. 2,76,51,835/.Our attention was drawn to page 68 to 93/paper wherein item wise detail of various expenses are placed, of which adhoc disallowances of expenses @10% of the total expenses under various heads was made by authorities below. Our attention was drawn to page 94/paper book wherein the AO vide letter dated 05.08.2015 during remand proceedings provided opportunity to assessee to explain as to why these additional evidences be admitted keeping in view Rule 46A of the Income-tax Rules, 1962. Our attention was also drawn to page no. 95 to 98 of the paper book, wherein letter dated 12.08.2015 is filed by the assessee before the AO during the course of remand proceedings. The assessee has also filed affidavit dated 12.08.2015 before AO during remand proceedings which is placed in paper book/page 99-101, wherein it is averred that the assessee was not provided with c....
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....ook and it was submitted that the difference in TDS stood duly explained and no additions to the income of the assessee are warranted. It was further submitted by learned counsel for the assessee that the second remand report issued by the AO, dated 14.03.2017 is placed in paper book at page no. 130-132. 11.2 With respect to second issue, it was further submitted by learned counsel for the assessee that AO has made adhoc disallowance to the tune of 10% of expenses under various heads. It was submitted that this is the only year when such disallowance of expenses on adhoc basis was done by the AO and neither in earlier years nor in later years, any disallowance of expenses on adhoc basis was made by the authorities. Our attention was drawn to page no. 43 of the paper book wherein the AO asked for details of these expenses vide notice dated 18.12.2013 issued u/s 142(1) of the 1961 Act. Our attention was drawn to page 37 of the paper book wherein the AO vide notice dated 24.09.2013 had asked for details of these expenses vide notice issued u/s 142(1) of the 1961 Act. Our attention was also drawn to page no. 248-250 of the paper book wherein assessment order dated 02.03.2013 issued ....
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....(3) of the 1961 Act and assessment order dated 15.12.2009 passed by the AO u/s 143(3) of the 1961 Act for ay: 2007-08, wherein in both these ay‟s no additions were made on adhoc basis by disallowance of these expenses. The learned counsel for the assessee relied upon decision of the Hon‟ble Bombay High Court in the case of PCIT v. Quest Investment Advisors Private Limited (2018) 96 taxmann.com 157(Bom.) to contend that by following rule of consistency no disallowances of expenses on adhoc basis are warranted in the case of the assessee as these expenses were fully allowed in preceding as well succeeding year(s). 11.3 The Ld. DR on the other hand submitted that the assessee had admitted that there still remains difference in reconciliation of TDS to the tune of Rs. 12,82,637/- vide ground number 4 raised by it with tribunal even as of now for which matter may be set aside and restored to the file of the AO for factual verification. So far as disallowance of adhoc disallowance of expenses is concerned, it was submitted by learned DR that even if no disallowances of expenses were made in the preceding year as well succeeding year but still disallowance of expenses could....
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....come declared per 1961 Act in return of income filed with Revenue was Rs. 22.17 crores. We have observed that there are two effective issues which we are now required to be adjudicated by us in this appeal. The additions have been made mainly on two counts firstly, there is a difference in TDS amount deducted by assessee‟s clients on behalf of the assessee on invoices for services raised by assessee in favour of its clients as is claimed by assessee in its return of income filed with Revenue and in information as reflected in Form no. 26AS maintained in data base of Income-tax department, wherein the differential income was extrapolated by applying TDS rate of 10% as is applicable on professional/technical services covered u/s 194J of the 1961 Act. The AO had observed that there was a difference of Rs. 30,88,606/- in aforesaid TDS amounts, wherein TDS as per form no. 26AS information per income-tax data base was Rs. 6,33,43,059/-, while TDS amount claimed by assessee in return of income filed with Revenue was Rs. 6,02,54,624/-, which led AO to make additions to the tune of Rs. 3,08,86,060/- in the hands of the assessee by extrapolating the income by applying TDS rate of 10% o....
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....ld assessee‟s counsel that there is no need to comply with earlier details asked for vide notice dated 24.09.2013 issued by the AO u/s 142(1) of the 1961 Act. The assessee is also contending that various telephonic calls were made to the office of the AO but no hearing took place and finally it culminated into an assessment order dated 29.01.2014 passed by the AO u/s 143(3) of the 1961 Act, which prejudiced the assessee as additions to the tune of Rs. 3,08,86,060/- were made by the AO towards differential income represented by the income as is reflected in Form No. 26AS per income-tax department data base and income as is reflected in its books of accounts. This contention of the assessee that proper and adequate opportunity was not granted by the AO cannot be accepted as the assessee was represented by an experienced tax-consultants and nothing prevented assessee to file reconciliation of TDS as per certificates with income as is reflected in its books of accounts in "tapal‟ of the department to comply with query number 40 raised by the AO in notice dated 24.09.2013 issued u/s 142(1) of the 1961 Act and secondly when the details called for in the first notice u/s 142(1....
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.... by learned CIT(A). The assessee is multi location company having branches/offices across India. There are more than 2800 entries of TDS to the credit of assessee in Form No. 26AS information. The income from professional fees( net of service tax) earned by the assessee is more than Rs. 72,84,91,431/- in the year under consideration. The details of professional fee/services are as under : Particulars Amount (In Rs.) Fees from services ( net of service tax) of the appellant as per Profit and Loss account 72,84,91,431 Add: Travelling and other expenses recovered from the customers from which taxes have been deducted by them ( these are reduced from the expenses) 1,51,70,116 Less: Export of services 4,58,53,992 Net income( net of service tax) which is liable to TDS 69,78,07,555 The TDS credit as is claimed in return of income filed by assessee is around Rs. 6,02,54,624/-. The difference now remaining to be reconciled in TDS as is reflected in 26AS information per income-tax data base and as is reflected in return of income filed with Revenue is Rs. 12,82,637/-.The un-reconciled differential is around 2.13% of the total TDS which is not significant diff....
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.... provisions of the 1961 Act by submitting reconciliation statements as well explaining the reasons for differential between income as is reported in Form No. 26AS information per data base maintained by income-tax department and income as is reflected in its books of accounts. The assessee has discharged its primary onus/burden and the assessee could not be asked to do impossible. It is well known that there are several reasons for differential in income computed based on TDS as is reflected in Form No. 26AS per data base maintained by income-tax department with income as is reported in the books of accounts. There could be differences in the accounting policy followed by the tax-payer and its clients who have deducted income-tax at source on behalf of the tax-payer as well wrong mention/punching of the PAN number of the taxpayers by clients while filing TDS returns with the department. One of the reasons for differential could be that clients have deducted TDS on gross amount inclusive of service tax while income is reflected by tax-payers exclusive of service tax. The assessee has no control over the data base of the Income-tax department as is reflected in Form No. 26AS and a....
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....iled with the tribunal. We order accordingly. 12.2 With regard to the second issue we have also observed that adhoc disallowance @ 10% of various expenses incurred by the assessee were made by the AO leading to additions to the income of the assessee to the tune of Rs. 2,76,51,835/- being 10% of expenses incurred by assessee under various heads of expenses aggregating to Rs. 27,65,18,354/-, which additions were later confirmed by learned CIT(A). The assessee has raised similar plea that no proper and adequate opportunity was granted by the AO during the course of assessment proceedings. We have observed that similar situation has arisen during assessment proceedings as we have discussed while adjudicating issue of grant of proper and adequate opportunity by the AO during assessment proceedings while adjudicating earlier issue of mismatch in TDS. The assessee in this case was asked by the AO vide notice dated 24.09.2013 issued u/s 142(1) to submit details of various expenses vide point number 30 and 31 in aforesaid communication dated 24.09.2013. The assessee submitted its reply on 11.11.2013 before the AO vide letter dated 06.11.2013, but the assessee chose not to reply to point....
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....n in that situation to presume that second notice dated 18.12.2013 issued by the AO u/s 142(1) calling for further information has waived the information called for by the AO in the first notice dated 24.09.2013 issued u/s 142(1) was not correct on the part of the assessee. Thus, in our considered view even if it is presumed that the AO was not conducting hearing, the assessee in order to protect itself from any prejudice, ought to have submitted the details called for in notices dated 24.09.2013 and 18.12.2013 issued by the AO u/s 142(1) in "tapal‟ of the income-tax department but instead the assessee chose not to furnish the aforesaid details. Thus, the assessee is equally responsible for its woes. We have observed that the assessee has duly submitted complete details of these expenses during the course of appellate proceedings before learned CIT(A). The details submitted by the assessee during appellate proceedings before learned CIT(A)/AO in remand proceedings are reproduced hereunder: a) Professional/technical services of Rs. 15,59,84,928/- : These expenses include the payments made to local technical experts (hired on contract basis) for rendering services in c....
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.... training expenses of Rs. 21,74,773: This include expenses in relation to workshops attended by the employees, training fees, etc." The assessee also submitted break up of these expenses before learned CIT(A) during appellate proceedings and before the AO during remand proceedings which are placed in paper book. The Remand Reports were called for by learned CIT(A) from the AO with respect to additional evidences filed before it keeping in view Rule 46A of the 1962 Rules. No defects in the books of accounts were brought on record by the authorities below nor books of accounts were rejected by the authorities below. If the authorities were not satisfied with aforesaid details, then they ought to have called for further details. In the preceding assessment year i.e. ay: 2010-11 and in immediately succeeding assessment year i.e. ay: 2012-13, no adhoc disallowances of expenses were made by the AO in an assessment framed u/s. 143(3) of the Act. The assessment orders for ay: 2010-11 and ay: 2012-13 are placed in file. The assessee has discharged its onus by bringing on record complete details of the expenses incurred by it albeit the same was brought on record during the course of appe....