TaxTMI 
TaxTMI 
2023 (7) TMI 1087
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....d complete & correct accounts of the business carried by the appellant and the same have been duly audited as per law. 3. Under the fact and circumstance of the case, the ld. First Appellate Authority were grossly erred in making addition of Rs. 54,10,504/- by applying GP ratio on gross receipts, which is unwarranted, against the facts & bad at law. Tax effect related to above mentioned ground of appeal is Rs 16,44,793/- 4. The ld. Assessing officer has grossly erred in disallowing a sum of Rs 3,60,000/- being accounting charges alleging that the same have been paid without deduction of tax, which is against the facts and bad at law. Tax effect related to above mentioned ground of appeal is Rs 1,09,440/- 5. The appellant prays for leave to add, amend, alter or withdraw any grounds of appeal. Total Tax Effect relating to all the above mentioned grounds of appeal is Rs 17,70,805/-." 2. At the time of hearing, Ld. Counsel for the assessee submitted that she does not wish to press Ground No.4, the same is hereby, dismissed as not pressed. 3. Ground No.5 raised by the assessee is general in nature, needs no separate adjudicatio....
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....,29,11,270/- by making additions under various heads amounting to Rs. 1,26,36,713/-. A copy of said orders is being enclosed herewith on page no. 37 to 43 of this paperbook for your ready reference. 6. Aggrieved by the aforesaid orders, the assessee Company filed appeal before the Ld. First Appellate Authority wherein the Hon'ble CIT(A) allowed partial relief to the assessee. The Ld. CIT(A) however upheld additions amounting to Rs. 54,64,918/- made by the Ld. A.O. vide orders dated 22.08.2019 on the basis of fall in GP rate and discrepancy in form 15CA and tax audit report. Copy of the said orders are enclosed on page no. 01 to 36 of this paperbook for your ready reference. 7. The additions upheld by the Ld. CIT(A) against which the assessee Company is in appeal before this Hon. Court are tabulated as under: S. No. Addition Under Section Amount of Addition upheld 1. Addition amounting to Rs. 54,10,404/- rejecting the books of the assessee and considering GP at the rate of 22.47% on the basis of average GP rates of the preceding years. 145(3) 54,10,404/- 2. Addition amounting to Rs. 54,514/- on account of difference in Form 15CA an....
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....ct and went ahead with rejecting the books of accounts of the assessee as well as resorting to additions based on GP ratios of the previous years. In other words the entire Assessment Order passed by the Ld. Assessing Officer was on the basis of the biased opinion formed by him by grossly misinterpretation of the details which were filed before him during the Assessment Proceedings. There were no defects in the books of accounts which was not explained before Hon'ble CIT(A) and Ld. A.O. and which would result in the rejection of books of accounts of the company under Section 145(3) of the Income Tax Act, 1961 and to apply the GP ratio of the earlier years. 11. During the First Appellate proceedings the assessee duly explained that the difference of Rs. 1,08,04,598/- is due to double addition of the amounts by the Ld. A.O. which was subsequently deleted by the Ld. CIT(A). Nonetheless, Ld. CIT(A) sustained the addition of Rs. 54,10,504/- on account of fall in GP rate without understanding the submissions and nature of business of the assessee. 12. The reconciliation of gross receipts of a professional with the information contained in form 26AS is always problem....
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....by the company on provisional basis. But the same is recorded by the auditor in the subsequent year on receipt basis resulting in mismatch of details of TDS contained in Form 26AS. A number of times at the time of payment, the company renegotiate the provision which has been created and a lesser payment is made but the TDS return filed for the previous year is not revised resulting in mismatch with Form 26AS. 13. In short any difference in Form 26AS in comparison to receipts in P&L Account arises because there are instances when the other party has not booked the expense in the current year and has recorded the same in next year, but the assessee company has shown such amount as Income in its P&L Account for the current year. Thus, the same cannot be termed as an intention to invade taxes as the same is only a matter of reconciliation and general business norm of the assessee company. 14. It is a settled principle of law that every year of assessment is a separate year and has its own specific and peculiar transactions. While making assessment in particular year assessing officer cannot resort to make additions on account of fall in GP without having any basis of ....
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.... 2,00,000/- Deleted by Ld. CIT(A) as Ld. A.O. failed to point out any adverse findings - Disallowances out of Director Remuneration 40A(2) 5,49,000/- Deleted after examining the evidences as produced by the assessee - 6. Disallowances of Accounting Charges 40a(ia) 3,60,000/- The Ld. CIT(A) allowed the expenses subject to verification of Ld. A.O. and the Ld. A.O. allowed the same after verification. - 1,26,36,713/- 17. As is evident from the above table, the Hon'ble CIT(A) directed Ld. A.O. in his orders to verify the expenses in relation to the accounting charges amounting to Rs. 3,60,000/-. The Ld. A.O. subsequently verified all the bills and has allowed the deduction to the assessee. In other words, both Ld. A.O. as well as Hon'ble CIT(A) have allowed the expenses of the assessee after verification of the bills but has rejected the books on mere discrepancies in accounting which were eventually explained by the assessee which is highly injudicious, unwarranted and bad at law. 18. Without prejudice to the aforesaid, the assessee Company has duly maintain....
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....amount of Rs. 7,67,010/- was claimed as expenses in Form 15CA however, the actual payment made for the same was of Rs. 7,12,596/- as reflected in the Tax Audit Report. 25. Moreover, during the assessment proceedings the assessee had duly submitted the reconciliation as well as explained that reimbursement of expenses was to be made to AID Thailand and Singapore and accordingly Form 15CA was prepared. The assessee made payment at a later stage which led to difference of Rs. 54,514/-. 26. The aforesaid orders passed by the Hon'ble First Appellate Authority suffers from various infirmities the appellant has accordingly taken following grounds of appeal against same:- i. Under the facts and circumstances of the case, the Ld. First Appellate Authority as well as Ld. A.O. have grossly erred in making an addition of Rs 54,514/- as unexplained expenditure u/s 69C of the Income Tax Act, 1961. ii. Under the facts and circumstances of the case, the Ld. First Appellate Authority has grossly erred in rejecting the books of accounts of the assessee without appreciating the fact that the appellant has maintained complete & correct accounts of the business c....
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....ltants Private Limited and N Dimpu Singh were engaged for executing a part of that particular project. As a result this gross revenue sum of Rs. 30,60,405/- appeared twice in third column of the said chart. Similarly the project being executed for Sunair Hotels amounting to Rs. 4,624,947/- is also appearing twice in the said column, the gross project value of Interglobe Hotel amounting to Rs. 4,891,485/- is also appearing twice in the said list. The same is the case with many other project which are appearing repeatedly in the said list as different subcontractors were working on the same project. The Ld. Assessing Officer made the total of that particular list by including the project receipts multiple times and thereby rejected the books of accounts of the assessee and made grossly unwarranted additions in the case of the assessee. Needless to say, that the Ld. Assessing Officer grossly misunderstood the details and made unwarranted additions on the basis of gross misunderstanding of the facts of the case. The rejection of books of accounts as well as resorting to addition on the basis of GP ratio was also a result of grossly non application of mind and misinterpretation of the d....
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....ts and 26AS which is derived from various TDS returns filed by the principal with respect to the payments made or due to the concerned assessee. Some small differences at times remain due to communication gap between the contractor and the principal but the same may not necessarily have any revenue implications for the purpose of Income Tax. It needs to be understood that a contractor does not have a long term relationship with the principal firms they are working with and there are instances where post-completion of the project due to various issues or disputes between the two parties they do not cooperate with each other. As a result there can be some small differences in 26AS and the revenue which has been recognized by a contractor but the same cannot be a basis for out rightly rejecting the books of accounts of the contractor or for making unwarranted additions on the basis of differences. This factual situation applies across the board to all the assessee where the income recognition is not in accordance with the deduction of tax provided under the Income Tax Act, 1961. For most of the TDS provisions the Income Tax Act provides for deduction and payment of tax on payment or o....
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....eject the books of account of the assessee. No specific defect in the maintenance of the books of account by the assessee has been pointed out AO.......... ...............In the absence of any specific defect pointed out in the books of account and the records maintained on computer, the AO was not justified in rejecting the books results, or to enhance the gross profit rate. Accordingly, there is no merit in this ground of appeal of the revenue. The same is accordingly, dismissed." Copy of the said ruling is enclosed on page no. 51 to 52 of this paperbook for your kind perusal. b. Ruling of Hon'ble ITAT Ahmedabad Bench in the case of Century Tiles Ltd. vs. Joint Commissioner of Income- tax, [2014] 51 taxmann.com 515 (Ahmedabad - Trib.) wherein it was held as under: "23. In the instant case, we find that the Assessing Officer could not bring any material on record to show that any bogus expenditure or non-verifiable expenses were debited under any head of expenses. In the above circumstances, in our considered view, the wholesale rejection of book result in the instant case was not warranted. The reasons given by the lower authorities in the ....
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.... a. AID Thailand reimbursement of Expenses 3,65,906/- b. AID Singapore reimbursement of Expenses 3,46,690/- Total (a+b) 7,12,596/- Difference (1-2) 54,414/- 41. The aforesaid difference is due to the fact that the said amount was paid post negotiations which led to decrease in payment. However, while filing Form 15CA those negotiations were taking place therefore the amount of Rs. 7,67,010/- was filed. 42. During the assessment proceedings the assessee duly submitted the reconciliation as well as explained that reimbursement of expenses was to be made to AID Thailand and Singapore and accordingly Form 15CA was prepared. 43. Without prejudice to the aforesaid, the Ld. CIT(A) has grossly erred in invoking the provisions of Section 69C and treating the aforesaid sum of Rs. 54,514/- as unexplained expenditure which is grossly injudicious, unwarranted and bad at law. 44. In the present case, the Ld. A.O. on his surmise and conjecture has alleged that the said payment has been made in cash and invoked section 69C of the Act. The Ld. A.O. failed to appreciate the fact that the pa....
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....nts to consultants the basis of the project receipts of the appellant concern would result in a double addition on account of the same project. To further substantiate the correctness of the total receipts, the AR produced job work invoices, copies of service tax returns, copies of contracts etc. In the light of the above details discussion, I direct the AO to delete the addition made on account of such purported discrepancy. It is however, pertinent to remember that this addition of Rs. 1,08,04,598/- includes the addition of Rs. 54,10,504/- on account of addition on fall in GP rate which has upheld in the foregoing paras. So, the appellant concern gets only a relief of Rs. 53,94,094/-." 10. We are unable to sustain the findings of Ld.CIT(A) for sustaining the addition partly on the basis of fall in gross profits without pointing out any specific discrepancy in accounts that resulted into suppression of true figure of gross profit. The findings should not be pure guess works, it should have certain foundation. In the case in hand, Lower authorities have failed to advert to the contentions of the assessee that difference between the figures reported in Form 26AS and actually reco....