TaxTMI 
TaxTMI 
2024 (7) TMI 1088
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....addition of Rs. 52,96,000/- made on account of investment in property as the assessee has failed to substantiate its claim of investment in property. 3. Whether on the facts and circumstances of the case, the Ld. CIT(A) erred in deleting the addition of Rs. 7,66,29,091/- made on account of unexpired fee as the assessee has failed to substantiate its claim on this count. 4. Whether on the facts and circumstances of the case, the Ld. CIT(A) erred in deleting the addition of Rs. 1,66,64,284/- made on account of rent charges on the ground that the assessee has failed to furnish copies of rent agreements of all properties. 5. Whether on the facts and circumstances of the case, the Ld. CIT(A) erred in deleting the addition of Rs. 5,38,57,551/- made on account of payment to contractors as they have not filed their return of income." 3. Briefly stated, the assessee is engaged in the business of running coaching centers at various locations in India primarily in the State of Delhi, Haryana, Rajasthan, Jharkhand, Bihar, Uttar Pradesh, Madhya Pradesh, etc. The assessee filed return of income on 31st October, 2017 declaring a loss of Rs. 2,02,23,664/-. The case was selected for scrutiny....
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....with the bank was submitted during the course of appellate proceeding which is also reproduced as under: Particulars ICICI Bank (Rs.) IDBI Bank (Rs.) Total (Rs.) Total GTO as per Bank Statements as taken by the AO 11,55,66,658/- 52,69,24,105/- 64,24,90,763/- Less: Excess credit taken by the AO (-) 4,80,90,136/- (-) 4,80,90,136/- Actual total of credit entries in the banks 11,55,66,658/- 47,88,33.969/- 59,44,00,627/- Less: Service tax component in the total receipts (-) 6,31,70,843/- Less: Inter-bank transfers 0 10,85,01,000/- (-)10,85,01,000/- Less: Cheques/ RTGS returns 3,20,521/- 32,93,493/- (-) 36,14,014/- Less: Cheques received from Smt. Neetu Singh 48,22,500/- (-) 48,22,500/- Less: Income tax refund 10,45,000/- (-) 10,45,000/- Less: Refund of the security deposits against rent 18,24,509/- (-) 18,24,509/- Add: Amount not deposited in bank and spent in cash for expenses (+) 1,13,99,484/- Receipts as per P&L Account 42,28,22,245/- Thus, the finding given by the Assessing Officer is incorrect. Even when the remand report....
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....m of Rs. 18,24,509/- as having been received as return of security deposit against rented premises having been vacated by the appellant on account of vacation of premises used for business purposes by the appellant. Therefore, this addition stands deleted. (h) The appellant had submitted during the course of assessment proceeding of having received fees in cash from its numerous students out of which Rs. 1,13,99,484/- was not deposited and was used for petty expenses in cash only. The AO has failed to point out any discrepancy with this regards. The same is forming total part of cash received in the cash book. In light of the above observations, the addition to the tune of Rs. 21,96,68,518/- thus made by the Assessing officer stands deleted. The ground of appeal is allowed." 7. We have perused the first appellate order, the assessment order, paper books filed on behalf of the assessee and the extensive arguments lead on behalf of the assessee to defend the action of the CIT(A). The Revenue has relied upon the assessment order. 8. It is contended on behalf of the assessee that the nomenclature towards excess cash deposits in bank account itself is misleading and contrary to th....
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....venue are recognized in the income statement in the period in which they are earned and not in the period when the fee is collected. The difference occurred between aggregate fee amount received Rs. 42,28,22,245/- during the year vis-à-vis revenue recognized during the year Rs. 41,11,52,751/- is attributable to mercantile accounting. A reconciliation of receipt and revenue recognized for the year was placed before the AO in response to the show cause notice. However, the AO while framing the assessment order proceeded on a wholly different tangent without bringing the alleged difference of Rs. 21.96 crore to the notice of the Assesse. The assessment order was passed on 31/12/2019 where the AO simply aggregated all credit entries in the respective banks as a cavalier exercise and compared it with the turnover declared. The AO aggregated the bank statement credit entries as turnover at Rs. 64,24,90,763/- [ICICI Bank credit entries Rs. 11,55,66,658 + IDBI credit entries Rs. 52,69,24,105/-] and proceeded to make high pitched additions. To assail the action of AO before CIT(A), the Assessee filed reconciliation between the credit entries in the bank and corresponding turnover dec....
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....rfunctory addition appears to be based on nuanced analysis of facts by the CIT(A) and resonate with the accounting principles and corroboration of facts on record. The CIT(A) has thus rightly removed the absurdity committed by the AO and correctly accepted the audited turnover as declared by the assessee. 12. We also observe that it is incomprehensible on the part of the AO to include credit entries on account of interbank transfers/contra entries, cheque bounce figures, service tax component, capital infused, income tax refund etc. as noted in the reconciliation statement as part of revenue/ sales receipt. The action of the AO is singularly perverse and also smacks of gross violation principles of natural justice. We fail to understand as to how all the credits appearing in the bank account of an assessee can be assumed as turnover of that assessee without appreciating the nature of entries. The additions made by the AO is prima facie in contravention of rudimentary principles of accounting and grossly unreasoned. The arbitrary action of the AO has been rightly set aside by the CIT(A). Significantly, following the mercantile method of accounting, the assessee has also recognized ....
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....the title of the premises was ever transferred in the name of the Assessee herein. Further, the Assessee paid rent to the landlord after deducting TDS and has duly deposited the TDS which is also reflected in the FORM 26AS. Further, the assessing officer has not brought anything on record to show the ownership of the said property vested with the Assessee. I have also perused the paper book filed before me consisting of lease deed/rent agreement of the property bearing unit no. 204 to 207 Apex Mall, Tonk Road, Jaipur. Appellant has further filed an affidavit denying any purchase of the property. I find no infirmity in the documents filed before me and in the facts and circumstances, the appellant herein cannot be held as owner of the property in question. In light of the above facts, the addition made by the A.O to the tune of Rs. 52,96,000/- under 69A of the Act stands deleted. The ground of appeal is allowed." 15.2. As pointed out to the Tribunal, the AO has made additions towards undisclosed investment in undisclosed property of Rs. 52,96,000/- on the basis of some inaccurate information gathered in SFT-12 in form 26AS. With reference to alleged investment in property, the asse....
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....ds. As fee is received in advance, the part of the fees to be recognized in the following year is treated as unexpired fees in the current year and is shown as such current liabilities in the Balance Sheet and recognized as revenue in the following year. (c) The appellant has been following the same method consistently over preceding and succeeding years. Further, it is seen from the record and the paper book filed from pages 2802-2836 during the course of appeal proceeding, the appellant follows mercantile system of accounting and it has been consistently following this over the past and previous assessment years. There being no change in the accounting policy of the appellant, the AO has not rejected the books of accounts of the appellant and has further failed to point out any violation of accounting principles and accounting standards by the appellant. If the AO has disallowed this unexpired fees then the AO was expected to have reduced the unexpired fees shown by the appellant carried over from the previous A.Y 2016-17. The Assessing Officer cannot approbate and reprobate in the same breath, therefore the addition to the extent of Rs. 7,66,29,091 stands deleted. The ground of ....
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.... accounting policy. Thus, no interference with the view taken by the CIT(A) is called for. 16.4. Ground No.3 is dismissed. 17. Ground No.4 concerns additions on account of rent charges on the ground that rent agreements of some property have not been provided. Accordingly, the AO doubted the genuineness and correctness of rent charges and disallowed 10% of the total rent amount on estimated basis. The assessee defended its case before the CIT(A) showing that TDS have been deducted on rent payment. List of properties along with the name of all owners together with rent agreements were provided. The PAN and copy of electricity bills relating to rental properties were provided to support the allowability. It was stated that the rental premises were used wholly and exclusively for coaching purposes and the payments towards rent have been paid through banking channel. 17.1. The CIT(A) considered the submissions made and perused the evidences adduced and found merit in the plea. The CIT(A) reversed and cancelled the additions made by the AO as per the findings noted below: "5.7.2 The Assessee has filed the rent agreement with 54 parties with electricity bills relating to the propert....
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....e copies of bills of contractors and the payment details were also provided. On appraisal of facts placed, the CIT(A) found the explanation offered by the assessee to be convincing. The additions so made was thus reversed and cancelled. The relevant paragraph dealing with the issue read as under: "5.8.2 The present disallowance made by the AO u/s 68 of the Income Tax Act 1961 is again done when there is no credit in the books of the appellant. The appellant runs coaching business and on account of which it has to incur expenditure under various heads i.e., advertisement, business promotion, office maintenance, repair and maintenance, security services and SMS charges. The appellant in order to remain relevant and to focus on its objective in the business procure these services from different contractors. The AO has failed to demonstrate that these expenses are not related to the business of the appellant, rather, as can be seen from the paper book filed by the appellant that these expenses have been incurred wholly and exclusively for the purposes of the appellant business. The appellant has also filed the details of contractors along with FORM 3CD. The appellant has also filed t....