PR. COMMISSIONER OF INCOME TAX 6 vs. WESTERN AUTO SPARES

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TAXAP/184/2018HC GujaratGJHC24008528201819 March 2018Author: HONOURABLE MR. JUSTICE AKIL KURESHI,HONOURABLE MR. JUSTICE B.N. KARIA3 pages
AI SummaryDismissed

What did the High Court hold?

The Tribunal decided both issues in favour of the assessee. Regarding the first issue, the Tribunal found no merit in the Revenue's plea. It was established that the difference in sales value between the financial books and the VAT return arose due to the exclusion of excise duty in the assessee's books, a fact that the Revenue failed to rebut. The Tribunal affirmed the CIT(A)'s action in deleting this addition. For the second issue, the Tribunal noted that the Assessing Officer had invoked disallowance for raw material purchases. However, the Revenue failed to demonstrate under which statutory provision of Chapter XVIIB of the Act these raw material purchases were liable for TDS deduction. The Tribunal agreed with the CIT(A)'s reasoning and found no case made out by the Revenue to revive the disallowance. The ratio decidendi is that differences in sales reporting due to accounting practices like excluding excise duty are explainable, and disallowances for non-deduction of TDS require specific statutory provisions to be invoked, especially concerning raw material purchases where such a requirement is not evident.

What were the facts?

The Revenue, represented by the Principal Commissioner of Income Tax 6, filed an appeal against the order of the Income Tax Appellate Tribunal (ITAT) dated August 31, 2017. The appeal challenged the ITAT's deletion of two additions made by the Assessing Officer. The first addition, amounting to Rs. 1,81,53,505, was on account of a difference in sales value shown in the assessee's financial books and its VAT return. The second addition, of Rs. 1,03,95,993, was due to the alleged non-deduction of TDS on contract payments. The assessee is Western Auto Spares. The assessment year(s) are not explicitly stated but are implied to be the subject of the ITAT's order.

What were the issues?

The Tribunal had to decide two questions of law and fact: 1. Whether the Appellate Tribunal erred in law and facts in deleting the addition of Rs. 1,81,53,505 on account of the difference in the value of sales as shown in financial books and VAT return? 2. Whether the Appellate Tribunal erred in law and facts in deleting the addition of Rs. 1,03,95,993 due to non-deduction of TDS on contract payment? Assessee's Contentions: The assessee's stand was reiterated, and it was noted that the difference in sales value arose because of the exclusion of excise duty in its books, which had been reconciled and formed part of the paper book. Regarding TDS, the assessee had already deducted TDS on all other payments of labour job works, and the issue pertained to raw material purchases. Revenue's Contentions: The Revenue sought to draw support from the Assessing Officer's action, arguing that the CIT(A) ought to have accepted the assessee's figures shown in the VAT return. For the second issue, the Revenue's case was based on the disallowance provision invoked by the Assessing Officer for raw material purchases. The Revenue failed to indicate any statutory provision under Chapter XVIIB of the Act that made raw material purchases liable for TDS deduction.

Which sections of the Income-tax Act were involved?

Chapter XVIIB

AI-generated summary — verify with the full judgment below

Cause title — parties, addresses and appearances
C/TAXAP/184/2018 ORDER IN THE HIGH COURT OF GUJARAT AT AHMEDABAD R/TAX APPEAL NO. 184 of 2018 ========================================================== PR. COMMISSIONER OF INCOME TAX 6 Versus WESTERN AUTO SPARES ========================================================== Appearance: MRS MAUNA M BHATT(174) for the PETITIONER(s) No. 1 ========================================================== CORAM: HONOURABLE MR.JUSTICE AKIL KURESHI and HONOURABLE MR.JUSTICE B.N. KARIA Date : 19/03/2018

ORAL ORDER (PER : HONOURABLE MR.JUSTICE AKIL KURESHI) Revenue is in appeal against the judgment of Income Tax Appellate   Tribunal   dated   31.8.2017   raising   the   following questions for our consideration : “(A) Whether the Appellate Tribunal has erred in law and facts   in   deleting   the   addition   of   Rs.1,81,53,505/­   on account   of   difference   in   value   of   sales   as   shown   in financial books and VAT return? (B) Whether the Appellate Tribunal has erred in law and facts in deleting the addition of Rs.1,03,95,993/­ due to non deduction of TDS on contract payment?”

With respect to the first question, the Tribunal made the following observations :

“3. We  have  heard  both  the  parties  strongly  reiterating their respective stands in the course of hearing. Learned Departmental   Representative   seeks   to   draw   vehement C/TAXAP/184/2018 ORDER support   from   the   Assessing   Officer’s   action   making   the impugned addition. His case is that the CIT(A) ought to have accepted assessee’s relevant figures shown in VAT return giving rise to the impugned differential amount. We find no merit in the instant plea. It has come on record that   the   assessee   has   already   reconciled   the   above difference as forming part of the paper book pages 32 to

54.

It is an admitted fact that the difference in question between assessee’s sales declared in P&L account and VAT return arises because of exclusion of excise duty in its books. The Revenue fails to rebut this clinching finding in the   course   of   hearing   before   us.   We   therefore   affirm CIT(A)’s   action   deleting   the   impugned   addition.   The Revenue fails in its first substantive ground.”

With respect to second question, the Tribunal had made the observations as under :

“5. Heard both parties. Relevant case records perused. The Assessing   Officer   admittedly   invoked   the   impugned disallowance   provision   qua   raw   material   purchases involving   the   above   amount   of   Rs.1,03,95,993/­.   Mr. Madhusudan   fails   to   dispute   that   assessee   has   already deducted TDS on all other  payments of labour job works. The issue that arises in the instant substantive ground is that   of   TDS   deduction   qua   assessee’s   raw   material purchases.   We   sought   Revenue’s   response   to enlightenment   as   to   how   and   under   what   statutory provision the above raw material purchases are liable to be deducted TDS under chapter XVIIB of the Act. It fails to indicate any such provision as is the CIT(A)’s reason in above extracted finding. No case therefore is made out in Revenue’s   instant   substantive   ground   to   revive   the impugned   disallowance   as   deleted   hereinabove   in   lower appellate proceedings.”

It can thus be seen that with respect to these questions CIT(Appeals)   and   Tribunal   had   concurrently   come   to   the

conclusion   that   difference   in   the   value   of   sales   shown   in financial book and VAT return was merely on account of change C/TAXAP/184/2018 ORDER in accounting method and the assessee had made all necessary TDS on labour job work charges respectively. No question of law arises. Tax Appeal  is dismissed. (AKIL KURESHI, J) (B.N. KARIA, J) raghu

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