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Facts
The assessee included unclaimed credit balances written back u/s 41(1) of Rs. 18,11,71,802/- in its profit and loss account, thereby offering it to tax. However, due to a discrepancy between the hard copy and the uploaded version of the tax audit report on the IT portal, the CPC made an adjustment, which the Addl/JCIT(A) sustained. Additionally, the assessee sought credit for TDS of Rs. 2,37,074/-.
Held
The Tribunal found that the assessee had already offered the amount of Rs. 18,11,71,802/- to tax as part of its net profit, and the adjustment by the CPC was due to a mismatch in reporting on the IT portal. Therefore, the addition made u/s 41(1) was set aside. Regarding the TDS credit, the AO was directed to verify the TDS amount and allow credit as per law upon production of necessary evidence by the assessee.
Key Issues
1. Whether the addition under Section 41(1) for unclaimed credit balances is justified when the amount has already been credited to the profit and loss account and offered to tax, despite a discrepancy in the uploaded tax audit report. 2. Whether the assessee is entitled to claim TDS credit upon verification by the Assessing Officer.
Sections Cited
Section 41(1), Section 143(1)(a)(iv), Section 199, Rule 37BA(3), Section 40A(2)(b)
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Income Tax Appellate Tribunal, MUMBAI “G” BENCH : MUMBAI
Before: SHRI VIKRAM SINGH YADAV & SHRI SANDEEP GOSAIN
Assessment Year : 2023-24 SOTC Travel Limited, DCIT, Circle-3(3)(1), 13th Floor, Aayakar Bhavan, Marathon Futurex, vs. Maharshi Karve Road, NM Joshi Marg, New Marine Lines, Delisle Road, S.O., Mumbai-400020. Lower Parel, Mumbai-400013. PAN : AAGCS6725D (Appellant) (Respondent) Assessee by : Ms. Pratiksha P.Jain Revenue by : Shri Swapnil Choudhary Date of Hearing : 31-07-2025 Date of Pronouncement : 05-08-2025 O R D E R PER VIKRAM SINGH YADAV, A.M : This is an appeal filed by the assessee against the order of the Learned Addl/JCIT(A)-2, Kolkata [„Ld.CIT(A)‟], dated 29-03-2025, pertaining to Assessment Year (AY) 2023-24.
During the course of hearing, the Ld.AR taken us through Ground No.2 of the assessee‟s appeal and submitted that the Addl/JCIT(A) has erred in sustaining the action of the AO/CPC, in making the addition of Rs.18,11,71,802/- u/s. 41(1) of the Act, without appreciating that the said amount has already been considered by the assessee while filing its return of income and the same resulted in double taxation. In this regard, our reference was drawn to the audited financial statements of the assessee- company which are contained at page Nos. 136 to 177 of assessee‟s paper book and it was submitted that the assessee has disclosed the revenue from operations amounting to Rs. 58,236.19 lakhs, as evident from the statement of Profit & Loss Account, which is available at page No. 137 of assessee‟s paper book. Further, reference was drawn to Note no. 23 at pages 160 of the paper book and it was submitted that the said figure includes all un-claimed credit balances no longer required u/s 41(1) amounting to Rs 18,11,71,802/-. It was submitted that taking the said revenue figures into account, the net profit comes to Rs. 1662.80 lakhs as per profit/loss account and which has been taken as the base figure for offering the income under the head „Income from business/profession” while filing the return of income. It was further submitted that the tax auditors in their audit report have confirmed the said fact that the assessee company has credited the figure of Rs 18,11,71,802/- to the statement of profit/loss account as evident from Notes to Form 3CD – paragraph 25 available at assessee‟s paper book page 301, however, while uploading the tax audit report on the IT Portal, have reported the said figure of Rs. 18,11,71,802/- separately under Clause-25 of their tax audit report which is required for reporting the amount chargeable to tax u/s 41(1) as evident from assessee‟s paper book page 189 and basis the same, the CPC has identified the mismatch between the returned income as well as what has been reported by the tax auditor and has thereafter made the adjustment. It was submitted that as evident from the financial statements and the return of income as well as confirmed by the tax auditor, since the assessee has already offered this amount to tax as part of its net profit, the same cannot be brought to tax separately in its hands and therefore, the adjustment so made by the CPC and confirmed by ld. Addl/JCIT(A) be directed to be deleted.
Per contra, the Ld.DR is heard, who has relied on the findings of the Addl/JCIT(A), which are contained at paragraph No. G-3 of the impugned order and the same reads as under:
“G3] I find that nowhere the figure of Rs 18,11,74,423/- is reflected. Even if two figures are added, such amount is not arrived. The Appellant has furnished the Annexure 5A as under:- SOTC Travel Limited Revenue from Operation AY 2023-24 Particulars Amount (INR) Remarks Revenue from operations 5,45,72,99,849 Marketing Fees & other incentive 15,25,45,666 income Unclaimed Credit balance no longer 12,39,83,599 GL Attached required, written back. Annexure 5 Part A Other Miscellaneous Operating income- PY GL Attached 5,71,88,203 Annexure 5 Part B GOP INCOME CUSTOMER W/BACK Other Miscellaneous Operating income- 3.26,01,122 othe 5,82,36,18,940 The Appellant has furnished some self made calculation in a plane paper as above without any signature or certificate from the Tax Auditor. Even if it is filed, there is no explanation as to why the Revised Tax Audit Report is not filed. In a number of cases, the CPC has rectified the additions made u/s 143(1)(a)(iv) after the Revised Tax Audit Report is uploaded. There is no scope to verify the Annual Report with the Books of Accounts now as the case is not under scrutiny. But as mentioned above, the Appellant has mentioned the amount added as liability written back as NIL in the P & L account in the ITR, where the amount of Rs 18,11,74,423/- was required to be added there as the Auditor has mentioned it in the TAR. The nature of liabilities stated can't be a part of Revenue from Operations. G 4] In view of the above, the self made break-up furnished as Annexure 5A is rejected being not acceptable. The Appellant has failed to furnish any Revised Tax Audit Report after correction, if any, as claimed in the Appeal that there was no place to write it. In view of the above, it is apparent that the Appellant has not added the amount of liabilities written back in the ITR, P & L Account or in the Trading Account as amount written back, it is also cannot be treated as SALE OF SERVICES. It is also apparent that the Tax Auditor has rightly mentioned it in the Tax Audit Report that it was not added though required to be added u/s 41(1). G 5]No explanation has been filed as to how the AMOUNT WRITTEN BACK can be classified as SALE OF SERVICE when in the page 34 of the ITR, in P & L Account, there is specific place to inform the amount of written back where the Appellant has mentioned that the amount of written back '0' (zero) as under:-
In view of the above, the self made break-up furnished as Annexure 5A is rejected being not acceptable. The Appellant has failed to furnish any Revised Tax Audit Report after correction, if any, as claimed in the Appeal that there was no place to write it. In view of the above, it is apparent that the Appellant has not added the amount of liabilities written back in the ITR, P & L Account or in the Trading Account as amount written back, it is also cannot be treated as SALE OF SERVICES. It is also apparent that the Tax Auditor has rightly mentioned it in the Tax Audit Report that it was not added though required to be added u/s 41(1).
We have heard the rival contentions and purused the material available on record. On perusal of the audited financial statements as well as return of income, we find that the assessee has credited the figure of Rs 18,11,71,802/- in its profit/loss account and the net profit as per profit/loss account comes to Rs 16,62,79,609/-. The said figure of net profit has been taken as a base figure for reporting the income under the head “Income from business/profession” as evident from the computation of income as well as return of income and there are no adjustment by way of addition/deduction of the said figure of Rs 18,11,71,802 which demonstrate that the said figure has been duly offered to tax.
As far as nature and character of the said figure is concerned, the tax auditors have stated in their report that the same reflects income chargeable to tax u/s 41(1) and at the same time, the tax auditors have also confirmed that the assessee has credited the said figure in its profit/loss account.
The genesis of the problem and mismatch lies in what has been stated in the tax audit report (the hard copy available as part of the assessee‟s paper book pages 252- 309 and in particular page 301) and how the same has been reported and captured while uploading the tax audit report in specified format in the IT portal (uploaded copy available at assessee‟s paper book pages 178-202 and in particular page 189).
In the hard copy of the tax audit report, the tax auditors have stated in clause 25: Any amount of profit chargeable to tax u/s. 41 as under:
However, while uploading the tax audit on the IT Portal, which has been stated is as under:
As evident from the latter report, there is nothing which has been stated as to whether the said figure has already been credited in the profit/loss account or not. Apparently, there is no field which has been provided in the specified format where such a remark could have been provided while uploading the data. The CPC however having access to the data so uploaded on the IT portal picked up the latter report and worked out the difference between what has been reported by the assessee in its return of income and what has been reported by the tax auditor and worked out the adjustment of Rs 18,11,71,802 and brought the same to tax. The assessee however during the appellate proceedings has brought the said fact to the notice of ld Add./JCIT(Appeal) as part of its submission dated 27/03/2025 available at assessee‟s paper book pages 521-539 which however, have not been properly appreciated by him which has resulted in sustenance of the adjustment so made by the CPC.
In light of aforesaid discussion and in the entirety of facts and circumstances, the adjustment of Rs 18,11,71,802/- so made by the CPC and confirmed by the ld Add/JCIT(Appeal) is hereby set aside and ground of appeal so taken by the assessee is allowed.
11. Regarding Ground No. 3, it was submitted that the Addl/JCIT(A) has erred in not directing grant of TDS credit of Rs. 2,37,074/-. In this regard, it was submitted by the Ld.AR that necessary directions may be issued to the AO to verify and allow the necessary credit to the assessee.
The Ld.DR has placed reliance on the findings of the Addl/JCIT(A) which are contained at paragraph No. G-7 and the same read as under:
“G7] Ground No 2:- As described in Para B above, the restriction of credit of TDS is made only of Rs 38,603/- as the same was not reflected in the 26AS. If the Appellant claims that the same is now reflected (may be due to the Revised TDS Return filed by the Deductor), the Ld AO is directed to verify it with 26AS and allow it as per Rule 37BA(3) after confirming that the corresponding income is computed for tax purpose. Rule 37BA(3) is as under:- "Credit for tax deducted at source for the purposes of section 199. 37BA(3) (1) Credit for tax deducted at source and paid to the Central Government, shall be given for the assessment year for which such income is assessable. (ii) Where tax has been deducted at source and paid to the Central Government and the income is assessable over a number of years, credit for tax deducted at source shall be allowed across those years in the same proportion in which the income is assessable to tax." If the TDS is not reflected in the 26AS, the Appellant should pursue the matter with the Deductor so that they can file the Revised TDS Return with PAN of the Appellant and exact amount. If it is done, the amounts will be reflected in the 26AS and after confirming the income u/r 37BA(3), the Ld AO will allow it. The Appellant has made some new claim that TDS of two amalgamating companies being Rs 38,536/- and Rs 48,000/- and claimed that it has not been allowed. I find that no such credit was claimed in the Schedule TDS of the ITR. No information has been filed as to whether any revised ITR was filed or not claiming these TDS Credit of Rs 86,536/-. Hence, such claim is not allowable. Hence, the Ground No 2 is PARTLY ALLOWED relating to the TDS Credit of Rs 38,603/- subject to the verification by the Ld AO in 26AS and fulfilment of Rule 37BA(3).”
We have heard the rival contentions and perused the material available on record. In light of the limited prayer raised before us, the AO is directed to verify where all TDS has been deducted on the assessee‟s payments and the assessee produces necessary evidence in support thereof, the credit may be allowed as per law after due verification. In the result, the ground is allowed for statistical purposes.
In the result, the appeal filed by the assessee is partly allowed for statistical purposes.