VIKAS STRIPS LTD.,DELHI vs. ACIT CIRCLE-26(2), NEW DELHI

The relevant facts as culled from the material on records are as under :

Assessee is a company stated to be engaged in the business of manufacturing & Trading of Iron & Steel Strips. Assessee electronically filed its return of income for A.Y. 2014-15 on 26.09.2014 declaring total income at Rs.42,11,015/-. The case was selected for scrutiny and thereafter in the order passed u/s 143(3) of the Act dated 16.12.2016 determined the total income at Rs.45,97,207/-. Aggrieved by order of AO, assessee carried the matter before the CIT(A), who vide order dated 22.02.2019 in Appeal No.10479/2016-17 dismissed the appeal of the assessee. Aggrieved by the order of CIT(A), assessee is now in appeal and has raised the following grounds: “

During the course of assessment proceedings, AO on comparing the 26AS statement and the income shown by the assessee noticed that as per Form 26AS assessee had received income of Rs.1,05,40,879/- whereas assessee has shown income of Rs.1,13,42,834/-. Assessee was asked to explain and reconcile the difference of income. Assessee filed the reconciliation and inter alia submitted that assessee had disclosed the correct income. The submissions of the assessee was not found acceptable to AO. AO thereafter made an addition of Rs.1,47,388/- on account of the following:

Aggrieved by the order of AO, assessee carried the matter before the CIT(A) who upheld the order of AO. Aggrieved by the order of CIT(A), assessee is now in appeal.

Before me, Learned AR reiterated the submissions made before the AO & CIT(A) and further submitted that AO has not rejected the books of accounts u/s 145 of the Act, meaning thereby that the income shown in the books of accounts was accepted to be correct and therefore in such a situation no addition could have been made by AO. He thereafter submitted that AO has proceeded to make the addition only based on the difference between the amounts shown by the assessee and the amount reflected in Form 26AS without considering the explanation of the assessee in proper perspective. He submitted that AO could have called for the necessary information from the respective parties which he has failed to do so and in such a situation also he submitted that no addition could have been made by AO.

Learned DR on the other hand supported the order of lower authorities. She further submitted that as far as addition of Rs.8,878/- with respect to Style Marketing Pvt. Ltd. is concerned, Assessee did not press for adjudication about the same before the CIT(A), as also noted by CIT(A) in para 3.2 of the order and therefore she submitted that assessee cannot now agitate aforesaid addition. With respect to the other additions, she submitted that it is the primary onus of the assessee to prove that no other income as reflected in Form 26AS has been received by the assessee and since the assessee has failed to discharge the onus. AO and CIT(A) were fully justified for making the addition.

I have heard the rival submissions and perused the material available on record. The issue in the present ground is with respect to the addition made on account of the difference between the amount shown by the assessee in the books of accounts and the amounts reflected in the Form 26AS. As far as addition with respect to Rs.8,878/- from Style Marketing Pvt. Ltd. is concerned, it is seen that before CIT(A) assessee did not agitate the addition. In such as situation, I am of the view that no interference to the order of CIT(A) to the extent of upholding the order of AO on addition of Rs.8,878/- is warranted. As far as other additions aggregating to Rs.1,38,510/- is concerned. I find that assessee had filed reconciliation and given explanation before the AO but the same was rejected by the AO without demonstrating as to how the explanation of the assessee is incorrect. I am of the view that no addition on undisclosed income is called for simply on the basis of the difference as per the books of accounts and the amount reflected in 26AS unless there is evidence with the Revenue about the income being earned by the assessee and not being reflected in the books of accounts, more so, when the books of accounts of the assessee are audited and the same have not been rejected by the AO u/s 145 of the Act and no independent enquiry having been made by AO on the issue. I therefore set aside the addition to the extent of Rs.1,38,510/- made by AO. Thus the ground of the assesse is partly allowed.

Ground No.2 & 3 are interconnected and are with respect to the disallowance u/s 40(a)(ia) of the Act.

During the course of assessment proceedings, AO noticed that assessee had claimed interest expenses of Rs.1,01,304/- being payment of interest of Car loan to Kotak Mahindra Prime Ltd. AO noticed that assessee had not deducted TDS on such interest payment. He also noticed that assessee had made payment towards repair and maintenance expense of Rs.1,34,500/- to M/s. Light Lift India Pvt. Ltd. and on such payments also no TDS was deducted by the assessee. AO therefore, by invoking the provision of Section 40(a)(ia) of the Act, made the addition of Rs. 1,01,304/- and Rs.1,34,500/-. Aggrieved by the order of AO, assessee carried the matter before CIT(A) who upheld the action of AO. Aggrieved by the order of CIT(A), assessee is now in appeal.

Before me, Learned AR reiterated the submissions made before the lower authorities and further submitted that assessee has paid interest of Rs.1,01,304/- to Kotak Mahindra Prime Ltd. and had also made the payment towards repair and maintenance expenses to M/s. Light Lift India Pvt. Ltd. amounting to Rs.1,34,500/-. He submitted that aforesaid payments have already been reflected by the respective recipients in their total income and in such a situation no addition is called for Section 40(a)(ia) of the Act. He thereafter fairly submitted that assessee has received a certificate from the Chartered Accountant of the respective recipients certifying that amount received from the assessee having been offered by the respective recipients as their income. He submitted that aforesaid certificate could not be produced before the CIT(A) and therefore matter may be remitted to lower authorities for verification.

Learned DR on the other hand supported the order of lower authorities but did not seriously object to the prayer of the assessee to remit the issue back for verification.

I have heard the rival submissions and perused the materials available on record. The issue in the present ground is with respect to the disallowance u/s 40(a)(ia) of the Act on account of non-deduction of TDS. It is the contention of the assessee that amount paid by the assessee has been reflected by the respective recipients in their income and have also been offered to tax. In support of the aforesaid contention, assessee has now produced the certificate from Chartered Accountant of the respective recipients. In view of the aforesaid, the issue is restored back to AO for verification and decide the issue afresh in accordance with law. Needless to state that AO shall grant adequate opportunity of hearing to the assessee and the assessee shall also promptly furnish all the necessary details called by the authorities. Thus the ground of assessee is allowed for statistical purposes.

In the result, appeal of the assessee is partly allowed.