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Income Tax Appellate Tribunal, ‘A’ BENCH : BANGALORE
Before: SHRI CHANDRA POOJARI & SMT. BEENA PILLAI
O R D E R Per Chandra Poojari, Accountant Member
This appeal by the assessee is directed against the order of CIT(A)-3, dated 29/1/2020 for the assessment year 2015-16.
2. The assessee raised following grounds :-
“1. The order of the Ld. Commissioner of lncome Tax (Appeals) is opposed to law, facts and circumstances of the case.
The order is passed in haste, without providing sufficient and reasonable opportunity of being heard.
3. The order is passed against the principle o natural justice and thus liable to be quashed.
4. The Ld. CIT(A) has erred in facts and in law b confirming the action of Ld. Assessing Officer wherein the claim of the Appellant regarding agricultural income under section 2(1) of the Act amounting to Rs. 1,09,10,859/- was treated as business income.
5. The Ld. Assessing Officer has erred in holding that income of the Appellant from performance of agricultural activities do not fall under the definition of agricultural income under section 2(1A) of the Act. The Ld. CIT (A) has erred in upholding the order of the Ld. Assessing Officer. – Rs.61,68,074/-
6. Without prejudice to the above, the Ld. Assessing Officer ought to have allowed the expenditure of Rs. 1,42,27,985/- incurred by the Appellant for the purpose of earning the income of Rs. 1,90,10,859/- from performance of agricultural activities.
7. The Ld. ClT(A) has erred in doubting the genuineness of expenditure of Rs. 1,42,27,985/- and brushing aside the Appellant's explanations as naive without applying his mind in light of the facts and circumstances of the case.
8. The Ld. CIT (A) while confirming the order of the Ld. Assessing Officer has erred in stating that the impugned expenditures claimed by the Appellant was not incorporated in the profit and loss account.
9. The Ld. CIT(A) has erred in law and on facts by taxing difference, between the returned income and gross receipts as per Form 26AS, amounting to Rs. 1,07,10,790/- albeit the Appellant reconciling and explaining the said difference before the Ld. CIT(A) and the Ld. Assessing Officer.
10. The Ld. CIT(A) has erred in sustaining the addition made on account of the difference between returned income and gross receipts as per Form 26AS despite the Ld. Assessing Officer's remand report wherein the Ld. Assessing Officer has verified and satisfied himself with respect to reconciliation and explanation. – Rs.34,75,116/-
11. The Ld. CIT(A) ought to have appreciated the fact that the impugned difference was the advance amount received by the Appellant which was duly offered by the Appellant in the succeeding previous year, following the concept of accrual system of accounting and computation of income.
12. The Ld. CIT(A) erred in not accepting the submission of the Appellant that it had inadvertently claimed the entire TDS reflecting in the Form 26AS although the Appellant was not eligible for the same. The Ld. CIT(A) has instead used the inadvertent mistake of the Appellant to arbitrarily sustain the addition in the hands of the Appellant.
13. The Ld. CIT(A) erred in upholding the levy of interest by the Ld. AO under section 234B of the Act. Rs.28,13,294/- Total tax effect Rs.1,24,56,484/-“
The facts of the case are that the assessee is a private limited company engaged in agricultural activities and filed return of income for the year under consideration on 30/9/2015, declaring a loss of Rs. 22,44,271/- after claiming exemption of agricultural income of Rs. 2,10,49,975/- u/s 10(1) of the Income- tax Act. The case was selected for limited scrutiny by the issue of notice under section 143(2) of the Act on 12/4/2016. In response, ld.AR furnished the details and documents called for. The assessment was completed under section 143(3) of the Act vide order dated 28/12/2017 by making the following additions/disallowances:
Accordingly, the total income of the assessee was assessed at Rs.2,75,96,522/- by the ld.AO vide assessment order dated 28/12/2017.
Aggrieved by the order of the ld.AO, the assessee filed an appeal before the CIT(A). The CIT(A) partly allowed the appeal by reducing the disallowance made on account of depreciation at Rs. 1,19,144/-. Against this assessee is in appeal before us.
Further, the assessee raised additional evidences, which is as follows:-
a) Copy of invoices in support of expenditure incurred by the assessee listed in Sl. No.8 to 27 of the paper book 1 & 2, which are as follows:-
Copy of Sample Invoices – Salary 09. Copy of Sample Invoices – Samplings 10. Copy of Sample Invoices – Tractor Cultivation 11. Copy of Sample Invoices – JCB & Earth Works 12. Copy of Sample Invoices – Labour Farm 13. Copy of Sample Invoices – Fertilizers 14. Copy of Sample Invoices – Fright & Transportation 15. Copy of Sample Invoices – Farm Equipments 16. Copy of Sample Invoices – General Farm Expenses 17. Copy of Sample Invoices – Repair & Maintenance 18. Copy of Sample Invoices – Petrol for Implements 19. Copy of Sample Invoices – Electricity Charges 20. Copy of Sample Invoices – Marketing Expenses 21. Copy of Sample Invoices – Soil Testing Expenses 22. Copy of Sample Invoices – Land Preparation 23. Copy of Sample Invoices – Pesticides 24. Copy of Sample Invoices – Water Sampling 25. Copy of Sample Invoices – JCB Work Pits 26. Copy of Sample Invoices – Farm Food Expenses 27. Copy of Sample Invoices – Travelling Expenses
The petition for additional evidences are as follows:-
“The petitioner is a private limited company engaged in agricultural activities and assessed to tax before the Ld, Assistant Commissioner of Income-tax, Circle - 3(1)(2), Bangalore. Return of income for the year under consideration was filed on 30-Sept-2015, declaring a loss of Rs. 22,44,271/- after claiming exemption of agricultural income of Rs. 2,10,49,975/- under section 10(1) of the Income-tax Act, 1961 (hereinafter referred to as 'the Act'). The case was selected for limited scrutiny by the issue of notice under section 143(2) of the Act on 12-Apr-2016. In response,
Authorized Representative of the Appellant appeared from time to time and furnished the details and documents called for. Assessment was completed under section 143(3) of the Act vide order dated 28-Dec-2017 by making the following additions! disallowances:
Accordingly, the total income of the Appellant was enhanced to Rs. 2,75,96,522/- by the Ld. AO vide the Assessment order dated 28-Dec-2017. Aggrieved with the order of the Ld. AO, the Appellant filed an appeal before the Commissioner of Income Tax (Appeals), Bengaluru on 27-Jan-2018. The Ld. CIT (A) partly allowed the appeal by reducing the disallowance made on account of depreciation of Rs. 1,19,144 vide his order dated 29-Jan-2020
Aggrieved with the order of the Ld. CIT(A), the petitioner is in appeal before the Hon'ble Income Tax Appellate Tribunal, Bengaluru, and wishes to submit the additional Evidence as under:
Copy of invoices in support of expenditures incurred by the Appellant, listed in si. no. 8 to 27 of the Paper Book 1 and 2; It is submitted that in the present case the Ld. AO has erred in disallowing the entire expenses of the Appellant, thereby charging the Appellant's entire gross revenue to tax. During the course of appellate proceedings, sample invoices were filed before the Ld. Assessing Officer, which were unfortunately ignored since some of the sample invoices were not duly signed. In the instant appeal before your honor, the Appellant wishes to submit most of the invoices towards the expenditure claimed by it.
It is submitted that these invoices could not be filed before the lower Authorities since the Appellant was not adequately advised by the learned Authorised Representative and also since it was under the bona- fide belief that the sample invoices filed by it before the lower Authorities would suffice to convince them about the genuineness of the claim of expenditure made by the Appellant. In view of the above facts and circumstances of the case, it is prayed before the Hon'bie Tribunal that the above-mentioned additional evidences may kindly be accepted by your lordships for disposal of the appeal.
8. The assessee prayed that the above additional evidences may be admitted for rendering substantial justice.
The ld.DR submitted that evidence brought on record by way of new evidence many not be admitted, if it is admitted, the same may be remitted to the AO for fresh consideration.
We have heard both the parties and perused the materials on record. Having considered the rival contentions, we observed that Section 254 of the Act r.w. Rule 29 of the Income Tax (Appellate Tribunal) Rules, 1963 states about power to admit additional evidences, whether mere fact that evidence sought to be produced is vital and important does not provide a substantial cause to allow its admission at appellate stage, especially when evidence was available to party at initial state and had not been produced at that time. The additional evidences submitted by the assessee at this stage are the first time and are necessary for deciding the appeal. Even otherwise, all the documents so placed on record by the assessee by way of additional evidences before the CIT(A) are necessary to adjudicate the controversy between the parties. Moreover, in case, the additional evidence so placed on record by the assessee is allowed then in that eventuality, no prejudice shall be caused to the rights of the Revenue. Whereas on the contrary, in case, the said additional evidences placed on record by the assessee is not considered then in that eventuality the rights of the assessee shall be prejudiced. Therefore in view of the substantial justice, we direct the AO to admit additional evidences so placed on record by the assessee before us and decide the issue accordingly. Therefore, grounds No.1 and 2 of the appeal raised by the assessee are allowed.
With regard to ground No.2 to 8, wince, we have admitted additional evidences placed on record by the assessee and we direct the AO to decide the issue after considering those additional evidences and also after providing reasonable opportunity of hearing to the assessee. Therefore, in view of our above findings, we see no need to adjudicate the other grounds so raised by the assessee.
With regard to ground No.9 to 10, the contention of the ld.AR is that income mentioned in the From No.26AS has not fully accrued to the assessee and only Rs.88,66,500/- has been accrued and the same was offered for taxation and the balance amount is not offered for taxation as per accrual system of accounting followed by the aassessee. As such, an amount of Rs.1,07,10,790/- is not accrued to the assessee in the asst. year under consideration cannot be taxed.
The ld.DR relied on the order of the lower authorities.
We have heard both the parties and perused the materials on record. The assessee in the present case offered an amount of Rs.88,66,500/- as income out of an amount of Rs.1,95,77,290/- mentioned in the Form No.26AS. However, the assessee claimed TDS benefit to the full extent Rs.3,91,546/-, which is relating to the total amount of Rs.1,95,77,290/- mentioned in the Form No.26AS. The AO added balance amount of Rs.1,07,10,790/- as income mentioned in the Form No.26AS observing that as per principle, entire amount covered in From No.26AS has to be taxed, as the assesse has claimed entire amount of tax as credit mentioned in From No.26AS. In our opinion, the assessee has followed accrual system of accounting and offered the income as and when it was accrued to the assessee. The lower authorities misconstrued the distinction between the recognition of income on the basis of the accounting on accrual of income and cash system of accounting . In fact, the income accrued to the assessee only on the recognition of the income, which is based on the raising of bills. Therefore, it is not possible to hold that the assessee has deviated from the regular method of accounting followed by it. We should notice that the distinction between raising of bills and accounting of receipt. In our opinion, the receipts of money relating to the deduction of TDS by the payer, the assessee has to account the actual amount accrued to the assessee and balance portion which is not accrued to the assessee to be treated as receipt of advance and the receipt of advance subject to the TDS not to be offered for taxation in this asst. year and that portion of the TDS would not be allowed to claim the credit in terms of provisions of sec. 198 and 199 of the Act and the income covering that TDS has not been accrued to the assessee as a result of the method of accounting employed by the assessee. The credit for that TDS portion would be carry forwarded and assessee would get the credit for that TDS certificate in the year in which corresponding receipts were offered to tax on the basis of method of accounting regularly employed by the assessee. With these observations, we remit this issue to the file of the AO to decide the issue in dispute in the light of the above findings. This ground of appeal of the assessee is partly allowed for statistical purposes.
In the result, this appeal of the assessee is partly allowed for statistical purposes only.