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Income Tax Appellate Tribunal, DELHI BENCH ‘G’, NEW DELHI
Before: Ms. Sushma ChowlaDr. B. R. R. Kumar
Per Dr. B.R.R. Kumar, Accountant Member:
Stay Application:
The assessee was carrying on business of a custom clearing agent and acted as C&F agent. The assessee had filed its return of income for AY 2015-16 on 05.10.2015 declaring total income of Rs. 40,27,460/-. The case of the assessee was selected under limited scrutiny on account of mismatch in sales turnover. During the course of assessment proceedings, it was noticed by Assessing Officer that as per Form 26AS the total receipts by the assessee were Rs.6,60,65,680/-. It was further observed that in P&L account, the assessee has shown a total
2 SA No. 44/Del/2 Trinetra Impex Pvt. Ltd. receipts of Rs.1,81,72,612/-. Hence, the assessee was asked to explain discrepancy between 26AS data and its P&L account.
The assessee submitted reconciliation between receipts in Form 26AS and corresponding revenue recorded as per P&L account with respect to three sample parties since the number of transactions and their related documents were voluminous. The Assessing Officer disregarded the submissions of the assessee, and vide order sheet entry dated 11.12.2017 show caused the assessee as to why addition should not be made on account of difference of receipts appearing in Form 26AS and revenue disclosed in P&L account for the relevant assessment year. Date of compliance to file all submissions and documents for the assessee was the very next day i.e. - 12.12.2017. Since the submissions and documents were voluminous in nature and time given was too short and since the assessee could not comply with show cause of the Assessing Officer, he added difference of receipt shown in 26AS and P&L account amounting to Rs. 4,78,93,068/- to the total income of the assessee.
The Assessing Officer also issued a demand notice u/s 156 of the Act raising the demand of Rs.2,07,49,030/-.
During the arguments of the stay application against the recovery, it was brought to our notice that additional evidences were submitted before the ld. CIT (A) which have been accepted under Rule 46A were forwarded to the Assessing Officer and obtained the remand report. The Assessing Officer submitted to the ld. CIT (A) that the reconciliation has been 3 SA No. 44/Del/2 Trinetra Impex Pvt. Ltd. accepted except for an amount of Rs.3,37,067/-. During the hearing of the Stay Application, these facts have been examined and since the issue involved verification of the expenses claimed as reimbursement by the assessee, the matter of the quantum appeal has been taken up simultaneously and adjudicated. Since, the Stay Application and the regular appeal have been heard and orders are being passes simultaneously. The matter in the quantum appeal stands remanded back to the file of the Assessing Officer. Hence, the Stay Application of the assessee becomes infructuous and treated as dismissed.
5. Following grounds have been raised by the assessee:
1. That, in view of the facts and circumstances of the case, the assessment order passed under section 143(3) of the Income Tax Act, 1961 (‘the Act’) dated 13.12.2017 by the Assessing Officer (‘the AO’) and also addition/disallowance made therein is illegal, bad in law and without jurisdiction.
2. That, in view of the facts and circumstances of the case, the Commissioner of Income Tax (Appeals) (‘CIT(Appeals)’) has grossly erred in upholding the action of AO in assessing the total income of the assessee at Rs. 5,19,20,530/- as against the returned income of Rs. 40,27,460/-.
3. That, the AO/CIT(A) has erred in not appreciating that this is a case of limited scrutiny and hence the addition made of Rs. 4,78,93,068/- is illegal and bad in law and without jurisdiction.
4. That, in view of the facts and circumstances of the case, the AO/CIT(A) has erred in making/upholding the addition on the basis of alleged difference of receipt shown in Form 26AS
4 SA No. 44/Del/2 Trinetra Impex Pvt. Ltd. and financials/return of income amounting to Rs. 4,78,93,068/-. The AO/CIT(A) has failed to appreciate the reconciliation along with all evidences/details and documents as filed by the Assessee which explains the difference of receipt appearing in Form 26AS and financials/return of income.
That, in view of the facts and circumstances of the case and in law, no addition can be made on the basis of the alleged difference of receipt shown in Form 26 AS and financials/return of income, and hence the same is liable to be deleted.
That, in view of the facts and circumstances of the case, the AO/CIT(A) has erred in not appreciating the business model of the Assessee and the accounting method adopted by it.
7. That, on the facts and circumstances of the case, the AO/CIT(A) has failed to appreciate the favourable assessment order passed in Assessee’s own case pertaining to AY 2014-15 and AY 2016-17, which is based on identical facts and wherein the business model and accounting method of the Assessee stands accepted.
8. That, in view of the facts and circumstances of the case, the CIT(A) has grossly erred in law in rejecting the application for additional evidence of the Assessee under Rule 46A of the Income Tax Rules, 1962 (‘the Rules’).
9. That, in view of the facts and circumstances of the case, the AO has erred in passing the impugned assessment order without giving the Assessee a reasonable opportunity of being heard and the same is in clear violation of principles of natural justice.
10. That, without prejudice, the addition made is unjust, illegal, bad in law and is liable to be deleted.
11. That the explanations given, evidence produced and material placed and made available on record have not been properly considered and judicially
5 SA No. 44/Del/2 Trinetra Impex Pvt. Ltd. interpreted and the same do not justify the addition made.
12. That, on the facts and circumstances of the case, the AO has erred in charging interest under Section 234B of the Act. The same has been wrongly levied and is also excessive.
That on the facts and circumstances of the case, the AO has erred in recording satisfaction and initiating penalty proceedings under Section 271(1)(c).” 6. The Assessing Officer made addition on account of difference of the receipts shown in 26AS and return of income of Rs.4,78,93,068/-. Receipts of Rs.6,60,65,680/- are appearing in 26AS whereas revenues from operation of Rs.1,62,09,805/- and other income of Rs.19,62,807/- totaling to Rs.1,81,72,612/- are disclosed in Profit and Loss A/c.
During the year under consideration, assessee acted as C&F agent and provided services to various clients. Accordingly, invoices were raised in this behalf. The invoice issued by the assessee comprised of following components: “a. Custom Duty, Air Freight, Dock / Port Charges b. Crane / Fork Lift, Survey / Insurance / License Prem c. D.O. Charges / Detention, Customs Documentation d. Local Transport, Loading / Unloading, Repair / Packing e. Examination Expenses, Print out Charges, f. Others Charges, License Charges g. Agency commission”
Out of above mention components only Agency commission was the revenue of Assessee Company and all the remaining components were basically reimbursement to the 6 SA No. 44/Del/2 Trinetra Impex Pvt. Ltd. Government Department/ outside agencies which the assessee company pays after recovering the same from clients. Such reimbursements were neither treated as income or expense in the books of accounts. These were directly paid to a particular vendor who bills the assessee company for the specific amount spent by assessee on account of different expenses as mentioned above. The vendor company also invoices to the assessee company mentioning the clients name which clearly supports the fact that the expense has been done on behalf of the clients.
Before the ld. CIT (A), the assessee submitted documentary evidence in large volumes with respect to the expenses incurred by the assessee on behalf of its client and reimbursement received from them.
S No. Particulars Volume No. Page No. 1. Invoices raised by assessee company to its 1-9 1-4505 clients 2. Bills/ledgers being submitted in support of reimbursable components
Encl.: 1. Bills of dock/AAl charges incurred by 10-14 4506-7278 assessee 15-16 2. Bills of delivery order (DO) charges 7279-8085 incurred by assessed 3. Challan of Custom Duty 17-18 8086-8832 4. Bills of transportation expenses 19-20 8833-9411 incurred by assessee 5. Bills of freight expenses incurred by 21 9412-9504 assessee
The assessee has submitted the reconciliation of income in the P&L account vis-à-vis the invoices raised.
7 SA No. 44/Del/2 Trinetra Impex Pvt. Ltd. Formula Particulars Amount Amount TOTAL INVOICE VALUE 488,145,306 A INVOICE OF PREVIOUS YEAR 167,910 B TOTAL INVOICE OF CURRENT YEAR 437,977,396 C= A-B LESS: CUSTOM DUTY 405,906,684 D DOCK CHARGES 12,732,470 E FREIGHT/TRANSPORTATION: 27,114,964 F D.O. CHARGES: 12,982,145.25 G EXAMINATION EXPENSES:- i) License expenses 646,610 ii) Bond debiting 360,333 iii) Crain/ Forklift 823,556 iv) Urgent Railment expenses 960,000 V) Miscellaneous expenses 831,077 3,621,576 H LOADING & UNLOADING EXPNESES:- i) Wages 1,438,260 v) Bond debiting 360,333 vi) Crain/ Forklift 823,556 vii) Urgent Bailment expenses 960,000 V) Miscellaneous expenses 831,077 3,621.576 LOADING & UNLOADING EXPNESES:- i)Wages 1,438,260 ii) Packaging/ Sealing 860,796 iii) Repair and other expenses 709,003 3,008,059 BE CHARGES/DOCUMENTATION 436,045 CHARGES SERVICE TAX (INCLUDING CESS) 3,918,684 k BAD DEBTS l Credit note of M/s Tirupati Global 211,500 Commission paid to M/s. GVP 16,854 Forwarder Commission paid to M/s. Chopra 50,000 Associates W/ off/Deduction by Clients (Ester 56,113 Industries Ltd) W/ off/Deduction by Clients (Majestic 8,986.20 Auto Ltd.) W/ off /Deduction by Clients (GVB 2,342 Forwarder) W/ off/Deduction by Clients (India Mat 2,527 Pro) W/ off /Deduction by Clients (RTC 1,854 International) W/ off/Deduction by Clients (Pooja 1,685 Forge) W/ off /Deduction by Clients (Sandeep 29,533 Industries)
8 SA No. 44/Del/2 Trinetra Impex Pvt. Ltd. W7 off /D eduction by Clients (Rasa 3,821 Autocom) W/ off/Deduction by Clients (Veegee 1,831 Industries) W/ off/Deduction by Clients (Hero 126,183.97 Motors Ltd) Bad debts (M/s. Munjal showa Ltd.) 1,533,732.82 2,046,963 Total Expenses 471,767,590 M= D+E+F+G+H +I+J+K+L INCOME AS PER PROFIT & LOSS A/C 16,209,806 N=C-M
Further, the assessee submitted that even as per the service tax return which consisted of transportation, loading expenses and agency commission, the service tax has been levied only on the components which are not reimbursements. The assessee has also reconciled the differences between receipts shown in the service tax return and revenues from operations.
Further, it was submitted that the assessee has been consistently following such method of accounting and the same has been duly accepted by the department as well. The details for the earlier and subsequent years are as under:
Assessment Year Receipts as per Form Revenue as per 26AS books AY 2014-15 6,37,09,595/- 1,58,93,920/- AY 2016-17 6,66,32,3317- 2,59,41,417/-
13. The additional evidences filed before the ld. CIT (A) were remanded to the Assessing Officer and the Assessing Officer technically refused to accept the additional evidences (para 3.4 of the CIT(A)), he has examined the matter on merits and submitted that 9 SA No. 44/Del/2 Trinetra Impex Pvt. Ltd. “it is observed from the reconciliation furnished by the assessee company, it is observed that amount of Rs.6,52,05,181/- (shown as payment/ amount credited in the form 26AS) on which TDS was deducted by the client of the assessee company on its services, in this regard, it is noticed that the amount of Rs.6,52,05,181/- was part of the invoices having the value of Rs.48,81,45,306/-. In the reconciliation of invoice value with the receipts recorded in the From 26AS, it is observed that aggregate value of invoices issued during the year as per the said reconciliation statement is Rs.48,81,45,306/-. In comparison thereto, total value of income reported as per Form 26AS is Rs.6,52,05,181/-. In this regard, assessee submitted before your goodself an invoice wise reconciliation citing reason for difference between the revenue as per each invoice vis-a-vis the corresponding entry in form 26AS which is placed on paper book page no. 9722- 9866.
It is observed that each party has followed different mechanism of deducting tax at source and considered different components of invoice for the purpose of deducting TDS. Some parties have deducted tax at source only in respect of the agency commission; some parties have deducted tax at source in respect of total invoice value less custom duty charges, some parties have deducted tax at source in respect of ail components but dock charges and so on and so forth.
In view of these facts, the reconciliation submitted by the assessee with respect to verified on test check basis and it is found that amount shown in the Form 26AS comprises in the details of invoices submitted by the assessee company.”
Further, the Assessing Officer has also reconciled the difference between the turnover as per service tax return and 10 SA No. 44/Del/2 Trinetra Impex Pvt. Ltd. as recorded in the P&L a/c. The report of the Assessing Officer on this aspect is as under:(page 30 of the CIT(A) appeal) “From the above reconciliation it is observed that the difference in turnover as per service tax return and that recorded in profit and loss A/c has been arisen because of the reason that Sendee tax has been levied only in respect of agency commission, transportation and loading/unloading charges. The details furnished by the assessee in this regard has been examined and it is found that various other components such as customs duty, dock charges, examination fee, etc. when added to such value results in the total invoice value of Rs. 48,81,45,306/- which has already been reconciled with the form 26AS and with P&L A/c. The contents of above reconciliations submitted by the assessee have been test checked, in this regard, it is claimed, by the assessee that it has followed the accounting treatment consistently in subsequent years as well but no evidence, in this regard, has been furnished by jt In this regard, the additional evidence adduced by the assessee may be considered for the disallowance on account of difference of receipt shown in 26AS & return of income.”
Though the Assessing Officer has examined the reconciliation part on merits except a difference of Rs.3,37,067/-, the ld. CIT(A) has choosen not to accept the additional evidences filed by the assessee and rejected the reconciliation filed by assessee. During the arguments before us, the ld. AR contended that the voluminous data given to the ld. CIT (A) could not have compiled within a short span of two days i.e. the date of show cause 11.12.2017 and the date of 11 SA No. 44/Del/2 Trinetra Impex Pvt. Ltd. order 13.12.2017. He argued that the details filed if considered with due diligence will reconcile the correct taxable income. The ld. DR also fairly argued that the matter needs to be examined by the Assessing Officer by taking into consideration the evidences filed by the assessee subsequently. Hence, taking into consideration and keeping in view, the arguments of both the parties, the time available to the assessee during the assessment proceedings, the examination under took by the Assessing Officer on the additional evidences field by the assessee before the ld. CIT (A) and the remand report thereof, we hereby set aside the matter to the file of the Assessing Officer to reconcile the mismatch of TDS vis-à-vis the returned income of the assessee.
In the result, the appeal of the assessee is allowed.
Order Pronounced in the Open Court on 28/01/2020.