TILKE GMBH & CO. KG,NOIDA vs. DDIT (INTERNATIONAL TAXATION), NOIDA

By undermining & disregarding the fact that income of Rs. 1,14,33,486/- which was already duly declared in the ITR filed for AY 2011-12 (though was agreed by assessee company/appellant as addition in AY 2010-11 for avoiding litigation and buying peace of mind), thus, no income and/or income tax thereon has been concealed by the Appellant in the year under appeal, since such income (in fact all Incomes Received) had suffered TDS u/s 195 r/w Sec. 90 r/w DTAA, which were being declared in the ITR (s) of respective assessment years, i.e. AY 2010-11 & 2011-12; 2. By alleging in unfounded manner regarding “the amount of tax sought to be evaded”, “concealment of particulars of income” and “furnished inaccurate particulars of income” merely on the basis of allegation made in the impugned orders u/s 143(3)/144C as well as 271(1)(c) that – “Since the Assessee has regularly adopted the mercantile method of accounting, income offered in the Return on Actual basis will be in contravention of Section 145 of the I.T. Act, 1961. Hence, the excess income of Rs. 1,14,33,486/- on Accrual basis is proposed to be added to the Gross Receipts of the assessee.”

This appeal is filed with a delay of 384 days and the explanation offered by the assessee is that in spite of their instructions their ARs did not refer the second appeal within time, as such, they had to change their council to take the conscious decision to file this appeal resulting in the delay. Unless the rights of the parties are crystallized by afflux of time, we are of the considered opinion that the technical consideration shall not result in denying the possibility of delivery of substantial justice. With this view of the matter, we condone the delay and proceed to hear the matter on merits.

It is the argument of the Ld. AR that the assessee offered the income for tax on receipt basis whereas the TDS certificate income was shown on accrual basis, therefore, the difference of Rs. 1,14,33,486/- arose but in spite of the fact that the assessee had furnished full of true particulars of the income and offered the amount on receipt basis to tax the AO proceeded to levy the penalty. It is the submission of the Ld. AR that there is no want of bona fides on the part of the assessee in as much as the assessee had shown this amount of Rs. 1,14,33,486/- in the computation of income relating to the AY 2011-12 which the assessee had to get deleted in respect of such year. Per contra, it is the argument of the Ld. DR that with the introduction of the explanation to Section 271(1)(c) of the Act w.e.f. 01.04.1964 the onus for proving that the statement of income was not on account of any willful neglect is on the part of the assessee and mere offering of an explanation is not sufficient but such an explanation has to be substantiated with reference to cogent and reliable evidence. On this premise, Ld. DR submitted that the orders of the authorities below do not warrant any interference and the appeal is liable to be dismissed.

We have carefully gone through the record. In this matter the explanation of the assessee for the difference of Rs. 1,14,33,486/- is that though the income as per TDS certificates was shown on accrual basis, the assessee offered the income for tax on receipt basis thereby giving rise to the difference which was offered for tax on receipt basis for the AY 2011-12. Record speaks vide page no. 78 & 80 read with the order dated 15.06.2016 of the Ld. CIT (A) in the appeal relating to the AY 2011-12 vide paragraph no. 5.10, that the return of income for the AY 2011-12 was filed by the assessee on 29.11.2011, whereas the assessment order for the year 2010-11 was passed on 28.05.2013. This means long prior to the assessment order for the year 2010-11 came to be passed in the year 2011 itself the assessee offered the sum of Rs. 1,14,33,486/- to tax. This unmistakably establishes bona fides on the part of the assessee as to the system of accountancy followed. After the amount of 1,14,33,486/- was brought to tax for the AY 2010-11, by way of order dated 15.06.2016 for the AY 2011-12 the assessee got this particular amount deleted and the order vide paragraph nos. 5.17 to 5.21 establishes the same. We are, therefore, satisfied that absolutely there is no willful negligence nor any mala fides on the part of the assessee in suppressing any income nor is there any concealment of income or furnishing of inaccurate particulars.

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