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Facts
The Revenue appealed against the CIT(A)'s order deleting three additions made by the AO. These additions pertained to an unexplained credit of Rs. 1,83,05,853/- made u/s 68, a disallowance of salary/wages of Rs. 58,65,646/- made u/s 37, and a disallowance of Rs. 14,83,607/- made u/s 14A read with Rule 8D. The dispute primarily revolved around reconciliation differences between Form 26AS, assessee's books, and previous assessment years.
Held
The Tribunal upheld the CIT(A)'s decision to delete the addition u/s 68, finding that the amount was already accounted for in the previous assessment year and properly reconciled. The deletion of salary/wages disallowance u/s 37 was also confirmed, as the assessee provided sufficient documentation of bank transfers and PF/ESI compliance. For the u/s 14A disallowance, the Tribunal confirmed its deletion, noting no exempt income was earned or claimed by the assessee, consistent with judicial precedents.
Key Issues
1. Whether the CIT(A) erred in deleting the addition u/s 68 for an amount already accounted for in a prior assessment year and reconciled. 2. Whether the CIT(A) erred in deleting the disallowance of salary/wages u/s 37 despite the AO's concerns about differences with previous years. 3. Whether the CIT(A) erred in deleting the disallowance u/s 14A when the assessee had not claimed any exempt income.
Sections Cited
Section 68 of the Income Tax Act, 1961, Section 37 of the Income Tax Act, 1961, Section 14A of the Income Tax Act, 1961, Rule 8D of the Income Tax Rules, 1962, Section 133(6) of the I.T. Act, 1961
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, DELHI BENCH ‘B’, NEW DELHI
Before: Sh. Kul BharatDr. B. R. R. Kumar
ORDER
Per Dr. B. R. R. Kumar, Accountant Member:
The present appeal has been filed by the Revenue against the order of ld. CIT(A)-3, New Delhi dated 02.04.2018. 2. Following grounds have been raised by the Revenue:
“1. "The Ld. Commissioner of Income Tax (Appeals) erred in law and on the facts of the case in deleting the addition of Rs. 1,83,05,853/- made by the AO u/s 68 of the Income Tax Act, 1961. 2. "The Ld. Commissioner of Income Tax (Appeals) erred in law and on the facts of the case in deleting the addition of Rs. 58,65,646/- made by the AO on account of salary/Wages u/s 37. 3. "The Ld. Commissioner of Income Tax (Appeals) erred in law and on the facts of the case in deleting the disallowance of Rs. 14,83,607/- made by the AO u/s 14A of the Income Tax Act 1961 read with Rule 8D of the Income Tax Rules, 1962.”
2 Delta Foods Pvt. Ltd. 3. The assessee company engaged in the business of manufacturing of biscuits, cakes & other bakery products on behalf of Britannia Industries on job work basis. For the purpose of manufacturing the raw material, packing material and other necessary items were provided by the Britannia Industries Ltd.
Addition u/s 68:
4. The addition u/s 68 of the Income Tax Act, 1961 has been made by the Assessing Officer owing to the difference in the Form 26AS and the income in the return of income of various parties.
5. The relevant part of the Assessment Order is as under:
S. Na me o f Sect io n In c o me in B o o ks an d retu r n In c o me in D iffe re n ce Re ma r ks N o. Part y 26AS Part ic u la rs Amou nt (R s . ) 1. Br it ann ia 194C Con ve r s ion 13, 73 ,3 1, 500 19, 65 ,1 0, 801 In du str ie s inc o me Lt d. 2. Ex c ise 5,8 0, 38 ,0 83 re imb ur se me nt Tot a l-A 19, 65 ,1 0, 801 19, 65 ,1 0, 801 Re co nc ile d
D har mpa l 194A Int ere st on 74, 38 ,5 83 74, 38 ,5 83 Sat ya pa l Ltd . ca pe x In ve st me nt 194A Co mpe n sat io n 1,0 0, 00 ,0 00 1,0 0, 00 ,0 00 on pre ter min at ion 194C Ex pen se s 11, 54 ,6 06 11, 54 ,6 06 re imb ur se me nt inc o me Pro je ct 24, 45 ,3 32 ex pen se s re imb ur se me nt inc o me Con ve r s ion 8,4 5, 95 7 2,7 7, 93 ,8 01 inc o me
3 Delta Foods Pvt. Ltd. Re ce ive d fro m 3,3 4, 74 5 Dha r m pa l Sat ya pa l Tot a l-B 2,2 2, 19 ,4 93 4,6 3, 87 ,2 60
Le ss : Ta ken as 1,8 3, 08 ,5 08 inc o me in FY 201 2 -13 Le ss : Rece ive d 58, 59 ,2 55 fr o m Dh ar mpa l Sat ya pa l 2,2 2, 19 ,4 93 2,2 2, 19 ,4 97 Re co ncile d
Punj ab 194A 21, 29 ,9 40 21, 31 ,0 66 Re co ncile d Na t iona l Ba nk
Tot a l-C 21, 31 ,0 66 21, 31 ,0 66 Re co ncile d
Hone y 193 2,1 2, 80 6 Bu ilde r s Lt d.
TD I Re a lc on 193 54, 51 9 Pv t. Lt d. 6. O rr is 193 1,0 5, 97 4 In fr astru ctu re Pv t. 7. Tran s co n 193 1,6 3, 05 3 D eve lo per s Pv t. Lt d. Tot a l-D 5,3 6, 35 2 5,3 6, 35 2 Re co ncile d
Re lia n ce 194 IB Tot a l-D - 2,5 5, 57 1 2,5 5, 57 1 Th is TDS In fr atee l Lt d . is wr on g ly ded ucte d b y Re lian ce in the PA N o f the as se sse e Tot a l- 22, 13 ,9 7, 712 24, 58 ,2 1, 050 A+ B +C +D +E The analysis of above mentioned data at serial no. 2, produced by the assessee during the assessment proceedings, with regard to M/s Dharampal Satyapal Ltd., postulates that receipts of Rs.1,83,08,508/- were accounted for in the total receipts of assessment year 2013-14 relevant to financial year 2012-13. As per inputs, available on record, the 4 Delta Foods Pvt. Ltd. TDS of the instant amount was claimed in assessment year 2014-15 relevant to financial year 2013-14. The AR of the assessee contended that instant receipts shown in form 26AS in assessment year 2014-15 have been brought to tax in preceding assessment year viz. 2013-14.
Examination of form 26AS in term of assessment year 2013-14 which was downloaded from the system transpires that receipts of Rs.2,16,02,712/- were received from M/s Dharampal Satyapal Ltd. and also duly accounted for in the total receipts of assessment year 2013-14. The contention of the assessee could not succeed. The assessee, vide order sheet recordings dated 21.10.2016 was asked to controvert the findings.
Vide notice u/s 133(6) of the I.T. Act, 1961, M/s Dharampal Satyapal Ltd. was mandated to furnish the details of business transactions with the assessee company during the year under reference. In compliance, copy of ledger account of the assessee company being maintained in its books of accounts along with TDS certificates were furnished which incorporates that assessee company was credited a sum of Rs. 4,63,87,260/- and TDS was made as per existing provisions as well. The assessee was confronted with the findings and copy of ledger account was provided to the assessee company as well. The assessee company vide no. SRA-LK/2016-17/706 dated 06.12.2016 which is reproduced as under:
Reconciliation of DSL amount Two year accounts of assessee in the books of DSL have been provided to us for reconciliation with their account in the books of assessee company. The debits and credits are fully matched. The only difference is that whereas the balance of Rs.1,83,08,500/- was transferred to income account in financial year ended 31st March, 2013 by the assessee company, DSL carried forward the same balance of Rs. 1,83,08,500/- to the next financial year ended 31s! March, 2014 and at the time of matching the closing balance of these two accounts dated 31.03.2014 of Rs. 89,76,908/-, they inadvertently again credited the amount of the sum Rs. 1,83,08,500/- by DSL. However the fact is that the amount paid at the time of settlement of account in the financial year ended 31sl March, 2014 has matched in both the accounts.
5 Delta Foods Pvt. Ltd. Following is the bifurcation of such credit on 3 r d February, 2014 in the books of DSL:
S. No. Amount Date A.Y Explanation 1. 1,83,08,508 31.03.2013 2013-14 Taken as income by assessee company in F.Y. 2012-13 but carried forwarded by DSL to F.Y. 2013-14 2. 58,59,255 31.01.2014 2014-15 Capital assets sold shown in balance sheet 3. 24,45,336 20.01.2014 2014-15 Shown as income in balance sheet: note 15 4. 3,34,745 20.01.2014 2014-15 Shown as income in balance sheet: note-15 Total 2,69,47,844 The submission reproduced above were again confronted to M/s DSL Ltd. (Dharampal SatyapaJ Ltd.) and in-compliance M/s DSL Ltd. through e-mail, furnished the details of amount credited in the account of the assessee company which is reproduced as under:
Name of the Amount TDS Amount TDS Made assessee Credited A.Y Made/claimed credited A.Y 2014-15 2013-14 M/s Delta foods 4,63,87,260 23,22,853 2,16702,712 2,49,325 (P) Ltd. Receipts shown 2,22,19,493 2,32,28,537 2,16,02,712 2,49,325 in the ITR by the assessee We have examined the rival submission carefully and details available on record which categorically demonstrate that assessee company has not accounted for receipts amounting to Rs.1,83,05,853/- in his books of accounts deliberately. Despite providing numerous opportunities, assessee failed to reconcile the receipts and unsuccessfully continued to beat around the bush. The assessee has also claimed the TDS made at the credit amount of Rs. 1,83,05,853/- in his rerun of income, tiled for the year under reference. The assessment proceedings cannot be extended further, in view of repeated blurred response of the assessee. In the light
6 Delta Foods Pvt. Ltd. of above facts & findings, Rs.1,83,05,853/- which remained unexplained, are added back u/s 68 of the Act, 1961 in the total income of the assessee, as additional income to tax for the year under reference.
The ld. CIT(A) deleted the addition holding as under:
“2.1 I have carefully considered the submissions of the appellant and the / remarks of AO in the assessment order on this issue. The submissions of the appellant show that the amount paid/credited as per original Form 26AS by the deductor in AY 2014-15 shows an amount of Rs. 4,63,87,260/- paid / credited by the deductor Dharampal Satyapa Ltd. (DSL) from which the amount received from DSL as per balance sheet relevant to AY 2014- 15 of Rs. 2,22,19,493/- is reduced and further amount of Rs. 58,59,255/- is reduced on account of sale of capital asset in AY 2014-15, the amount comes to Rs.1,83,08,508/-, less difference due to rounding off. Perusal of the balance sheet final amount of appellant, reveals this amount of Rs. 1,83,08,508/- has already been taken as income by appellant company in AY 2013-14. I hold the impugned addition amount to a duly addition is the same has already been taken as income by the appellant for AY 2013-14. At the para 3.1 of the assessment order assessing officer has given the figure of Rs. 1,83,08,508/-. However, in the last paragraph of the assessment order the figure of Rs. 1,83,05,853/- has been mentioned, which is apparently erroneous.
2.2 The deductor (DSL) has first time deducted tax at source @ 2% on the amount of Rs. 1,80,21,930/- at the time when it give an advance to appellant company in AY 2013-14, and the second time when the appellant company account was credited by DSL in its books for AY 2014-15. The figure of TDS @ 2% on the amount of Rs. 1,80,21,930/- was uploaded by the deductor in the Form 26AS of appellant company for both AY 2013-14 and AY 2014-15. Subsequently, the deductor (DSL) modified the Form 26AS details of appellant company for AY 2014-15 in the income tax website which resulted in the total credit of DSL being reduced from Rs. 4,63,87,260/- to Rs. 2,83,65,330/-. As a result the amount of Rs. 2,69,47,844/- paid / credited by the deductor on February, 03, 2014 now stands modified to Rs. 89,25,914/-. Necessary clarification has also been 7 Delta Foods Pvt. Ltd. issued by DSL which has been reproduced at para 2.1 above. Hence, the addition of Rs. 1,83,05,853/- is reconciled and the addition of Rs. 1,83,05,853/- is hereby deleted.”
The reconciliation has been brought before both the parties during the hearing. No contrary findings could be brought to our notice.
8. Since, the decision of the ld. CIT(A) is rightly based on the reconciliation of the amounts, we decline to interfere with the order of the ld. CIT(A).
Ground No. 2 Disallowance on account of salary/wages – Rs.58,64,646:
The AO made disallowance on account of salary & wages holding that they were in much difference to the earlier years period.
From the details of salaries / wages paid to the employees and the audited accounts, the comparative table below would go to show that the salary / wages paid to workers and the employer contribution towards EPF and ESI had all reduced in the relevant year, contrary to the observation of the AO in the impugned order.
Particulars AY 2014-15 AY 2013-14 Salary / Wages paid to workers Rs.30,78,899/- Rs.36,99,802/ - (excluding Director’s remuneration) Employees contribution towards EPF Rs.3,88,806/ - Rs.4,52,246/ - Employees contribution towards ESI Rs.3,47,977/- Rs.3,87,102/-
In support of salary / wages account, appellant company had in the assessment proceedings filed the following details:
8 Delta Foods Pvt. Ltd. (i) Salary summary for March 2014 with copy of salary register for the same month by letter dated 30.11.2016. (ii) Details of salary / wages as per audited accounts by letter dated 07.12.2016. (iii) Details of salary account (bank account number) of employees and available addresses from the records of the appellant company.
It was submitted that the salary were transferred to the employee salary account mainly in Canara Bank. The details of the account number along with their addresses as per the records of the appellant company were given.
From the salary reconciliation provided to the AO proves that the employees are registered with the PF / ESI authorities and deductions were duly made. The chart containing the ESI- ID number/ PF-ID number of such employees were submitted to the revenue authorities alongwith their addresses.
The ld. CIT(A) deleted the addition after examining the details of the salary of the employees transfer to the salary accounts which were mostly maintained with Canara Bank, Ghaziabad SME Branch. The ld. CIT(A) held that from the salary reconciliation Statement it is apparent that these employees are registered with the PF/ESI authorities and the deductions as shown in the reconciliation statement were being made.
The ld. CIT(A) has also examined the chart containing the ESI/ID No. and PF/ID No. was submitted along with addresses of the employees as per the appellant’s records. The ld. CIT(A)
9 Delta Foods Pvt. Ltd. held that the appellant made the payments to the outstation temporary workers, by cheque and not by cash as presumed by the Assessing officer. The ld. CIT(A) held that the details of cheque issued to the temporary workers for salary payment were furnished from the bank statement and tallied with list of names of temporary workers on the basis of which disallowance of salary payment was done by Assessing officer of Rs.58,64,646/-.
Since, all the details have been categorically examined by the ld. CIT(A) and also available in the paper book filed before us. After verification of the paper book and going through the entire facts and as no contrary evidences were brought before us, we find no reason to interfere with the order of the ld. CIT(A) as the salary payments tallied with the list of the names of the temporary workers from the bank statement.
Dividend:
Both the parties fairly submitted that no exempt income earned by the assessee. Hence, keeping in view the decision of the Hon’ble Delhi High Court in the case of Cheminvest Limited vs. CIT (2015) 378 ITR 33, we hold that no disallowance is called for, in the absence of any exempt income claimed by the assessee.
10 Delta Foods Pvt. Ltd. 18. In the result, the appeal of the Revenue is dismissed. Order Pronounced in the Open Court on 30/05/2024.