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Income Tax Appellate Tribunal, “A” BENCH, MUMBAI
Before: SHRI SANJAY ARORA, AM & SHRI AMIT SHUKLA, JM
सुनवाई क� तार�ख / : 25.4.2016 Date of Hearing घोषणा क� तार�ख / : 06.5.2016 Date of Pronouncement आदेश / O R D E R Per Sanjay Arora, A. M.: These are a set of two Appeals, i.e., for two consecutive years, being assessment years (A.Ys.) 2007-08 and 2008-09, arising out of the Order by the Commissioner of Income Tax (Appeals)-14, Mumbai (‘CIT(A)’ for short) dated 19.8.2010, allowing the Assessee’s appeal contesting its’ assessment u/s.143(3) of the Income Tax Act, 1961 (‘the Act’ hereinafter) for the relevant years. The issues being common, the same posted for and, accordingly, heard together and are being disposed of vide a common, consolidated order.
2 & 2049/Mum/12 (A.Ys.2007-08 & 2008-09) ITO vs. Adikanksha Impex Pvt. Ltd. 2.1 The brief facts of the case are that the Assessing Officer (A.O.) observed a variation between the turnover figure reported by the assessee, engaged in the job work of stainless steel utensils (in the main, for its associate company, M/s. H. K. Impex Pvt. Ltd.), and that on which tax (stood) deducted at source (TDS) by the said payer, as under: (Amt in Rs. lacs) Sr. No. Particulars/A.Y. 2007-08 2008-09 1 Sales (as per profit and 63.52 121.44 loss account) 2 TDS (as per Form 16) 101.71 178.11 In explanation, it was submitted by the assessee that tax had been deducted by the payer-company, as required by law, not only on the credit/s allowed to it in respect of the goods processed (turnover), but also on the advance released in its’ favour, and which had been taken into account in recognizing income for the subsequent period/s. The same did not find favour with the A.O., who proceeded on the basis that the difference represented the assessee’s suppressed turnover, adding the same to the assessee’s income.
2.2 In appeal, the ld. CIT(A) verified the assessee’s claim/s with reference to the records, to find the same as correct. The A.O., in his view, ought to have also restricted the assessee’s claim for TDS to the amount considered or taken into account for computing the income, i.e., the turnover credited to the income statement for the relevant years, i.e., as prescribed by section 199 r/w s. 37BA. He, however, fell short of passing any direction in the matter while deleting the entire addition.
We have heard the parties, and perused the material on record. 3.1 There can be in principle no quarrel with or objection to the assessee’s case. Any adjustment to the assessee’s income, on account of TDS, could be made only if the tax stands deducted (at source) on any sum assessable to tax for the relevant year, which though has not been offered as income (for the said year). That is, though 3 & 2049/Mum/12 (A.Ys.2007-08 & 2008-09) ITO vs. Adikanksha Impex Pvt. Ltd. having accrued as income, tax on which stands deducted, has yet not been offered to tax. Merely because tax has been deducted, and which is to be in terms of the relevant provisions of law, would not by itself give rise to inference of income. Why, the TDS certificate as well as the (TDS) return are prescribed to specify the nature of the sum on which tax has been deducted, i.e., whether by way of income or as an advance. In the present case, tax stands deducted in excess of that disclosed as income, and which has been explained as on account of deduction on amounts in the nature of advance and, accordingly, likely to accrue as income in time. Though, therefore, tax stands deducted thereon in terms of the relevant provision of law, the same has yet not assumed the nature of income. The question, therefore, boils down to the assessee proving its claim/s, toward which it has filed copious paper-books. The ld. DR would, taking us through the audited balance-sheet as at the end of the relevant years (forming part of paper book – pgs. 17-26/PB-I and pgs. 16-46/PB- II), point out that even adding the amount of advance (from customers), as outstanding per the assessee’s final accounts (as on 31.3.2007 and 31.3.2008), do not add up to the sum on which tax has been deducted at source, repudiating the assessee’s claim. For example, the amount of advance as on 31.3.2007 (Rs.19.20 lacs), and the job work charges raised for the year (Rs.63.52 lacs), add to Rs.82.72 lacs, far below the amount on which tax has been deducted at source. The opening advance of Rs.1.26 lacs would rather stand to be reduced therefrom in-as-much as the amount to that extent stands received during a preceding year. For the following year, the advance outstanding (as at the year-end) is Rs.26.70 lacs, and the turnover Rs.121.44 lacs, working to a total of Rs.128.94 lacs, i.e., on adjusting the brought forward advance from the preceding year, while the total amount on which tax stands deducted (as per the TDS certificate/s) for that year is Rs.178.11 lacs. In fact, the amounts (of Rs.82.72 lacs and Rs.128.94 lacs) afore-mentioned, for the two years under reference, are much closer to the amount of Rs.82.27 lacs (PB-I/pg.55) and Rs.126.35 lacs (PB-II/pg. 99), stated as received from, and reflected in the account of, 4 & 2049/Mum/12 (A.Ys.2007-08 & 2008-09) ITO vs. Adikanksha Impex Pvt. Ltd. H. K. Impex P. Ltd. for the relevant years respectively. We also find it rather inconsistent that the difference between the amount on which tax stands deducted – claimed in full, and that returned as income, should, rather than shrinking – the advance for the first year (Yr.1), or a part thereof, getting adjusted against income for the second year (Yr.2), continues to gallop, increasing, as would be apparent, from Rs.38.19 lacs (for Yr. 1) to Rs.56.67 (for Yr. 2) (refer Table at para 2.1 above). We have accordingly perused the statements of account of either party, confirmed by the other, forming part of the paper-books (PB-I/pgs. 50-54 & PB-II/pgs. 96-98). The same are in agreement with the balances disclosed per the assessee’s balance-sheets as at the end of the relevant years as ‘advance from customers’. There is accordingly no basis for the inference of the excess TDS as being on income, and which is therefore undisclosed, as done by the AO. We, accordingly, uphold the action of the ld. CIT(A) in deleting the addition on account of suppression of income for both the years. Coming to excess (difference) under reference, as well as its’ increase over time, the same is under the circumstances on account of deduction of tax at source on both, i.e., the amount paid as advance to, as well as on the credit allowed (for the bills raised by), the assessee. The TDS reflected in the accounts, however, does not agree with that claimed, and for which the TDS certificates stand issued. As against the TDS claimed, i.e., at Rs.2,31,283/- and Rs.4,66,119/- for the two consecutive years respectively, the TDS as per the account (of H. K. Impex P. Ltd.), as far as we have been able to see, is at Rs.68,664/- and Rs.4,59,173/- respectively. The book figures are in fact inclusive of tax deducted at source on ‘vehicle charges’ as well, and which stand disclosed as income in the accounts under the head ‘Other Income’. This aspect, i.e., the mismatch between the TDS claimed and that reflected in accounts, would be required to be satisfactorily explained, with concomitant adjustment to income and/or, as the case may be, tax credit, as per law, i.e., where (and to the extent) unexplained.
5 & 2049/Mum/12 (A.Ys.2007-08 & 2008-09) ITO vs. Adikanksha Impex Pvt. Ltd. 3.2 We now take up the argument by the ld. DR that the claim for TDS should, in any case, be restricted to the income disclosed in-as-much as the credit for the tax deducted at source could not be allowed in respect of an amount/s received in advance, which would though stand to be adjusted against income in time. Though no specific ground has been raised by the Revenue per its’ appeal memo, an oral plea to this effect was raised by the ld. DR, and which being germane; rather, incidental, noted both by us as well as, prior thereto, by the ld. CIT(A), was admitted. There is, in fact, no estoppel against law, and the tribunal is entitled to frame the issue/s arising out of the impugned order, taking care though that the matter is duly confronted for being replied, stating their case, to the parties. On being put to the ld. AR, he conceded to being allowed credit for TDS against the corresponding income. We are, however, of the clear view that the tax at source having been deducted in excess, i.e., than that prescribed under law, the assessee shall stand to be allowed the same, i.e., its’ claim as per the TDS certificates, save that corresponding to the amount admittedly outstanding as at the year-end by way of advance from customers, being at Rs.19,20,137/- and Rs.26,69,629/- as on 31.3.2007 and 31.3.2008 respectively. It is the correct legal position that is relevant, and not the view that the parties may take of their rights in the matter {refer: Kedarnath Jute Mfg. Co. Ltd. v. CIT (1971) 82 ITR 363 (SC); CIT v. C. Parakh & Co. (India) Ltd. (1956) 29 ITR 661 (SC)}.
We summarize our decision as under: a) there is in the facts and circumstances of the case, nothing to support the inference of suppression of income, and the action of the ld. CIT(A) in deleting the addition made on that account is upheld; b) the assessee would be entitled to its’ full claim for TDS on the tax deducted at source during the relevant years, except that relatable to the amount outstanding as an advance as at the year/s end. Quite clearly, the amount excluded for the first year would stand to be allowed credit for for the following year. That is, the total amount on which TDS credit would stand to be deferred 6 & 2049/Mum/12 (A.Ys.2007-08 & 2008-09) ITO vs. Adikanksha Impex Pvt. Ltd. for both the years is that received as advance from the customers as on 31.3.2008, being Rs.26,69,629/-, the TDS on the amount outstanding as on 31.3.2007 (Rs.19,20,137/-) being allowed credit for A.Y. 2008-09, on the basis of it having since accrued as income – the turnover for the second year being at Rs.121.44 lacs. c) the A.O. shall confirm the claim for TDS (as per certificates) with the assessee’s accounts (which are in agreement with that of the corresponding party), making adjustment to the assessee’s income/tax credit allowable, in case of any unexplained difference, in accordance with law. We decide accordingly. Before parting with our order, we wish to state that we consider it as rather unfortunate that both the authorities below failed to carry out the necessary verification. While the A.O. summarily rejected the assessee’s claims, the ld. CIT(A) accepted them likewise, i.e., without an examination of the accounts of the assessee and/or the payee concern, determining the facts. This position continued even before us, with the representatives of both the sides, we are afraid to say, not applying their minds in the matter, addressing the issues concerned. It is only on the ld. DR pointing to the difference being not reconciled, with the advance amount also not meeting the difference, that an examination of accounts was undertaken by us; the ld. DR also resting his case on pointing the said position, without taking the matter to its logical conclusion. In the result, the Revenue’s appeal is dismissed at the afore-said terms.
Order pronounced in the open court on May 06, 2016 Sd/- Sd/- (Amit Shukla) (Sanjay Arora) �या�यक सद�य / Judicial Member लेखा सद�य / Accountant Member मुंबई Mumbai; �दनांक Dated : 06.05.2016 व.�न.स./Roshani, Sr. PS 7 ITA Nos. 7237/Mum/10 & 2049/Mum/12 (A.Ys.2007-08 & 2008-09) ITO vs. Adikanksha Impex Pvt. Ltd. आदेश क� ��त�ल�प अ�े�षत/Copy of the Order forwarded to : अपीलाथ� / The Appellant 1. ��यथ� / The Respondent 2. आयकर आयु�त(अपील) / The CIT(A) 3. आयकर आयु�त / CIT - concerned 4. �वभागीय ��त�न�ध, आयकर अपील�य अ�धकरण, मुंबई / DR, ITAT, Mumbai 5. गाड� फाईल / Guard File 6. आदेशानुसार/ BY ORDER,