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Income Tax Appellate Tribunal, “SMC” BENCH, AHMEDABAD
Before: SMT. ANNAPURNA GUPTA & SHRI SIDDHARTHA NAUTIYAL
PER SIDDHARTHA NAUTIYAL - JUDICIAL MEMBER:
This appeal has been filed by the Assessee against the order passed by the Ld. Additional Commissioner of Income Tax/Joint Commissioner Income Tax (Appeals)-1, (in short “Ld. ADDL/JCIT(A)”), Bengaluru vide order dated 26.03.2024 for Assessment Year 2013-14.
The Assessee has taken the following grounds of appeal:- 2.
“1. The Learned C.I.T. (Appeals) has erred in law and on facts of the case in upholding the action of the Assessing Officer of considering the difference in Form 26AS as unrecorded receipts. 2. The appellant craves leave to add, amend or alter the grounds of appeal at the time of hearing, if need arise.”
3. The brief facts of the case are that the assessee filed a return of income on 02/10/2013for A.Y. 2013-2014, declaring a total income of Rs. 22,62,760/-. The assessee is engaged in project commissioning and maintenance under the name and style of M/s. Jalpa Enterprises. During the assessment proceedings, the assessee was asked to reconcile the receipts as per Form 26AS and those shown in the return of income. The assessee explained that discrepancies arose due to technical certifications and pending approvals from Essar Project India Limited, to whom services were rendered, leading to differences in the invoiced and booked amounts over two financial years. As per the Ld. Assessing Officer, the assessee was unable to provide ledger confirmation from Essar Projects India Limited, and notices issued under section 133(6) to various addresses of Essar Projects India Limited were either returned unserved or went unanswered. Consequently, the difference of Rs. 15,01,822/- was added to the assessee's total income as undisclosed receipts, and penalty proceedings under section 271(1)(c) for concealing particulars of income were also initiated.
In appeal, Ld. CIT(Appeals) dismissed the appeal of the assessee with the following observations:
“5. DECISION 5.1. The main ground of appeal is the addition of Rs. 15,01,822/- made on account of undisclosed receipt which was the difference between the sales amount recorded in the books of accounts & Form 26AS. 5.2. The submission of the assessee with regard to this ground is given below: The appellant is engaged in the business of execution of project commissioning and maintenance job in his proprietary concern, M/s Jalpa Enterprises. The assessee has done installation & erection works for one of their client M/s Essar Project India Limited at their Jamnagar site during the F.Y.2011-12 & 2012-13. The sales booked as per the books of accounts & as per the Form 26AS is as follows:
ESSAR PROJECTS (INDIA) LIMITED Jamnagar F.Y.2011-12 F.Y.2012-13 Sales as per Form 26 AS 4,96,49,413.77 1,91,88,598.00 Sales as per books of accounts 5,37,03,161.78 1,36,33,027.76 (40,53,748.01) 55,55,570.24 Net Difference 15,01,82.23 The basic reason for the difference was due to deductions made by the client against the invoices raised b the assessee. II. ALLEGATIONS:
1. 1. During the course of submission, various details required by the learned Income Tax Officer were submitted. The reconciliation between the sales as per books of accounts & Form 26AS was provided & the reasons for the same was also explained for.
2. The AC IT has erred in law and in facts and in the circumstances of the case in passing the order u/s 143(3) of the Income Tax Act & making the addition of Rs.15,01,822/- as unexplained receipt, ignoring the facts of the case. III. SUBMISSIONS:- • Reasons for Difference in Sales Amount The project involved lot of technical certifications and approvals. The difference between the sales amount recorded in the books of accounts & Form 26AS is due to the fact that few deductions were made from the invoices raised by the appellant by Essar's Cost Control Department on account of their internal policies. Hence, the appellant has booked the sales on the basis of the amount approved by the client. The^ payment received from the client is also to the extent of the amount approved & booked. The ledger of the Essar Projects (India) Limited in the books of the accounts for F. Y.2011-12 & 2012-13 is attached herewith. The fact that the party is not responding to the correspondences of the Income tax Act cannot mean that the difference is unexplained by the assessee. • TDS is not a charging section The only reason that there is difference between Form 26AS & turnover mentioned by the assessee in the books of accounts cannot be the sole basis, on which the entire addition of difference can be brought to tax. The facts of the case needs to be considered. The provisions of section relating to deduction of tax at source are not charging sections or computation section. Deduction of tax at source is merely one of the mode of collection of tax. The amount on which TDS is deducted is subject to charge as per the provisions of the Act. An income of a taxpayer is not required to be computed merely with reference to the TDS Certificate but assessment of an income is altogether an independent exercise. Accounts regularly maintained in the course of business have to be taken as correct unless there are strong and sufficient reasons to indicate that they are unreliable and incorrect. The procedure of the Assessing Officer is of judicial nature and in making the assessment he should proceed on judicial principles. If evidence is produced by the assessee in support of its return it should be accepted unless it is rebutted by admissible evidence and not by mere hearsay. • Relevant Case Laws ITO Vs Star Consortium (Income Tax Appeal No. 64/KOL/2020 C.O.No.08/Kol/2020 It has been held by the ITAT, Kolkata in ITO Vs Star Consortium (Income Tax Appeal No. 04/KOL/2020 C.O.No.08/Kol/2020, that the A.O. cannot make additions merely by relying on information available in TDS Certificate i.e. Form 26AS. The judgment held that: Since the income has been added, the AO is legally required to prove that the said income accrued to the appellant or was received by it. The burden is on the AO to prove the alleged fact. On the contrary in the assessment proceedings, the AO demanded the appellant to prove that the amount appearing in Form 26AS did not belong to the appellant. In any case, it is difficult to prove the negative for the appellant, who seems to have submitted good amount of papers to the AO to support its case on the issue concerned. For the purposes of the appellate order, I hold that the AO has proceeded without any material to hold that the appellant had earned Rs. 2,14,35,593/-. I further hold that Form 26AS alone cannot lead to addition of income if claims are made of wrong data entry/information and lack o1 corresponding services by the deductee to the deductor." TUV India (P.) Ltd. v. Deputy Commissioner of Income-tax, Mumbai [2019] It has been held by ITAT Mumbai, that no addition can be made on the basis of mismatch in Form 26AS, if explanation is offered by the assessee for the difference. The assessee has submitted reconciliation statements and offered explanations party wise during appellate proceedings thus, the assessee has duly discharged its primary onus casted under the Act. Seal For Life India Pvt. Ltd.,... vs The Deputy Commissioner Of Income It has been held by ITAT, Ahmedabad in the above case that once the assessee produces reasonable evidence establishing a particular quantum of income in his hands and such evidence is not found fault with, he cannot be taxed on some other figure merely because a tax deductor states that figure. Obviously, the assessee has no control over such inputs which are clearly incorrect. In view of these discussions, in our considered view, the impugned addition must stand deleted."
5.3. It is seen that during the assessment proceedings the, AO in the assessment order, the relevant extract of the same given below, had requested the assessee to produce the evidence to substantiate his claim. However, the assessee failed to do so. "Vide order sheet entry dated 22/02/2016, it was brought to the notice of the assessee's authorised representative that the assesee has not furnished any ledger confirmation from Essar Projects India Limited. It is also brought to his notice that the notice issued u/s. 133(6) of the Act to Essar Projects (India) Limited, 12 Essar House, Swastik Society, Jamnagar has been returned un-served. The assessee was, therefore, requested to show cause as to why the difference of Rs. 15.01.8227- which could not be reconciled by the assessee should not be added to his total income as undisclosed receipts. It is also to mention here that notice u/s. 133(6) of the Act has again been issued to Essar Projects (India) Limited, PO Box No. 14 PO Khambhalia, Refinery Site 38 KM, Jamnagar Okha Highway, Vadinar, Dist. Jamnagar. The same has again been returned un-served. The notice u/s.133(6) of the Act was sent to Essar Projects (India) Limited Essar House 11, Keshav Rao, Khadye Marg, Mahalaxmi, Mumbai 400 034, but though this notice has been served, no reply has been received till date. The onus is on the assessee to reconcile the difference in his account with Essar Projects India Limited with supporting evidence. As the assessee has not been able to reconcile the receipt of Rs. 15,01,8227- till date, the same is added to the total income of the assessee as undisclosed receipt." 5.4. Even during the appellate proceedings, the assessee failed to provide the ledger confirmation from Essar Projects India Limited. The mere explanation offered by the assessee for the difference cannot be accepted. Also, the assessee failed to utilise the several opportunities provided during the appeal proceedings to counter the addition made in the assessment order. In view of this, the order passed by the AO, warrants no interference. All grounds of appeal raised by the assessee are dismissed. In the result, the appeal is dismissed.” 6.
5. The assessee is in appeal before us against the aforesaid order passed by Ld. CIT(Appeals) dismissing the appeal of the assessee. Before us, the counsel for the assessee submitted that the assessee which is operating under the proprietary concern M/s Jalpa Enterprises, is engaged in project commissioning and maintenance. During the financial years 2011-12 and 2012-13, the assessee undertook installation and erection works for M/s Essar Projects India Limited at their Jamnagar site. A discrepancy arose between the revenue recorded in the appellant's books of accounts and the taxable value of services reflected in Form 26AS due to deductions made by Essar against the invoices raised by the appellant. The appellant has provided a ledger of Essar Projects in their books of accounts for these financial years. The assessee submitted that the reason for the difference in Sales amount is that the project involved numerous technical certifications and approvals, resulting in differences between the sales amount recorded in the books of the assessee and the amount reflected in Form 26AS. These differences were due to deductions made by Essar's Accounts Department based on contractual terms. The assessee booked sales based on the amount approved by the client, and payments received corresponded to these approved amounts. The counsel for the assessee submitted that the assessee also paid service tax on the amounts received from Essar. The counsel for the assessee submitted that the assessee was continuously following up with Essar for the recovery of the balance payments. The counsel for the assessee also produced before us email communications between the assessee and Essar Ltd. and submitted that the assessee also communicated with Essar regarding the notice issued by the Income Tax Authorities, requesting a ledger copy from Essar’s books. However, Essar did not respond to the requests made by the assessee. The Ld. Counsel for the assessee submitted that the lack of response from Essar does not imply that the difference constitutes unexplained income. The counsel for the assessee placed reliance on several judicial precedents to the effect that when an entity fails to respond to a notice under section 133(6), it does not automatically render the transaction non-genuine. Further, the Ld. Counsel for the assessee submitted that TDS provisions are not charging or computation sections but merely a mode of tax collection. Therefore, the difference between the amount reflected in Form 26AS and the turnover in the books of the assessee cannot be the sole basis for making addition in the hands of the assessee. The Ld. Counsel for the assessee submitted that accounts regularly maintained in the course of business should be accepted as correct unless proven otherwise with strong evidence. In this case, no defects in the books of accounts were pointed out by the Ld. Assessing Officer and no incriminating material was produced by the Ld. Assessing Officer to suggest that the assessee had earned any income outside the books of accounts.
In response, DR placed reliance on the observations made by the assessing officer and Ld. CIT(Appeals) in their respective orders.
We have heard the rival contentions and perused the material on record. We have also seen the email communication between the assessee and Essar Ltd, wherein the assessee has requested the latter to provide ledger copy of the company mentioning details of invoices raised by the assessee and payments made by Essar Ltd against the same. However, it is observed that Essar Ltd did not respond to email communications by the assessee. The counsel for the assessee’s submitted that there was no default on part of the assessee in disclosing the correct amount of income and no income can be added in the hands of the assessee only on the basis of TDS deducted by the payer in the hands of the assessee. The counsel for the assessee submitted that the tax authorities have brought anything on record that any income which has been earned by the assessee, which has not been offered to tax. In the case of Seal For Life India (P.) Ltd.96 taxmann.com 645 (Ahmedabad - Trib.), the assessee received Rs. 1.10 lac as interest from bank. However, information appearing in Form 26AS showed said amount to be Rs. 4.48 lakh. The ITAT held that once assessee had produced reasonable evidence establishing a particular quantum of interest income in his hands and such evidence was not found fault with, he could not be taxed on some other figure merely because a tax deductor stated that other figure; obviously, assessee had no control over such inputs which were clearly incorrect.
Accordingly, looking into the instant facts and the judicial precedents cited above, we are of the considered view that no addition is warranted in the hands of the assessee, looking into the instant facts.
In the result, the appeal of the assessee is allowed. This Order pronounced in Open Court on 29/08/2024
Sd/- Sd/- (ANNAPURNA GUPTA) (SIDDHARTHA NAUTIYAL) ACCOUNTANT MEMBER JUDICIAL MEMBER Ahmedabad; Dated 29/08/2024 TANMAY, Sr. PS TRUE COPY आदेश क� ��त�ल�प अ�े�षत/Copy of the Order forwarded to : 1. अपीलाथ� / The Appellant 2. ��यथ� / The Respondent. 3. संबं�धत आयकर आयु�त / Concerned CIT 4. आयकर आयु�त(अपील) / The CIT(A)- 5. �वभागीय ��त�न�ध, आयकर अपील�य अ�धकरण, अहमदाबाद / DR, ITAT, Ahmedabad 6. गाड� फाईल / Guard file. आदेशानुसार/ BY ORDER,