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Income Tax Appellate Tribunal, DELHI BENCH: ‘H’: NEW DELHI
Before: SHRI H.S. SIDHU & SHRI INTURI RAMA RAO
PER INTURI RAMA RAO, A.M.: This appeal by the assessee is directed against the order of CIT(A)-I, New Delhi, dated 09.06.2015 passed for the assessment year 2011-12. The assessee raised the following grounds of appeal: i. That on the facts and circumstances of the case and in law, the assessment order passed under section 143(3) of the Income-tax Act, 1961 ("the Act") by the Income-tax officer, Ward 1(3), New Delhi ('the learned AO') is based on surmises and conjectures and therefore, bad in law. ii. That on the facts and circumstances of the case and in law, the learned Commissioner of Income-tax (Appeals) ['learned CIT(A)'] has erred in upholding the order of learned AO, wherein the learned AO has made an addition of INR 2,62,51,181 on account of difference between the receipts as per Form 26AS and the audited financial statements of the appellant for the subject AY.
iii. That on the facts and circumstances of the case and in law, the learned CIT(A) has erred in upholding the action of the learned AO without appreciating the fact that such difference in revenue has not accrued to the Appellant during the previous relevant to subject A Y and in complete disregard of the method of accounting followed in the financial statements of the Appellant, duly audited by a Chartered Accountant and without invoking the provisions of Section 145 of the Income- tax Act, 1961 ('Act'). iv. That on the facts and in the circumstances of the case and in law, the learned CIT(A) has grossly erred in holding that the accounting treatment by the Appellant is a colourable device for evading taxes without appreciating the fact that the accounting treatment done by the Appellant is in accordance with mandatorily applicable Accounting Standards issued by the Institute of Chartered Accountants of India. v. That on the facts and in circumstances of the case, the learned CIT(A) has grossly erred in upholding the addition made by the learned AO disturbing the regular method of accounting followed by the assessee thereby disregarding the legal position laid down by Hon'ble Supreme Court in the case of Radhasoami Satsang (193 ITR 321). vi. That on the facts and in circumstances of the case, the learned CIT(A) has grossly erred in upholding the addition made by the learned AO based on his own conjectures and surmises and in complete disregard of the contention of the Appellant that such revenue has been offered to tax in the year(s) in which it has accrued to the Appellant as per the method of accounting regularly followed by the Appellant and that any action of taxing such revenue during the subject AY shall amount of double taxation, which is clearly not permissible. vii. Without prejudice the ground 2, 3, 4, 5 and 6 above, on the facts and in the circumstances of the case and in law, the learned CIT(A) has grossly erred in not allowing relief amounting to INR 53,92,010 being service tax, surcharge and education cess appearing in 26AS statement, despite the fact that the learned AO vide remand report dated April 9, 2015 agreed to the contention of the Appellant that said amount should have been added to total income of the Appellant. viii. Without prejudice to the ground 2, 3, 4, 5 and 6 above, on the facts and in the circumstances of the case and in law, the learned CIT(A) has grossly erred in holding that the entire amount of addition of INR 2,62,51,181 pertains to M/s Skyline Outdoor Media (P) Ltd without appreciating the fact that the amount of INR 51,98,931 represents deferred revenue arising on account of invoice raised by the Appellant for the work to be performed for various customers, duly evident from the submissions and copy of invoices submitted by the Appellant. ix. Without prejudice to the ground 2, 3, 4, 5 and 6 above, the learned CIT(A) has erred in upholding the action of the learned AO of considering total receipts as per Form 26AS as INR 7,41,20,909, as against INR 7,37,70,707 being amount actually reflecting in Form 26AS. x. Without prejudice to ground 2, 3, 4, 5 and 6 above, it is submitted that where your honors are of the view that such amount is subject to tax during relevant AY, directions be issued to the learned AO to allow deduction in respect of such amount for the subsequent AY during which the said amount has been offered to tax by the Appellant. xi. On the facts and in the circumstances of the case and in law, the learned AO has erred in initiating penalty u/s 271 (1 )(c) of the Act on the disallowances/additions made in the assessment order for the subject AY. All the above grounds are without prejudice to each other.
The brief facts of the case are that the assessee is a company incorporated under the provisions of Companies Act, 1956. It is engaged in the business of providing outdoor advertisements. The return of income for the assessment year 2011-12 was filed on 30th September, 2011, declaring taxable income of Rs. 22,40,025/-. Later on, the case was selected for scrutiny assessment under the CASS and the assessment was completed under Section 143(3) of the Income- tax Act, 1961 (for short “the Act”) vide order dated 26th February, 2014, at a total income of Rs. 2,84,91,206/-. While doing so, the Assessing Officer made addition of Rs. 2,84,91,210/- on account of alleged difference in gross receipts declared and as per Form No. 26AS of the Act. During the course of assessment proceedings, the Assessing Officer noticed that as per ITR Data of AIR reflected in Form No. 26AS, the gross receipts were Rs. 7,37,70,707/- as against the gross receipts declared in return of income of Rs. 4,78,69,728/-. The assessee company was called upon to explain the difference of Rs. 2,62,51,181/-. In response to the same, the assessee submitted that the difference arisen on account of advance receipt in respect of which no services were performed. However, tax was deducted at source by the payee on payment basis. Therefore, the Assessing Officer directed the assesee company to furnish the confirmation letters from the respective parties, which had not been complied with by the assessee company. Therefore, the Assessing Officer drawn inference that the sum of Rs. 2,01,17,941/- on which tax was deducted at source by one party, namely, M/s Skyline Outdoors Media Pvt. Ltd., which is a sister concern of the appellant, was income of the assessee company, therefore brought to tax. Being aggrieved by this order, an appeal was preferred before the CIT(A)-I, New Delhi, who after calling remand report from the Assessing Officer, dismissed the appeal on 9th June, 2015, vide paras 6.4 & 6.5, which read as under: “6.4 I have carefully considered the submissions of the appellant, additional evidence submitted by the appellant, assessment order, remand report of the AO and rejoinder of the appellant on AO's remand report, I find that the appellant has received the amount of Rs. 2,62,51,181/- from its sister concern namely M/s Skyline Outdoor Media Pvt. Ltd. The appellant has received this amount against the sale bills raised by itself during the year. It is an admitted fact that the above concern is the sister concern of the appellant company. It is also an admitted fact that M/s Skyline Outdoor Media Pvt., has claimed the above amount in its account as revenue expenditure and claimed full deduction on account of expenses during this year itself and made TDS on above amount. The credit for the TDS so made has been claimed by the appellant company in its return of income without offering the above amount for tax. The appellant has argued that they have not offered this amount during the year as the agreement between the appellant company and its sister concern M/s Skyline Outdoor Media Pvt.
Ltd. provides that while M/s Skyline Outdoor Media Pvt. Ltd. will make the payment on the basis of bills raised by the appellant but the appellant will credit it in its account on the basis of actual work done. It was submitted that the appellant has offered the above income during the subsequent assessment years up to assessment year 2014-15. It was submitted that the claim for credit during the assessment year 2011-12 may be withdrawn and should be allowed on proportionate basis in the subsequent years. “6.5 On careful consideration of facts and circumstances of the case, I find no substance in the submission of the appellant. This is clearly a case where the appellant by entering into transaction with a related party has evaded tax by not showing the impugned income during the year under consideration i.e assessment year 2011-12 particularly when the group company has claimed the entire amount as deduction from its income of assessment year 2011-12. The argument of the appellant that the transaction is revenue neutral sounds hollow as the appellant has divided this income of assessment year 2011-12 in three years and claimed expenses in all these three years and has thereby reduced the net taxable income to a nominal figure. If the appellant had shown this amount as Income for the year under appeal (which was the correct method), the tax liability will certainly be higher. Had there been substance in the claim of the appellant that the transaction is revenue neutral, then it should not have any grievance if the amount is treated as income for the year under appeal, which it indeed is, The accounting policy or some self designed clause of an agreement cannot override the provision of law. The appellant has utterly failed to give justification for spreading over of income. In fact the appellant itself has raised the invoice for the full amount and there is no mention about any pending services being rendered, in future. This is clearly a colorable device adopted by the appellant in collusion with a group company where by the payment made by group company has been claimed as deduction entirely during the year itself but the appellant has not declared this amount as income for the year under consideration. In view of the above facts, I do not find any merit in the submission of the appellant and therefore the addition made by the AO is upheld. Ground no. 2 is rejected.” Being aggrieved from the above order, the assessee is in appeal before us: 3. The learned counsel for the assessee company submitted that the disparity between the income declared by the assessee company and the receipts as per the Form 26AS are on account of advance receipts and advance billing made by the assessee company. In respect of which, no services were rendered and where as the tax was deducted at source by the payer i.e. Skyline Outdoor Media Pvt. Ltd. In support of this contention, he filed copies of the invoices raised. He further submitted that the information contained in Form No. 26AS cannot be the sole basis for making the addition. In support of this contention, he filed copy of the decision of the coordinate bench of ITAT, Delhi in the case of ITO Vs. Sh. Basant Kumar, for AY 2009-10, dated 31st March, 2015.
On the other hand, the ld. DR placed reliance on the orders of the lower authorities and submitted that the order of the Assessing Officer should be confirmed.
We heard the rival submissions of the parties and perused the material on record. We find from the assessment order that the Assessing Officer made addition of Rs. 2,62,51,181/- solely based on the information contained in Form No. 26AS of the Department. The coordinate bench of the ITAT, Delhi in ITA No. 4679/Del/2012, for AY 2009-10, dated 31st March, 2015, held vide para 6 of the order that the information contained in Form No. 26AS cannot be itself the basis for making addition to the income returned. To the same effect, the decision of a coordinate bench of ITAT, Jabalpur, in the case of Ravindra Pratap Thareja Vs. ITO, 154 ITD 633.
We do not find any reason to differ from the reasoning given by the coordinate benches in the cases cited supra. The Assessing Officer is duty-bound to make independent inquiry as to whether income has accrued to the assessee company as per the method of accounting regularly being followed by the assessee in respect of the transactions reported in Form No. 26AS. The Assessing Officer, after due verification of the transactions with reference to the documentary evidence like agreement entered into between the parties, has to render the finding whether the income has really accrued to the assessee company or not. Only after such verification, the addition can be made by the Assessing Officer after affording reasonable opportunity of being heard to the assessee-company. Therefore, in order to meet the ends of justice, we restore the matter to the file of the Assessing Officer to make de novo assessment after affording reasonable opportunity of being heard to the assessee company. Hence, the appeal filed by the assessee is treated as partly allowed for statistical purposes.
In the result, the appeal is partly allowed for statistical purposes. The decision is pronounced in the open court on 9th October, 2015.