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2013 (4) TMI 266 - AT - Income TaxDeemed income - difference between the receipts in the Profit and Loss account and the amount of receipt shown in the TDS certificates furnished by the payer of the income - assessee has pleaded that adequate opportunity was not given to the assessee to substantiate its claim with respect to the notices that were issued to the vendors of the assessee u/s. 133(6) and no confirmation was received from such vendors - penalty proceedings under section 271 (1 )(c) - Held that - In this case the AO issued notices u/s. 133(6) to all the vendors of the assessee. Vendors numbering 18 were found acceptable. It is seen that indeed, AO collected evidence at the back of the assessee and never confronted the same to the assessee. The assessee was not allowed any opportunity to rebut the evidence. However, AO went on to make the addition on account of the alleged short receipts declared in the profit and loss account.Thus this is entirely in violation of the natural justice principles of audi alterem parterm. As the parties who have paid the said advance has clearly informed that the amount in question has been treated as expenses incurred by them during the year. Hence, the plea of the assessee to treat the amount received as advance is not very cogent. However,as found that there is considerable cogency in the assessee s submissions that proper credit of pass through cost should be taken, if the amount is being treated as revenue receipt. Since first issue in this case is remitted to the file of the AO, this issue is also remitted to the his file to examine the assessee s submission in this regard regarding the pass through cost in this case - in favour of assessee for statistical purposes.
Issues Involved:
1. Deemed Income from the Difference in Receipts 2. Disallowance Based on Presumptions and Lack of Opportunity 3. Disallowance for Vendors Not Sent Notices 4. Disallowance for Confirmed Vendor Payments 5. Allegation of Unacceptable Vendor Payments Despite Confirmations 6. Use of Material Collected Without Confrontation 7. Advances Treated as Accrued Income 8. Inconsistent Treatment of Advances 9. Inclusion of Pass Through Cost in Advances 10. Initiation of Penalty Proceedings 11. Charging of Interest under Sections 234B, 234D, and 244A 12. Confirmation of Additions by DRP 13. Lack of Adequate Opportunity by DRP 14. Ignoring Material on Record Detailed Analysis: 1. Deemed Income from the Difference in Receipts: The Deputy Commissioner of Income-tax, Circle-3(1), New Delhi, erred in holding the difference between the receipts in the Profit and Loss account and the amount shown in the TDS certificates as deemed income. The assessee argued that the receipts shown in the TDS certificates included advances and pass-through costs, which should not be considered as income. The Assessing Officer issued notices under section 133(6) to verify the claim, but many notices were unserved or unconfirmed. The DRP agreed that the Assessing Officer should verify the genuineness of the pass-through costs but should not treat the entire difference as deemed income. 2. Disallowance Based on Presumptions and Lack of Opportunity: The assessee contended that the huge disallowance was based on presumptions and without giving adequate opportunity to support its claim, violating the principles of natural justice. The DRP and Assessing Officer did not consider the detailed submissions and confirmations provided by the assessee regarding vendor payments. 3. Disallowance for Vendors Not Sent Notices: The assessee argued that disallowing claims for vendors to whom no notice was sent by the Assessing Officer was based on mere presumption and violated natural justice. The DRP and Assessing Officer did not verify claims for vendors who were not issued notices. 4. Disallowance for Confirmed Vendor Payments: The assessee highlighted that even payments confirmed by vendors were disallowed. In some cases, the Assessing Officer acknowledged no difference between the amounts confirmed by vendors and claimed by the assessee, yet disallowance was made. 5. Allegation of Unacceptable Vendor Payments Despite Confirmations: The assessee argued that the DRP and Assessing Officer disregarded confirmations received from certain vendors, alleging unacceptable payments despite evidence provided. The difference in accounting treatment between the assessee and vendors was not considered. 6. Use of Material Collected Without Confrontation: The assessee contended that material collected by the Assessing Officer and used against it was not confronted, nor was any opportunity given to rebut it, making the disallowance unlawful and excessive. The ITAT in a similar case remitted the issue back to the Assessing Officer for fresh consideration after providing the assessee an opportunity to rebut the evidence. 7. Advances Treated as Accrued Income: The Assessing Officer treated advances received from clients as accrued income based on the clients' accounting treatment. The assessee argued that it recognized income when services were rendered, not when advances were received. The DRP upheld the Assessing Officer's view, leading to an addition of Rs. 16,699,360/-. 8. Inconsistent Treatment of Advances: The assessee argued that similar advances in previous years were not challenged by the Assessing Officer, indicating inconsistency in treatment. The DRP did not consider this argument, maintaining the addition. 9. Inclusion of Pass Through Cost in Advances: The assessee contended that the entire amount of advance included pass-through costs, which should not be considered as income. The DRP rejected this argument, stating that no details were provided regarding the pass-through costs. 10. Initiation of Penalty Proceedings: The assessee argued that the Assessing Officer erred in initiating penalty proceedings under section 271(1)(c) for furnishing inaccurate particulars and concealing income. The judgment does not provide a detailed analysis of this issue. 11. Charging of Interest under Sections 234B, 234D, and 244A: The assessee contended that the Assessing Officer erred in charging interest under sections 234B, 234D, and 244A. The judgment does not provide a detailed analysis of this issue. 12. Confirmation of Additions by DRP: The assessee argued that the DRP erred in confirming the additions proposed by the Assessing Officer and rejecting objections filed against the draft assessment order. The judgment does not provide a detailed analysis of this issue. 13. Lack of Adequate Opportunity by DRP: The assessee contended that the DRP did not provide adequate opportunity of being heard. The judgment does not provide a detailed analysis of this issue. 14. Ignoring Material on Record: The assessee argued that the evidences and material available on record were not properly considered, leading to unjust additions. The judgment does not provide a detailed analysis of this issue. Conclusion: The appeal was allowed for statistical purposes, with the ITAT remitting the issues regarding the addition of Rs. 1,581,163,105/- and Rs. 16,699,360/- back to the Assessing Officer for fresh consideration, providing the assessee an opportunity to substantiate its claims. The ITAT emphasized the need for adequate opportunity and adherence to principles of natural justice.
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