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2017 (8) TMI 441 - AT - Income TaxDeemed income - difference between revenue disclosed by the assessee in P&L account and the amount of the receipts shown in Form No.26AS - Held that:- Identical issue has already been dealt with in AY 2005-06 [2010 (11) TMI 630 - ITAT DELHI] in assessee’s own case by the ITAT, Delhi Bench ‘B’, New Delhi (order available at page 1 to 45 of the paper book) and has been answered in favour of the assessee. Moreover, the assessee has been held to have borrowed in the capacity of an agent and this proposition of fact and law has also been accepted by the ld. DRP in its order for AY 2009-10 lying at page 47 to 63 of paper book 1. So, impugning the accounting policy followed by assessee by ld. CIT (A)/AO is mis-interpretation of settled proposition in assessee’s own case by the ITAT as well as DRP. Addition being the amount paid/payable by the assessee to third party vendors - vendors did not respond to the notice issued by the AO u/s 133 (6) - Held that:- The assessee is carrying on the business of advertisement for Samsung Groups of company in print and electronic media by way of outsourcing from the vendors, When the vendor raises the bill on the assessee for the payment of the amount, then assessee raises bill for the amount payable to the vendors plus its remuneration on its clients. Perusal of P&L account, available at page 74 of the paper book 1 of 2, shows that the assessee has not declared its receipt from its clients on income side and payment to the vendors on the expenditure side which otherwise does not amount to under-statement of income. This issue requires to be determined on the basis of factual and legal position applicable in this case and by following the order dated 17.08.2016 (supra) passed by the coordinate Bench for AY 2010- 11, applicable to the identical facts of this case, the impugned order is set aside and the matter is restored to the AO for deciding this issue afresh after providing an opportunity of being heard to the assessee. In case, the payment is actually made by the assessee to the vendors in terms of the Agreement then no addition can be made otherwise addition on account of alleged payment can be made. Addition u/s 68 - ad hoc addition being 50% of the amount paid/payable to the vendors to whom no notices were sent by the AO - Held that:- When no notice has been sent to the vendors to whom the payments have been made by assessee by raising bills to his clients along with its remuneration, no ad hoc addition can be made. We are of the considered view that this issue is also required to be restored to the AO to decide afresh after issuing notice and procuring requisite information under the law and to decide the issue afresh after providing an opportunity of being heard to the assessee. Non deduction of tds - payment made to its vendors for supply of material - Held that:- As discussed in the preceding paras, while determining grounds above all the vendors have not come up before the AO and out of 22 vendors, only 8 vendors have confirmed the receipt and such an addition cannot be made by randomly picking up the facts. Secondly, when the issue has already been determined in favour of the assessee by the Tribunal in AY 2010-11 that the assessee is not a sub-contractor but an agent, the service element is apparently not there in the supply of material to attract section 194C of the Act. So, in the given circumstances, we are of the considered view that this issue is required to be determined afresh after providing an opportunity of being heard to the assessee after due verification. So far as question of disallowance of payment i.e. 50% of the balance amount made to its vendors for supply of material without deduction of TDS u/s 40(a)(ia) of the Act on ad hoc basis is concerned, the same is also required to be determined afresh in the light of the findings returned on grounds no.3 to 8. Furthermore, the entire facts as to the supply of material by the vendors are yet to be brought on record by the AO by making discreet investigation. So, consequently, grounds no.9 to 14 are determined in favour of assessee. Addition on account of decrease in the Net Profit (NP) ratio - Held that:- Bare perusal of the comparative chart of GP and NP rates for AY 2007-08 and AY 2013-14 goes to prove that net profit ratio in the instant case has never been consistent and even otherwise, it cannot be consistent as it depends upon numerous reasons. When the audited books of account have not been rejected, merely making an addition on ground of fall in NP ratio is not sustainable in the eyes of law. Moreover, the assessee has duly explained the reasons for fall in the net profit ratio in AY 2011-12 viz. fall in service income; increase in personnel expenses; and increase in depreciation charges which have been reproduced by the ld. CIT (A) of the impugned order but has not preferred to assign any reason for not accepting the contentions raised by the assessee. So, in view of the facts and circumstances of the case, we are of the considered view that in the absence of any cogent reasons, addition on the basis of fall in net profit ratio, that too without rejecting the books of account, is not sustainable, hence deleted.
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