TMI Blog2015 (2) TMI 947X X X X Extracts X X X X X X X X Extracts X X X X ..... ce of TDS to the Central Government account on or before the due date of filing return of income u/s. 139(1) of the Act is retrospective in nature. Thus as the assessee having deposited TDS amount before the due date of filing the return u/s. 139(1) no disallowance can be made by invoking the provisions contained u/s. 40(a)(ia) of the Act - Decided in favour of assessee. Estimated profit on cancelled sales and sales returns - Held that:- The internal control system in the bills do not permit any corrections and the only way is to cancel and enter again. The bills have to be cancelled in case the bills which are entered in one firm's name are going to another concern's name due to technical snag. Sometimes, the quantities were entered wrongly and the invoices have to be prepared again reflecting the correct quantities. Name of the dealer/customer if entered wrongly is to be rectified for preparing the invoice in the correct name. in the absence of any evidence to prove that the assessee had tampered the bills to suppress gross sales the contentions of Revenue cannot be accepted. Further, the assessee has prepared the reconciliation and table the CIT(A) has stated as follows: "Fur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of income u/s. 139(1) of the Act for the year under consideration and hence the addition of ₹ 1,31,446 deserves to be deleted. Following are the important portions written submissions of the assessee before the CIT(A), in this regard: In this connection, it is submitted that the assessee company has paid the amounts of ₹ 1,14,309 and ₹ 17,137 towards Provident fund and ESI respectively to the account of the employees before the due date for filing of return of income and the same should be allowed under section 43B of the Income Tax Act, 1961. In this connection, reliance is placed on the following case laws: 1. CIT vs. George Williamson (Assam) Ltd., 284 ITR 619. 2. CIT vs. Assam Tribune, 253 ITR 93 wherein it was held that the contributions towards provident fund, etc., paid before the filing of the return by the assessee are entitled for deduction. 3. Premier Ltd, Mumbai vs Department Of Income Tax (ITAT Mumbai), vide order in ITA No. 3017/Mum/2012 dated 22nd May, 2013. 5. The CIT(A) relied on the decision in the case of CIT vs. Bharat Bamboo Timber Suppliers reported in 219 ITR 212 (Gau), wherein the Gauhati High Court has held that if the sale ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ove statutory provisions of the Act including definition of Section 2(24)(x) and Sections 36(1)(va) and 43B(b), which read thus: 2(24) 'Income' includes (x) any sum received by the assessee from his employees as contribution to any PF or superannuation fund or any fund set up under the provisions of the Employees State Insurance Act, 1948 (34 of 1948) or any other fund for the welfare of such employees. 36(1) The deductions provided for in the following clauses shall be allowed in respect of the matters dealt with therein, in computing the income referred to in Section 28 (va) any sum received by the assessee from any of his employees to which the provisions of Sub-clause (x) of Clause (24) of Section 2 apply, if such sum is credited by the assessee to the employee's account in the relevant fund or funds on or before the due date. Explanation For the purposes of this clause, 'due date' means the date by which the assessee is required as an employer to credit an employee's contribution to the employee's account in the relevant fund under any Act, rule, order or notification issued thereunder or under any standing order, award, contract of service or other ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... drew our attention to the deletion of second proviso to Section 43B of the Income Tax Act by Finance Act, 2003 which provision has come into force, with effect from 1-4- 2004. The reliance placed upon the decision of the Apex Court in Allied Motors (P) Ltd. v. CIT (supra) and also on the decision in General Finance Co. v. CIT (supra) in respect of applicability of Section 43B(b) and also omission of Clause (a) or (c) or (d) or (f) referred to above occurred in the first proviso to Section 43B, supports the case of the assessees and also relevant paras extracted from Allied Motor's case (supra) and para 59 referred to supra in this judgment from the Finance Bill with all fours support the case of the assessees/ respondents. Therefore, we have to answer the substantial question of law No. 1 framed by this Court in these appeals at the instance of the revenue against them, viz., in the negative (sic). Accordingly, we answer the substantial question No. 1 framed in these appeals in the negative (sic). Respectfully following the ratio above decisions, besides the consistent view taken by the coordinate benches of this Tribunal noted above, we delete the impugned additions made by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee having deposited TDS amount before the due date of filing the return u/s. 139(1) no disallowance can be made by invoking the provisions contained u/s. 40(a)(ia) of the Act ... 6.4 Fact remains that the TDS amount had been remitted into Government account before the due date of filing the return in the case on hand. Respectfully following the order of the Jurisdictional ITAT referred to above, I direct the AO to delete the addition of ₹ 15,09,321/- made u/s. 40(a)(ia) of the Act. Hence this ground of appeal is allowed. 10. Aggrieved, the Revenue is in further appeal before us. We find that this issue has been dealt with by the co- ordinate Bench of the Tribunal in the case of DCIT vs. M/s. Liquidz India Pvt. Ltd. in ITA No. 835/Hyd/2013 order dated 28.8.2013 wherein it has been held as follows: 7. We have heard both the parties and perused the materials on record as well as gone through the orders of the authorities below. As held by the Delhi High Court in the case of CIT vs. Rajinder Kumar in Income Tax Appeal No. 65/2013 dated 1st July, 2013, the impugned amendment to section 40(a)(ia) permits remittance of TDS to the Central Government account on or b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 14,63,13,477 535,09,92,315 Turnover as per Return 463,54,92,552 Difference 71,54,99,763 Less: Cancelled Bills - MPLA Data 70,41,89,293 Less: Cancelled Bills - MPLA Data 67,23,792 Less: Cancelled Bills - MPLA Data 45,86,678 71,54,99,763 Difference 14. The assessee also produced before the AO, copies of individual cancelled bills and copies of sale bills in support of the reconciliation statement. However, the AO did not accept the appellant's explanation and treated the difference amount of ₹ 71,54,99,763 as Suppressed Sales Turnover and estimated profit on the same at ₹ 15,75,30,347 which was added to the total income. The relevant discussion is at pages 6 to 9 of the assessment order which is extracted below: The billing format of the cancelled bill copies ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ter and hence expressed its inability to produce the same. Hence in absence of daily stock movement register the entry wise reconciliation and consequent reversal of the entries made cannot be found out. Hence the above claim of the assessee-company that they found reflected in the firms books of accounts is accordingly not acceptable. Further in respect of the above, it is not clear why regularly a large number of bills are raised in the name of the sister concerns by the assessee-company which are subsequently cancelled for which neither any reconciliation nor any explanation with regard to the reversal of such entries as reflected in respective books of accounts of the company and firms are produced. Hence the attempt of the assessee-company to explain the turnover difference in the form of the cancelled bills cannot be accepted. Further in respect of the cancelled bills vide 1075/ 1077/ 1078/ 1079/1805/ 176/ 1276/ 1280/ 1315/ 1975/ 11946/ 2390/ 2415 and 2427 found in the MPLA Database (Head Office) has submitted that these are various credit bills raised by the assessee-company in favour of its sister concerns t-t/s Meena Jewels Exclusive, M/s Meena Jewels Pearls and M/s. A. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and explain entry wise reconciliation and consequent reversal of the entries as reflected in the books of accounts especially with reference to stock register and Cash Bank book maintained by it. In view of the above of the above discussion and also during the course of survey large numbers of sales bills were found which were not accounted in the regular books of accounts. Further during the course of assessment proceedings the assessee-company raised the contention that these bills were cancelled bills and are raised in the name of the sister concern. But it has not explained why at regular intervals such large numbers of bills were raised and cancelled. Further it is a normal practice to cancel sales bills if it has some errors but in the case of the assessee-company it is seen as a regular practice which ought to be an exemption, in which for the F. Y 2009-10 110 Sales bills in MPLA Database and 119 Sales bills MEJA Database were cancelled. Further when the same was put forth to the assessee- company it simply stated that these bills are cancelled without any evidence in the books of accounts particularly stock book. In view of the above it clear that the bills found in the c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... itted that the difference of ₹ 71, 54, 99, 763/- in turnover as mentioned above between the total turnover as per the database and turnover as per the return of income is explained by the reconciliation statement as under: Particulars Amount(Rs. As per IT Department MPLA Database (Head Office) 520,46,78,838 MEJA Database (Branches Hyd) 14,63,13,477 535,09,92,315 Turnover as per Return 463,54,92,552 Difference 71,54,99,763 Less Cancelled Bills - MPLA Data Cancelled Bills - MEJA Data Sales Return Bills 71,54,99,763 Difference Nil From the above table, the detaile ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... explanation regarding cancelled bills: Explanation Regarding Cancelled Bills 1. As per the internal control system, in the bills which are entered and saved on the system, if any corrections are required, it will not be permitted. The only way is to cancel and enter again. This is one of the reasons for more cancellations. 2. The bills which are entered in one firm's name are going into another concern's name due to a technical snag. This has also resulted in more cancellations. 3. There were also cases where sales for which the quantities / amounts were entered wrong. These were rectified in the same company, by preparing the invoice with correct quantity and amount. 4. Name of the dealer/customer in the bill was entered wrongly. These were rectified by preparing the invoice in the correct name. In connection with the above explanations, the appellant company is maintaining all the relevant details and each cancellation bill is supported by a corrected bill raised and the corrected bill is included in the turnover of the appellant company. This fact can be appreciated by referring page nos. 7 to 113 of volume 1 of the paper book filed on 17.04.2013. In this con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... buyer. In a case where sales take place and subsequently get cancelled, the revenue is not recognized. The assessing officer has not appreciated this fact and levied tax by applying the gross profit ratio on the cancelled bills which do not form part of turnover. It is neither accrued nor recognized by the appellant in order to include in the turnover of the appellant. In this regard, it is submitted that the accounting of turnover is done using the standard accounting package software. It is difficult for the assessee company to maintain documentary evidence for the same. However, despite of difficulty in maintaining the record, the appellant has submitted the relevant details showing all the calculations for cancelled bills. Fact remains that the AO himself showed suspicion with regard to the impugned cancelled sales. There is no material brought on record to show that there is any suppression of turnover so as to estimate any profit on it for both the years under consideration. The AO is not entitled to make any guess work while making the addition without reference to any evidence or any material at all. There must be something more than bare suspicion to support the addition. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tered in the regular books of account and to treat the amount of Rs .71,54,99,763/- as suppressed sales turnover on which income of ₹ 15,75,30,347/- is estimated. The high court of Uttarakhand in the case of Kiran Lata vs. ITAT reported at (2009) 318 ITR 44 (Uttarakhand) has ruled that it is sufficient if a professional keeps regular books of account . In this connection, it is submitted that in the case of Sujan Singh vs. Assessing officer reported at (2008) 307 ITR (AT) 172 (Amritsar), it was held by the tribunal that merely because the assessee did not keep quantitative stock register and held not produced the books relating to sales, the assessee was not liable for a penalty u/s. 271A r. w.s 44AA of the Act. . Nonetheless, the appellant company is regularly maintaining complete stock records for the year under consideration and the same were produced during the course of scrutiny proceedings. But the assessing officer has concluded by stating vide page 6 of the assessment order that it is an afterthought by the appellant company--------. The assessing officer has not considered the fact that the appellant company is maintaining all the relevant details in respect of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... company is consistently following the same accounting policy which is in compliance with the prescribed law. The Assessing officer has not provided any material fact or findings to prove that the turnover shown by the appellant is suppressed. In view of the above, the conclusion by findings by the assessing officer, merely on the basis of suspicion, presumptions and conjectures is unjustified and bad in law. It is submitted that the appellant company has not made any sale which is left unaccounted in the books of account. This fact can further be appreciated by the below submission If the assessing officer's view that there is suppression in sales turnover of ₹ 71,54,99,763/- is accepted, the resultant sales would results as under On cash basis Increase in cash/bank balance On credit basis Increase in debtors a. The assessing officer ought to have appreciated that if there is a transaction in respect of sale it would either increase the cash/bank balance or would turn into debtors. But in the appellant case, there is no finding by the assessing officer in respect of either increase i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eferring to page 148 of volume 1 of paper book filed on 17.04.2013. It is to further submit that the appellant company is engaged in the business of jewellery which involves customer choice. As the customer choice is involved in this type of business there are fair chances that the customer would return the sale, if the product is not made as per the specifications of the customer. In respect of the above mentioned sales returns of ₹ 45,86,678/-, the appellant company is maintaining all the relevant details and the same were submitted during the course of assessment proceedings. This fact can further be appreciated by referring to page 1 to 68 of volume 4 of the paper book filed on 17.04.2013. The assessing officer has applied the gross profit percentage on amount of sale return of ₹ 45,86,678/- and added arrived amount to the returned income of the appellant company. The action of the assessing officer in this context is not correct, not justified and bad in law. The appellant has further submitted branch wise and party wise breakups for the cancelled bills apart from filing paper book on 17.4.2013. 17. The CIT(A) held as follows: 7.4 I have carefully considere ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the year under consideration by making further enquiries with the parties concerned. It is not the case of the AO that the parties concerned have admitted the impugned sales in their books of account for the year under consideration. There is no material available on record to prove that the turn over admitted by the appellant is suppressed. 7.5 Also, there is no finding by the AD as to the corresponding increase in cash balance or debtors as a result of suppressed sales. Fact remains that during the course of survey conducted u/s 133A of the Act on 2/8/2011, no unaccounted cash was found in the assessee's business premises. If there are any suppressed sales as opined by the AO, there should be corresponding unaccounted purchases. Fact remains that there is no finding by the AD on any unaccounted purchases. The Turnover admitted in the return of income has been subjected to VAT. More-over, as claimed by the appellant, there are no adverse comments in the tax audit report u/s 44AB of the Act with regard to the appellant's turnover or profit for the year under consideration. 7.6 There is no dispute with regard to the maintenance of Sales Register and Stock Register by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd the AO took 21% on turn over ₹ 15,75,30,347/- on net profit. The ld. CIT(A) has deleted the amount of ₹ 15,75,30,347/- on the basis of decision of the High Court of Uttarakhand in the case of Kiran Lata vs ITAT reported at (2009) 318 ITR 44 (Uttarakhand). Before the Hon'ble 'B' Bench the assessee has submitted reconciliation tables stating that the cancelled bills are accounted elsewhere which is not possible as each branch work independently and it is not clear how bill pertaining to one branch is duplicated in another. 1. There exists differences in most of the transactions even though assessee insists that cancelled bills are issued elsewhere in same company and sister concern as seen between column B C of the table which is totalling to ₹ 1,86,92,278/-. For example, bill no. 1077 do not have a corresponding duplicate bill as claimed by the assessee and there is difference in amount and quantity. Even with same duplicate no. 1151, there is difference in quantity. So all these with differences should be out rightly rejected rather than taking difference only. 2. Cancelled bills reconciliation from the recorded statement furnished by the as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... visited the branch offices i.e. Punjagutta, Begumpet Branch and GVK-1 of M/s Meena Jewellers along with my assistant Sri Koushik Vinay after completion of the F. Y. 2010-11 to take backup data from the system and to shift the data base for the F.Y. 2010-11 by executing the commands as instructed by our MD Sri Umesh Jethwani, Sri Srinivas who worked as Sr. Accountant used to do this work earlier. The software is prepared by Chennai based company on our request. By executing the commands given by my Head office, we have made certain changes in the data base. Because of that the old data i.e. data relevant to F.Y. 2010-11 has been deleted. The above work is done as per directions of my employee Sri Umesh Jethwani , 7. Substantial stock difference was found curing survey showing unaccounted purchase sale. Since the assessee has prepared the reconciliation tables as an afterthought and most of those entries are not matching. The assessee claims that reasons for cancellation of bills were discrepancies, then why bills without discrepancies were cancelled. It might be the bills have been cancelled due to some customers' denial for purchasing of items or some other reasons during ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ancelled bills along with copies of sales bills in support of the reconciliation statement. The very same reconciliation statement along with party-wise break up for cancelled bills which are filed before me are verified. The AO's rejection of appellant's explanation in this regard is not based on sound footing ... As can be seen from the above extract, the learned CIT(A) has already verified the reconciliation statement and found to be correct. The learned DR alleged that bill no. 1077 did not have corresponding duplicate bill. This is not correct. In this regard, we would like to submit that the actual sale was made to Meena Jewels exclusive (qty 15237.000 gms, ₹ 2,59,75,590/-) but erroneously the entry was made in the name of Meena Jewels and Pearls in Bill No. 1077 (qty 16360, ₹ 2,86,80,645/-). To rectify the error, the bill No. 1077 was cancelled and the actual sale made to Meena Jewels exclusive was made in Bill No. 1090. The learned DR alleged that there is difference in amount and quantity without appreciating the fact that there was not only wrong entry made in the name of the sister concern but also there was wrong entry in amount and quantity also. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r settings related to the hardware. In reply to the question, he clearly explained that he has executed commands to take the backup of the data from the system. There was no question relating to the details of the cancellation bills in the statement. For the sake of clarity, we are reproducing the question and answer of the above said statement as under: Q 5. It was stated by your Assistant Sri Koushik Vinay that you and your assistant visited the branch offices i.e. Punjagutta Branch and Begumpet Branch and have done certain configuration changes by using certain commands as per the directions of your Managing Partner. Please exactly explain what happened? Ans. (Pass for 15 minutes) Yes it is true. I have visited the branch offices i.e. Punjagutta, Begumpet Branch and GVK-l of M/s Meena jewellers along with my assistant Sri Koushik Vinay after completion of Financial year 2010-2011 to take backup data from the system and to shift the data base for the F.Y. 2010-11 by executing the commands as instructed by our MD Sri Umesh Jethwani. Sri Srinivas who was worked as Sr. Accountant used to do this work earlier. He has guided me to execute the commands to take back up and to shift the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... clearly stated that he has never demanded for such type of software which suppresses the gross receipts. The question which was put to Sri Umesh Jethwani was relating to the statement of Giritech Technologies. The Giritech Technologies were developing various software but that cannot be implied that all the software were supplied to the assessee. It is the business of Giritech Technologies to develop the software as per the requirements of the assessee and the assessee has never demanded for such type of software. Instead of making the complete study of the statement, the learned DR has extracted the statement of Giritech Technologies which was put as question to the Sri Umesh Jethwani, without extracting the answer. Further Sri Umesh Jethwani has clarified in answer to Q No. 13, that there was no intention to suppress the sales and the difference is because of inter transaction between firm and branches. Hence, the allegations made and conclusions arrived by the learned OR are completely incorrect and without any basis and merely on the basis of suspicion and surmises. In support of the above submissions, reliance is placed on the decision of high court of Gujarat in the case of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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