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TMI Blog2016 (6) TMI 119X X X X Extracts X X X X X X X X Extracts X X X X ..... 3,26,762/- without appreciating the fact that AO correctly made addition to the assessee's total income on account difference between the Gross Receipts as per Form 16A and Gross receipt as per P&L account on mercantile method of accounting which is followed by assessee and reported in TAR" 2. Rival contentions have been heard and record perused. Facts in brief are the assessee, a proprietor of a concern named M/s Vaishnavi Industrial Services, is a labour contractor providing labour to two companies namely, M/s Century Textile Mills and M/s Anandji Haridas & Co. During the course of scrutiny assessment the AO made addition of Rs. 53,26,762/- on account of difference between the gross receipts as per Form No.16A and gross receipts as per P&L account. By the impugned order, CIT(A) deleted the addition after observing as under :- "2.6 A perusal of the above reveals that labour charge of Rs. 32,21,205/- and the productivity allowance of Rs. 16,50,325/- received from the above two companies, were in fact paid back. The total of these two works out to Rs. 48,71,530/-. This is the reason why these two figures were not shown in the P&L A/c (filed along with the return of income) in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as dismissed. The finding of Hon'ble ITAT in para-5 is as follows : "We have heard both the sides at some length and also carefully peruse the orders of the authorities below in the light of a short compilation filed and the case law cited. The short legal issue before us is that whether the receipts shown as per the TDS certificate is the income of the assessee to be taxed wholly without any adjustments. To answer this legal question, we have examined the nature of business activity of the assessee and it was found that the assessee-company is carrying on transportation business. Broadly speaking two types of business activity being carried out by the assessee, one, supply of its own trucks on hire for transportation of goods and the hire charges are credited in the books, second, trucks are arranged for the customers on commission basis end the payments were being made directly by the customer to the truck-owners and the assessee only obtained commission. It was explained to Revenue Authorities that though as per the TDS Certificate, the amount mentioned was Rs. 34,24,868/- on which TDS of Rs. 35,482/- was deducted but on those transactions the assessee had received only commiss ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... with reference to the TDS Certificate but assessment of an income is altogether an independent exercise. With this understanding of law if we compare the facts of the case, and then it is evident that the amount which was certified on the TDS Certificate could or could not have been subject to tax in the hands of the assessee recipient. The deductor had chosen a safe procedure of deduction of tax on the entire amount of freight. Otherwise the freight was to be paid to the truck owners and not to the assessee-company, who is only a conduit in arranging the hiring of the trucks. The freight was to be passed on to the trucks owners, therefore, the freight was not subject to tax in the hands of the assessee. Nevertheless, accounts of the assessee have also demonstrated the same. With the result, the amount on which the TDS was deducted had not matched with the figures of the income disclosed by the assessee in respect of those transactions. Such a business transaction can be dealt with in two ways; i.e. either to be treated as the receipts with overriding liability or secondly that the freight receipts were subject to the expenditure of freight charges to be paid to the truck owners. O ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n of the profit is to be considered as taxable and not the entire amount in the case of discrepancies between the sale or receipt amount as per books of accounts and the amounts shown in the TDS certificate for taxability purposes. Accordingly, the Tribunal has directed the Assessing Officer to adopt GP rate declared by the tax payer for the assessment year under consideration and compute the addition. 2.13 The facts in the appellant's case is identical to that of the above mentioned cases. what needs to be taxed is only the income element and not the gross receipt. As mentioned above, what was received by the appellant has been totally paid and they were only contra entries. In spite of the reconciliation statement filed, clearly explaining the discrepancy, the AO has added the gross receipts to the total income. The appellant has duly disclosed the income related to the transaction above as mentioned earlier in this order. The fact that the receipts and payments have not been brought through the P&L account has not affected in any way the income and the profit out of the above transaction. It is only a simple matter of presentation of accounts. Having admitted the income on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ween Gross income accounted in books of accounts and TDS certificate. The above reconciliation filed by the appellant is self explanatory and the difference has been explained. However it is relevant to point out the submission of the appellant made before the AO on 24/12/2010 at this juncture. Para 8 of the submission is as under: "Method of accounting : The method of accounting is mercantile as reported in TAR. The wages of every month become due and payable on 7th of next months. E.g. March 2007 wages are payable to the works on 7th of April 2007 and the bill is raised on 5th to 7th of April, amount received and paid to the workers. Thus, the wages of March 2008 are due only on 7th of April 2008 and they do not become receivable and payable in March 2008. Your contention that March 2008 wages receivable should be shown as receivable is not correct for two reasons. Firstly if the wages receivable are shown then wages payable will also will have to be shown. In the accounts, both wages receivable and payable for March 2008 are not shown. In the accounts both wages receivable and payable for March 2008 are not shown. Secondly is March 2008 wages are shown then March 2007 wage ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r to the file of AO for deciding afresh after verifying assessee's contention that it has incurred equal amount of expenditure with regard to labour charges received so as to reach to the conclusion that no income has been generated out of it. The AO is also directed to verify whether in the audited P&L account the assessee has included both income and expenditure and to decide the issue afresh.
4. The amount of Rs. 4,11,234/- was deleted by CIT(A) on the plea that this income pertains to the bills raised by the assessee in the month of March, which has been taken by the assessee as its income in its account in the month of April, 2008. However, nothing was placed on record by the assessee to justify CIT(A)'s conclusion that this income was accounted for in the next financial year. In the interest of justice, we restore this amount of Rs. 4,11,234/- to the file of AO to verify as to whether the assessee has accounted for this income in the subsequent year, so as to justify its of not including the same in the year under consideration.
5. In the result, appeal of the revenue is allowed for statistical purposes.
Order pronounced in the open court on this 27/04/2016. X X X X Extracts X X X X X X X X Extracts X X X X
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