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2016 (6) TMI 119 - ITAT MUMBAI

2016 (6) TMI 119 - ITAT MUMBAI - TMI - Addition on difference in freight charges - difference in disclosure by the assessee in its return of income vis-à-vis TDS Certificate - CIT(A) accepted assessee’s contention that this receipt was not disclosed in the return, because the exact amount was spent by the assessee and no profit was earned on this receipt - Held that:- We do not find any merit in this observation of CIT(A) insofar as even if the assessee had incurred expenditure equal to the amou .....

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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. - Decided in favour of revenue for statistical purposes.

Accrual of income - Income accounted for in the next financial year - Held that:- The amount of ₹ 4,11,234/- was deleted by CIT(A) on the plea that this income pertains .....

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y its of not including the same in the year under consideration. Decided in favour of revenue for statistical purposes. - ITA No.3241/Mum/2012 - Dated:- 27-4-2016 - SHRI R.C.SHARMA, AM AND SHRI AMIT SHUKLA, JM For The Revenue : Shri Yogesh Kamat For The Assessee : Shri Hari S. Raheja ORDER PER R.C.SHARMA (A.M): This is an appeal filed by the revenue against the order of CIT(A), Mumbai, for the assessment year 2008-09, in the matter of order passed u/s.143(3) of the I.T.Act on the following groun .....

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Gross Receipts as per Form 16A and Gross receipt as per P&L account" 3. "On the fact and in the circumstances of the case and in law, the Ld. CIT(A) has erred in giving relief of ₹ 53,26,762/- 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 .....

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ned order, CIT(A) deleted the addition after observing as under :- 2.6 A perusal of the above reveals that labour charge of ₹ 32,21,205/- and the productivity allowance of ₹ 16,50,325/- received from the above two companies, were in fact paid back. The total of these two works out to ₹ 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 the credit side and they were also not shown in the payment side .....

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vailable in Exhibit -3 of the paper book. As per the p/l account submitted along with the return of income the assessee has shown 19,79,693 towards service charges received and the service tax collected. The break up of the same is available in this exhibit. The details are as follows: Service Charge Service Tax Total The amount collected from M/s Anandji & co 7,42,816 4,06,551 11,49,367 The amount collected from M/s Century Textile Mills & Industries ltd. 3,22,217 5,08,103 8,30,320 19,7 .....

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pellant in its P&L Alc. What emerges out of the above discussion is that the appellant has admitted profit on both the wages as well as labour charges. 2.11 In this regard it is relevant to point out the decision of ITAT Ahmadabad in the case of M/s Hans road carriers P. Ltd in ITA No.1792/Ahd/2007. The facts in this case are that the appellant was engaged in the business of providing transportation services and getting commission on arranging the trucks on hire. During the assessment year 2 .....

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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 i .....

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eceived only commission of ₹ 500/- per truck. Therefore, the facts have revealed that the TDS was deducted on the whole amount of freight on trucks supplied through assessee but said amount had an over-riding right of the Truck-owners therefore directly diverted to their respective accounts. On careful examination of the statutory provisions to answer this legal question, it is evident that the deduction of tax at source is not a levy of tax unless and until it is followed by an assessment .....

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which can further elaborate this view. For example, the recipient maintains account on cash basis which may not match with the amounts certified in the TDS Certificate due to the reason that the deductor has maintained the account on mercantile basis. Naturally the deductor will deduct the tax on accrual basis, however, the recipient shall disclose the income on receipt basis. In this situation, there shell always be a mismatch between the amount of receipt as per TDS Certificate and the taxable .....

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tc. So the deduction of tax on an income does not ipso facto declare that the amount referred in the TDS certificate is subject to tax on the whole figure that too on the same year mentioned in the certificate. An observation at this stage can be made that the provisions relating to Tax Deduction at Source are not the provisions for the computation of income. An income of a taxpayer is not required to be computed merely with reference to the TDS Certificate but assessment of an income is altoget .....

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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 liabilit .....

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n is reproduced below:- •... In our considered opinion, the provisions of deduction of TDS have been brought in the statute to facilitate the collection of tax. It is not the intention of the legislature that the credit for a portion of TDS deducted and paid is never granted. In the instant case, it is admitted by the Revenue that the amount. of the TDS covered by TDS certificates in question could not be granted to truck operators/owners as the relevant TDS certificates stand in the name o .....

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is that the assessee instead of showing receipt of full freight and then showing the freight paid to truck operators/owners, has shown only the difference between the aforesaid two amounts as here income as because the payments of freight were directly collected by the truck drivers. In our considered opinion, this is simply a matter of presentation of accounts and merely for not presenting in the accounts, the amount of the gross freight and then freight paid to truck operator/owner separately .....

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ench that only the embedded portion 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 t .....

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pts 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 these transaction in the form of service charges for rendering the services, the Assessing Officer has no justification in adding the gross amount as income of the appellant. As mentioned above, all relevant documents in support of the assessee contention had bee .....

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ued to the appellant. To summarize: 1. Against the bills raised by the appellant, the above mentioned companies made payments by cheque which got deposited into assessee's bank account and subsequently paid in to-to towards wages & labour charges. 2. Due entries made in the books of accounts 3. Tax Audit Report has been finalized and there is no adverse finding on this aspect. 4. trading account showing contra entries and re-conciliation statement were submitted before the AO 5. The prof .....

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f to the extent of ₹ 48,71,530/- is granted as per the above discussion and the balance difference works out to ₹ 4,11,424/-. (Rs 53,26,762 - ₹ 48,71,5301-). This is exactly the difference between the receipt as per the TDS certificate ₹ 1,54,52,467/- and the gross receipt admitted by the appellant ₹ 1,50,41 ,403/- as per the "Income & Expenditure A/c. statement (Rs 1,54,52,467 - ₹ 1,50,41,403 = ₹ 4,11,424/-). In respect of this also, the reconc .....

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ethod 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 .....

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the AO in this regard appears in page 2 of the assessment order and the same is reproduced below: "As per the reconciliation given by the authorised representative of the assessee it is mentioned that 'the assessee has not included the payment received from M/s. Century Textile Mills of ₹ 9,00,000/- and M/s. Anandji Haridas & Co. of ₹ 3, 92,498/- as they are shown in the next year. 2.18 The submission of the appellant makes it clear that the appellant has been consistent .....

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ed. The appeal of the appellant is allowed. The appellant gets relief of ₹ 53,26,762/- (48,71,530 +.4, 11,424) 3. We have considered rival contentions and gone through the orders of authorities below and found that due to difference in freight charges disclosed by the assessee in its return of income vis-à-vis TDS Certificate, addition was made by AO. The AO found that assessee had shown labour charges levied of ₹ 1,01,25,705/- whereas TDS Certificate shows total receipt of &# .....

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