TMI Blog2019 (8) TMI 1050X X X X Extracts X X X X X X X X Extracts X X X X ..... were made on account of mismatch of income vide TDS as is reflected in Form No. 26AS information per income-tax data base maintained by department and the income as is reflected in assessee‟s books of accounts. The assessment orders for AY: 2010-11 and 2012-13 are placed on record in file. We are presently concerned with ay: 2012-13. No doubt every assessment year is a separate unit and principles of res judicata are not applicable but indications can be drawn/gathered from assessment orders of the other years as to behaviour pattern of the tax-payer and modus operandi of the tax-payer adopted to defraud Revenue/conceal income, if any. No such incriminating information is brought on record by Revenue. Thus we accept contentions of the assessee and are of the considered view that no additions to the income are warranted in the hands of the assessee for impugned ay: 2011-12 owing to differential in income as was extrapolated from TDS as is reflected in for No. 26AS information per income-tax department data base and income as is reflected in books of accounts maintained by the assessee. The assessee succeeds on these ground number 2-4 raised by assessee in its memo of ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed to consider that the notice under section 143(2) of the Act issued by the Assessing Officer was time barred, and hence, the order passed under section 143(3) of the Act was illegal and bad in law. 2) The learned Commissioner of Income Tax (Appeals) erred in confirming the addition of ₹ 1,80,57,980/-, being income corresponding to alleged unreconciled TDS ₹ 18,05,798/-, as per the Form 26AS. 3) Having regard to letter dated February 24, 2017 filed with the Assessing Officer during remand proceedings, remand report dated March 24, 2017 and letter dated April 10, 2017 filed with the Commissioner of Income Tax (Appeals) during appeal proceedings, the Appellant submits that the finding of the Commissioner of Income Tax (Appeals) that some amount of TDS is unreconciled is perverse, and contrary to facts on record. 4) In any event, the Appellant Company submits that the addition of ₹ 1,80,57,980/- is highly excessive and arbitrary, and the same requires to be reduced substantially.In any event, the alleged difference in TDS could not have exceeded ₹ 12,82,637/- 5) The learned Commissione ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... we dismiss this Ground No. 7 raised by assessee in memo of appeal filed with the tribunal as not being pressed. We order accordingly. 6. It is then brought to the notice of the Bench during the course of hearing that now there are only two effective issues which need to be adjudicated by tribunal, wherein Ground no. 2 to 4 raised by assessee in memo of appeal field with tribunal represent one effective issue concerning additions made on account of mismatch of Income-tax deducted at source(TDS) as per books of accounts maintained by the assessee with the TDS credit as is appearing in Form no. 26AS information per income-tax data base. It was then submitted that second effective issue in this appeal filed by assessee is covered by Ground No. 5 and 6 raised by assessee in memo of appeal filed with tribunal which concerns itself with ad-hoc disallowance of expenses @10% amounting to ₹ 2,76,51,835/- out of aggregate expenses to the tune of ₹ 27,65,18,354/- claimed by assessee under various heads of expenses. 7. During the course of assessment proceedings conducted by the AO u/s 143(3) read with Section 143(2) of the 1961 Act, the AO observe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to additions to the income of the assessee to the tune of ₹ 2,76,51,835/- in the hands of the assessee. The AO had observed that assessee had failed to give documentary evidences and details with respect to these expenses to substantiate these expenses. It was also observed by the AO that complete details were not submitted by the assessee during assessment proceedings and under these circumstances it could not be established that these expenses were incurred wholly and exclusively for the purposes of business of the assessee and also it could not be concluded whether these expenses are revenue in nature. The AO also observed that in absence of aforesaid details, it could not be established that proper income-tax was deducted by the assessee while making payments for these expenses as is mandated under Chapter XVII-B of the 1961 Act which led AO to make additions to the tune of ₹ 2,76,51,835/- being ad-hoc disallowance @ 10% of the expenses aggregating to ₹ 27,65,18,354/- of the total expenses incurred by assessee under various heads of income as are enumerated in details in assessment order dated 29.01.2014 passed by the AO u/s 143(3) of the 1961 Act. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce under section 142(1) dated 18 December 2013. 7. During the course of the hearing, the authorised representative of the appellant checked with the staff of the learned DCIT whether the appellant is required to file the details as per earlier notice (dated 24 September 2013) and the details as per the new notice dated 18 December 2013. The staff of the learned DCIT informed that the earlier notice dated 24 September 2013 can be ignored and asked the appellant to file the details as requested in the new notice dated 18 December on 26 December 2013, on the basis of which the assessment will be completed, Further, the staff of the DCIT also informed that hence forth the appellant has to file the details / discuss the case with him, and only at the time of finalising the assessment order, the learned DCIT will take the hearing. 8. Accordingly, the appellant compiled and filed around 65% of the details requested in the notice dated 18 December 2013 vide its letter dated 26 December 2013. The appellant submits that during the current year there was change in the Financial Controller and new Financial Controller has assumed the off ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e TDS as was reflected in Form no. 26AS per income-tax department data base and as claimed by the assessee in return of income filed with the Revenue and based on the same additions to the income of the assessee were made by the AO to the tune of ₹ 3,08,86,060/- by holding that these are professional services and provisions of Section 194J are applicable which contemplate deduction of income-tax at source @10% and an amount of ₹ 3,08,86,060/- stood added to income of the assessee by the AO by extrapolating the income accordingly. The assessee claimed that it was not provided with AIR information by the AO during the course of assessment proceedings. The assessee also claimed before learned CIT(A) that proper and adequate opportunity of hearing was not provided by the AO during the course of assessment proceedings. The assessee submitted that the AO‟s observations that the assessee has not submitted explanation and reconciliation of TDS is not correct. The assessee prayed that these additions be deleted. The assessee also submitted that at the time of filing of return of income, it claimed credit of TDS based on original TDS certificates available ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of service tax. The assessee submitted that gross income as reflected in Form No. 26AS was ₹ 65,68,39,242/- ( including service tax) and hence net income as per Form No. 26AS after excluding service tax @10.3% works out to ₹ 59,55,02,486/-. The assessee submitted that income offered by it in its return of income which was liable to TDS of ₹ 69,78,07,555/- was much higher than the income as reflected in Form No. 26AS viz. ₹ 59,55,02,486/-. Thus, the assessee claimed that it offered entire income as is reflected in Form No. 26AS to tax and there is no undisclosed income which was not offered to tax and prayers were made to delete the additions. The assessee also claimed that this differential of TDS of ₹ 30,88,606/- is mainly due to error made by one of the clients of the assessee namely Tilaknagar Industries Limited wherein PAN number of the assessee was mentioned instead of PAN number of their client to whom income was paid, while filing their TDS return with Revenue. The assessee produced evidences by way of emails exchanged with said Tilaknagar Industries Limited to prove that error took place while filing TDS returns by said Tilaknagar Industries L ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... However the appellant has filed during the appeal proceedings the details and relevant documents in the form of additional evidence. The AO in his remand report has objected to the admission of additional evidence. The Ld AR has explained from the documents filed as additional evidence, that a mistake occurred at the time of uploading the TDS certificates by the deductors especially in the case of one M/s Tilaknagr Industries. The Ld AR contended that it had correctly claimed its TDS at ₹ 6,02,54,624/- and the corresponding receipts accordingly admitted in the P L account and no income was omitted to be offered. There is some force in the contention of the appellant. But as per the copy of latest form 26AS filed, it is still remained unreconciled. The TDS amount appearing in the latest 26AS is said to be ₹ 6,15,37,261/- as against the original amount of ₹ 6,33,43,059/- thereby resulting in difference of ₹ 18,05,798/-Considering the AO's stand in making the extrapolated computation of the receipts, it has to be now worked out with the latest unreconciled figure of ₹ 18,05,798/-.The AO's findings are upheld to that extent and addition is restric ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... c) Travelling and conveyance expenses of ₹ 5,31,06,751: These expenses mainly include the business expenditure like travel charges, car hire charges, lodging and boarding charges incurred in the course of providing an audit or an inspection service to the client, conveyance paid to employees for working overtime, car hire charges, expenses of managers meeting, etc. d) Seminar business promotion expenses of ₹ 1,20,06,995: These expenses mainly include the expenditure incurred on business training courses provided mainly to imbibe the good business practices for the benefit of the client at large, IRCA certificated lead auditor certificate courses fees payable to TUV Nord Cert GMBH, advertisement and trade fairs, club charges, marketing fees, advertisement charges, entertainment expenses, seminar expenses, etc. e) Miscellaneous expenses of ₹ 1,33,65,339: These expenses mainly include expenditure incurred on festival and gift expenses, recruitment expenses, bank charges, insurance, octroi / freight charges, rates and taxes, exchange differences, office expenses, fees to directors, audit fees expenses, etc. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the case for hearings on given dates. 5.5.2 It is needless to say that it is the sole discretion of the AO how to compute income of the assessee. But the question arises here is that whether the AO has fairly and correctly exercised such discretion or not. In the instant case, it is observed that the ld AO has estimated the disallowance at @ 10% of the expenditure. It is considered that the adhoc disallowance @ 10% to be very fair and reasonable. As the AO had exercised his discretion and made best judgment and also taking into consideration of the facts and circumstances of the case, I do not find any reason to delete the same. I therefore uphold the addition made by the AO and hence this ground raised by the appellant is also dismissed. 11. Now, aggrieved by appellate order dated 05.09.2017passed by learned CIT(A), the assessee has filed an appeal before the tribunal and elaborate contentions were made by Ld. Counsel for the assessee on both the aforesaid issues. The learned counsel for assessee explained before the Bench that the assessee is a service provider engaged in the certification work. It was explained that additions to the tune of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 0.12.2014 assessee has tried to reconcile difference in TDS between as is reflected in return of income filed with Revenue with that as reflected in 26AS maintained per data base of income-tax department. It was submitted that assessee has duly reconciled the difference in TDS and no additions are warranted. Our attention was also drawn to page no. 55/paper book wherein details of TDS as per form no. 26AS is placed. Our attention was also drawn to page no. 57 of the paper book wherein M/s. Tilaknagar Industries Ltd. one of the client of the asssessee, agreed that they have mistakenly declared TDS of ₹ 27,64,023/- against assessee, as against actual TDS deducted against income of ₹ 51,951/- invoiced by the assessee for the entire year under consideration. Our attention was also drawn to page no. 61 to 62/paper book wherein party wise reconciliation of difference in TDS is placed. Our attention was drawn to page no. 63 to 66/paper book wherein party wise difference of TDS as per Form No. 26AS per income-tax department data base and return of income filed with Revenue is placed. With respect to second issue also, the assessee claimed before the Bench that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... before learned AO/CIT(A) with respect to additions being made owing to mismatch of TDS as per Form no. 26AS with that of TDS claimed as per return of income filed with Revenue. Our attention was also drawn to page no. 123 of the paper book, wherein the assessee has explained before AO vide letter dated 24.02.2017 differences in TDS as per books of accounts and TDS as is reflected in Form no. 26AS per income-tax department data base and it was explained that the difference between the two as of date is only to the tune of ₹ 12.89 lacs which is an insignificant amount vis-a-vis total TDS of ₹ 6.02 crores. Reliance was placed by learned counsel for the assessee on the decision of Hon‟ble Delhi High Court in the case of Court on its own Motion v. CIT reported in (2013) 352 ITR 273 (Delhi) and decision of Hon‟ble Bombay High Court in the case of Arun Ganesh Jogdeo v. Union of India, dated 28.08.2015 in PIL no. 27 of 2014. Our attention was also drawn to pages no. 125-129, pages no. 133-203 and page no. 204 -212 of the paper book and it was submitted that the difference in TDS stood duly explained and no additions to the income of the assessee ar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed. Our attention was also drawn to page no. 90 of the paper book wherein details of Repairs(Building)incurred by the assessee are placed. Our attention was also drawn by learned counsel for the assessee to page no. 91-92 of the paper book, wherein details of Repairs(Others) incurred by the assessee are placed. Our attention is also drawn to page 93 of the paper book wherein details of Staff Training Expenses incurred by the assessee are placed. Our attention was also drawn to para 5.5 of appellate order passed by learned CIT(A) and it was submitted that Ld. CIT(A) confirmed adhoc disallowance of these expenses, to the tune of 10% of these expenses incurred by assessee under various heads of expenses. It was submitted additional evidences were placed before Ld. CIT(A) but the same were rejected. It was submitted that no adhoc disallowance of expenses are warranted as complete details of these expenses were furnished. The learned counsel for the assessee also brought to our notice, assessment order dated 23.11.2018 passed by the AO in assessee‟s own case for ay: 2016-17 passed u/s 143(3) of the 1961 Act and assessment order dated 15.12.2009 passed by the AO u/s 143(3) of the 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Ld. Counsel for the assessee in rejoinder submitted that ground no. 4 is alternative and without prejudice to ground no. 2 and 3 raised by assessee in memo of appeal filed with tribunal. It was submitted that no additions should be made on account of mismatch of TDS in Form No. 26-AS and as claimed in return of income filed with Revenue. Our attention was drawn to paper book / page no. 48 and it was submitted that proper and adequate opportunity of heard was not provided to assessee by the AO during the course of assessment proceedings. The assessee placed reliance on the decision of Hon‟ble Bombay High Court in the case of Prabhavati Shah(supra). 12. We have considered rival contentions and perused the material on record including cited case laws. We have observed that the assessee is engaged in the business of certification for Quality Environmental Management Systems, QS 9000 for Automobile Industry, Third Party Inspection, CE Marketing and other related work. The assessee also carries out testing services and solutions for the food and agricultural sector. The assessee has gross revenue of ₹ 72.84 crores from services and the income declared pe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessment proceedings. A fresh questionnaire was issued on 18.12.2013 by the AO vide notice issued u/s 142(1) of the 1961 Act. There was no query raised by the AO in this notice dated 18.12.2013 issued u/s 142(1) of the 1961 Act with respect to the reconciliation of TDS with income as is reflected in the books of accounts of the assessee. The said fresh questionnaire vide notice dated 18.12.2013 issued u/s 142(1) of the 1961 Act never stipulated that it is issued in suppression of the earlier questionnaire issued vide notice dated 24.09.203 issued by the AO u/s 142(1) of the 1961 Act, rather it stipulated that this notice dated 18.12.2013 issued by the AO u/s 142(1) of the 1961 Act is in connection with ongoing assessment proceedings, for which the details are called for. This query as to reconciliation of TDS with the income as is reflected in its books of accounts raised by the AO vide notice dated 24.09.2013 issued u/s 142(1) of the 1961 Act remained un-complied with by assessee till culmination of assessment proceedings. The assessee is now contending that the AO did not gave proper and adequate opportunity of being heard to the assessee and one of the staff of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fference between as is reflected in Form No. 26AS information per income-tax department data base and in the return of income filed with the Revenue. There was one of the client of the assessee namely Tilaknagar Industries Limited who filed an erroneous TDS return with department wherein PAN of assessee was wrongly quoted by them instead of quoting correct PAN of some other vendor on whose behalf TDS was deducted by said Tilaknagar Industries Limited. This led to an error of TDS amount of ₹ 27,64,023/- which got credited to the assessee account, instead of applicable TDS on correct invoice amount of ₹ 51,951/- raised by assessee in favour of Tilaknagar Industries Limited for the entire year under consideration, which was rectified by Tilaknagar Industries Limited by filing revised TDS return. The impact on income due to the aforesaid error was to the tune of ₹ 2,76,40,230/- computed keeping in view that TDS rate u/s 194J on professional/technical services is @10% by extrapolating income, out of total additions to the tune of ₹ 3,08,86,060/- made by the AO. The assessee has produced all relevant details and explanations in remand proceedings ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essee with Revenue on 28.11.2011 was ₹ 6,02,54,624/-, leading to TDS differential to the tune of ₹ 12,82,637/-. It can be seen that first remand report is dated 16.10.2015 and second remand report is dated 14.03.2017, both these remand reports were issued by the AO during appellate proceedings conducted by learned CIT(A), which effectively means that there is a gap of almost 17 months. Thus, AO/learned CIT(A) had effective/sufficient time to conduct necessary enquiries to demolish/rebut the version of the assessee that all its income stood duly disclosed in return of income filed with Revenue and no additions are warranted for this TDS mismatch. The powers of learned CIT(A) are co-terminus with the powers of the AO. Neither AO nor learned CIT(A) had considered it appropriate to conduct enquiries with the parties who had deducted TDS on behalf of the assessee wherein there are differential between information as per Form No. 26AS per income-tax data base and TDS as per books of accounts of the assessee, despite having all information in their possession which was submitted by assessee during appellate/remand proceedings and sufficient time to conduct such enquiries. No n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ontentions of the assessee. The assessee‟s case was also scrutinised under the provisions of Section 143(2) read with Section 143(3) of the 1961 Act for immediately preceding year as well immediately succeeding year,but no such additions were made on account of mismatch of income vide TDS as is reflected in Form No. 26AS information per income-tax data base maintained by department and the income as is reflected in assessee‟s books of accounts. The assessment orders for ay: 2010-11 and 2012-13 are placed on record in file. We are presently concerned with ay: 2012-13. No doubt every assessment year is a separate unit and principles of res judicata are not applicable but indications can be drawn/gathered from assessment orders of the other years as to behaviour pattern of the tax-payer and modus operandi of the tax-payer adopted to defraud Revenue/conceal income, if any. No such incriminating information is brought on record by Revenue. Thus in our considered view keeping in view complete factual matrix of the case before us as is emerging from records and on the touch stone of preponderance of probabilities, we accept contentions of the assessee and are of the considered ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s, for which the details are called for. This query as to submissions of details of various expenses incurred by the assessee remained un-complied with by the assessee till culmination of assessment proceedings. The assessee is now contending that the AO did not gave proper and adequate opportunity of being heard to the assessee and that one of the staff of the AO verbally told assessee‟s counsel that there is no need to comply with earlier details asked for vide notice dated 24.09.2013 issued u/s 142(1) of the 1961 Act. The assessee is also contending that various telephonic calls were made to the office of the AO but no hearing took place and finally it culminated into an assessment order dated 29.01.2014 passed by the AO u/s 143(3) of the 1961 Act, which prejudiced the assessee as additions to the tune of ₹ 2,76,51,835/- were made by the AO towards adhoc disallowance computed @10% of expenses incurred under various heads. This contention of the assessee that proper and adequate opportunity was not granted by the AO during the course of assessment proceedings cannot be accepted as the assessee was represented by an experienced tax-consultants and nothing prevented ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5,31,06,751: These expenses mainly include the business expenditure like travel charges, car hire charges, lodging and boarding charges incurred in the course of providing an audit or an inspection service to the client, conveyance paid to employees for working overtime, car hire charges, expenses of managers meeting, etc. d) Seminar business promotion expenses of ₹ 1,20,06,995: These expenses mainly include the expenditure incurred on business training courses provided mainly to imbibe the good business practices for the benefit of the client at large, IRCA certificated lead auditor certificate courses fees payable to TUV Nord Cert GMBH, advertisement and trade fairs, club charges, marketing fees, advertisement charges, entertainment expenses, seminar expenses, etc. e) Miscellaneous expenses of ₹ 1,33,65,339: These expenses mainly include expenditure incurred on festival and gift expenses, recruitment expenses, bank charges, insurance, octroi / freight charges, rates and taxes, exchange differences, office expenses, fees to directors, audit fees expenses, etc. f) Repairs and maintenance-building of ₹ 78, ..... 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