AD SPACE MART PVT. LTD., MUMBAI V. ITO 6 (1) (1), MUMBAI

ITA 2251/MUM/2016

• Counselvise Citation: [2017] 126 COUNSELVISE.COM (IT) 8920 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 6 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-10-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 08-02-2017
• Assessment Year: 2011-2012
• Appeal Filed On: 07-04-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SUMAN KUMAR
• Assessee Lawyers: CHETAN KARIA
• Section: 142(1)

Judgement Text

1 ITA NO.2251/MUM/2016 IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH B, MUMBAI BEFORE SHRI D.T. GARASIA (JUDICIAL MEMBER) AND SHRI G MANJUNATHA (ACCOUNTANT MEMBER) I.T.A NO.2251/MUM/2016 (ASSESSMENT YEAR 2011-12) AD SPACE MART PVT LTD B-102, MANEK KUNJ, DR. SS RAO ROAD, LALBAUG, MUMBAI 400 012 PAN : AAGCA8993B VS ITO, 6(1)(1), MUMBAI APPELLANT RESPONDEDNT APPELLANT BY SHRI CHETAN KARIA RESPONDENT BY SHRI SUMAN KUMAR DATE OF HEARING 25-09-2017 DATE OF PRONOUNCEMENT 27-10-2017 O R D E R PER G MANJUNATHA, AM : THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGA INST THE ORDER OF THE CIT(A)-12, MUMBAI DATED 11-01-2016 AND IT PERTAINS TO AY 2011-12. 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE C OMPANY ENGAGED IN THE BUSINESS OF ADVERTISING AGENCY, FILED ITS RETURN OF INCOME FOR THE ASSESSMENT YEAR 2011-12 ON 23-09-2011 DECLARING TOTAL INCOME O F RS.25,25,598. THE CASE WAS SELECTED FOR SCRUTINY AND ACCORDINGLY, NOTICES U/S 143(2) AND 142(1) ALONGWITH QUESTIONNAIRE DATED 10-07-2013 WERE ISSUE D. IN RESPONSE TO 2 ITA NO.2251/MUM/2016 NOTICES, THE AUTHORIZED REPRESENTATIVE OF THE ASSES SEE APPEARED FROM TIME TO TIME AND FURNISHED THE DETAILS, AS CALLED FOR. DUR ING THE COURSE OF ASSESSMENT PROCEEDINGS, THE AO NOTICED THAT THERE IS A DIFFERE NCE IN GROSS RECEIPTS ADMITTED BY THE ASSESSEE IN ITS BOOKS OF ACCOUNT AN D GROSS RECEIPTS APPEARED IN FORM 26AS. THEREFORE, HE ASKED THE ASSESSEE TO RECONCILE THE TURNOVER DECLARED IN ITS BOOKS OF ACCOUNT WITH FORM 26AS. I N RESPONSE, THE ASSESSEE VIDE LETTER DATED 24-01-2014 SUBMITTED RECONCILIATI ON OF GROSS RECEIPTS AS PER FORM 26AS AND AS PER P&L ACCOUNT AND SUBMITTED THA T THE DIFFERENCE IN TURNOVER BETWEEN BOOKS OF ACCOUNT AND FORM 26AS IS ON ACCOUNT OF METHOD OF ACCOUNTING FOLLOWED BY THE ASSESSEE AS PER WHICH IT IS FOLLOWING MERCANTILE SYSTEM OF ACCOUNTING FOR BOOKING RECEIPTS, WHEREA S SOME CUSTOMERS DEDUCT TDS ON ADVANCE PAYMENTS AND SOME CUSTOMERS DEDUCT T AX AT SOURCE ON FINAL BILL AMOUNT. THE ASSESSEE ACCOUNTS RECEIPTS ON THE BASIS OF BILL RAISED TO CUSTOMERS, THEREFORE, THERE WILL ALWAYS BE DIFFEREN CE BETWEEN RECEIPTS SHOWN IN THE BOOKS OF ACCOUNT AND THAT IN FORM 26AS. THE AO, AFTER CONSIDERING THE EXPLANATIONS OF THE ASSESSEE AND ALSO TAKING INTO A CCOUNT FORM 26AS OBSERVED THAT THE ASSESSEE HAS FAILED TO EXPLAIN WITH NECESS ARY EVIDENCE THE DIFFERENCE BETWEEN TURNOVER AS PER BOOKS OF ACCOUNT AND THAT I N FORM 26AS. THE AO FURTHER OBSERVED THAT IN THE CASE OF RAINBOW PRODUC TIONS LTD, THE PARTY ALREADY REPORTED A GROSS TURNOVER OF RS. 59,37,750 WHEREAS THE ASSESSEE HAS TAKEN 3 ITA NO.2251/MUM/2016 GROSS RECEIPTS OF RS.4,01,326. THE ASSESSEE HAS FA ILED TO EXPLAIN THE DIFFERENCE IN GROSS RECEIPTS REPORTED BY THE PARTY AND GROSS R ECEIPTS REPORTED AS PER BOOKS OF ACCOUNT THOUGH IT CLAIMS THAT IT IS FOLLOW ING MERCANTILE SYSTEM OF ACCOUNTING AND PART OF RECEIPTS HAS BEEN CONSIDERED IN AY 2009-10. THEREFORE, IT IS CLEAR FROM THE ABOVE FINDING THAT THE ASSESSE E HAS FAILED TO RECONCILE DIFFERENCE OF RS.62,34,487 AND ACCORDINGLY MADE ADD ITIONS TO THE DIFFERENCE IN RECEIPTS AS PER BOOKS OF ACCOUNT AND THAT IN FORM 2 6AS. AGGRIEVED BY THE ASSESSMENT ORDER, ASSESSEE PREFERRED APPEAL BEFORE CIT(A). 3. BEFORE THE CIT(A), THE ASSESSEE REITERATED ITS STAN D TAKEN BEFORE THE AO. THE ASSESSEE FURTHER SUBMITTED THAT THE AO WAS INCO RRECT IN MAKING ADDITIONS TOWARDS GROSS RECEIPTS ON THE BASIS OF FORM 26AS EV EN THOUGH THE ASSESSEE HAS EXPLAINED DIFFERENCE BETWEEN THE TURNOVER IN FORM 2 6AS AND ITS BOOKS OF ACCOUNT WHICH IS ON ACCOUNT OF METHOD OF ACCOUNTING REGULARLY FOLLOWED IN ITS BUSINESS. THE ASSESSEE FURTHER SUBMITTED THAT INSO FAR AS GROSS RECEIPTS REPORTED BY RAINBOW PRODUCTIONS LTD, THE PARTY HAS PAID AN AMOUNT OF RS.29,74,625 WHEREAS THROUGH INADVERTENT MISTAKE IT HAS REPORTED A GROSS RECEIPT OF RS.56,55,000. THE PARTY HAS REVISED ITS TDS STATEMENT. THE ASSESSEE HAS FILED COPIES OF REVISED FORM 26AS GENERATED FRO M ONLINE PORTAL OF INCOME- TAX DEPARTMENT TO EXPLAIN THE DIFFERENCE BETWEEN TU RNOVER APPEARING IN THE BOOKS OF ACCOUNT AND TURNOVER AS PER FORM 26AS. 4 ITA NO.2251/MUM/2016 4. THE CIT(A), AFTER CONSIDERING RELEVANT SUBMISSIONS OF THE ASSESSEE OBSERVED THAT THE ASSESSEE HAS FAILED TO EXPLAIN DI FFERENCE BETWEEN TURNOVER REPORTED BY M/S RAINBOW PRODUCTIONS LTD AND TURNOVE R AS PER ITS BOOKS OF ACCOUNT. THE ASSESSEES CONTENTION THAT THE AMOUNT RECEIVED FROM M/S RAINBOW PRODUCTIONS LTD WAS JUST TRANSFERRED TO THE VARIOUS PARTIES FOR RELEASING ADVERTISEMENT ON BEHALF OF THE ASSESSEE I S FACTUALLY INCORRECT. THE CIT(A) OBSERVED THAT THE AO HAS BROUGHT OUT CLEAR F ACTS OF DIFFERENCE BETWEEN TURNOVER REPORTED IN ASSESSEES BOOKS OF ACCOUNT AN D TURNOVER REPORTED BY THE PARTIES WHICH APPEARED IN FORM 26AS; THEREFORE, THE AO WAS RIGHT IN MAKING ADDITION OF RS.55,36,424 ON ACCOUNT OF RECEIPTS REC EIVED FROM M/S RAINBOW PRODUCTIONS LTD. REGARDING BALANCE AMOUNT OF RS.6, 98,063, THE CIT(A) OBSERVED THAT THE ASSESSEE HAS NOT EXPLAINED OR PRO DUCED ANY EVIDENCE. THEREFORE, HE CONFIRMED ADDITIONS MADE BY THE AO. AGGRIEVED BY THE ORDER OF CIT(A), THE ASSESSEE IS IN APPEAL BEFORE US. 5. THE LD.AR FOR THE ASSESSEE SUBMITTED THAT THE LD.CI T(A) WAS ERRED IN CONFIRMING ADDITIONS MADE BY THE AO TOWARDS DIFFERE NCE IN TURNOVER APPEARED IN THE FORM 26AS. THE LD.AR FURTHER SUBMITTED THAT THE DATA APPEARED IN FORM 26AS IS PROVISIONAL ONE WHICH CAN BE REVISED BY TH E FILERS OF TDS STATEMENTS, THEREFORE, ONLY ON THE BASIS OF FORM 26AS ADDITION CANNOT BE MADE; DESPITE THE ASSESSEE HAS RECONCILED DIFFERENCE BETWEEN TURN OVER AS PER ITS BOOKS OF 5 ITA NO.2251/MUM/2016 ACCOUNT AND TURNOVER APPEARED IN FORM 26AS. THE AR FURTHER SUBMITTED THAT M/S RAINBOW PRODUCTIONS LTD WRONGLY FILED TDS RETUR N SHOWING A REVENUE OF RS.56,55,000; HOWEVER, SUBSEQUENTLY THEY HAVE FILED CORRECTION STATEMENT AND REDUCED PAYMENT MADE TO THE ASSESSEE TO RS.32,30,44 2. THIS FACT HAS BEEN BROUGHT TO THE NOTICE OF THE CIT(A). HOWEVER, THE CIT(A) HAS IGNORED THE REVISED FORM 26AS FILED BY THE ASSESSEE TO CONFIRM ADDITION MADE BY THE AO. THE AR FURTHER SUBMITTED THAT M/S RAINBOW PRODUCTIO NS LTD HAS ACTUALLY PAID RS.29,50,380 FOR THE ADVERTISEMENT RELEASED BY THE ASSESSEE IN WHICH THE ASSESSEE HAS MADE PAYMENT OF RS.27,36,322. IF RECE IPTS ARE TREATED AS REVENUE, CORRESPONDING PAYMENTS MUST BE CONSIDERED AS EXPENSES. THE CIT(A) HAS IGNORED THE SUBMISSIONS OF THE ASSESSEE TO CONF IRM ADDITIONS MADE BY THE AO, THEREFORE, THE ISSUE MAY BE SET ASIDE TO THE FI LE OF THE AO FOR FRESH ADJUDICATION AFTER CONSIDERING THE SUBMISSIONS OF T HE ASSESSEE. 6. ON THE OTHER HAND, THE LD.DR STRONGLY SUPPORTED THE ORDER OF CIT(A). 7. WE HAVE HEARD BOTH THE PARTIES, PERUSED THE MATERIA L AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF AUTHORITIES BELOW. THE AO MADE ADDITIONS TO THE RETURNED INCOME FOR RS.62,34,487 ON THE BASIS O F FORM 26AS. THE AO FURTHER OBSERVED THAT THE ASSESSEE FAILED TO RECONC ILE DIFFERENCE BETWEEN TURNOVER REPORTED IN ITS BOOKS OF ACCOUNT AND TURNO VER APPEARED IN FORM 26AS. ACCORDING TO THE AO, THE ASSESSEE HAS FAILED TO ACC OUNT CERTAIN RECEIPTS FROM 6 ITA NO.2251/MUM/2016 M/S RAINBOW PRODUCTIONS LTD AND OTHER PARTIES. IT IS THE CONTENTION OF THE ASSESSEE THAT ADDITIONS CANNOT BE MADE TOWARDS GROS S RECEIPTS ON THE BASIS OF FORM 26AS AS THE DATA APPEARED IN FORM 26AS IS PROV ISIONAL WHICH CAN BE REVISED AT ANY TIME BY THE FILERS OF TDS STATEMENT. THE ASSESSEE FURTHER CONTENDED THAT M/S RAINBOW PRODUCTIONS LTD HAS WRON GLY REPORTED TURNOVER OF RS.55,36,424. HOWEVER, SUBSEQUENTLY REVISED IT TO RS.32,40,442. THE CIT(A) IGNORED REVISED FORM 26AS DOWNLOADED FROM THE DATA BASE OF THE DEPARTMENT. THE ASSESSEE FURTHER CONTENDED THAT M/S RAINBOW PRO DUCTIONS LTD ALSO PAID CERTAIN AMOUNT IN RESPECT OF ADVERTISEMENTS RELEASE D BY THE ASSESSEE IN VARIOUS PUBLICATIONS FOR WHICH THE ASSESSEE HAS MAD E PAYMENT OF RS.27,36,322. IF RECEIPTS ARE TREATED AS REVENUE A S PER FORM, 26AS CORRESPONDING PAYMENTS MUST ALSO BE CONSIDERED AS E XPENSES AS THE ASSESSEE HAS TAKEN THE AMOUNT PAID BY M/S RAINBOW PRODUCTION S LTD IN THE CURRENT LIABILITIES. 8. HAVING HEARD BOTH THE SIDES AND CONSIDERED MATERIAL ON RECORD, WE FIND THAT THE AO HAS MADE ADDITION SOLELY ON THE BASIS O F FORM 26AS. THE ASSESSEE CLAIMED THAT IT IS FOLLOWING MERCANTILE SYSTEM OF A CCOUNTING FOR BOOKING ITS RECEIPTS WHEREAS SOME OF THE CUSTOMERS DEDUCTED TDS ON ADVANCE PAYMENTS AND SOME CUSTOMERS DEDUCTED TDS ON FINAL BILL AMOUN T. SINCE THE ASSESSEE IS FOLLOWING MERCANTILE SYSTEM OF ACCOUNTING TO BOOK I TS RECEIPTS, THERE WILL 7 ITA NO.2251/MUM/2016 ALWAYS BE DIFFERENCE BETWEEN GROSS RECEIPTS AS PER ITS BOOKS OF ACCOUNT AND GROSS RECEIPTS APPEAR IN FORM 26AS BECAUSE OF MISMA TCH BETWEEN TDS DEDUCTIONS BY THE CUSTOMERS AND BOOKING OF RECEIPT S BY THE ASSESSEE. WE FIND FORCE IN THE ARGUMENT OF THE ASSESSEE FOR THE REASO N THAT ADDITION CANNOT BE MADE ONLY ON THE BASIS OF FORM 26AS DESPITE THE ASS ESSEE FURNISHED REVISED FORM 26AS RECTIFYING THE EARLIER MISTAKES IN UPLOAD ING DATA WHILE FILING TDS STATEMENTS. THE ASSESSEE HAS FILED REVISED FORM 26 AS AS PER WHICH M/S RAINBOW PRODUCTIONS LTD HAS REPORTED A PAYMENT OF R S.32,30,422 AS AGAINST THE TOTAL RECEIPTS SHOWN IN THE EARLIER FORM 26AS O F RS.56,55,000. THOUGH THE ASSESSEE HAS FURNISHED COPY OF REVISED FORM 26AS, T HE CIT(A) HAS FAILED TO CONSIDER THE REVISED FORM 26AS. THEREFORE, WE ARE OF THE CONSIDERED VIEW THAT THE ISSUE NEEDS TO BE RECONSIDERED BY THE AO IN THE LIGHT OF THE SUBMISSIONS OF THE ASSESSEE THAT M/S RAINBOW PRODUCTIONS LTD HAS C ORRECTED ITS EARLIER MISTAKE IN FILING TDS STATEMENT. INSOFAR AS OTHER P ARTIES, THE ASSESSEE HAS MADE SIMILAR SUBMISSIONS. HENCE, WE SET ASIDE THE ISSUE TO THE FILE OF THE AO AND DIRECT HIM TO CONSIDER THE ISSUE AFRESH IN THE LIGH T OF SUBMISSIONS OF THE ASSESSEE. 9. IN THE RESULT, APPEAL FILED BY THE ASSESSEE IS ALLO WED FOR STATISTICAL PURPOSE. 8 ITA NO.2251/MUM/2016 ORDER PRONOUNCED IN THE OPEN COURT ON 27 TH OCTOBER, 2017. SD/- SD/- (D.T. GARASIA) (G MANJUNATHA) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DT : 27 TH OCTOBER, 2017 PK/- COPY TO : 1. APPELLANT 2. RESPONDENT 3. CIT(A) 4. CIT 5. DR /TRUE COPY/ BY ORDER ASSTT. REGISTRAR, ITAT, MUMBAI