Appeal details
Counselvise Citation
[2022] 104 COUNSELVISE.COM (IT) 0703 (ITAT-HYDERABAD)
Assessee PAN
Bench
Appeal Number
Duration Of Justice
1 year(s) 11 month(s) 20 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
16-10-2022
Appeal Filed By
Assessee
Order Result
PartlyAllowed
Bench Allotted
DB-B
Next Hearing Date
12-10-2022
Assessment Year
2017-2018
Appeal Filed On
26-10-2020
Judgement Text
आयकर अपीलीय अधिकरण, हैदराबाद पीठ में IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCHES “B”, HYDERABAD BEFORE SHRI RAMA KANTA PANDA, ACCOUNTANT MEMBER & SHRI K.NARASIMHA CHARY, JUDICIAL MEMBER आ.अपी.सं / ITA Nos. निर्धारण वर्ा / A.Y. अपीलधर्थी / Appellant प्रत् यर्थी / Respondent 589/Hyd/2020 2017-18 Lampex Electronics Limited, Hyderabad [PAN: AAACL4134B] DCIT, Circle-5(1), Erstwhile Circle-16(1), Hyderabad 96/Hyd/2021 2017-18 ACIT, Circle-5(1), Hyderabad Lampex Electronics Limited, Hyderabad [PAN: AAACL4134B] सी.ओ./ C.O. No. 6/HYD/2021 (Arising out of ITA Nos. 96/Hyd/2021) निर्धारण वर्ा / Assessment Years: 2017-18 Lampex Electronics Limited, Hyderabad [PAN: AAACL4134B] Vs DCIT, Circle-5(1), Hyderabad (क्रॉस ऑब्जेक्टर / Cross-Objector) (प्रत् यर्थी / Respondent) निर्धाररती द्वधरध/Assessee by: Shri P.N.Moorthy, AR रधजस् व द्वधरध/Revenue by: Shri Kumar Aditya, DR स ु िवधई की तधरीख/Date of hearing: 13/10/2022 घोर्णध की तधरीख/Pronouncement on: 17/10/2022 ITA Nos.589/Hyd/2020, 96/Hyd/2021 C.O.No.6/Hyd/2021 Page 2 of 10 आदेश / ORDER PER K. NARASIMHA CHARY, JM: Challenging the order passed by the CIT(Appeals)-4, Hyderabad, (“Ld.CIT(A)”) in the case of M/s. Lampex Electronics Limited (“the assessee”) for the assessment year 2017-18, both assessee and Revenue preferred these appeals and the assessee preferred cross-objections. Facts involved in all these three appeals emanate from the same order, we, therefore, deem it just and convenient to dispose-of these appeals and cross-objections by way of this common order. 2. Revenue preferred this appeal with a delay of eighty four days. Revenue attributed the reason for delay in filing the appeal to the delay in receiving the authorisation under section 253(2) of the Income Tax Act, 1961 (for short “the Act”) in the Office of the learned Assessing Officer on 20/01/2021 whereas the appeal was to be filed on 10/11/2020 since the order of the Learned CIT(A) was received on 11/09/2020. Apart from this, circumstances under covid pandemic was also taken shelter by the Revenue. There can be no denial of the fact that the Hon'ble Supreme Court in the Suo Motu proceedings in the case of M.A.No. 21/2022 in M.A.No. 665/2021 in SMW(C) No.3 of 2020 by order dated 10/01/2022 held that in cases, where the limitation would have expired during the period between 15/03/2020 and 28/02/2022, notwithstanding the actual balance period of limitation remaining, all persons shall have a limitation period of 90 days from 01/03/2022, and in the event of actual balance period of limitation remaining with effect from 01/03/2022 is greater than 90 days, that longer period shall apply. Appeal of the Revenue and cross objection are covered by the order of the Hon'ble Supreme Court. We, therefore, now shall proceed to hear the appeals and cross objection. 3. Brief facts of the case are that the assessee company is in the business of manufacturing and exporting of LCD, LCD display Modules, Mini Receipt Printers, Baby Cash Registers, Spot Billing Machines, Hand ITA Nos.589/Hyd/2020, 96/Hyd/2021 C.O.No.6/Hyd/2021 Page 3 of 10 Held Terminals, Automatic Meter Ren Boxes etc., the research and development for designs and development for the above devices. The assessee filed its return of income for the assessment year 2017-18 on 30/12/2019 declaring an income of Rs. 4,54,50,600/- and book profits under section 115JB of the Act at Rs.4,61,66,572/-. 4. By way of order dated 30/12/2019, learned Assessing Officer determined the income of the assessee at Rs. 8,43,23,821/- under the normal provisions and book profits under section 115JB of the Act at Rs. 4,61,66,572/-, by making the following additions/disallowances: Rs. 1. Disallowance under section 36(1)(va) r.w.s. 2(24)(x) of the Act 6,85,645 2. Disallowance of prior period expenditure 32,77,357 3. Unexplained cash credits under section 68 1,25,35,576 4. Disallowance of expenditure towards currency fluctuations 31,38,667 5. Difference in receipts between 26AS and P&L a/c 1,92,33,976 5. Aggrieved, assessee preferred the appeal before the Learned CIT(A) and by way of impugned order, learned CIT(A) sustained the addition of Rs. 1,25,35,576/- under section 68 of the Act, reduced the addition of Rs. 1,92,33,976/- on account of difference between the receipts appearing in form 26AS and receipts in profit and loss account to Rs. 3,44,455/- and Rs. 6,85,645/- made under section 36(1)(va) of the Act; while deleting the disallowance of Rs. 31,38,667/- on account of disallowance of expenditure towards currency fluctuations. 6. Assessee, therefore, filed ITA No. 589/Hyd/2020 in respect of the additions sustained and Revenue filed ITA No. 96/Hyd/2021 in respect of the relief granted to the assessee by the learned CIT(A). Assessee preferred cross objection supporting the view taken by the Learned CIT(A) while granting relief to the assessee. ITA Nos.589/Hyd/2020, 96/Hyd/2021 C.O.No.6/Hyd/2021 Page 4 of 10 7. In respect of the addition of Rs. 1,25,35,576/-, observations of the learned Assessing Officer are that these are the cash deposits during demonetization period and the assessee explained that in view of their launch of set up boxes to penetrate into the market, they have accepted cash sales of hand held terminals, displays for spares etc., to various parties against sale invoices. Learned Assessing Officer found that the deposits to the tune of Rs. 84,64,431/- were prior to the date 04/07/2016. However, stating that except furnishing cash book and invoices, which suffer several defects and not verifiable, the assessee did not substantiate the sources for the cash deposits made by in its bank accounts and, therefore, the total amount of Rs. 1,25,35,576/- has to be added to the income of assessee under section 68 of the Act. 8. On this aspect, observations of the Learned CIT(A) are that the assessee is in the business of electronic including computer hardware but some invoices raised to M/s. Sai Meenakshi Steels, Iron and Steel merchant of Secunderabad for supply of MS steels and since the assessee does not engage in that business, the assessee has to explain the details of the transporter of the lorry, from whom MS steel was purchased, where it was stores, how it was delivered to the buyer etc., and further that the Learned Assessing Officer highlighted nine parties vis-à-vis the invoices and found those to be suspicious. Further according to the Learned CIT(A), invoices with respect to the items sold ‘battery pack’ but the type of battery full description of the item etc., were not mentioned. Learned CIT(A) further observed that the assessee has not submitted any documentary evidence in support of the contention that it got order from Rural Electrification Transmission Project Company Ltd., for supply of steel boxes. For these reasons, Learned CIT(A) echoed the suspicion the Learned Assessing Officer and confirmed the addition made under section 68 of the Act. 9. On this aspect, Learned AR submitted that the authorities did not seek any explanation from the assessee after submitting the books even ITA Nos.589/Hyd/2020, 96/Hyd/2021 C.O.No.6/Hyd/2021 Page 5 of 10 the Learned CIT(A) also did not give an opportunity to the assessee to explain the discrepancies in the invoices, which according to them go to the root of the matter. 10. Learned AR submitted that all their books are audited and the assessee possesses all the details which the authorities expect from them. Further according to the Learned AR whenever the sale is concluded, the Excise Duty and VAT were paid to the respective departments and verification of such record would clearly establish that there is no discrepancy in the books of the assessee. Further, according to him, in the years earlier to and subsequently also the assessee has been following the same method of business and the volumes of turnover are comparable, so as to reach a just conclusion that nothing abnormal had happened in the cash sales conducted by the assessee in this particular year. According to him, in all fairness, the authorities should have verified such record also to reach a just conclusion on this aspect. 11. Per contra, learned DR relied the observations of the Learned Assessing Officer that except furnishing the cash book, the assessee did not explain the sources of cash deposits. He submitted that the assessee did not furnish any account books relating to the Excise Duty and VAT or the books to compare the volumes of business and cash sales in the earlier and subsequent years to substantiate their business method or that nothing abnormal took place in the year of demonetization. 12. On a careful consideration of the matter, we are of the considered opinion that unless one compares the sale pattern of the assessee in the earlier and subsequent years, it cannot be said that there is something abnormal in the cash sales of the assessee attributable to the demonetization period. Further, the plea of the assessee that the Excise Duty and VAT record would substantiate their case has also to be verified. Without verification of the fact it cannot be conclusively be decided that in order to defeat the demonetization, the assessee had shown high cash ITA Nos.589/Hyd/2020, 96/Hyd/2021 C.O.No.6/Hyd/2021 Page 6 of 10 sales or that the entire cash sales have to be added to the income of the assessee. Furthermore, the Learned Assessing Officer himself referred to several invoices in favour of nine persons and all such invoices were for the period prior to the demonetization and the value of such invoices is Rs. 84,64,431/-. Since this amount cannot be attributed to the demonetization, such a sum prima facie appears to be not to be added to the income of the assessee, unless some other reason is found on verification of the record. 13. For these reasons, we are of the considered opinion that this issue has to be set aside to the file of the learned Assessing Officer for proper verification of the books of the assessee with reference to the Excise Duty and VAT payments and also payments made in the bank prior to the date of demonetization, where there cannot be any doubt of assessee creating the cash sales to defeat the demonetization. This ground and the additional grounds are accordingly treated as allowed for statistical purposes. 14. Now coming to the addition of Rs. 6,39,896/- and Rs. 45,749/- on account of EPF and ESI by invoking section 36(1)(va) read with section 2(24)(x) of the Act, the fact remains that the employees’ contribution to provident fund and ESI were paid by the assessee after the due date specified under the relevant Act. This issue is squarely covered by the decision of the Hon'ble Apex Court in the case of Checkmate Services Pvt. Ltd., Vs. CIT, Civil Appeal No. 2833/2016 by order dated 12/10/2022 against the assessee. Respectfully following the same, dismiss this ground of appeal. 15. Next ground of appeal of assessee and ground No. 2 of Revenue’s appeal relate to upholding of addition of Rs. 1,92,33,976/- to the tune of Rs. 3,44,455/- on account of the difference between interest income and service charges and deleting the balance. Facts are that there is a difference between interest income and service charge as per profit and ITA Nos.589/Hyd/2020, 96/Hyd/2021 C.O.No.6/Hyd/2021 Page 7 of 10 loss account and form 26AS. According to Learned Assessing Officer, services charges in form 26AS are to the tune of Rs. 3,85,04,092/- and the service charges credited in the profit and loss account are Rs. 1,96,14,571/- and that the interest receipts appearing in form 26AS are Rs. 11,58,888/- and the interest income in the profit and loss account is only Rs. 8,14,433/-. Stating that the assessee could not reconcile the difference Learned Assessing Officer added a sum of Rs. 1,92,33,976/-. 16. In appeal, Learned CIT(A) found the contention of the assessee that the entire amount appearing in form 26AS is not service charges and the receipts under sections 194C, 194J, 194A and 206C of the Act to the extent of Rs. 1,85,93,440/-, Rs. 1,03,39,152/-, Rs. 11,58,888/- and Rs. 95,71,500/- totaling to Rs. 3,96,62,980/- were also to be found in form 26AS. On a careful consideration of these amounts covered under sections 194C, 194J, and 206C of the Act from the ledger copies produced by the assessee Learned CIT(A) held that nothing adverse could be found on account of this. 17. Learned CIT(A), however, found that the interest receipt under section 194A of the Act was to the tune of Rs. 11,58,888/- whereas the assessee had shown only Rs. 8,14,433/- in their profit and loss account and though the assessee stated that this difference includes in the miscellaneous income of Rs. 21,57,908/- Learned CIT(A) did not find it satisfactory. Learned CIT(A), therefore, sustained the addition to the extent of this difference of Rs. 3,44,455/- and deleted the balance as the receipts explained under sections 194C, 194J, and 206C of the Act. 18. It is not the case of the Revenue that on a consideration of entries in the form 26AS, the Learned Assessing Officer gave any finding that the entire amount of Rs. 3,96,62,980/- represents the service charges. We are not in agreement with the submission of the Learned DR that since the assessee failed to furnish a copy of form 26AS explaining the receipts under various heads, Learned Assessing Officer is justified in making the ITA Nos.589/Hyd/2020, 96/Hyd/2021 C.O.No.6/Hyd/2021 Page 8 of 10 addition. Above all, form 26AS is the document of the Revenue and the assessee need not furnish a copy and a bare reading of form 26AS reveal the receipts under various heads and it does not require any expertise reconcilement to be made by the assessee. What the Learned CIT(A) did, Learned Assessing Officer could have done. We, therefore, do not find any reason to interfere with the deletion of the amounts covered under sections 194C, 194J, and 206C of the Act. At the same time, Learned Assessing Officer will verify whether the sum of Rs. 344,455/- is included in the sum of Rs. 21,57,908/- shown in the profit and loss account as miscellaneous income. For this limited purpose, we set aside the issue for verification to the file of Learned Assessing Officer. Accordingly Revenue’s ground is dismissed and the assessee’s grounds is treated as allowed for statistical purposes. 19. Coming to the first ground of Revenue’s appeal, it relates to the addition of Rs. 31,38,667/- on account of foreign exchange fluctuation which was claimed as expenditure under section 43A of the Act. On this aspect, Learned CIT(A) while referring to the provisions under section 43A and 43AA of the Act, and to the decision of Hon'ble Apex Court in the case of CIT Vs. Woodward Governor India (P) Ltd., (2009) 179 Taxman 326 (SC), observed that the assessee has been consistently following the AS-11 which requires that any income or loss arising or accruing to the assessee on account of foreign exchange fluctuation should be shown in the financial statements in a consistent manner, and inasmuch as the ledgers, invoices and working of the laws accrued due to the foreign exchange fluctuation is consistent accounting practice, any addition on that score is not warranted. According to us also, case of the assessee is squarely covered by the decision of the Hon'ble Apex Court in the casse of Woodward Governor India (P) Ltd (supra). Since the Learned CIT(A) followed the binding precedent, we do not find anything illegality or irregularity in his findings and accordingly uphold the same. This ground of appeal of Revenue is dismissed. In view of our findings on both the ITA Nos.589/Hyd/2020, 96/Hyd/2021 C.O.No.6/Hyd/2021 Page 9 of 10 grounds of Revenue’s appeal cross objection of the assessee becomes infructuous. 20. In the result, appeal of the assessee is treated as partly allowed for statistical purposes. Appeal of the Revenue and the cross objection of the assessee are dismissed. Order pronounced in the open court on this the 17 th day of October, 2022 Sd/- Sd/- (RAMA KANTA PANDA) (K. NARASIMHA CHARY) ACCOUNTANT MEMBER JUDICIAL MEMBER Hyderabad, Dated: 17/10/2022 TNMM ITA Nos.589/Hyd/2020, 96/Hyd/2021 C.O.No.6/Hyd/2021 Page 10 of 10 Copy forwarded to: 1. M/s.Lampex Electronics Limited, D.No.6-2-231, Kukatpally, Hyderabad. 2. DCIT, Circle-5(1), Erstwhile-16(1), Hyderabad. 3. ACIT, Circle-5(1), Hyderabad. 4. CIT(A)-4, Hyderabad. 5. Pr.CIT-4, Hyderabad. 6. DR, ITAT, Hyderabad. 7. GUARD FILE TRUE COPY ASSISTANT REGISTRAR ITAT, HYDERABAD
Mehul