2017 (4) TMI 1277 - AT - Income Tax

Addition to total income - GP rate was lower than immediately preceding year, but net profit was better in this year - Additions of income as per 26AS details - Held that - The AO has made the addition of ₹ 1,71,40,163/- as if the assessee has treated the gross receipts of ₹ 9,92,47,244/- as her income. The AO totally failed to appreciate that for receiving gross receipt, she might have incurred expenditure. Therefore, he at the most can consider the income at the rate of 1.96% of the turnover remained to be accounted - the additions is confirmed to the extent of 1.96% of different i.e. ₹ 1,71,40,163/-. The ld.AO shall calculate the amount and made addition in the income declared by the assessee - appeal allowed in part.

Summary

Issues:
Appeal against addition to total income.

Analysis:
The assessee appealed against the addition of ?1,71,40,163 to their total income. The case involved the assessee, an individual engaged in civil construction consultancy business. The Assessing Officer (AO) noticed a difference in receipts shown by the assessee in the profit & loss account compared to TDS details. The AO confronted the assessee regarding this difference, to which the assessee explained ongoing disputes with the Municipal Corporation affecting the income booking. The AO, however, was not satisfied with the explanation and made the addition to the total income.

On appeal, the Commissioner of Income Tax (Appeals) [CIT(A)] confirmed the addition but noted that the assessee could apply before the AO in the next assessment year to avoid double taxation. The CIT(A) upheld the addition made by the AO, emphasizing the requirement for the appellant to include all receipts/income received or accrued in the relevant financial year itself.

During the appeal process, the assessee contended that the receipts were accounted for in the next year when payments were confirmed by the municipality. The assessee argued that only the income embedded in the gross receipts should be considered for addition. The Tribunal considered the contentions and ruled that the income part involved in the gross receipts should be added to the total income. The Tribunal acknowledged that the assessee might have incurred expenditure in earning the gross receipts, thus confirming the addition to the extent of 1.96% of the difference, amounting to ?1,71,40,163. The Tribunal allowed the assessee to approach the AO in the next year to exclude this amount from taxation to avoid double taxation.

In conclusion, the Tribunal partly allowed the appeal, confirming the addition to the total income but limiting it to the income part embedded in the gross receipts. The assessee was granted the opportunity to seek exclusion of this amount from taxation in the subsequent year to prevent double taxation.