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2015 (12) TMI 503 - AT - Income TaxAddition on account of difference between the receipts as per Form 26AS and the audited financial statements of the appellant for the subject AY - additions without invoking the provisions of Section 145 - Held that - The Assessing Officer is duty-bound to make independent inquiry as to whether income has accrued to the assessee company as per the method of accounting regularly being followed by the assessee in respect of the transactions reported in Form No. 26AS. The Assessing Officer, after due verification of the transactions with reference to the documentary evidence like agreement entered into between the parties, has to render the finding whether the income has really accrued to the assessee company or not. Only after such verification, the addition can be made by the Assessing Officer after affording reasonable opportunity of being heard to the assessee-company. Therefore, in order to meet the ends of justice, we restore the matter to the file of the Assessing Officer to make de novo assessment after affording reasonable opportunity of being heard to the assessee company. - Decided partly in favour of assessee for statistical purposes.
Issues Involved:
1. Discrepancy in income declared by the assessee and receipts as per Form 26AS. 2. Addition made by Assessing Officer based on Form 26AS information. 3. Justification for spreading over income. 4. Disallowance of relief for service tax, surcharge, and education cess. 5. Allocation of addition to a specific entity. 6. Penalty initiation under section 271(1)(c) of the Income-tax Act. Analysis: Issue 1: Discrepancy in income declared by the assessee and receipts as per Form 26AS The appellant contended that the difference in income declared and receipts in Form 26AS was due to advance receipts without services rendered, where tax was deducted at source. The Assessing Officer made an addition based on this difference. The CIT(A) upheld this addition, stating that the appellant evaded tax by not showing the income for the relevant assessment year, even though the related party claimed the amount as a deduction. The CIT(A) rejected the appellant's argument of the transaction being revenue-neutral, considering it a colorable device for tax evasion. However, the ITAT Delhi bench emphasized that Form 26AS alone cannot be the basis for additions, requiring an independent inquiry by the Assessing Officer. The matter was remanded for a fresh assessment, allowing the appellant a reasonable opportunity to present their case. Issue 2: Addition made by Assessing Officer based on Form 26AS information The Assessing Officer made an addition to the income solely based on Form 26AS data, without conducting an independent inquiry into whether the income had accrued to the assessee. The ITAT Delhi bench cited previous decisions to support the view that Form 26AS information alone cannot justify such additions. The Assessing Officer was directed to conduct a thorough verification and afford the assessee a fair opportunity to be heard before making any additions. Issue 3: Justification for spreading over income The CIT(A) dismissed the appellant's justification for spreading over income, considering it a tax evasion tactic. The ITAT Delhi bench, however, emphasized the need for the Assessing Officer to verify if income had genuinely accrued to the assessee based on their accounting method. The matter was remanded for a fresh assessment, allowing the appellant to present their case. Issue 4: Disallowance of relief for service tax, surcharge, and education cess The CIT(A) disallowed relief for service tax, surcharge, and education cess despite the Assessing Officer agreeing to the appellant's contention. The ITAT Delhi bench did not provide a specific ruling on this issue in the summarized judgment. Issue 5: Allocation of addition to a specific entity The CIT(A) allocated the addition to a specific entity without considering the appellant's submissions regarding deferred revenue. The ITAT Delhi bench did not provide a specific ruling on this issue in the summarized judgment. Issue 6: Penalty initiation under section 271(1)(c) of the Income-tax Act The appellant challenged the penalty initiation under section 271(1)(c) for disallowances/additions made in the assessment order. The ITAT Delhi bench did not provide a specific ruling on this issue in the summarized judgment.
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