2014 (3) TMI 1185 - AT - Income Tax

Suppressed turnover - turnover difference - tr eating the excess receipts credited in form 26AS as undisclosed incomedifference between the turnover shown in the books of accounts and turnover reflected in Form No.26AS generated from AST system of ITD application - plea of the assessee is that only net profit is to be considered at 8%.- HELD THAT - Assessee failed to establish that the corresponding expenditure relating to this turnover has not at all been booked in its books of accounts. The assessee s plea can be accepted only if the corresponding expenditure relating to this turnover is not at all booked by the assessee in its books of account. Since the assessee failed to substantiate that the expenditure relating to this turnover has not at all been claimed in its regular books of accounts, we are not inclined to allow the same. Corresponding expenditure relating to this suppressed turnover has already been booked by the assessee, the entire undisclosed turnover is to be considered as income of the assessee. Decided against assessee.

Summary

Issues Involved:
1. Discrepancy in turnover reported in books of accounts and form 26AS
2. Treatment of excess receipts as undisclosed income
3. Inclusion of differential turnover in total turnover estimation
4. Consideration of net income and corresponding expenditure

Analysis:

Issue 1: Discrepancy in turnover reported in books of accounts and form 26AS
The case involved a company engaged in civil constructions where the Assessing Officer noted a variance in total turnover as per books of accounts and as per form No.26AS. The difference amounted to Rs. 14,77,77,984. The company provided a reconciliation statement to explain the variance, attributing it to mobilization advances and payments recognized in the subsequent assessment year. However, the Assessing Officer treated the difference as additional income of the company.

Issue 2: Treatment of excess receipts as undisclosed income
The company contended that the excess receipts of Rs. 14.78 crores were part of contract receipts and TDS credit was allowed by the CIT (A). The company argued that these receipts should not be treated as undisclosed income. However, the Appellate Tribunal found that the entire turnover difference was to be considered as suppressed turnover due to lack of supporting evidence in the reconciliation provided by the company.

Issue 3: Inclusion of differential turnover in total turnover estimation
The company requested the differential turnover of Rs. 14.78 crores to be added to the total turnover while estimating income. The Tribunal, however, held that since the corresponding expenditure relating to this turnover had already been booked in the company's accounts, the entire undisclosed turnover had to be considered as income, rejecting the company's plea to consider only the net profit at 8%.

Issue 4: Consideration of net income and corresponding expenditure
The company argued that only the net profit should be considered at 8% and not the gross turnover. The Tribunal emphasized that for the company's plea to be accepted, it needed to demonstrate that the corresponding expenditure related to the turnover had not been claimed in its regular books of accounts. As the company failed to substantiate this, the Tribunal upheld the decision of the lower authorities, confirming the treatment of the entire undisclosed turnover as income.

In conclusion, the Appellate Tribunal dismissed the appeal filed by the company, upholding the decision of the CIT (A) regarding the treatment of the discrepancy in turnover as additional income due to lack of evidence supporting the company's claims.