2018 (3) TMI 131 - AT - Income Tax

Undisclosed contract receipts - Held that - CIT(A) has analyzed the relevant record and found that the claim of the assessee is not correct as all these expenses on account of direct purchase and sales tax deduction and interest have already been taken under consideration while preparing the profit and loss account. Once the claim of the assessee that the difference is on account of books adjustment entry is found to be wrong and contrary of the facts then the addition made by the AO of the differential amount is proper and justified. It is further noted that when the assessee has booked all the corresponding expenses in the books of accounts then, even the contention of the assessee that only net profit of these contract receipt can be added to the income of the assessee is not acceptable. - Decided against assessee.

Summary

Issues involved:
1. Addition in net profit based on gross receipts as per Form 26AS.

Analysis:
1. The assessee, a Civil Contractor, filed its return of income for the assessment year 2009-10, declaring a total income of ?22,91,734. The assessment was reopened, and the Assessing Officer (AO) noted a discrepancy in contract receipts declared by the assessee and those appearing in Form 26AS, proposing an addition of ?24,96,557 to the income. The assessee explained that the difference arose due to a TDS return made by the deductee, and only the net profit rate on this differential amount should be added to the income. However, the AO added the entire differential amount to the income, which was confirmed by the CIT(A).

2. The assessee contended before the Tribunal that only the profit element in the gross contract receipts should be added to the income, relying on various decisions. The assessee argued that undisclosed receipts should only have the net profit added to the income, as the expenditure incurred for acquisition of the goods sold must be allowed. The Department, on the other hand, supported the CIT(A)'s findings, stating that the expenses claimed by the assessee were already accounted for in the profit and loss account.

3. The Tribunal considered the submissions and records, noting the discrepancy in contract receipts and the explanation provided by the assessee regarding book adjustment entries made by the deductee. The Tribunal observed that the assessee's claim of the difference being on account of book adjustments was not tenable, as all expenses related to direct purchases and deductions were already considered in the profit and loss account. The Tribunal held that the addition made by the AO of the differential amount was justified, as the assessee's claim was found to be incorrect based on the facts and records available.

4. In conclusion, the Tribunal dismissed the assessee's appeal, upholding the addition of ?24,96,557 as undisclosed contract receipts. The Tribunal found no merit in the appeal, considering the factual findings and analysis conducted by the CIT(A) regarding the incorrectness of the assessee's claim and the already accounted expenses in the books of accounts.