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2021 (4) TMI 677 - AT - Income TaxEstimation of Net profit - difference between the amount shown as turnover by the assessee and as reflected in Form 26AS - CIT-A deleted the addition - CIT(A) in estimating the net profit at 11.17% to match the TDS vis- -vis additional turnover estimated by the AO, when according to assessee the net profit it had disclosed on its turn over from the same source which was accepted by both the Ld. CIT(A) AO is at the tune of 1.22% - HELD THAT - We note that only because there is a mismatch between TDS certificate (26AS) and turnover shown by the assessee in its P L account cannot be the sole basis on which the entire addition of the difference could have been brought to tax. Therefore, on the facts and circumstances discussed above we find the view of the Ld. CIT(A) to be a plausible view and accordingly his action of deleting addition is confirmed and therefore, the appeal of the revenue stands dismissed. Partial confirmation made by the Ld. CIT(A) by resorting to estimation of NP at 11.17% of the difference in amount/turnover - We note that while doing so i.e. while exercising his co-terminus power in the appellate proceedings he could have done so as per law meaning when he proposed to estimate the income of the assessee, the Ld. CIT(A) should have first of all rejected the audited books of account produced by the assessee in accordance to Section 145 of the Income Tax Act, 1961 (hereinafter referred to as the Act) which the Ld. CIT(A) has not admittedly done. So the estimation of Ld. CIT(A) fails being bad in law. Therefore we direct the deletion of estimated amount. It is not that assessee s case is that it has not claimed the credit for ₹ 2.14 crores, if that is so, then the presumption is that the corresponding receipt of ₹ 2.14 crores is not belonging to assessee. If that fact is correct, then no addition is warranted. However, on examination if it is found that assessee has claimed credit for TDS of ₹ 2.14 crores then the AO is directed to assess the income element embedded in these receipt which in the facts of the present case is N.P. of 1.22%.
Issues:
- Dispute over addition of income by Revenue and cross objection by Assessee - Discrepancy in turnover amount between Form 26AS and profit and loss account - AO's addition of ?2,14,35,593 as concealed income - Ld. CIT(A)'s deletion of the addition and estimation of net profit at 11.17% - Assessee's contention for a lower net profit percentage Analysis: 1. Discrepancy in Turnover: The case involved a dispute regarding a discrepancy in turnover amount between the profit and loss account and Form 26AS. The AO believed the difference of ?2,14,35,593 to be understated income, leading to an addition to the total income. 2. AO's Addition: The AO added the disputed amount to the total income, alleging concealment by the assessee. The assessee explained that the discrepancy arose due to incorrect data filed by payees and a transfer of business to another entity. The AO, citing paucity of time, did not verify the provided explanations adequately. 3. Ld. CIT(A)'s Decision: The Ld. CIT(A) deleted the addition, emphasizing the AO's delay in raising the discrepancy issue and the assessee's timely response. The Ld. CIT(A) noted the communication between the parties, highlighting errors in TDS filing by the payees, and found the AO lacked substantial evidence to support the addition. 4. Estimation of Net Profit: While the Ld. CIT(A) estimated net profit at 11.17%, the assessee argued for a lower percentage based on the turnover shown in the profit and loss account. The Ld. CIT(A) justified the deletion of the addition and the estimation of net profit based on the evidence provided by the assessee. 5. Judgment and Direction: The Tribunal upheld the Ld. CIT(A)'s decision to delete the addition and dismissed the revenue's appeal. However, the Tribunal found the estimation of net profit at 11.17% without rejecting the audited books to be legally flawed, directing the deletion of the estimated amount. The Tribunal also directed the AO to assess the income element if the credit for the disputed amount was claimed by the assessee. In conclusion, the Tribunal upheld the deletion of the addition and allowed the assessee's cross-objection for statistical purposes, emphasizing the importance of substantial evidence and proper verification in tax assessments.
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