2021 (8) TMI 108 - AT - Income Tax

Difference between income shown as per Form 26AS and income shown as per profit and loss account - HELD THAT - None appeared on behalf of assessee despite notice. We note that assessee has duly explained to the ld. Assessing Officer that the reason of impugned difference was partly relating to service tax which has been accepted by the ld. AO. However, the explanation of sales which has been considered differently in 26AS and profit and loss account has not been accepted by the ld. Assessing Officer. We note that no reason has been given by the AO as to why he is not accepting them. No case is made out that from the examination of records, the explanation has been found to be incorrect. Without giving any reason, the rejection of the explanation thereof is not sustainable. Hence, we direct that addition should be restricted to the difference as accepted by the assessee in its explanation - Appeal of the assessee stands partly allowed.

Summary

Issues:
Difference in income as per Form 26AS and profit and loss account leading to addition by Assessing Officer without proper justification.

Analysis:
The appeal was against the order of the Ld. CIT(A) for the Assessment Year 2014-15. The grounds of appeal included the contention that the appellate order was passed without giving the appellant an opportunity to be heard and that the addition made by the Assessing Officer of ?12,50,251 was confirmed solely based on the discrepancy between income in Form 26AS and the profit and loss account. The Assessing Officer noted the differences in income for various parties and reasons for such differences, including service tax and sales amounts. The Assessing Officer held that since the income was under the mercantile system, the difference should be considered as income for the year, resulting in the addition. The CIT(A) upheld the Assessing Officer's decision, stating that the appellant had claimed full TDS credit despite the income discrepancy. The appellant then appealed to the ITAT.

Upon hearing the arguments and examining the records, the ITAT noted that the Assessing Officer accepted the explanation for the service tax difference but rejected the explanation for sales differences without providing any justification. The ITAT found the rejection without proper reasoning unsustainable and directed that the addition should be restricted to the difference accepted by the assessee in its explanation, amounting to ?3,13,698 + ?6,28,000. As a result, the appeal was partly allowed, and the addition was reduced accordingly. The judgment was pronounced on 28/07/2021.