2022 (11) TMI 576 - AT - Income Tax

Unexplained turnover - Difference between sales as per profit and loss account and gross services as per service tax return to the income of the assessee - HELD THAT - Turnover in service tax return is on account of receipt of money during the year. Therefore, it is apparent that manner of recording turnover for service tax is different than the amount of Turnover shown in the profit and loss account. Though, the difference arising between these two sums is required to be explained by the assessee, 1 with respect to advances 2 grossed up of the services, services received during the year, but turnover shown in last year etc. The difference between gross receipt shown by the assessee in service tax return and in the books of accounts may be the first trigger point of investigation and reconciliation, but unless there is difference which shows that there is lower income offered by the assessee in its tax return, the addition cannot be made. We direct the assessee to submit the party wise reconciliation of income offered in the profit and loss account with the amount of gross receipts on which service tax is collected and reconcile the difference between the two. If the advances are received during the year, assessee should also demonstrate that these sums are disclosed in advance received from the customers. Therefore, it is the duty of the assessee to provide reconciliation between the two sums. In view of this, we set aside the whole issue back to the file of the learned AO with a direction to the assessee to submit the reconciliation with proper evidence. Appeal of the assessee is allowed for the statistical purposes.

Summary

Issues:
1. Addition of Rs.19,55,652/- to the income of the assessee due to difference between sales in profit and loss account and gross services in service tax return.
2. Delay in filing the appeal and condonation of the same.

Analysis:

Issue 1: Addition of Rs.19,55,652/- to the income of the assessee
The appeal was filed against the CIT(A)'s order confirming the addition made by the Assessing Officer. The assessee contended that the difference in turnover was due to changes in service tax payment basis and billing methods. The AR provided details to support the contention that the turnover as per service tax and profit and loss account would naturally differ due to the nature of services provided and tax regulations. However, the CIT(A) rejected the explanation as party-wise details of service tax turnover were not provided. The ITAT noted that while the difference required explanation, it did not automatically indicate lower income offered for taxation. Therefore, the matter was remanded back to the Assessing Officer for the assessee to submit a detailed reconciliation, including party-wise details, to clarify the difference. The ITAT allowed the appeal with this direction, emphasizing the need for proper evidence to support the reconciliation.

Issue 2: Delay in filing the appeal and condonation
The appeal was filed with a substantial delay of 764 days, which the assessee attributed to inadvertent omission by an employee. The assessee submitted an affidavit explaining the circumstances leading to the delay, stating that upon discovering the oversight, immediate action was taken to file the appeal. The ITAT, considering the explanation and lack of malafide intent, decided to condone the delay in filing the appeal. The decision was based on prioritizing the merits of the case over technicalities, especially when the delay was not intentional.

In conclusion, the ITAT allowed the appeal for statistical purposes, remanding the issue of addition back to the Assessing Officer for detailed reconciliation. The delay in filing the appeal was condoned due to the inadvertent nature of the omission by the assessee's employee.

This detailed analysis covers the issues raised in the legal judgment, highlighting the key arguments, decisions, and directions provided by the ITAT in response to the appeal filed by the assessee.