2023 (1) TMI 656 - AT - Income Tax

Difference in contract receipt shown in books viz-a-viz in form 26AS - difference represents the amount received after filing of return of income - HELD THAT - We note that there was mismatch in the gross income reported by the assessee viz a viz the income reflecting in form 26AS for an amount of Rs. 4,13,081.00 only. As such, the assessee has shown less income by the impugned amount, therefore concurrent view was taken by the lower authorities that the assessee has suppressed the income in the books of accounts. However, we find that the assessee before the CIT (A) has contended that the impugned income was received after filing of return of income. Thus a doubt arises whether the impugned amount was shown by the assessee in the income tax return in the later year, if that be so, then if any addition is made in the year under consideration, it shall certain lead to the double addition which is undesirable under the provisions of law. As equally important to note that the assessee under a mercantile system of accounting has to declare income based on the concept of accrual. Be that as it may be, in the interest of justice and fair play we are inclined to give one opportunity to the assessee to make the properly presentation of the facts so that the AO could adjudicate the issue of afresh as per the provisions of law. Hence, the ground of appeal is allowed for the statistical purposes.

Summary

Issues:
1. Addition on account of difference in Contract Receipt and Form No.26AS
2. Charging of interest under sections 234A, 234B, and 234C
3. Initiation of penalty proceedings under section 271(1)(c) of the IT Act

Analysis:

Issue 1: Addition on account of difference in Contract Receipt and Form No.26AS
The assessee contested the addition of Rs. 4,13,081 based on the variance between contract receipts in the books and as per Form 26AS. The Assessing Officer (AO) noted a difference in receipts and made the addition. The assessee argued that the variance was due to post-return income receipt. However, the Commissioner of Income Tax (Appeals) upheld the addition, stating that income accrual mandates inclusion in the return, rejecting the assessee's explanation. The ITAT acknowledged the mismatch but granted the assessee an opportunity to present facts for fresh assessment, considering the possibility of double addition and the accrual basis of accounting.

Issue 2: Charging of interest under sections 234A, 234B, and 234C
The grounds of appeal included contesting the charging of interest under sections 234A, 234B, and 234C. However, the judgment did not provide detailed analysis or findings regarding this issue, focusing primarily on the contract receipt discrepancy.

Issue 3: Initiation of penalty proceedings under section 271(1)(c) of the IT Act
The assessee raised concerns about the initiation of penalty proceedings under section 271(1)(c) of the IT Act. Nonetheless, the judgment did not delve into this issue, as the primary focus remained on the addition related to contract receipts.

In conclusion, the ITAT allowed the appeal for statistical purposes, granting the assessee an opportunity to present additional facts for a fresh assessment concerning the discrepancy in contract receipts. The judgment emphasized the importance of adhering to accrual-based accounting principles while considering the possibility of double addition and ensuring fair play in the assessment process.