2023 (10) TMI 1263 - AT - Income Tax

Undisclosed income - Difference between income as per financials and income as per Form 26AS - CIT(A) deleted the addition - only grievance of the Revenue was that when the additional evidence in the form of reconciliation sheet has been taken on record, provisions contained under rule 46A of IT Rules need to be complied with by providing opportunity of being heard to the assessee - HELD THAT - We are of the considered view that the assessee has brought on record reconciliation of the account as extracted by the AO of the assessment order but before the Ld. CIT(A) the assessee has filed comprehensive explanation and reconciliation to decide the issue in question. When the Ld. CIT(A) has coterminous power there was no need to call for the remand report from the AO moreover the issue was pertaining to reconciliation of the account only which stood reconciled as duly explained in the impugned order by the Ld. CIT(A). Decided against revenue.

Summary

Issues Involved:
1. Difference between income as per financials and income as per Form 26AS.
2. Lack of documentary evidence to substantiate the claim.
3. Non-compliance with Rule 46A of I.T. Rules, 1962.
4. Discrepancy in reconciliation sheets submitted at different stages.

Summary:

1. Difference between income as per financials and income as per Form 26AS:
The Assessing Officer (AO) observed a mismatch between the receipts reflected in Form 26AS (Rs. 30,35,06,000/-) and those shown in the Profit & Loss (P&L) account (Rs. 28,08,07,958/-). The AO added Rs. 2,26,98,042/- to the income, representing this difference. The CIT(A) deleted this addition, accepting the assessee's reconciliation.

2. Lack of documentary evidence to substantiate the claim:
The CIT(A) accepted the assessee's reconciliation, which explained the differences due to service tax, timing differences in income recognition, and income not reflected in Form 26AS due to no TDS being deducted. The reconciliation included:
- Difference due to service tax: Rs. 3,33,01,067/-
- Income offered in the current year but reflected in Form 26AS of the next year: Rs. 1,52,83,936/-
- Income offered in the previous year but reflected in Form 26AS of the current year: Rs. 89,23,743/-
- Income not reflected in Form 26AS due to no TDS: Rs. 33,63,251/-
- Miscellaneous differences: Rs. 8,82,939/-

3. Non-compliance with Rule 46A of I.T. Rules, 1962:
The Revenue argued that additional evidence (reconciliation sheet) was considered by the CIT(A) without giving the AO a reasonable opportunity to examine it, as required by Rule 46A. The Tribunal found that the CIT(A) had the coterminous power to consider the reconciliation and that the issue was sufficiently explained without needing a remand report from the AO.

4. Discrepancy in reconciliation sheets submitted at different stages:
The CIT(A) and Tribunal found that the explanations provided by the assessee regarding the differences were consistent and adequately substantiated with documentary evidence. The Tribunal upheld the CIT(A)'s decision, noting no infirmity or perversity in the order.

Conclusion:
The Tribunal dismissed the Revenue's appeal, affirming the CIT(A)'s deletion of the addition of Rs. 2,26,98,042/-, based on the comprehensive reconciliation and explanations provided by the assessee. The order was pronounced in the open court on 28.06.2023.