2017 (2) TMI 326 - AT - Income Tax

Undisclosed current asset - outstanding balance receivable being not reflected the same in the balance sheet as on 31-03-06 - Held that - We find that the impugned amount of ₹ 3,70,244/- remained as unpaid as on 31-03-2006 as the Simplex Infrastructures Limited to whom the Assessee rendered services retained the same as retention money for realization of liquidated damages, if any, for the work executed by the Assessee and according to Assessee, the realization of the amount was uncertain and that was the reason, he did not show the amount as receivable in the Balance Sheet. It is pertinent to note that the Simplex Infrastructures Limited deducted tax on the total amount as required to be paid to the Assessee and a letter of confirmation was filed before the AO as issued by the Simplex Infrastructures Ltd, deductor, along with the evidences of payments mentioning the cheque no s and dates of payments of impugned of ₹ 3,70,244/- and thereby, we agree with the submissions of the Ld.AR that the tax was offered on the total value of contract work and we find force in the arguments of the Assessee that income once taxed can not be taxed again, we hold that the impugned addition was part of gross receipt and as shown income in the profit and loss account, thus, it can not become an addition again bringing the same for taxation for not following the principles of accountancy. - Decided in favour of assessee

Summary

Issues:
Whether the addition of ?3,70,244 as an undisclosed current asset was justified by the CIT-A?

Analysis:
The appeal was against the order passed by the Commissioner of Income Tax(Appeals) for the assessment year 2006-07. The main issue raised by the assessee was the justification of confirming the addition of ?3,70,244 as an undisclosed current asset. The assessee, engaged in contract work, declared total income of ?2,04,640 and the income was determined by the AO at ?5,96,866. The case was transferred to a different jurisdiction, and the AO added ?3,70,244 to the income of the assessee as an outstanding balance receivable not reflected in the balance sheet. The assessee argued that the amount was not shown as receivable due to uncertainty in realization, relying on the mercantile system of accounting and various legal precedents.

During the appeal before the CIT-A, the assessee submitted bills and TDS details, explaining that the amount in question was unpaid retention money for possible damages. The CIT-A, however, rejected the argument that the amount was already offered for taxation and considered it as a case of income concealment due to non-disclosure in the balance sheet. The CIT-A upheld the addition as undisclosed income, emphasizing that the balance sheet did not reflect the outstanding amount, leading to a concealment of profit.

The assessee, citing legal principles and judgments, argued that the impugned amount was part of gross receipts and had already been included in the profit and loss account, hence should not be taxed again. The Tribunal agreed with the assessee's contentions, holding that once income is taxed, it cannot be taxed again, and the addition of ?3,70,244 as undisclosed income was not justified. The Tribunal allowed the appeal, emphasizing that the impugned amount was already part of the shown income and should not be subjected to double taxation.

In conclusion, the Tribunal allowed the appeal of the assessee, ruling that the addition of ?3,70,244 as an undisclosed current asset was not justified, as the amount had already been included in the gross receipts and profit & loss account, and taxing it again would amount to double taxation.