2017 (6) TMI 1075 - AT - Income Tax

Addition on undisclosed receivable amount on account of transportation charges - Held that - The transportation charges received during the period 31st March, 2010 and incurred during that period and has been debited to the profit and loss account at ₹ 3,76,174/- would not form part of receivable transportation charges. Besides, the transport rebate for A.Y 2008-09 shown by the assessee in profit and loss account would not be added because assesse has already shown as receipt in the profit and loss account. In addition to this, the AO forgot to add transport rebate reimbursable at ₹ 1,09,148.40. Therefore, reconciliation made by the AO to work out the transportation charges receivable is entirely wrong and does not base on accounting principles. Therefore, addition made by the AO and confirmed by the ld. CIT(A) needs to be deleted. Appeal filed by the assessee is allowed.

Summary

Issues:
Appeal against assessment order for AY 2010-2011, delay condonation, addition of undisclosed receivable amount on transportation charges.

Analysis:
1. The appeal was filed against the assessment order for AY 2010-2011, challenging the additions made by the Assessing Officer (AO) under Section 143(3) of the Income Tax Act 1961. The delay in filing the appeal was condoned after finding a reasonable cause for the delay.

2. The main issue revolved around the addition of an undisclosed receivable amount on transportation charges. The AO had added a significant amount to the assessee's income, considering it as receivable. The CIT(A) upheld the AO's decision, emphasizing the importance of maintaining consistent accounting practices and providing supporting evidence for claims.

3. The assessee, dissatisfied with the CIT(A)'s order, appealed further, focusing on the specific grounds related to the transportation charges. The grounds highlighted discrepancies in the treatment of various expenses and receipts, arguing for a more accurate calculation of the receivable amount.

4. During the appeal hearing, the assessee's representative presented a detailed reconciliation of the disputed amount, demonstrating that the AO's addition was based on incorrect assumptions. The reconciliation highlighted errors in the AO's computation, particularly regarding already incurred expenses and previously accounted receipts.

5. The Tribunal, after considering the arguments from both sides, agreed with the assessee's contentions. It found merit in the explanations provided by the assessee's representative, pointing out flaws in the AO's reconciliation methodology. Consequently, the Tribunal allowed the appeal, directing the deletion of the addition made by the AO.

6. In conclusion, the Tribunal ruled in favor of the assessee, overturning the addition of the undisclosed receivable amount on transportation charges. The decision was based on the discrepancies identified in the AO's calculations and the failure to adhere to proper accounting principles.

7. The judgment was pronounced on 22/02/2017, with the Tribunal allowing the appeal and setting aside the addition made by the AO.