2017 (12) TMI 1414 - AT - Income Tax

Mismatch between the audited profit and loss account and ITS details - The assessee is acting as agent on various Air Lines for domestic and international bookings. The assessee operates through its branches in almost all the major cities and places of tourist interest in India. - Held that - On perusal of audited financial statement we note that the assessee has shown gross total income of ₹12,65,18,608/- as evident from the audited profit and loss account. Thus, the allegation of the AO that all the income shown in the ITS details has not been declared in income tax return does not hold good. The AO has not bought anything on record about the name of parties in respect of which the assessee failed to disclose income in its income tax return. Thus, we feel that no addition cannot be sustained in the given facts and circumstances. We also note that the additional income declared by assessee in its income tax return vis- -vis in ITS details exceeds the income shown in ITS details. Once the income shown by the assessee is greater than the ITS details then no addition can be made on account of non-disclosure of income. - Decided against revenue

Summary

Issues:
- Discrepancy in income disclosure between ITS details and income tax return
- Addition made by AO for mismatch in audited profit and loss account and ITS details

Analysis:
1. The main issue in this case was the discrepancy in income disclosure between the Income Tax Scrutiny (ITS) details and the income tax return. The Revenue appealed against the deletion of additions made by the Assessing Officer (AO) for discrepancies amounting to ?2,11,53,391, ?17,88,917, and ?1,30,500. The AO observed that the assessee had not disclosed certain incomes as per ITS details, leading to the additions. The assessee argued that a detailed reconciliation was provided to the AO, showing that the declared income exceeded the ITS details. The assessee relied on a Mumbai Tribunal case to support their claim. The Commissioner of Income Tax (Appeals) (CIT(A)) deleted the additions made by the AO, emphasizing that the returned income exceeded the ITS details, and the AO failed to rebut the explanations provided by the assessee.

2. The second issue involved the addition made by the AO based on the mismatch between the audited profit and loss account and the ITS details. The AO noted discrepancies in contractual receipts, rental income, and professional fees not reflected in the books of account. The assessee explained that the contractual receipt was already included in the audited financial statements, and no rental income was received. The CIT(A) considered the submissions and relevant case law, concluding that the additions made by the AO were not sustainable. The ITAT Kolkata upheld the CIT(A)'s decision, stating that the AO did not provide evidence of undisclosed income in the income tax return and that the returned income exceeded the ITS details.

3. The ITAT Kolkata further emphasized that if the income declared in the tax return exceeds the ITS details, no addition can be made for non-disclosure of income. Citing a Mumbai Tribunal case, the ITAT Kolkata reiterated that additions solely based on ITS information without proper substantiation are not valid. The tribunal declined to interfere with the CIT(A)'s order, ultimately dismissing the Revenue's appeal. The judgment highlighted the importance of reconciling income details and the significance of the returned income exceeding the ITS details to prevent unwarranted additions by tax authorities.