2022 (3) TMI 655 - AT - Income Tax

Additions towards difference in the 26AS (TDS statement) and the books results - assessee argued that merely there is a difference in the 26AS and the books results, there cannot be an addition to returned income the books of account of the assessee duly audited. AO has not found any single defect in the books of accounts that has been produced before the Assessing Officer - main contentions is that the other party has booked the expenses, that cannot be the reason while making the assessment in the case of the assessee, when the contract receipt got reflected in the subsequent year as per regular method of accounting followed - HELD THAT - Surprisingly one addition is based on 26AS amount and amount in books and another from the expenses booked by the assessee and income of two years comparison. This shows how the additions were made by followings choose pick. It is only elementary that information as per data base of the Revenue authorities cannot be, by itself, a legally sustainable basis for making addition to the income of the assessee and that such imports are based starting point for appropriate inquiry which in this case made and explained by the assessee reconciliation to that want also made. There is nothing more than this information input which has been put against the assessee. We have noted that the audited books of accounts and reconciliation and the various entities contract amount offered for tax over a period time. Only difference between the contract value of each party matches over a period of time irrespective of the year offered by the assessee and therefore, grievance of the Revenue that the assessee has not offered correct income is fully explained by the assessee by filing the chart. The income offered for both the parties, in respect of which the addition made almost reconciled and offered for in the regular books, AO has not rejected the book results. Therefore, it is not required to disturb the books result which has been audited by an independent auditor. Thus, the addition made for an amount of ₹ 18,78,750/-, ₹ 15,23,978/- totaling to ₹ 34,02,728/- as per ground No. 1 are deleted on the basis of finding discussed herein above. For lumpsum disallowance of expenses - It is apparent that on the best the reason known ld. CIT(A), he has not considered the contentions of the assessee that the books of accounts are being audited and no single defects found in the bills vouchers etc. produced before the Assessing Officer. Assessment proceedings no expenses so personal nature of the expenses brought on record. No defect in any of the voucher in nature and expended is placed on record and in absence of any such observations, the ld. Assessing Officer as well as ld. CIT(A) has erred in law as well as on facts in making /confirming disallowance Looking to these factual position that even on comparative the expenses are on lower side with that of last year. DR has not placed anything contrary to this and vehemently contended the observation of the AO. In the light of these observation that there are no defects in the books, bills and voucher no addition can be made. Not only that which expenses to what extent can be considered as private as assessee being an artificial person is not spelt out from the order of lower authorities. The chart suggest that the same are at reduced figure compared to last year. Considering the material evidences and facts placed before us, we delete the lumpsum addition and thus the ground No. 2 is allowed.

Summary

Issues Involved:
1. Addition of ?18,78,750/- and ?15,23,978/- due to differences between TDS Form 26AS and books of accounts.
2. Lumpsum disallowance of ?2,00,000/-.
3. Charging interest under sections 234A, 234B, 234C, and 234D, and withdrawal of interest under section 244A of the Income Tax Act.

Issue-wise Detailed Analysis:

1. Addition of ?18,78,750/- and ?15,23,978/- due to differences between TDS Form 26AS and books of accounts:
The assessee, engaged in the business of labor contractor supplier, filed its return declaring an income of ?5,21,007/-. The case was selected for scrutiny due to a discrepancy between the turnover reported in Form 26AS and the books of accounts. The Assessing Officer (AO) observed a turnover of ?67,84,050/- in the books, while Form 26AS reflected ?86,62,800/-, resulting in an addition of ?18,78,750/-. Similarly, for M/s Bhairav Township Pvt. Ltd, a difference of ?15,23,978/- was noted due to discrepancies between income offered and expenses booked. The CIT(A) upheld these additions, stating that the assessee failed to provide documentary evidence to substantiate their claims.

The assessee argued that their books were duly audited, and no defects were found. They contended that the AO made the addition solely based on Form 26AS without rejecting the books of accounts. The assessee provided a reconciliation chart showing that the discrepancies were due to timing differences in income recognition. The Tribunal concluded that the AO's additions were not justified as the books were audited, and proper explanations were provided. Therefore, the additions of ?18,78,750/- and ?15,23,978/- were deleted.

2. Lumpsum disallowance of ?2,00,000/-:
The AO made an ad-hoc disallowance of ?2,00,000/- from various expenses such as travelling, consumables, conveyance, diesel, and staff welfare, citing revenue leakage and personal use. The CIT(A) upheld this disallowance without providing separate findings.

The assessee argued that their books were audited, and no defects were found in the vouchers. They presented a comparative chart showing that the expenses were reasonable and even lower than the previous year. The Tribunal noted that the AO and CIT(A) did not identify any specific defects or personal nature of the expenses. Given the absence of evidence supporting the disallowance and the comparative analysis showing reasonable expenses, the Tribunal deleted the lumpsum addition of ?2,00,000/-.

3. Charging interest under sections 234A, 234B, 234C, and 234D, and withdrawal of interest under section 244A:
The assessee contested the charging of interest under sections 234A, 234B, 234C, and 234D, and the withdrawal of interest under section 244A. The Tribunal noted that this ground was consequential and would depend on the outcome of the main issues.

Conclusion:
The Tribunal allowed the appeal, deleting the additions of ?18,78,750/- and ?15,23,978/- and the lumpsum disallowance of ?2,00,000/-. The issue of interest was deemed consequential and to be addressed in accordance with the law. The order was pronounced on 08/03/2022.