2022 (7) TMI 938 - AT - Income Tax

Revision u/s 263 - 5% of bill amount never offered for taxation by the assessee - contention of the Revenue is that income has not suffered taxation, which has been rightly brought to tax by authorities below, which is vehemently disputed by assessee even in its grounds of appeal - HELD THAT - We have prima facie observed that once the assessee has offered/credited total billed amount of Rs.4,40,43,593/- in its Profit and Loss Account (as stated by AO at para 5(i) of the assessment order) and merely receivables as at year end to the tune of Rs.22,02,368/- were set-off against creditors, then obviously instead of showing receivables in Balance Sheet as at year end, the assessee has reduced the creditors which are to be shown in Balance Sheet as at year end, but, prima facie it appears that the income has been fully brought to tax, which A.O. itself has admitted that the total receipt of Rs.4,40,43,593/- has been credited in the P L A/c. We are of the considered view that the matter need to be restored back to the file of A.O. for limited verification as to whether the entire amount of billing has been credited to P L A/c as income and suffered taxation or not, and in case, if 5% of the amount of receivable is merely set-off against the creditor instead of showing receivable in the balance-sheet, will not have any repercussion on the income chargeable to tax, provided 100% billing amount (including 5% receivable of the last fortnight aggregating to Rs.22,02,368/- ) was offered to tax by the assessee in return of income and due taxes paid. If that be so where merely receivables are set off against creditors although total billed amount is credited to P L Account and offered for taxation and due taxes paid, we are of the considered view that no prejudice is caused to Revenue although it may be an accounting error. Thus, with these directions, we direct A.O. to verify whether such income to the tune of Rs.22,02,368/- was offered to taxation by assessee or not, or it is purely an accounting error of setoff of receivable against creditor. With these directions, we set aside the matter to the file of A.O. for carrying out limited verification as directed by us in this order. Appeal of assessee allowed for statistical purposes.

Summary

Issues:
- Addition of Rs.22,02,368 to the income of the assessee due to non-disclosure of income.
- Confirmation of the addition by the Commissioner of Income Tax (Appeals).
- Appeal filed by the assessee before the tribunal challenging the appellate order.
- Absence of the assessee during the hearing of the appeal before the tribunal.

Detailed Analysis:

1. Background and Assessment Process:
The appeal was filed by the assessee against the appellate order dated 12.12.2017 passed by the Commissioner of Income-tax (Appeals) for the assessment year 2012-13. The case involved scrutiny assessment under Section 143(3) of the Income-tax Act, 1961. The initial assessment order dated 28.03.2015 was set aside, and a fresh assessment was directed by the CIT, Varanasi, resulting in the subsequent assessment order dated 24.12.2016.

2. Issue of Non-disclosure of Income:
The primary issue in the appeal was the addition of Rs.22,02,368 to the income of the assessee due to non-disclosure. The revenue authorities contended that the assessee had not shown 5% of the billed amount for the last fortnight of the financial year as receivable, leading to the income not being taxed. The CIT(A) confirmed this addition, emphasizing the necessity for reflecting such income in the books of accounts.

3. Tribunal Hearing and Decision:
During the tribunal hearing, the assessee did not appear, and the Revenue argued in favor of upholding the addition. The Revenue highlighted that the entire billed amount should have been credited to the Profit and Loss Account, and any discrepancy in the treatment of receivables against creditors could impact the taxation. The tribunal, after considering the submissions, observed that the total billed amount had been credited to the Profit and Loss Account. It directed the Assessing Officer to verify whether the income of Rs.22,02,368 was offered for taxation by the assessee and if any accounting error existed in setting off receivables against creditors.

4. Tribunal's Decision and Directions:
The tribunal allowed the appeal for statistical purposes, indicating that the matter needed verification by the Assessing Officer. It emphasized the importance of ensuring that the entire billing amount was offered for taxation and paid due taxes. The tribunal directed the AO to conduct a limited verification to determine if the income had been correctly taxed, considering the accounting treatment. The AO was instructed to provide the assessee with a proper opportunity to be heard in line with the principles of natural justice.

In conclusion, the tribunal's decision focused on ensuring the correct taxation of income and addressing any potential accounting errors, highlighting the need for a thorough verification process by the Assessing Officer while providing the assessee with a fair opportunity to present their case.