2023 (10) TMI 1034 - AT - Income Tax

Suppressed contract receipts - difference in receipts as per books of accounts and Form No.26AS - HELD THAT - Admittedly, it is a matter of fact borne from the assessment order that the assessee firm had maintained its accounts as per the mercantile system of accountancy. Based on the aforesaid method of accountancy followed by the assessee firm, the accounting for the aforesaid amount of contract receipts on the date on which the bill was raised by it on M/s. Thermax Ltd. is found to be in order. As the A.O., while framing the assessment, had admittedly, due to paucity of time, not deliberated upon the aforesaid explanation of the assessee, therefore, in our considered view, the matter in all fairness requires to be restored to his file. Needless to say, the A.O. shall, in the course of the set-aside proceedings, afford a reasonable opportunity of being heard to the assessee firm, which shall remain at liberty to substantiate its claim on the basis of fresh documentary evidence. Thus, the Grounds raised by the assessee firm are allowed for statistical purposes in terms of our aforesaid observations.

Summary

Issues involved:
The appeal challenges the addition of Rs. 10,08,710 based on the alleged difference in receipts as per books of accounts and Form No.26AS for the assessment year 2014-15.

Details of the Judgment:

Issue 1: Discrepancy in receipts
The assessee firm, engaged in business activities, filed its return for A.Y.2014-15, declaring income. Discrepancy arose when the AO noted a variance in receipts from M/s. Thermax Ltd. as per Form 26AS and books of accounts. Assessee claimed part of the receipts were accounted for in the preceding year. However, AO disregarded the explanation due to mismatch in amounts, absence of external evidence, and timing of income booking. Consequently, AO added Rs. 10,08,710 as income for the current year. The CIT(A) upheld this decision despite the assessee's contentions.

Issue 2: Appeal before ITAT
The assessee appealed before the ITAT challenging the addition of Rs. 10,08,710. The ITAT considered arguments from both parties, reviewed lower authorities' orders, and examined relevant judicial pronouncements. The core dispute revolved around the sustainability of the addition made by the AO regarding the alleged suppressed contract receipts. The AR of the assessee presented a reconciliation of the discrepancy, asserting that the entire amount had been offered for tax. Notably, the assessee maintained accounts under the mercantile system.

Conclusion:
The ITAT observed that the AO did not adequately consider the reconciliation provided by the assessee due to time constraints. Thus, the matter was remanded to the AO for further examination, allowing the assessee to present additional evidence. The ITAT directed the AO to provide a reasonable opportunity for the assessee to substantiate their claim. Additionally, if the amount had indeed been taxed in the preceding year, the AO was instructed to make necessary adjustments. The ITAT allowed the appeal for statistical purposes, citing the judgment in the case of Income-tax Officer V/s. Bachu Lal Kapoor. A general ground of appeal was dismissed as not pressed.