KAUSHIK LAXMIDAS POPAT,MUMBAI vs. ITO, WARD 29(2)(1), MUMBAI

The solitary issue raised by the assessee in appeal is with respect to addition of ₹ 70,64,630/- on account of difference between books of the assessee and Form 26AS/AIR data.

Shri. Rajesh Athavale appearing on behalf of the assessee submitted that, the assessee is engaged in the business of advertisement under the proprietary concerns Om Shakti Outdoors. During the course of scrutiny assessment for the impugned assessment year, the Assessing Officer observed that the total receipts as per Form 26AS were ₹ 1,47,89,008/-, whereas, the assessee in return of income had shown gross receipts of ₹ 77,24,378/-. Thus, the AO held that the assessee was required to get its accounts audited u/s 44AB of the Income Tax Act, 1961 [hereinafter referred to as the Act’]. The assessee during scrutiny assessment proceedings explained that the assessee had received sum of ₹ 60,10,840/- only from the Tirupati Balaji Builders & Developers Pvt. Ltd.[ In short ‘TBG’]. TBG fraudulently with an intention to claim excessive advertisement expenditure deducted TDS on higher amount and deposited the same in the account of assessee. Thus, ₹ 1,41,98,100/- shown as payment to the assessee is excessive. The assessee had never received payment to that extent from TBG. The Ld. AR raised multiple prepositions in the defence.

Per contra, Ms. Usha Gaikwad representing the department vehemently defended the impugned order and prayed for dismissing the appeal of the assessee.

We have heard the submissions made by rival sides and have examined the orders of lower authorities. We have also considered the decisions on which reliance has been placed by the Ld. AR of assessee. The short issue in present appeal for our consideration is addition on account of difference between receipts declared in profit and loss account and 26AS statement. The assessee in his return of income has declared receipts of ₹ 77,24,378/- during the period relevant to the Assessment year under appeal, whereas 26AS statement shows that the assessee has received ₹ 1,41,98,100/- from TBG alone. It is an undisputed fact that the assessee has taken credit of entire TDS i.e. ₹ 1,41,981/- that has been deposited by TBG to the credit of assessee. This fact itself shows that the assessee has received payment in respect of which TDS was deducted and deposited in assessee’s PAN. Thus, in so far as argument of the assessee that TBG has deposited higher amount of TDS to claim higher expenditure and other peripheral arguments, we find no merit in the same. The AO has made addition of difference between amount reflected in 26AS statement and the amount disclosed by the assessee i.e. ₹70,64,630/- (₹147,89,008/- - ₹ 77,24,378/-). We are of considered view that the entire receipts cannot be added in the hands of the assessee as his income. It is only the profit element embedded in the receipts from TBG that can be brought to tax. We deem it appropriate to restore this issue to the AO to re-examine the issue and determine the profit element embedded in the receipts from TBG. The AO shall grant reasonable opportunity to the assessee to make submissions in accordance with law.

Consequently, the appeal of the assessee is allowed for statistical purpose in the terms aforesaid.