ASHOKKUMAR PARSHOTAMDAS SOLANKI,(PROP. OF SHIV SHAKTI CONSTRUCTION),PATAN vs. ITO, WARD-1,, PATAN

When the matter was called for hearing, the learned counsel for the assessee, at the outset, submitted that although several grounds have been raised, the solitary grievance is addition of Rs.77,00,063/- towards undisclosed sales on the basis of comparison made by the AO in relation to turnover declared by the assessee vis- à-vis turnover statedly reported in the prescribed form to the Service Tax Department.

As pointed out, the assessee is an individual and engaged in supply of labour for construction and allied activities in the name of proprietary concern M/s. Shiv Shakti Construction. The return of income for AY 2014-15 under consideration was filed declaring a turnover of Rs.58,67,316/- and a total income of Rs.4,87,000/-. It was submitted that the assessee is engaged in the business of supply of labour contract work and is duly registered with service tax department. It was contended that the assessee has rendered services within India only and earned income from supply of labour amounting to Rs.58,67,316/- only. However, the AO has recorded a finding that as per AIR information by Service Tax Department, the turnover is declared at Rs.1,35,67,379/-. The AO has thus alleged an amount of Rs.77,00,063/- as undisclosed income towards understatement of turnover to the Income Tax Department.

The learned counsel in this regard submitted that the wrong data in service tax return could be possibly due to clerical error by the Consultant while filing the service tax return as the online system of filing service tax return was introduced about that time. It was pointed out that the figure of export/exempt service is wrongly mentioned by the Consultant due to uploading or typographical error as the assessee has provided only domestic taxable services within India and paid due taxes on the same. The learned counsel for the assessee referred to several documents, such as, balance sheet, P&L account, service tax return, bank statement etc. to support the bonafides of the error committed while filing the service tax return. It was finally submitted that the assessee cannot be taxed for the hypothetical income which was neither earned nor received on the solitary basis of an incorrect service tax return. Under the circumstances, it was urged that the matter be set aside to the file of the AO for suitable verification of the facts with the Service Tax Department to arrive at a benign view in the matter.

On the basis of facts narrated above, we find adequate force in the plea of the assessee for setting aside the assessment order and remanding the matter back to the file of the AO for a fresh verification and consequently framing fresh assessment order after suitable verification of facts. The AO in our view should exercise his statutory powers and obtain information from the Service Tax Department towards turnover as well as the service tax recovery of alleged inflated turnover. It shall be open to the assessee to place all such evidences and materials before the AO to explain the alleged variance in the turnover in the de novo proceedings. The AO shall make such enquiry as may be considered expedient to examine the bonafides of the stand of assessee. The additions made are thus set aside and the AO is directed to determine the issue afresh in accordance with law after giving reasonable opportunity to the assessee in this regard and after making such clarifications and examinations as may be considered expedient.

In the result, the appeal of the assessee is allowed for statistical purposes.