DY. COMMISSIONER OF INCOME TAX , CIRCLE-15(1), HYDERABAD vs. MAATHA PROJECTS LLP, HYDERABAD

The Ld. CIT(A)-7, Hyderabad had erred in treating the receipts as advances without any corroborative evidence to support the argument of the assessee.

The Ld. CIT(A) erred in appreciating that apart from giving 26AS reconciliation the assessee has not substantiated the actual work done and the basis for treating the receipt as advance. 4. Any other ground(s) that may be urged at the time of hearing.” 2. Briefly, the facts of the case are that the only issue arising in this case is whether the gross receipts disclosed as per the service tax return filed can be treated as gross receipts / work done for the purpose of computation of income as per Income Tax. The Assessing Officer held that the appellant had declared an amount of Rs.48,21,46,000/- as sales for the purpose of service tax return. However, the appellant has recognized revenue of Rs.11,15,48,133/- for the purpose of computation of Income Tax. The Assessing Officer observed that the tax deductor to whom assessee was providing services has deducted tax of Rs.96,42,900/- on the gross amount of Rs. 48,21,45,000/-. Under the circumstances, the Assessing Officer treated the difference of Rs.37,05,97,867/-(i.e.Rs.48,21,46,000 - Rs.11,15,48,133) as un-booked gross receipts and estimated profit at 8% on Rs. 37,05,97,867/-, which comes to Rs. 2,96,47,830/- and added the same to the returned income of the for the impugned AY.

Aggrieved by the order of CIT(A), the revenue is in appeal before the ITAT.

Before us, the ld. DR of the assessee submitted that the CIT(A) erred in appreciating that apart from giving 26AS reconciliation the assessee has not substantiated the actual work done and the basis for treating the receipt as advance. He, therefore, submitted that the AO has rightly made the addition.

The ld. AR, on the other hand relied on the order of CIT(A) and submitted that the services are not performed in the current AY and till the performance of the service by the assessee, the assessee could not be said to be received the amount on accrual as the assessee could not exercise its dominion over the receipt and the impugned amounts should be taxed in the year in which the assessee renders

We have considered the rival submissions and perused the material on record as well as gone through the orders of revenue authorities. From the order of AO, we find that the assessee has raised sales bills, but, in the revenue account certain percentage has been offered as revenue for the year under consideration. The AR of the assessee submitted that the balance was shown as advance from customers and in the subsequent year, it has been offered for taxation. We find that neither the AO nor CIT(A) verified this fact. The ld. AR has also not produced any documentary evidence to substantiate its claim with regard to advance from customers. Therefore, in the interest of justice, we deem it fit and proper to remit the issue to the file of the AO with a direction to re-decide the issue with cogent materials in respect of advances received by the assessee from the customers and whether it has been offered as income in the respective years with complete reconciliation, after providing reasonable opportunity of being heard to the assessee in the matter. Accordingly, the grounds raised by the revenue are treated as allowed for statistical purposes.

In the result, appeal of the revenue is allowed for statistical purposes in above terms. Pronounced in the open court on 21st September, 2021.