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Income Tax Appellate Tribunal, JAIPUR BENCH ’SMC’, JAIPUR
Before: SHRI SHRI VIJAY PAL RAOvk;dj vihy la-@ITA No. 884/JP/2018
This appeal by the assessee is directed against the order dated 24.05.2018 of ld. CIT (Appeals)-2, Jaipur for the assessment year 2013-14. The assessee has raised the following grounds of appeal :-
“ 1. That on the facts and in the circumstances of the case the ld. CIT (A) is wrong, unjust and has erred in law in holding that appellant has disclosed short turnover of Rs. 10,37,891.00 by solely relying on Form 26AS and sustaining an addition of Rs. 83031.00 made by ld. AO by applying net profit rate of 8% on said turnover of Rs. 10,37,891.00.
2. that on the facts and in the circumstances of the case the ld. CIT (A) is wrong, unjust and has erred in law in holding that appellant has disclosed short turnover of Rs. 18,23,325.00 in respect of sales made to Asian Paints Limited by solely relying on credit summations of ledger of the appellant in the books of Asian Paints Limited without examining the nature of the entries and period to which they relate and sustaining an addition of Rs. 1,45,866.00 made by ld. AO by applying net profit rate of 8% on said turnover of Rs. 18,23,325.00.
3. That the appellant craves the permission to add or to amend to any of ground of appeal or to withdraw any of them.”
Ground Nos. 1 & 2 are regarding additions made on account of discrepancy in the turnover between the assessee’s record and in Form 26AS as well as discrepancy found due to the turnover shown in the ledger account from Asian Paints Ltd. by applying profit rate at 8% of the said turnover.
The assessee is an individual and engaged in the business of providing services to customers on behalf of Asian Paints Ltd. in the name of proprietorship concern M/s. Kandarp Traders. The assessee filed his return of income on 30th July, 2014 declaring total income at Rs. 9,80,000/- under section 44AD of the IT Act on the disclosed turnover of Rs. 80,55,351/-. During the scrutiny proceedings, the AO noted that as per 26AS the total receipt of the assessee during the year are Rs. 1,08,27,899/- including Rs. 62,844/- received under section 192B. Thus the AO found that the receipt of the assessee under section 194C, 194I and 194J as per 26AS are Rs. 1,07,65,055/-. The AO asked the assessee as to why the income on account of undisclosed receipt or short receipt declared by the assessee should not be added to the total income of the assessee. In reply, the assessee contended that some of the TDS shown in the 26AS under section 194I and purchase tax collected by the service provider for the Government are not the income of the assessee but these are only the tax collected by the assessee on behalf of the Government. The assessee clarified that 26AS includes service tax component of Rs. 10,28,410/- and, therefore, for the purpose of section 44AD the turnover should be taken excluding service tax component. The AO did not accept this contention of the assessee and has called for the information from Asian Paints under section 133(6) of the Act. As
per the ledger account of the assessee from Asian Paints, the total receipt was found at Rs. 1,08,88,410/-. Thus the AO noted discrepancy in the turnover disclosed by the assessee as against the turnover shown in the ledger account from Asian Paints.
The assessee countered this figure of turnover by saying that some of the amounts shown in the ledger account are already subjected to tax in the preceding year. The AO rejected the said contention on the ground that the assessee has not maintained regular books of account and made the addition by applying the net profit at 8% on the excess turnover found recorded in the ledger account from Asian Paints. The assessee challenged the action of the AO before the ld. CIT (A) but could not succeed.
Before the Tribunal, the ld. A/R of the assessee has submitted that in Form 26AS the total amount of Rs. 10,37,891/- does not pertain to the assessee. The assessee neither received those amounts nor any invoice was raised by the assessee in favour of those parties. He has referred to the details of those amounts and submitted that these are wrong entries in the Form 26AS whereas no such transactions have been entered into by the assessee or any amount was received by the assessee. He has further contended that the ld. CIT (A) has made a reference regarding one transaction shown in Form 26AS. However, the said transaction is regarding TDS deducted by the company M/s. Kandarp Tradelinks and Services Pvt. Ltd. under section 192B on salary and the assessee has duly disclosed the same in his computation of income. Therefore, the said amount cannot be taken for the purpose of taking the turnover of the assessee when it is salary income and separately declared by the assessee. Apart from that, a credit of Rs. 10,37,891/- is also not part of the turnover of the assessee and, therefore, the AO has wrongly made an addition on this account.
On the other hand, the ld. D/R has relied upon the orders of the authorities below.
I have considered the rival submissions as well as the relevant material on record. While making the addition on account of undisclosed turnover, the AO considered the entries in Form 26AS. The assessee has submitted that as many as 12 entries shown in the Form 26AS do not pertain to the assessee as the assessee has not done any transaction with these parties and also not received any amount from these parties. The details of these entries are as under :-
Sl.No. Name Gross Amount TDS (i) Shakuntlam Colonisers Pvt Ltd 51856.00 520.00 (ii) ITC Limited 76800.00 768.00 (iii) SIDBI 40737.00 815.00 (iv) Wedig Tech Solutions Pvt Ltd 9200.00 92.00 (v) Benzochem Industries 66555.00 1332.00 (vi) Raj Rajeshwari Buildrs 199000.00 3980.00 (vii) Imkemex India Pvt Ltd 222000.00 2220.00 (viii) Rahul Sehgal 115000.00 1150.00 (ix) SBI 82142.00 1642.00 (x) Banarsi Das Automobiles Ltd 46100.00 4610.00 (xi) DC Model Sr Secondary School 34501.00 346.00 (xii) Manish Bhalla 94000.00 940.00 TOTAL 1037891.00 14266.00 Thus the addition made by the AO by taking the short declaration of turnover to the extent of this amount is claimed as unjustified as these are not the transactions of the assessee. The assessee has pointed out that some of the transactions as recorded in the 26AS are also in respect of some other receipts and not forming the part of the turnover. However, the AO has not considered these entries which do not constitute the turnover of the assessee. Accordingly, in the facts and circumstances of the case when the assessee has specifically pointed out the transactions which found in the Form 26AS but not entered into or carried out by the assessee nor any amount was received from these parties on account of such transactions, then the matter requires to be properly verified whether these entries in the Form 26AS are representing the turnover of the assessee or not. Further, the assessee has also filed before the AO a reconciliation statement wherein certain entries are reversed but the AO has not verified this fact whether certain entries are reversed by the assessee and therefore, cannot be considered as part of the turnover for the year under consideration. Accordingly, this issue is set aside to the record of the AO for proper verification of these facts regarding the entries in Form 26AS not pertaining to the assessee and consequently do not constitute the turnover for the year and secondly in the reconciliation statement the assessee has shown various entries as reversed and, therefore, do not form part of the turnover for the year. Needless to say, the AO should afford an appropriate opportunity of hearing before passing fresh order on this issue.
In the result, the appeal of the assessee is allowed for statistical purposes. Order is pronounced in the open court on 29/10/2019.