BRILLIANT PRINTERS PRIVATE LIMITED,BENGALURU vs. DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE-1(1)(1), BENGALURU

The only issue raised by the assessee is that the learned CIT(A) erred in confirming the addition of Rs. 2,15,606/- representing duty drawback, on the ground that it was duly offered to tax in the subsequent years.

The Assessing Officer (AO) during the assessment proceedings found that the assessee had accrued a total duty drawback of Rs. 2,28,942/-, whereas the assessee had offered only Rs. 13,336/- as duty drawback income, leaving an unaccounted balance of Rs. 2,15,606/- only. Accordingly, the AO made an addition of Rs. 2,15,606/- (i.e., Rs. 2,28,942/- minus Rs. 13,336/-) to the total income of the assessee. On appeal, the ld. CIT(A) upheld the addition made by the AO.

Being aggrieved by the order of the ld. CIT(A), the assessee preferred an appeal before us.

The learned Authorized Representative (ld. AR) appearing on behalf of the assessee filed a paper book running from pages 1 to 112 and submitted that the impugned amount of duty drawback has already been offered to tax in the subsequent years on receipt basis. In support of the contention, the ld. AR drew our attention to pages 55 to 112 of the paper book containing the Statements of Income for Assessment Years 2019-20 to 2022-23. Accordingly, the ld. AR contended that if the addition is sustained in the year under consideration, it would result in double taxation of the same income, which is impermissible under law.

On the other hand, the learned Departmental Representative (ld. DR) submitted that the assessee follows the mercantile system of accounting and therefore the income represented by the duty drawback ought to have been accounted for strictly on accrual basis. According to the ld. DR, the impugned amount of duty drawback accrued during the year under consideration and hence was rightly brought to tax by the AO. The ld. DR vehemently supported the orders of the authorities below.

We have heard the rival submissions of both the parties and perused the materials available on record. Admittedly, the assessee follows the mercantile system of accounting and therefore the impugned amount of duty drawback is ordinarily liable to be taxed on accrual basis in the year under consideration. However, it is also the contention of the assessee that the same amount has already been offered to tax in the subsequent years on receipt basis. 8. In our considered view, if the impugned amount of duty drawback has already suffered tax in the subsequent years, then sustaining the addition again in the year under consideration would result in double taxation of the same income, which is not permissible under the provisions of the Act. We are also conscious of the practical difficulty that may arise if the Revenue is required to reopen the assessments of subsequent years for granting corresponding relief, particularly when no additional revenue benefit would accrue to the Revenue. 9. Nonetheless, the contention of the assessee that the impugned amount of duty drawback has already been offered to tax in the subsequent years requires factual verification at the end of the AO. Accordingly, we direct the AO to verify whether the exact amount of duty drawback under consideration has been subjected to tax in the subsequent assessment years. If upon such verification the contention of the assessee is found to be correct, then no addition on account of the impugned duty drawback shall survive in the year under consideration, so as to avoid double taxation of the same income. Hence, the ground of appeal of the assessee is allowed for statistical purposes.

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