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Facts
The appellant disclosed brokerage income on a cash basis, but the CPC made an addition for a mismatch with the 26AS statement. The appellant's rectification petition was rejected. The CIT(A) upheld the addition, finding that the appellant failed to prove consistent adherence to the cash basis of accounting.
Held
The Tribunal found that the CIT(A) did not fully consider the appellant's claim of consistently following the cash basis of accounting. The matter was remitted back to the CIT(A) to verify the returns of income for the current and subsequent years regarding the cash basis and TDS claims.
Key Issues
Whether the CIT(A) erred in upholding the addition made by the CPC without properly considering the appellant's claim of consistently following the cash basis of accounting, especially concerning brokerage income and TDS.
Sections Cited
143(1)(a), 154, 145
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Income Tax Appellate Tribunal, Mumbai “SMC” Bench, Mumbai.
Before: Smt. Kavitha Rajagopal (JM) & Shri Omkareshwar Chidara (AM)
1. Ld. CIT(A) erred in law as well as on fact in upholding adjustment of Rs.13,41,062 made by CPC, Bengaluru u/s. 143(l)(a) of the Act.
2. Ld. CIT(A) erred in law as well as on fact in upholding rejection of application made u/s. 154 of the Act
3. Id. CIT(A) erred in law as well as on fact in upholding addition of Rs. 13,41,062 duly offered for taxation in subsequent years on cash basis, ignoring evidences and explanation placed on record
2. In this case, the CPC made an addition of Rs. 13,41,062/- stating that there is a mismatch in income as appearing in 26AS statement as agaisnt income offered in the income tax return which was processed under section 143(1)(a) of the I.T. Act. The appellant filed a rectification petition under section 154 of the Act before CPC and the same was rejected. The CPC, has not taken into consideration the submissions made by appellant under 2 Manisha Lal section 154 of the Act and the same was rejected without proper reasoning, claimed the appellant.
As the CPC rejected the petition under section 154 of the Act, an appeal was filed by the appellant before Ld. CIT(A). The Ld. CIT(A) has dismissed the appeal of the appellant by adjudicating as follows :- “On perusal, of the submissions and the documents filed during appellate proceedings, it is observed that the appellant is an individual who gets Brokerage/Commission income in shares and securities from the Broker which is disclosed under Income from Other Source during the year. The Ld CPC has added the difference between the Income as per Income Tax return and 26AS u/s 143(1)(a) of the Act. The contention of the appellant is that "the appellant disclosed income from Brokerage under the head Income from Other Source based on cash receipt from the Broker along with TDS amount of Rs. 131608 reflected in 26AS. The same has consistently been followed in the previous years as well as subsequent years. Since the Income Tax return form ITR-2 does not have any specific schedule for "Basis for accounting method" as defined in section 145 of the Income Tax Act. Moreover, the appellant follows cash basis of accounting and the differential income of Rs. 1341062/- has been offered for Income by the appellant in the subsequent assessment years. The appellant further is stated that if the receipts are completely omitted then the provision of section 143(1)(a)(vi) shall be applicable. In our case, the assessee has not omitted the receipts, in fact the assessee has followed the Cash basis of accounting and hence in view of the same section 143(1)(a)(vi) is not applicable. "However the appellant has filed to prove that he been consistently following cash basis of accounting and that the receipts as per form No. 26 As have dully been reflected the returns. Onus is on the appellant to reconcile and show with evidence that there is no receipt which is not accounted for and reflected in the returns. The appellant has failed to discharge this onus. In view of the above discussion, it is held that the addition made by the assessing officer amounting to Rs. 13,41,062/- under head income from other source is upheld and the grounds of appeal no. 1 and 2 dismissed.
Aggrieved by the order of Ld. CIT(A), an appeal was filed before the ITAT with the grounds of appeal stated in page No. 1 of this order.
During the proceedings before the ITAT, the Ld. AR of the appellant has again pleaded that the appellant is an ‘individual’ consistently following cash system of accounting which can be perused from the return of income filed by him in this assessment year and subsequent two years of returns of 3 Manisha Lal income. This vital fact was not considered by Ld. CIT(A) while deciding the appeal.
The Ld. DR relied on the orders of the Ld. AO and Ld. CIT(A).
After hearing both sides, it is decided that the file is remitted back to the file of the Ld. CIT(A) with the following directions :-
a) To peruse the returns of income filed by the appellant of the current year and subsequent years of income to see whether the appellant offered brokerage income on cash basis i.e., as and when he has received the same. b) While claiming TDS, corresponding incomes were offered to tax or not.
An opportunity shall be given to the appellant by Ld. CIT(A) to demonstrate the contentions of appellant and accordingly an order may be passed on merits.
With these directions, the appeal is remitted to the file of Ld. CIT(A).
The appeal of appellant is allowed for statistical purposes.
Order pronounced in the open Court on 24/02/2025.