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Facts
The assessee filed their return of income declaring Rs. 74,73,220/-. During scrutiny, a difference of Rs. 10,22,493/- was found between the turnover reported in GSTR-1R/GSTR-3B-R and the Income Tax Return. This difference was added as undisclosed assets, leading to a total income assessment of Rs. 85,07,853/-.
Held
The Tribunal noted that the dispute solely concerned the difference in turnover reported in GST returns and the ITR. In the interest of justice, the issue was remitted back to the Assessing Officer (AO) for reconciliation, with directions to provide the assessee with three effective opportunities to substantiate their case.
Key Issues
Whether the difference between turnover reported in GST returns and Income Tax Returns is sufficient to add the difference as undisclosed income without proper reconciliation?
Sections Cited
143(2), 142(1)
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Income Tax Appellate Tribunal, ‘B’ BENCH : BANGALORE
Before: SHRI LAXMI PRASAD SAHU & SHRI SOUNDARARAJAN K.
ORDER
PER LAXMI PRASAD SAHU, ACCOUNTANT MEMBER
This is an appeal filed by the assessee against the order passed by the Ld.CIT(A) dated 09/05/2025 vide DIN & Order No: ITBA/NFAC/S/250/2025-26/1076133397(1) on the following grounds of appeal:
1. The Learned Commissioner of Income Tax (NFAC) ought to have appreciated that the difference in sales reported in GSTR-1 and GSTR-3B does not indicate under reporting of income.
2. The Learned Commissioner of Income Tax (NFAC) ought to have appreciated that the difference in sales reported in GST returns and Income Tax Returns does not justify the addition made to the total income, as held in the following cases i. ITO-22(3)(1) v. Reliable Builders and Developers ii. Oliria Foods and Beverages Ltd. vs. Income Tax Officer, Jaipur-
The Learned Commissioner of Income Tax (NFAC) ought to have directed the Assessing Officer to adopt Rs.85,07,853 as total income as determined in the assessment order, instead of Rs. 1,49,60,005 in the computation of income sheet for the purpose of computation of tax liability., 4. Without prejudice, the addition made are excessive and ought to be reduced substantially.
5. For these and other grounds that may be urged at the time of hearing, the appellant prays that the appeal may kindly be allowed.”
Briefly stated the facts of the case are that the assessee filed their return of income on 22/12/2020 declaring an income of Rs. 74,73,220/-. Later on, the case was selected for scrutiny and notice u/s. 143(2) and 142(1) was issued to the assessee and subsequently, other statutory notices were issued to the assessee. The assessee furnished reply. From the detailed submissions, it was noticed that there is difference in the turnover reported as per GSTR-1R and GSTR-3B-R in the ITR-GSTR reported. Resultantly, there is net difference of Rs. 10,22,493/- was worked out. It was brought to the notice of the assessee, but assessee could not explain the differences as adopted by them. Therefore the difference was added as undisclosed assets and total income was assessed at Rs. 85,07,853/-.
3. Aggrieved from the above order, the assessee filed appeal before the Ld.CIT(A). The assessee furnished the written submissions which is incorporate in the CIT(A)’s order. On going through the written submissions, the Ld.CIT(A) noted that the assessee has not reconciled the discrepancies on the GST records with the audited accounts. The assessee has also taken alternate ground that 8% of profit may be considered on the differences of turnover and this was also declined by the Ld.CIT(A) since the assessee has filed his return of income on the basis of audited books of
Aggrieved from the above order, the assessee filed appeal before this Tribunal.
The Ld. Counsel reiterated the submissions made before the lower authorities and submitted that if a chance is given to the assessee to reconcile the differences as observed by the revenue authorities, the assessee will be able to reconcile with the cogent documents. On the other hand, the Ld.DR relied on the order of the lower authorities and submitted that he had two opportunities to reconcile but instead of reconciling the difference, the assessee explained the reasons.
Considering the rival submissions and perusing the available materials on record and the orders of the authorities below, we noted that the dispute is only regarding the difference of Rs. 10,22,493/- as per the figure shown in GSTR return and ITR. Considering the facts of the case and in the interest of justice, we remit this issue to the file of AO for reconciliation of the figures reported in the returns and decide the issue as per law after giving three effective oppourtinities and the assessee is directed to substantiate its case with cogent materials and not to seek unnecessary adjournments for the early disposal of the case. In case of failure, no second leniency shall be granted to the assessee.
In the result, the appeal filed by the assessee is allowed for statistical purposes. Order pronounced in the open court on 09th October, 2025.