RAVI YANTRIKI UDYOG PRIVATE LIMITED,PUNE vs. ITO WARD (5)(4), PUNE

ITA 1588/PUN/2025Status: DisposedITAT Pune29 October 2025AY 2015-168 pages
AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that the assessee's claim for reversal of income due to non-recovery was supported by its books of account, which reflected the raised invoices and subsequent reversal as per accounting principles. The Tribunal noted that the assessee followed the mercantile system of accounting, and the reversal was a valid business decision due to non-recovery. Respectfully following the decisions in T.R.F. Ltd. vs. CIT and Oman International Bank (supra), the Tribunal found that treating a debt as bad and writing it off in the books based on commercial wisdom is sufficient for claiming deduction or for not offering such income for taxation, provided the decision is bonafide. The Tribunal observed that the AO and CIT(A) had not brought any contrary material or juridical precedent to enable a different view. Therefore, the Tribunal set aside the impugned order of the CIT(A)/NFAC and directed the AO to delete the addition of Rs.1,13,53,979/-. The grounds raised by the assessee were allowed.

What were the facts?

The assessee, Ravi Yantriki Udyog Private Limited, engaged in erection and commission of plants, filed its return for AY 2015-16 declaring an income of Rs.14,44,400/-. The case was selected for limited scrutiny due to discrepancies between TDS reflected in Form 26AS and reported receipts. The Assessing Officer (AO) noted receipts of Rs.1,13,53,979/- under Section 194C in Form 26AS that were not offered to tax. After obtaining information from M/s Vanshika Sugar and Power Industries Ltd. under Section 133(6), the AO added this amount as suppressed receipts to the assessee's total income, totaling Rs.1,27,98,380/-. The assessee appealed to the CIT(A)/NFAC, which upheld the addition, stating the assessee failed to provide documentary evidence and that income booked under the mercantile system should be offered for taxation once a bill is raised. The CIT(A) also initiated penalty proceedings under Section 271(1)(c).

What were the issues?

1. Whether the addition of Rs.1,13,53,979/- as suppressed receipts is justified, considering the assessee's claim that the amount was reversed in its books on 31.03.2015 due to non-receipt, despite following the mercantile system of accounting and claiming TDS credit for the same (turning on Section 143(3) and principles of mercantile accounting). 2. Whether the CIT(A) erred in upholding the addition solely based on Form 26AS without appreciating that the amount was reversed in the books due to non-recovery, which is a valid business decision and does not amount to suppression of income, especially when income has not accrued or is not likely to be realized (turning on principles of income recognition and Section 143(3)). Assessee's Contentions: The assessee argued that the amount of Rs.1,13,53,979/- was duly reversed in its books on 31.03.2015 due to non-receipt from M/s Vanshika Sugar and Power Industries Ltd. It followed the mercantile system of accounting, and mere booking followed by reversal due to non-recovery does not constitute suppression of receipts, particularly when income is not actually received or realized. The assessee contended that the reversal was supported by its books of account, reflecting raised invoices and subsequent reversal as per accounting principles due to non-recovery, which is a valid business decision. The assessee relied on the principle that income not accrued or realized cannot be taxed, especially when written off. The AO's addition was based on information from the party which was factually incorrect, and the AO failed to appreciate that the relied-upon bills were from the accounting year 2013-14, not taxable in the current year. The assessee also cited the decisions in T.R.F. Ltd. vs. CIT and Oman International Bank (supra) to support its claim for deduction/deletion of addition.

Which sections of the Income-tax Act were involved?

Section 194C,Section 143(2),Section 142(1),Section 133(6),Section 143(3),Section 271(1)(c),Section 36(1)(vii),Section 36(1)(vi)

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Income Tax Appellate Tribunal, “B” BENCH, PUNE

Before: SHRI R.K. PANDA & MS. ASTHA CHANDRA

PER ASTHA CHANDRA, JM :

The appeal filed by the assessee is directed against the order dated 02.04.2025 of the Ld. Commissioner of Income Tax (Appeals), NFAC, Delhi [“CIT(A)/NFAC"] pertaining to Assessment Year (“AY”) 2015-16. 2. The assessee has raised the following grounds of appeal:- "On facts and in law:

1.

The Ld. CIT(A) has erred in upholding the assessment of total income at Rs.1,27,98,380/- as against the returned income of Rs.14,44,400/- thereby confirming the addition of Rs.1,13,53,979/- made by the Assessing Officer (AO) as alleged suppressed receipts.

2.

The Ld. CIT(

The order continues below.

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