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Facts
The assessee, a partnership firm engaged in distribution, filed its return of income for AY 2018-19. The AO completed the assessment by making an addition of Rs. 8,15,305/- on account of a discrepancy between gross receipts in Form 26AS and the Profit & Loss account, treating the difference as undisclosed business receipts. The assessee contended that the variation was due to GST component included in Form 26AS but excluded from their accounts.
Held
The Tribunal noted that the assessee's explanation regarding the exclusion of GST from gross receipts was substantiated with sample invoices. The assessing authority and the CIT(A) failed to disprove this explanation or provide any finding as to why it could not be accepted. Therefore, the addition was considered unwarranted.
Key Issues
Whether the addition made by the AO on account of the difference in gross receipts between Form 26AS and the Profit & Loss account, treating it as undisclosed income, is justified when the assessee provided a valid explanation related to the GST component.
Sections Cited
143(3), 143(3A), 143(3B)
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Income Tax Appellate Tribunal, COCHIN BENCH
Before: SHRI INTURI RAMA RAO, AM & SHRI SONJOY SARMA, JM
O R D E R Per: Inturi Rama Rao, AM This appeal filed by the assessee is directed against the order of the National Faceless Appeal Centre, Delhi [CIT(A)] dated 22.05.2024 for Assessment Year (AY) 2018-19.
Brief facts of the case are that the appellant is a partnership firm duly constituted under the provisions of the Partnership Act. It is engaged in the business of distribution of consumer products and ancillary products of Hindustan Unilever Ltd. The return of income for AY 2018-19 was filed on 31.10.2018 disclosing total income of Sitaram Trading Company Rs. 44,49,830/-. Against the said return of income, the assessment was completed by the National e-Assessment Centre (hereinafter called "the AO") vide order dated 19.03.2021 passed u/s. 143(3) r.w.s. 143(3A) & 143(3B) of the Income Tax Act, 1961 (the Act) at a total income of Rs. 55,07,360/-. While doing so, the AO made addition of Rs. 8,15,305/- considering the gross receipts as per Form 26AS for the previous year relevant to the assessment year of Rs. 5,56,84,919/- as against the gross receipts shown by the appellant of Rs. 4,61,23,089/-. The difference of gross receipt of Rs. 95,91,830/- was treated as undisclosed business receipts, estimated the income at 8.5%. Accordingly, made addition of Rs. 8,15,305/- as undisclosed income of the appellant. The AO also brought to tax an amount of Rs. 1,48,627/- being the difference in the amount of interest of income tax refund for AY 2014-15.
The factual background leading to the above addition is that the gross receipts as per Form 26AS was Rs. 5,56,84,919/- whereas the gross receipts reflected in the Profit & Loss A/c. is only Rs. 4,61,23,089/-. When the appellant was called upon to explain the discrepancy between the two, it is submitted that the variation is on account of tax deducted at source on gross amount of the bill, which is inclusive of GST component whereas the appellant had accounted the gross receipts net of GST component. However, the AO chose to make addition of the differential amount by treating it as business receipts and made addition estimating the income at 8.5%.
Being aggrieved, the appellant is in appeal before this Tribunal in the present appeal.
At the outset, we find that there is a delay of 277 days in filing the present appeal. The appellant filed a petition along with an affidavit seeking condonation of delay in filing the appeal, wherein it is stated that the delay had occurred as he was down with pneumonia. Hence, the delay is not willful or deliberate. Therefore, it is prayed that the delay in filing the appeal may be condoned and the appeal may be admitted for adjudication. Having regard to the averments made in the affidavit seeking condonation of delay, in the absence of any evidence contrary, we are of the considered opinion that the appellant society is prevented by sufficient reasonable cause in filing the appeal within the prescribed limit. Accordingly, we condone the delay and admit the appeal for adjudication.
We have heard the rival contentions and perused the material available on record.
The issue in the present appeal relates to the addition on account of discrepancy in the amount of gross business receipts shown in Form 26AS and the amount shown in the Profit & Loss A/c. The appellant firm had explained that the variation is on account of deduction of tax at source even on the component of GST Sitaram Trading Company whereas, the appellant company had accounted the gross receipts net of GST. The explanation was also substantiated by filing one copy of the invoice on sample basis. The explanation offered by the appellant was not proved to be wrong by the assessing authority. The assessing authority simply made addition without meeting the explanation of the appellant, so also the learned CIT(A) merely confirmed the addition without giving any finding as to how the explanation of the appellant cannot be accepted. In view of this position, we hold that the addition made is unwarranted. Accordingly, direct the AO to delete the addition of Rs. 8,15,305/-.
In the result, the appeal filed by the assessee stands allowed.
Order pronounced in the open court on 31st July, 2025.