M/S. SHREE GANESH BUILDERS,AHMEDABAD vs. THE ITO, WARD-3(2)(10),, AHMEDABAD

आदेश/O R D E R

PER WASEEM AHMED, ACCOUNTANT MEMBER:

The captioned appeal has been filed at the instance of the Assessee against the order of the Learned Commissioner of Income Tax(Appeal)-3, Ahmedabad, dated 15/01/2018 arising in the matter of Assessment Order passed under s. 143(3) r.w.s. 263 of the Income Tax Act, 1961 (here-in-after referred to as "the Act") relevant to the Assessment Year 2010-2011.

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7.1 On the other hand, the ld. DR relied on the order of authorities below.

As per information received from DCIT, central Circle-1(4), Ahmedabad vide letter dated 25/04/2017, the assessee has paid payment in cash amounting to Rs.25,20,000/- to M/s.Safal Estate, Group case of HN Safal during the search proceedings. The assessee has filed her return of income for A.Y. 2011-12. The cash deposit of Rs.25,20,000/- made by her during the financial year 2010-11 is unexplained/undisclosed. To verify the genuineness, the further investigation is needful in the case. In view of the above facts, I have reason to believe that income chargeable to tax has escaped assessment within the meaning of Section 147 of the IT Act for A.Y. 2011-12 by an amount exceeding Rs.1 lakh as the assessee has failed to disclose fully and truly all material facts necessary for her assessment. Therefore this is a fit case for issue of Notice u/s.148 of the IT Act for A.Y. 2011-12.

8.1 In the present case it was found by the AO that the assessee has shown less income in comparison to the income shown in form 26AS issued by the Income Tax Department. As per the Income Tax Department the income of the assessee stands at Rs. 13,29,73,762 whereas the assessee has shown income of Rs. 11,62,86,136/- in its books of accounts. Accordingly, the differential amount of Rs. 1,66,87,626/- was treated by the AO as income of the assessee. However, the Ld. CIT-A has

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restricted the difference between the income shown by the assessee vis-a-vis the income shown in the form 26AS to the tune of Rs. 52,83,446/- only. Thus the issue before us is limited to the extent of Rs. 52,83,446/- only representing the difference between the income shown by the assessee in the books of accounts and in form 26AS issued by the Income Tax Department.

8.2 First of all, we note that the assessee has been raising the running bills to the company namely M/s Ranjit Buildcon Limited along with the service tax amount which was recorded separately in the books of accounts. For example, the assessee has raised 1st invoice in the year under consideration amounting to Rs. 54,01,034/- along with the amount of service tax of Rs. 2,22,524/- which can be verified from the different ledgers of the income placed on page 23 of the paper book, M/s Ranjit Buildcon Limited ledger placed on page 15 of the paper book, service tax ledger placed on page 56 of the paper book which were maintained by the assessee in its books of accounts. Admittedly, the income shown by the assessee represents the corresponding expenses in the books of M/s Ranjit. On perusal of the ledger of the assessee in the books of M/s Ranjit Buildcon Limited, it was noticed that M/s Ranjit Buildcon Limited has been showing the gross amount of the bill raised by the assessee which was containing the amount of service tax as an expense on which the TDS was deducted under the relevant section of the Act. Thus, there was a difference between the income shown by the assessee viz a viz the expenses recorded by Ranjit Buildcon Limited in its books of accounts. As such, the party namely Ranjit Buildcon Limited has deducted the TDS on the element of service tax which was shown as an expense in in its accounts but contrary to that the assessee has not shown any income in the name of service tax which has led to the difference to the tune of Rs. 36,48,960/-, consequently the higher amount was reported in form 26AS. Accordingly, we are not convinced with the finding of the Ld. CIT-A that there was a difference between the income of the assessee Viz a Viz form 26AS as discussed above to the tune of Rs. 36,48,960.00.

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8.3 Likewise, we note that the assessee in the earlier assessment year has raised an invoice of 81,34,480/- to M/s Ranjit Buildcon Limited but the same was recorded at Rs. 75,62,268/- which has resulted to a difference of Rs. 8,71,432/- only and same was rectified in the year under consideration. For this purpose, we have verified the ledger of the assessee viz a viz the ledger of Ranjit Buildcon Limited. Thus, to the extent, there is difference in the income and accordingly the assessee get relief for an amount of Rs. 8,71,432/- only.

8.4 For the balance amount of difference of Rs. 7,63,054/-, we note that the assessee has not produced any plausible reason and failed to reconcile the same. However, we note that the impugned amount of difference represents the business receipts of the assessee and therefore the gross amount cannot be made subject to tax. In this regard, we find support and guidance from the order of the Hon’ble Gujarat High Court in the case of CIT vs. President Industries reported in 258 ITR 654 where it was directed to make the addition only to the extent of gross profit. The relevant extract of the order is reproduced as under:

‘The amount of sales by itself cannot represent the income of the assessee who has not disclosed the sales. The sales only represent the price received by the seller of the goods for the acquisition of which it has already incurred the cost. It is the realisation of excess over the cost incurred that only forms part of the profit included in the consideration of sales. Therefore, unless there is a finding to the effect that the investment by way of incurring cost in acquiring goods which have been sold has been made by the assessee and that has also not been disclosed, the question whether entire sum of undisclosed sales proceeds can be treated as income, answers by itself in the negative.”

8.5 In view of the above we are of the view that the justice will be served both to the assessee and the revenue if the impugned amount of difference as discussed above (Rs. 7,63,054/-), if only the profit element embedded in such unaccounted gross receipt is made subject to tax. As such, we are of the view that 8% of such gross amount being Rs. 61,044.32 should be added to the total income of the assessee. In view of the above and after considering the facts in totality, we confirm the addition of Rs. 61,044.32 only and the balance amount of addition is hereby

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deleted. Hence the ground of the assessee is partly allowed.

Order pronounced in the Court on 05/08/2022 at Ahmedabad.

Sd/- Sd/- (MADHUMITA ROY) (WASEEM AHMED) JUDICIAL MEMBER ACCOUNTANT MEMBER (True Copy) Ahmedabad; Dated 05/08/2022 Manish