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Facts
The assessee, a civil contractor, declared income for AY 2015-16. The Assessing Officer (AO) noticed a significant difference between the gross receipts reflected in Form 26AS and the turnover disclosed in the assessee's books of account. The AO consequently added the differential amount as undisclosed income.
Held
The Tribunal held that the core controversy was a timing mismatch in income recognition and TDS deduction. It found that the assessee was not provided a sufficient opportunity to present a reconciliation statement and that the CIT(A) had not properly examined the evidence. Therefore, the matter was restored to the AO for de novo verification.
Key Issues
Whether receipts reflected in Form 26AS in AY 2015-16, but claimed by the assessee to have been recognized and offered to tax in AY 2014-15, constitute undisclosed income for AY 2015-16, considering the TDS was deducted in the latter year.
Sections Cited
133(6)
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Income Tax Appellate Tribunal, MUMBAI BENCH “B” MUMBAI
Before: SHRI OM PRAKASH KANT & MS. KAVITHA RAJAGOPAL
ORDER PER OM PRAKASH KANT, AM
This appeal by the assessee is directed against the order dated 11th September 2025 passed by the Ld. Commissioner of Income- Tax - National Faceless Appeal Centre, Delhi [in short “the learned CIT(A)”], for the assessment year 2015–16.
The solitary grievance of the Assessee relates to the The solitary grievance of the Assessee relates to the The solitary grievance of the Assessee relates to the sustenance of an addition amounting to ₹77,50,284/ sustenance of an addition amounting to 77,50,284/-, predicated on a discrepancy between the gross receipts reflected in Form No. on a discrepancy between the gross receipts reflected in Form No. on a discrepancy between the gross receipts reflected in Form No. 26AS and the turnover disclosed in the A 26AS and the turnover disclosed in the Assessee’s books of ssessee’s books of account.
Briefly stated, the facts are that the Assessee is an individual Briefly stated, the facts are that the Assessee is an individual Briefly stated, the facts are that the Assessee is an individual engaged in the business of a civil contractor under the proprietary engaged in the business of a civil contractor under the proprietary engaged in the business of a civil contractor under the proprietary concern M/s Shilpi Associates M/s Shilpi Associates. For the year under consideration, . For the year under consideration, the assessee filed his return of income on 28th March 2016, the assessee filed his return of income on 28th March 2016, the assessee filed his return of income on 28th March 2016, ₹10,55,750/-. declaring declaring a a total total income income of of . The The case case was was subsequently selected for limited scrutiny. During the scrutiny subsequently selected for limited scrutiny. During the scrutiny subsequently selected for limited scrutiny. During the scrutiny proceedings, the Assessing Officer noted proceedings, the Assessing Officer noted that as per Form No. 26AS, that as per Form No. 26AS, the assessee received Rs.79,28,938/ the assessee received Rs.79,28,938/- from M/s Brooks Brothers from M/s Brooks Brothers India Pvt. Ltd. and Rs.24,55,693/ India Pvt. Ltd. and Rs.24,55,693/- from M/s Reliance Brands from M/s Reliance Brands Limited, aggregating to Rs.1,03,84,631/ Limited, aggregating to Rs.1,03,84,631/-. However, the profit and . However, the profit and loss account of the assessee reflected sa loss account of the assessee reflected sales of Rs.65,81,057/ les of Rs.65,81,057/- only.
The Assessee contended that the differential amount of The Assessee contended that the differential amount of The Assessee contended that the differential amount of ₹77,50,284/- had already been recognized as income in the had already been recognized as income in the had already been recognized as income in the preceding financial year (F.Y. 2013 preceding financial year (F.Y. 2013-14) corresponding to A.Y. 2014 14) corresponding to A.Y. 2014- 15. It was submitted that the deductors had 15. It was submitted that the deductors had accounted for the accounted for the transactions and deducted tax (TDS) in the subsequent year (F.Y. transactions and deducted tax (TDS) in the subsequent year (F.Y. transactions and deducted tax (TDS) in the subsequent year (F.Y. 2014-15), resulting in a timing mismatch. The Assessing Officer 15), resulting in a timing mismatch. The Assessing Officer 15), resulting in a timing mismatch. The Assessing Officer issued notice u/s 133(6) of the Act, to both the parties. M/s issued notice u/s 133(6) of the Act, to both the parties. M/s issued notice u/s 133(6) of the Act, to both the parties. M/s
Shital Bhavin Khatri (Legal Representative Shital Bhavin Khatri (Legal Representative 3 of Late Bhavin Mahendra Khatri) of Late Bhavin Mahendra Khatri)
Reliance Brands Ltd. responded by denying havi Reliance Brands Ltd. responded by denying having any transaction ng any transaction in financial year 2013 in financial year 2013-14 and no response was received from 14 and no response was received from Brooks Brother India Pvt. Ltd. The AO, noting a denial of Brooks Brother India Pvt. Ltd. The AO, noting a denial of Brooks Brother India Pvt. Ltd. The AO, noting a denial of transactions in F.Y. 2013 transactions in F.Y. 2013-14 by M/s Reliance Brands Ltd. and a 14 by M/s Reliance Brands Ltd. and a lack of response from M/s Brooks Brothers, treated the entire sum lack of response from M/s Brooks Brothers, treated the e lack of response from M/s Brooks Brothers, treated the e of ₹77,50,284/- as undisclosed income for the impugned year. as undisclosed income for the impugned year. as undisclosed income for the impugned year.
On further appeal, the Ld. CIT(A) On further appeal, the Ld. CIT(A) affirmed the addition, affirmed the addition, holding that the Assessee failed to discharge the primary onus of holding that the Assessee failed to discharge the primary onus of holding that the Assessee failed to discharge the primary onus of proving that the receipts were offered to tax in the proving that the receipts were offered to tax in the earlier year. The earlier year. The Ld. CIT(A) further observed that in the absence of third-party Ld. CIT(A) further observed that in the absence of third Ld. CIT(A) further observed that in the absence of third confirmations or audited reconciliations, the credit appearing in confirmations or audited reconciliations, the credit appearing in confirmations or audited reconciliations, the credit appearing in Form 26AS for the current year must be deemed as the "real Form 26AS for the current year must be deemed as the "real Form 26AS for the current year must be deemed as the "real income" of the year in which the tax was deducted. The relevant income" of the year in which the tax was deducted. income" of the year in which the tax was deducted. finding of ld CIT(A) is reproduced finding of ld CIT(A) is reproduced as under:
“5.2 GROUNDS OF APPEAL NOS. 2 to 6: The appellant during the 5.2 GROUNDS OF APPEAL NOS. 2 to 6: The appellant during the 5.2 GROUNDS OF APPEAL
NOS. 2 to 6: The appellant during the appellate proceedings stated that the Assessing Officer erred in appellate proceedings stated that the Assessing Officer erred in appellate proceedings stated that the Assessing Officer erred in recomputing income at 88,06,034/ recomputing income at 88,06,034/- by adding entire difference in by adding entire difference in gross receipts. Assessing Officer erred in not adjusting various direct receipts. Assessing Officer erred in not adjusting various direct receipts. Assessing Officer erred in not adjusting various direct and indirect expenses, thereby duplicating income. The appellant is a and indirect expenses, thereby duplicating income. The appellant is a and indirect expenses, thereby duplicating income. The appellant is a small contractor and had declared turnover of 65,81,057/ small contractor and had declared turnover of 65,81,057/ small contractor and had declared turnover of 65,81,057/- with net income of 10,55,750/ income of 10,55,750/-. Further, as per appellant, out . Further, as per appellant, out of the gross receipts reflected in Form 26AS of 1,03,84,631/ receipts reflected in Form 26AS of 1,03,84,631/ receipts reflected in Form 26AS of 1,03,84,631/-, a sum of 77,50,284/- was already accounted in F.Y. 2013 was already accounted in F.Y. 2013-14. However, the 14. However, the payer company booked it in F.Y. 2014 payer company booked it in F.Y. 2014-15 and deducted TDS in that 15 and deducted TDS in that year, leading to mismatch. Further, the appellant stat year, leading to mismatch. Further, the appellant stat year, leading to mismatch. Further, the appellant stated that Assessing Officer wrongly added the entire 77,50,284/ Assessing Officer wrongly added the entire 77,50,284/ Assessing Officer wrongly added the entire 77,50,284/- to the income of F.Y. 2014 of F.Y. 2014-15 without considering the fact that it was already 15 without considering the fact that it was already declared in earlier year. If such addition is made, then expenses of declared in earlier year. If such addition is made, then expenses of declared in earlier year. If such addition is made, then expenses of 71,25,611/- pertaining to these receipts must pertaining to these receipts must also be allowed, else also be allowed, else there is duplication of income. In reality, the difference in gross there is duplication of income. In reality, the difference in gross there is duplication of income. In reality, the difference in gross receipts was only 39,46,410/ receipts was only 39,46,410/-, but the Assessing Officer added the , but the Assessing Officer added the Shital Bhavin Khatri (Legal Representative Shital Bhavin Khatri (Legal Representative 4 of Late Bhavin Mahendra Khatri) of Late Bhavin Mahendra Khatri) entire amount. This has resulted in double taxation and a high entire amount. This has resulted in double taxation and a high entire amount. This has resulted in double taxation and a high-pitched assessment, contrary to pri assessment, contrary to principles of natural justice. Assessing Officer compared Form 26AS with the sales declared by the Assessing Officer compared Form 26AS with the sales declared by the Assessing Officer compared Form 26AS with the sales declared by the appellant and found that receipts were substantially higher than those appellant and found that receipts were substantially higher than those appellant and found that receipts were substantially higher than those disclosed. Notice u/s 133(6) was issued to both parties (Reliance disclosed. Notice u/s 133(6) was issued to both parties (Reliance disclosed. Notice u/s 133(6) was issued to both parties (Reliance Brands Ltd. and Brooks Brands Ltd. and Brooks Brothers India Pvt. Ltd.). Reliance Brands Ltd. Brothers India Pvt. Ltd.). Reliance Brands Ltd. categorically denied any transaction with the appellant in F.Y. 2013 categorically denied any transaction with the appellant in F.Y. 2013 categorically denied any transaction with the appellant in F.Y. 2013- 14, contradicting the appellant's claim. As per Assessing Officer, the 14, contradicting the appellant's claim. As per Assessing Officer, the 14, contradicting the appellant's claim. As per Assessing Officer, the assessee could not obtain confirmations from the parties or produce assessee could not obtain confirmations from the parties or produce assessee could not obtain confirmations from the parties or produce independent evidence to substantiate the claim that receipts pertained independent evidence to substantiate the claim that receipts pertained independent evidence to substantiate the claim that receipts pertained to F.Y. 2013-14. Since TDS was deducted and credited in F.Y. 2014
14. Since TDS was deducted and credited in F.Y. 2014
14. Since TDS was deducted and credited in F.Y. 2014- 15, receipts were rightfully taxable in this year. The onus of proving 15, receipts were rightfully taxable in this year. The onus of proving 15, receipts were rightfully taxable in this year. The onus of proving that receipts belong to an earlier year lies squ that receipts belong to an earlier year lies squarely on the assessee, arely on the assessee, which he failed to discharge. Hence, Assessing Officer treated which he failed to discharge. Hence, Assessing Officer treated which he failed to discharge. Hence, Assessing Officer treated 77,50,284/-as receipts of the current year and computed total income as receipts of the current year and computed total income as receipts of the current year and computed total income accordingly at 88.06.034/ accordingly at 88.06.034/-. The appellant has argued that receipts of 77,50,284/ The appellant has argued that receipts of 77,50,284/ The appellant has argued that receipts of 77,50,284/- were already Vaccounted in F.Y. 2013 nted in F.Y. 2013-14. However, no corroborative evidence has 14. However, no corroborative evidence has been produced to demonstrate that such receipts were indeed declared been produced to demonstrate that such receipts were indeed declared been produced to demonstrate that such receipts were indeed declared as income in the earlier year. Mere entries in self as income in the earlier year. Mere entries in self-maintained books maintained books are insufficient unless backed by third are insufficient unless backed by third-party confirmatio party confirmations, audited accounts, or reconciliation accepted by the concerned deductors. On accounts, or reconciliation accepted by the concerned deductors. On accounts, or reconciliation accepted by the concerned deductors. On the contrary, Reliance Brands Ltd., a major payer, has specifically the contrary, Reliance Brands Ltd., a major payer, has specifically the contrary, Reliance Brands Ltd., a major payer, has specifically denied any transaction in F.Y. 2013 denied any transaction in F.Y. 2013-14. This denial weakens the 14. This denial weakens the appellant's case considerably. Therefore, th appellant's case considerably. Therefore, the Assessing Officer's action e Assessing Officer's action of treating the receipts as pertaining to F.Y. 2014 of treating the receipts as pertaining to F.Y. 2014-15 is correct in law. 15 is correct in law. The appellant's plea that proportionate expenses of 71,25,611/ The appellant's plea that proportionate expenses of 71,25,611/ The appellant's plea that proportionate expenses of 71,25,611/- should also be allowed is not sustainable. These expenses have should also be allowed is not sustainable. These expenses have should also be allowed is not sustainable. These expenses have already been claimed in ea already been claimed in earlier year against turnover shown for that rlier year against turnover shown for that year. Allowing them again would amount to double deduction. Since year. Allowing them again would amount to double deduction. Since year. Allowing them again would amount to double deduction. Since appellant failed to establish that receipts pertained to F.Y. 2013 appellant failed to establish that receipts pertained to F.Y. 2013 appellant failed to establish that receipts pertained to F.Y. 2013-14, the question of adjusting earlier year's expenses in current year does the question of adjusting earlier year's expenses in current year does the question of adjusting earlier year's expenses in current year does not arise. The allegation of over rise. The allegation of over-assessment and multiplicity of assessment and multiplicity of additions is also not tenable. The Assessing Officer has simply brought additions is also not tenable. The Assessing Officer has simply brought additions is also not tenable. The Assessing Officer has simply brought to tax receipts reflected in 26AS which were not shown in books for to tax receipts reflected in 26AS which were not shown in books for to tax receipts reflected in 26AS which were not shown in books for this year. No income has been taxed twice. In fact, the this year. No income has been taxed twice. In fact, the this year. No income has been taxed twice. In fact, the claim of earlier year recognition is unsupported by evidence and stands contradicted year recognition is unsupported by evidence and stands contradicted year recognition is unsupported by evidence and stands contradicted by payer's confirmation. Therefore, the addition cannot be termed as by payer's confirmation. Therefore, the addition cannot be termed as by payer's confirmation. Therefore, the addition cannot be termed as duplication. The appellant has sought relief on the ground that only duplication. The appellant has sought relief on the ground that only duplication. The appellant has sought relief on the ground that only "real income" can be taxed. It is "real income" can be taxed. It is settled law that receipts evidenced by settled law that receipts evidenced by TDS deduction and credited in assessee's account during the year are TDS deduction and credited in assessee's account during the year are TDS deduction and credited in assessee's account during the year are real and taxable income of that year, unless assessee demonstrates real and taxable income of that year, unless assessee demonstrates real and taxable income of that year, unless assessee demonstrates with documentary proof that such receipts have already been offered with documentary proof that such receipts have already been offered with documentary proof that such receipts have already been offered in earlier year. Since appellant has failed to discharge this onus, ear. Since appellant has failed to discharge this onus, ear. Since appellant has failed to discharge this onus,
Shital Bhavin Khatri (Legal Representative Shital Bhavin Khatri (Legal Representative 5 of Late Bhavin Mahendra Khatri) of Late Bhavin Mahendra Khatri)
Assessing Officer's action stands justified. In view of the above, I hold Assessing Officer's action stands justified. In view of the above, I hold Assessing Officer's action stands justified. In view of the above, I hold that the Assessing Officer has correctly added 77,50,284/ that the Assessing Officer has correctly added 77,50,284/ that the Assessing Officer has correctly added 77,50,284/- to the income of the assessee. The appellant's contentions of dupli income of the assessee. The appellant's contentions of dupli income of the assessee. The appellant's contentions of duplication, allowance of earlier year expenses, and high allowance of earlier year expenses, and high-pitched assessment are pitched assessment are devoid of merit. Accordingly, Grounds No. 2, 3, 4, 5 & 6 are devoid of merit. Accordingly, Grounds No. 2, 3, 4, 5 & 6 are devoid of merit. Accordingly, Grounds No. 2, 3, 4, 5 & 6 are dismissed.”
Before us, the Ld. Counsel for the Assessee vehemently argued Before us, the Ld. Counsel for the Assessee vehemently argued Before us, the Ld. Counsel for the Assessee vehemently argued that the assessment was concluded in haste that the assessment was concluded in haste on 19.12.2017, despite on 19.12.2017, despite a request for an adjournment until 26.12.2017 to submit a detailed a request for an adjournment until 26.12.2017 to submit a detailed a request for an adjournment until 26.12.2017 to submit a detailed reconciliation. It was submitted no reasonable opportunity was reconciliation. It was submitted no reasonable opportunity was reconciliation. It was submitted no reasonable opportunity was provided to the assessee to explain the reconciliation of the receipt provided to the assessee to explain the reconciliation of the receipt provided to the assessee to explain the reconciliation of the receipt which were appearing in the Form which were appearing in the Form No. 26AS and not offered for tax No. 26AS and not offered for tax in the assessment year under consideration with the income in the assessment year under consideration with the income in the assessment year under consideration with the income already offered in assessment year 2014 already offered in assessment year 2014-15 i.e. immediately 15 i.e. immediately preceding preceding preceding assessment assessment assessment year. year. year. The The The assessee assessee assessee filed filed filed detailed detailed detailed reconciliation statement along with profit and l reconciliation statement along with profit and loss account for oss account for assessment year 2014 assessment year 2014-15 and return of income for assessment year 15 and return of income for assessment year 2014-15, which clearly demonstrate that the impugned receipts 15, which clearly demonstrate that the impugned receipts 15, which clearly demonstrate that the impugned receipts were subjected to tax in that year but the Ld. CIT(A) without were subjected to tax in that year but the Ld. CIT(A) without were subjected to tax in that year but the Ld. CIT(A) without considering dismissed the prayer of the assessee. Conversely, the considering dismissed the prayer of the assessee. considering dismissed the prayer of the assessee. Ld. Departmental Representative (DR) relied heavily on the orders of Ld. Departmental Representative (DR) relied heavily on the orders of Ld. Departmental Representative (DR) relied heavily on the orders of the authorities below, emphasizing the categorical denial by the the authorities below, emphasizing the categorical denial by the the authorities below, emphasizing the categorical denial by the deductor.
We have heard the rival submissions and perused the material We have heard the rival submissions and perused the material We have heard the rival submissions and perused the material on record. The core controversy on record. The core controversy revolves around a "timing revolves around a "timing mismatch" between the recognition of income by the Assessee (on mismatch" between the recognition of income by the Assessee (on mismatch" between the recognition of income by the Assessee (on
Shital Bhavin Khatri (Legal Representative Shital Bhavin Khatri (Legal Representative 6 of Late Bhavin Mahendra Khatri) of Late Bhavin Mahendra Khatri) accrual basis) and the deduction of tax by the payees. It is a accrual basis) and the deduction of tax by the payees. accrual basis) and the deduction of tax by the payees. fundamental principle of taxation that the same income cannot be fundamental principle of taxation that the same income cannot be fundamental principle of taxation that the same income cannot be taxed twice. If the Assessee has taxed twice. If the Assessee has already offered the receipts to tax in already offered the receipts to tax in A.Y. 2014-15, bringing the same to tax again in A.Y. 2015 15, bringing the same to tax again in A.Y. 2015 15, bringing the same to tax again in A.Y. 2015-16 merely because the TDS was reflected in the latter year would lead merely because the TDS was reflected in the latter year would lead merely because the TDS was reflected in the latter year would lead to double taxation, which is impermissible in law. The issue in to double taxation, which is impermissible in law. to double taxation, which is impermissible in law. dispute is reconciliatio dispute is reconciliation of the receipt in respect of two parties n of the receipt in respect of two parties shown by the assessee in assessment year 2014-15 along with shown by the assessee in assessment year 2014 shown by the assessee in assessment year 2014 detail of the Form 26AS comprising of receipt from two parties. It is detail of the Form 26AS comprising of receipt from two parties. It is detail of the Form 26AS comprising of receipt from two parties. It is the contention of the assessee that the receipt which the Assessing the contention of the assessee that the receipt which the Assessing the contention of the assessee that the receipt which the Assessing Officer has added in the assessment year 2015 ed in the assessment year 2015-16 i.e. the current 16 i.e. the current assessment year have already offered in the immediately preceding assessment year have already offered in the immediately preceding assessment year have already offered in the immediately preceding assessment year 2014 assessment year 2014-15.
The claim of the Assessee requires rigorous factual verification. he claim of the Assessee requires rigorous factual verification. he claim of the Assessee requires rigorous factual verification. The reconciliation between the bills raised The reconciliation between the bills raised in F.Y. 2013 in F.Y. 2013-14 and the corresponding entries in the current year's Form 26AS is a matter corresponding entries in the current year's Form 26AS is a matter corresponding entries in the current year's Form 26AS is a matter of record. We find that the Assessee was not afforded a sufficient We find that the Assessee was not afforded a sufficient We find that the Assessee was not afforded a sufficient opportunity to present this reconciliation before the AO, and the Ld. opportunity to present this reconciliation before the AO, and the Ld. opportunity to present this reconciliation before the AO, and the Ld. CIT(A) failed to examine the CIT(A) failed to examine the fresh evidence (P&L account of the fresh evidence (P&L account of the preceding year) in the right perspective. preceding year) in the right perspective.
Therefore, in the interest of justice and to prevent the in the interest of justice and to prevent the in the interest of justice and to prevent the miscarriage of equity, we deem it fit to set aside the impugned order miscarriage of equity, we deem it fit to set aside the impugned order miscarriage of equity, we deem it fit to set aside the impugned order and restore the matter to the file of the Asses and restore the matter to the file of the Assessing Officer. The AO is Officer. The AO is Shital Bhavin Khatri (Legal Representative Shital Bhavin Khatri (Legal Representative 7 of Late Bhavin Mahendra Khatri) of Late Bhavin Mahendra Khatri)
(i) Conduct a de novo verification of the reconciliation Conduct a de novo verification of the reconciliation Conduct a de novo verification of the reconciliation statement provided by the Assessee, (ii) tement provided by the Assessee, (ii) Examine the bills issued in Examine the bills issued in A.Y. 2014-15 and verify if the corresponding income was indeed 15 and verify if the corresponding income was indeed 15 and verify if the corresponding income was indeed offered to tax in that offered to tax in that year, and (iii) Allow the Assessee a reasonable Allow the Assessee a reasonable opportunity of being heard and to produce necessary third-party opportunity of being heard and to produce necessary third opportunity of being heard and to produce necessary third evidence or certificates from the deductors evidence or certificates from the deductors and then decide the and then decide the issue in accordance with law issue in accordance with law. Accordingly the ground No. 1 and 2 of Accordingly the ground No. 1 and 2 of the appeal of the assessee are allowed. the appeal of the assessee are allowed.
Consequently, Grounds No Consequently, Grounds No. 1 and 2 are allowed for statistical . 1 and 2 are allowed for statistical purposes. Since the primary issue is remanded for verification, the purposes. Since the primary issue is remanded for verification, the purposes. Since the primary issue is remanded for verification, the remaining grounds are rendered academic and do not require remaining grounds are rendered academic and do not require remaining grounds are rendered academic and do not require separate adjudication. separate adjudication.
In the result, the appeal of the assessee is allowed for In the result, the appeal of the assessee is allowed for In the result, the appeal of the assessee is allowed for statistical purposes.