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Facts
The assessee, a transport operator, declared total income of Rs.16,70,310/- for AY 2016-17. During assessment, the AO noted a variation of Rs.24,15,018/- between Form 26AS and the assessee's books of accounts, treating it as undisclosed income. The CIT(A) upheld the addition.
Held
The Tribunal observed that the assessee's books of accounts were audited, and no defects were pointed out by revenue authorities. Differences between Form 26AS and the books might arise due to various reasons beyond the assessee's control. The AO should have conducted further inquiries instead of making a straight addition.
Key Issues
Whether the addition of Rs.24,15,018/- as undisclosed income based solely on a discrepancy between Form 26AS and the assessee's books, without proper inquiry, is justified.
Sections Cited
250 of the Income Tax Act, 1961, 143(1) of the Act, 143(2) of the Act, 142(1) of the Act, 44AB of the Act
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Income Tax Appellate Tribunal, “SMC’’BENCH: BANGALORE
O R D E R
PER KESHAV DUBEY, JUDICIAL MEMBER:
This appeal at the instance of the assessee is directed against the order of the ld. Addl./JCIT(A)-1, Chennai dated 26/08/2025 vide DIN and Order no. ITBA/APL/S/250/2025-26/1080026416(1) passed u/s. 250 of the Income Tax Act, 1961 (in short “the Act”) for the AY 2016- 17.
The assessee has raised the following grounds of appeal:-
1. The learned Add/JCIT(A)-1, Chennai erred in passing the order in the manner she did.
Canara Goods Transport, Mangaluru Page 2 of 8 2. On the facts and in the circumstances of the case, the learned Add/JCIT(A) is not justified in upholding the learned Assessing Officer’s action of bring to tax a sum of Rs.24,15,018/- as undisclosed receipts of the Appellant by only relying on the Form 26AS.
3. The learned Add/JCIT(A) has ought to have appreciated the fact that, all the receipts as reflected in the Form 26AS have been duly offered for tax and same is reflected in the audited financial statements.
The learned Add/JCIT(A) has overlooked the fact that, the learned Assessing Officer has failed to give credit of TDS as reflected in the Form 26AS.
5. The learned Add/JCIT(A) has grossly ignored the alternative plea of the appellant, that if it all undisclosed receipts as alleged by the Assessing Officer ought have been brought to tax at the gross profit ratio declared by the appellant and not the entire receipts.
Without prejudice to the above grounds, the impugned addition is unwarranted, excessive and liable to be deleted in their entirely.
7. For these and any other grounds that may be raised at the time of hearing, the Appellant respectfully prays that the appeal be allowed, and the penalty may be deleted in full.
Brief facts of the case are that the assessee is a partnership firm and carrying the business as a transport operator/transport Canara Goods Transport, Mangaluru Page 3 of 8 Contractor with branches spread in the state of Karnataka, Maharashtra and Tamilnadu for the last 40 years. The assessee firm filed its return of income for the AY 2016-17 on 23/09/2017 declaring total income of Rs.16,70,310/-. The return was processed u/s. 143(1) of the Act on 27/10/2016 accepting the returned income. The case was thereafter taken up for limited scrutiny assessment and accordingly notices u/s. 143(2) of the Act as well as 142(1) of the Act along with the questionnaire was issued. In response to notices issued, the assessee furnished its reply/ details from time to time.
3.1 During the course of assessment proceedings, the AO found from records that there was a variation in the amount as per Form 26AS vis-à-vis the books of accounts of the assessee. Further, it was also noticed that there was a variation in the TDS credit claimed in the return and as available in Form 26AS. The total receipts as per Form 26ASis amounting to Rs.2,98,11,545/- as against Rs.2,75,00,323/- disclosed by the assessee. During the course of assessment proceedings, the assessee submitted a reconciliation statement which showed that total receipts declared in the ITR was Rs.9,91,54,184/-. Of this, the assessee stated that Rs.2,75,00,323/- was with TDS and the remaining Rs.7,16,94,861/- was without TDS. The AO observed that the reconciliation statement provided by assessee was incomplete in the sense that it had the details of the amount disclosed in the books of which TDS was made but it failed to disclose the other receipt shown in Form 26AS on which TDS was made but was not disclosed in the books. The AO on perusal of the Form 26AS vis-à-vis the reconciliation statement provided by the assessee found that there is a Canara Goods Transport, Mangaluru Page 4 of 8 difference of Rs.24,15,018/- and accordingly issued show cause notice requesting the assessee to submit its reply. However, as the assessee did not furnish any reply or given any clarification in respect of the variation in the turnover/receipts as appearing in the ITR vis-à-vis Form 26AS the amount of Rs.24,15,018/- was held as undisclosed income and added to the total income of the assessee. The AO thus completed the assessment proceedings u/s. 143(3) of the Act on a total assessed income of Rs.40,85,330/-.
4. Aggrieved by the assessment order passed by the AO dated 28/11/2018 u/s. 143(3) of the Act, the assessee preferred an appeal before the ld. Addl./JCIT(A)/CIT(A).
The ld. Addl./JCIT(A)-1, Chennai dismissed the appeal of the assessee with the following observations:-
4.2 There was a variation in the TDS credit claimed in the return and as available in Form 26AS. The total receipts as per From 26AS amounts to Rs.2,98,11,545/- as against Rs.2,75,00,323/- disclosed by the appellant. The reconciliation statement furnished by the appellant shows the total receipts declared in the ITR as Rs.9,91,95,184/-. Out of this, rs.2,75,00,323/- was with TDS and the remaining Rs.7,16,94,861/- was without deducting tax at source. But the reconciliation statement did not disclose the other receipts shown in Form 26AS and on which TDS was made. However, on perusal of Form 26AS vis-à-vis the reconciliation statement provided by the appellant, a difference of Rs.24,15,018/- was found and hence the addition made by the AO as undisclosed income, is upheld.
Canara Goods Transport, Mangaluru Page 5 of 8 4.3 Further, the assessing officer is directed to9 give credit for TDS to the extent of Rs.46,352 i.e. the difference between TDS of 26AS per schedule 6 of the ITR Rs.6,20,791 and as per 26AS relied on by the Assessing Officer RS.6,67,143/-.
Again aggrieved by the order of ld. Addl./JCIT(A)-1, Chennai, the 6. assessee has filed the present before this Tribunal. The assessee has also filed paper book of comprising 45 pages containing therein the copy of written submission, reconciliation of income, Form 26AS, copy of ITR, copy of computation of income along with audited financial statement and audit report.
Before us, the ld. AR of the assessee vehemently submitted that during the course of assessment proceeding, the assessee submitted the reconciliation statement which is also acknowledged by the AO in the assessment order. The AO did not accept the reconciliation statement provided by the assessee merely by stating that the assessee had neither furnishedany reply nor given any clarification in respect of variation in the turnover/ receipts as appearing in the ITR vis-à-vis Form 26AS amounting to Rs.24,15,018/-. The AR of the assessee also drew our attention to the reconciliation statement produced before us (placed at page no.6 to 10of the PB) and submitted that the total lorry charges with TDS was Rs.2,75,00,323/- and the lorry charges without TDS was Rs.7,16,94,861/- and accordingly the gross receipts declared under the ITR amounting to Rs.9,91,95,184/- is fully matched.
The ld. DR on the other hand vehemently supported the order of the authorities below and submitted that the assessee failed to submit any clarification with regard to variation in turnover/ Canara Goods Transport, Mangaluru Page 6 of 8 receipts as appearing the ITR vis-à-vis in Form 26AS amounting to Rs.24,15,018/- and accordingly prayed that the appeal of the assessee may be dismissed.
We have heard the rival submissions and perused the material available on record. On going through the profit and loss account for the year ended 31/03/2016, we take a note of the fact that the assessee had declared total lorry hire charges collected amounting to Rs.9,91,95,184/-. Ongoing through the reconciliation statement, first we take a note of the fact that out of these total receipts of Rs.9,91,95,184/-, the total lorry hire charges with TDS was Rs.2,75,00,323/- (the details of which is submitted in the reconciliation statement) and the balance lorry hire charges without TDS was thus Rs.7,16,94,861/-. The allegation of the AO is that a total lorry hire charges with TDS as per the Form 26AS is amounting to Rs.2,98,11,545/- as against Rs.2,75,00,323/- as disclosed by the assessee. We are of the considered opinion that the contention of the ld. DR is absolutely correct that the assessee failed to furnish the reconciliation of these receipts with TDS before both the authorities below.
9.1 We are also of the consider opinion that the books of account of the assessee are audited u/s.44AB of the Act by the chartered accountant and no defect what so ever has been pointed out by the revenue authorities in the books of accounts of the assessee. Merely because there is a difference between income as reported in Form 26AS information as per the database maintained by the Income Tax Department and the income as reflected in the books of accounts of the assessee, the addition cannot be Canara Goods Transport, Mangaluru Page 7 of 8 sustained. The differences may be due to the different accounting policy followed by the taxpayer and its clients who have deducted the TDS, there may be wrong mentions/ punching of the PAN of the taxpayer by the clients while filing the TDS return, there may be instances the client may deducted the TDS on the gross amount inclusive of the GST while the income is reflected by taxpayers exclusive of GST. We are of the considered opinion that the assessee has no control over the data base of the Income Tax Department as reflected in Form 26AS and at best the assessee could do to offer bonafide explanation for these differential which the assessee didn’t during the assessment as well as appellate proceedings. Further, we are also of the opinion that if the assessee could not provided the detailed reconciliation as required, the AO ought to have conducted necessary enquiries to unravel the truth instead of preferring to add the differential as undisclosed income of the assessee straight way. In view of the above observations, we remit the sole issue to the file of AO to decide a fresh in accordance with law after taking into consideration the reconciliation statement to be furnished by the assessee for the total receipts having TDS as per Form 26AS amounting to Rs.2,98,11,545/- as against Rs.2,75,00,323/- as disclosed by the assessee. Needless to say a reasonable opportunity of being heard must be granted to the assessee. The assessee is also directed to produce all the necessary reconciliation to the satisfaction of the AO for the completion of assessment proceedings. It is ordered accordingly.
In the result, the appeal filed by the assessee is partly allowed for statistical purposes.
Order pronounced in the open court on 30th Jan, 2026