M/S. ROYAL TECH ENTERPRISES,MEERUT vs. ACIT, MEERUT

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ITA 1708/DEL/2013Status: DisposedITAT Delhi30 October 2015AY 2007-084 pages
AI SummaryRemanded

What did the Tribunal hold?

The Tribunal held that Form 26AS alone cannot be the basis for addition without independent inquiry and verification of documentary evidence. The matter was restored to the AO for de novo assessment after affording an opportunity to the assessee.

What were the facts?

The assessee company, engaged in contracts, filed its return of income. The Assessing Officer (AO) made an addition of Rs. 22,66,949/- based on the difference between Form 26AS and declared income. The CIT(A) dismissed the appeal as the assessee could not explain the difference.

What were the issues?

Whether addition can be made solely based on Form 26AS without independent inquiry and documentary evidence. Whether the AO properly considered the assessee's explanation and provided a reasonable opportunity of being heard.

Which sections of the Income-tax Act were involved?

Section 143(3),Section 148

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Income Tax Appellate Tribunal, DELHI BENCH: ‘F’: NEW DELHI

Before: SHRI INTURI RAMA RAO & MS. SUCHITRA KAMBLE

For Respondent: Smt. Anjula Jain, Sr. DR
Hearing: 29.10.2015Pronounced: 30.10.2015

ORDER PER INTURI RAMA RAO, A.M.: The present appeal filed by the assessee company is directed against the order of ld. CIT(A), dated 15.03.2013 passed for the assessment year 2007-08. The assessee raised the following grounds of appeal: i. That Ld. A.O. as well as Ld. CIT(A) is in error that difference of contract receipt can be added in the total income directly and ignore written reply filed by the assessee, in which difference is explained by the assessee instead of addition at the gross profit rate or net profit rate addition of contractual receipt is bad in law. ii. That Ld. A.O. as well as Ld. CIT(A) is in error ignoring the fact that the assessee has shown advance of Rs. 25,46,599/- duly reflected in balance sheet of that year cannot be assess tax in the year consideration, when account of the was made in mercantile basis. Therefore, addition made by the A.O. and confirmed by the CIT(A) is bad in law. iii. That the Ld. CIT(A) ignore the fact that books of A/c and other documents was destroyed by the fire. Hence, the assessee was unable to produce books of account before CIT(A), Meerut. Hence, no adverse view can be taken.

1.

Assessment Year: 2007-08 iv. That the assessee has right to add/delete or modify any grounds during the appeal proceeding.

2.

The brief facts of the case are that the appellant is a partnership company. It is engaged in the business of contracts. The return f income for the assessment year 2007-08 was filed on 05.11.2007 declaring income of Rs. 3,71,000/- and later on the return of income was revised on 12th June, 2008 at an income of Rs. 2,85,717/-. Subsequently, the case was taken for scrutiny assessment and the assessment was completed at a total income of Rs. 25,52,670/- vide order dated 06.12.2010 passed under Section 143(3)/148 of the Income-tax Act, 1961 (for short “the Act”) after making addition of Rs. 22,66,949/- being the difference between the gross receipts as per the form No. 26AS of the department and the income declared by the assessee. The assessee could not reconcile the difference before the learned Assessing Officer. Being aggrieved by the assessment order, an appeal was filed before the ld. CIT(A) who vide impugned order dated 15.03.2013 dismissed the appeal on the ground that the assessee could not explain the difference with the documentary evidence before him. Aggrieved, the assessee is before us with the present appeal.

3.

We heard the rival submissions and perused the material on record. We find from the assessment order that the addition was made solely based on the information contained in Form No. 26AS of the Department. The coordinate bench of the ITAT, Delhi in for AY 2009-10, dated 31st March, 2015, vide para 6 of the order held that the information contained in Form No. 26AS cannot be itself the basis for making addition to the income Assessment Year: 2007-08 returned. To the same effect, the decision of a coordinate bench of ITAT, Jabalpur, in the case of Ravindra Pratap Thareja Vs. ITO, 154 ITD 633.

6.

We do not find any reason to differ from the reasoning given by the coordinate benches in the cases cited supra. The Assessing Officer is duty-bound to make independent inquiry as to whether income has accrued to the assessee company as per the method of accounting regularly being followed by the assessee in respect of the transactions reported in Form No. 26AS. The Assessing Officer, after due verification of the transactions with reference to the documentary evidence like agreement entered into between the parties, has to render the finding whether the income has really accrued to the assessee company or not. Only after such verification, the addition can be made by the Assessing Officer after affording reasonable opportunity of being heard to the assessee-company. Therefore, in order to meet the ends of justice, we restore the matter to the file of the Assessing Officer to make de novo assessment after affording reasonable opportunity of being heard to the assessee company. Hence, the appeal filed by the assessee is treated as partly allowed for statistical purposes.

7.

In the result, the appeal is partly allowed for statistical purposes. The decision is pronounced in the open court on 30th October, 2015.

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