ACIT, NEW DELHI vs. M/S. GLOBAL ASSOCIATES, NEW DELHI

This appeal by the Revenue is directed against the order dated 22.03.2013 of the learned CIT(A)-XXVII, New Delhi for the assessment year 2009-10 on the following grounds :

The brief facts of the case are that the assessee is engaged in the business of exporting and trading goods namely iron ore Fines, transportation and loading & unloading of minerals. He filed his return of income with Circle 36(1), New Delhi on 30.09.2009 and latter filed a revised return on 05.03.2010 declaring total income of Rs.3,33,45,060/-. The return of income was processed u/s. 143(1) on 28.01.2011 at the income declared in the revised return. The case was selected for scrutiny and the Assessing Officer made disallowance of Rs.1,39,16,741/- on the ground that there is a mismatch with Form No. 26AS. In Form No. 26AS, there was difference of above amount in the name of one party, Grewal Associates Pvt. Ltd. Since the assessee failed to reconcile the above difference, the AO added the amount of Rs.1,39,16,741/- to the income of assessee on this account. The assessee preferred an appeal before the CIT(A) and the ld. CIT(A), following the decision of Cuttack Bench of ITAT, held that in case of the difference between the assessee’s books and as per TDS certificate, only the embedded portion of profit was to be added to the assessee’s income and not the whole of the receipts. In the assessee’s case, net profit rate of 2.25% has been shown. However, it is seen that this profit rate is in respect of two types of business being carried by the appellant, i.e., trading of Iron ore and transportation and loading & unloading business. The receipts shown short by the assessee are in the nature of contract receipts as has been observed by the AO in the assessment order. The learned CIT(A), after considering various decisions applicable to the contractors’ cases, applied the net profit rate of 8% to be a reasonable rate on these receipts being in the nature of contract receipts and the same is applied to the above receipts not reflected in the books of account of the assessee. Aggrieved by the impugned order, the Revenue is in appeal before us.

During the course of hearing, the ld. DR submitted that while restricting the addition to Rs.11,13,339/-, the ld. CIT(A) has ignored the fact that the assessee had suppressed the entire receipts of Rs.1,39,16,741/- representing the difference between TDS certificate of M/s. Grewal Associates Pvt. Ltd. and the receipts shown by assessee in its books of account. He therefore, submitted that the entire suppressed receipts should be added to the income of the assessee as done by the Assessing Officer. On the other hand, the ld. AR of the assessee relied on the order of the first appellate authority and urged for its sustenance.

We have considered the rival submissions, perused the orders of the authorities below and the material available on record. The only question to be adjudicated in this appeal is whether the entire difference of Rs.1,39,16,741/- between TDS certificate in Form 26AS and the receipts shown by assessee in its books of account, are liable to be added to the income of assessee or only the profit embedded in the above receipts not shown by assessee, has to be added to the income of assessee. In this context, we find that the ld. First appellate authority has applied the profit rate of 8% to the deficit contract receipts not shown by the assessee in its books of account and accordingly added a sum of Rs.11,13,339/- to the income of assessee, which represents the profit embedded to the receipts of Rs.1,39,16,741/-. For this, the ld. First appellate authority has relied upon a direct decision of ITAT, Cuttack Bench in the case of RR Carrying Corpn. Vs. ACIT, 126 TTJ 240 wherein it has been held that in case of the difference between the assessee’s books and as per TDS certificate, only the embedded portion of the profits has to be added to the assessee’s income. No contrary decision is brought to our notice by the learned DR. Even the revenue has not challenged the rate of profit applied by the ld. CIT(A) in the grounds of appeal, rather wrong figures of rate of profit and addition sustained by ld. CIT(A) have been given in the grounds of appeal inasmuch as the figure of addition sustained by CIT(A) is shown at Rs.1,11,339/- in place of 11,13,339/- and rate of profit is shown at 7% in place of 8%. In view of this discussion, we do not find any infirmity in the impugned order and the same does not call for any interference.

In the result, the appeal filed by the Revenue is dismissed. Order pronounced in the open court on 09.10.2015.