Addition not sustained as explained by the discrepancy between reported gross income and Form 26AS
Fact and issue of the case
This appeal filed by the assessee is against the order of Ld. CIT(A), National Faceless Appeal Centre (NFAC), Delhi vide Order No. ITBA/NFAC/S/250/2022-23/1048309234(1) dated 28.12.2022 against the order of ITO, Ward-4(5), Kolkata u/s. 144 of the Income-tax Act, 1961 (hereinafter referred to as the “Act”), dated 17.10.2016 for AY 2014-15.
Sole ground raised by the assessee in the present appeal is in respect of addition made by the Ld. AO towards difference of gross receipts as reflected in Form 26AS and that reported by the assessee, amounting to Rs.3,93,644/-.
Brief facts of the case are that assessee is a partnership firm and filed its return reporting total income at Rs.6,94,540/-. In the course of assessment, Ld. AO noted that assessee has shown gross receipts of Rs.39,09,400/- as against gross receipts reflected in Form 26AS of Rs.43,03,044/-. On account of this difference of Rs.3,93,644/-, ld. AO called for explanation from the assessee. Not convinced by the submissions, Ld. AO completed the assessment by making addition of this difference of Rs.3,94,644/- by treating it as undisclosed gross receipt. Aggrieved, assessee went in appeal before the ld. CIT(A) who dismissed the same.
Counsel for the assessee contended that assessee is engaged in the business of providing servicing of medical equipments to the customers of M/s. Siemens Limited under a works contract. Service charges received by the assessee from Siemens Ltd. is subjected to TDS which are duly reflected in Form 26AS. It was submitted that on the service charges received by the assessee, service tax is also collected which is subsequently deposited to the Government account. Service charges received by the assessee exclusive of service tax, accounts to Rs.39,09,400/-. When the service tax component is added, the total comes to Rs.43,03,043/-. He thus submitted that the gross receipts reflected in Form 26AS is inclusive of service tax whereas assessee has filed its return by taking the gross receipts without the component of service tax. Hence, there is no difference in the reporting of the gross receipts which has a bearing on the total income returned by the assessee. Therefore, it was claimed that the addition made by the Ld. AO on account of this difference by treating it as undisclosed gross receipt is not tenable.
Observation of the court
We have heard the rival contentions and perused the material available on record. The fact as reproduced above in respect of gross receipts towards service charges and the component of service tax are undisputed. Addition made by the Ld. AO is on account of difference between the figure of gross receipts reported by the assessee which is including the service tax component whereas the figure reported in Form 26AS is inclusive of the service tax component which has been adequately reconciled by the assessee from the charts reproduced above. From the above factual matrix, we find that the addition made by the Ld. AO on account of difference of Rs.3,94,644/- between the two above stated figures by treating it as undisclosed gross receipt is not tenable. Accordingly, the addition so made is deleted. The grounds taken by the assessee in this respect are allowed.
In the result, appeal of the assessee is allowed.
Order pronounced in the open Court on 17th May, 2023.
In the result, appeal of the assessee is allowed and ruled in favour of the assessee
Read the full order from hereMediserv-House-of-Prof.-Usha-Singh-Vs-ITO-ITAT-Kolkata-2