ITAT Cancels Addition of Rs. 3.19 Lakh as Undisclosed Receipts, Citing Timing Difference in Accounting [Read Order]

The Ahmedabad Bench of Income Tax Appellate Tribunal ( ITAT ) cancelled the addition of Rs. 3.19 lakh as undisclosed receipts, citing a timing difference in accounting between the assessee’s books and the customer’s records.

Dineshbhai Muljibhai Patel,appellant-assessee,was engaged in the business of electrical work, installation, and consultancy under the name Amal Electricals. On 26/09/2015, he filed his income tax return, declaring a total income of Rs.27,61,790/-.

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However, the Assessing Officer (AO) determined his income at Rs.30,95,350/-, including additions of Rs.3,19,308/- for undisclosed receipts and Rs.14,250/- for undisclosed interest income, totaling Rs.3,33,558/-. Penalty proceedings were initiated under section 271(1)(c) of the Income Tax Act for concealing this income.

The tribunal considered the submissions of both parties and reviewed the materials on record. It observed that the addition of Rs.3,19,308/- was based entirely on a discrepancy between the amount reflected in Form 26-AS and the reconciliation provided by the assessee. While Form 26-AS showed Tax Deducted at Source (TDS) deductions under Section 194C of Rs.17,65,740/-, the assessee had recorded Rs.14,46,432/- in the books for labor services, resulting in a difference of Rs.3,19,308/-, which was treated as unaccounted income.

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The two member bench comprising Dr.BRR Kumar (Vice President) and Suchitra Kamble (Judicial Member) found that this difference arose from a labor bill of Rs.3,85,210/- dated 17/02/2014, which was recorded in the assessee’s books in FY 2013-14 but accounted for by the customer in FY 2014-15. Reconciliation details provided on pages 67 and 70 of the assessee’s paper book confirmed that the amounts matched.

Based on this reconciliation, the tribunal concluded that no addition was justified. It set aside the order of the Commissioner of Income Tax (Appeals) [CIT(A)] and allowed the assessee’s appeal.

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