The Income Tax Appellate Tribunal (ITAT), Delhi bench has quashed the rejection of books of accounts of the assessee and the Gross Profit (GP) Ratio application on Gross Receipts in the absence of suppression or discrepancy in the accounts, but upheld the addition of Unexplained Expenditure under Section 69C of Income Tax Act, 1961 as negotiations were not proved by the assessee.
The appellant, Total Integrated Design (India) Pvt. Ltd. is a company engaged in interior decoration and architecture services.
The case revolved around several key issues, including the rejection of the appellant’s books of accounts, the application of GP Ratio on gross receipts and the addition made as unexplained expenditure under Section 69C of the Income Tax Act, 1961.
The appellant assessee was represented by Ms. Gunjan Jain while the respondent revenue, Income Tax Officer (ITO), was represented by Shri Gurpreet Shah Singh.
The appellant contended that the rejection of their books of accounts, additions to their income and the application of GP Ratio on their gross receipts were based on misunderstandings and misinterpretations of their business operations.
The appellant argued that the rejection of their accounts was unwarranted, as their records were maintained accurately and audited in accordance with the law. The appellant highlighted discrepancies arising from the misunderstanding of repeated project amounts due to multiple subcontractors working on the same project.
The ITAT acknowledged the appellant’s arguments and set aside the findings related to the rejection of books of accounts and the application of the GP ratio on gross receipts in the absence of suppression or discrepancy in the books of accounts of the appellant and directed the Assessing Officer (AO) to re-evaluate the issue considering the explanations provided by the appellant.
The appellant, highlighting the nature of their business as interior decorators, architects, furnishers and surveyors, explained that their projects often involve complex negotiations, price adjustments and delays, leading to potential profits or losses.
The appellant argued that the difference between Form 15CA and the Tax Audit Report was a result of these negotiations leading to a reduced payment. The appellant emphasised that the AO misunderstood their transaction details, resulting in the wrongful rejection of their books of accounts and subsequent additions.
The respondent revenue reiterated their findings.
The Bench upheld the addition of Rs.54,514/- as unexplained expenditure under section 69C of the Income Tax Act, 1961 citing insufficient evidence to substantiate the appellant’s claims of negotiations leading to reduced payments.
In result, the two-member bench comprising Shri Kul Bharat (Judicial Member) and Shri M. Balaganesh (Accountant Member) partly allowed the appeal for statistical purposes.
Subscribe Taxscan Premium to view the JudgmentSupport our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates
