Mismatch in BoA and Form 26AS: ITAT restricts Addition only on Embedded Portion of Profit [Read Order]

The Income Tax Appellate Tribunal (ITAT), Delhi has held that the addition due to mismatch between the Books of Accounts and Form 26AS can be made only on the embedded portion of the profit.

The Assessee challenged the addition of Rs. 41,40,753/- made by the AO on account of unaccounted sales arises due to difference in receipts between the Assessee’s books of account and as per Form No. 26AS. The first appellate auithority confirmed the amount of Rs. 41,40,753/- on account of mismatch of amounts as per Form No. 26AS and gross receipts as per audited accounts on the ground that said amount was not accounted for by the Assessee in its gross receipts.

Relying on a catena of decisions, the Tribunal bench comprising Shri Pradip Kumar Kedia, Accountant Member and Shri N. K. Choudhry, Judicial Member observed that the Courts, in these cases, clearly held that in case of the difference between the Assessee’s books of account and as per Form No. 26AS, then on the said difference, only embedded portion of the profits is to be taken into consideration and the addition is to be made thereon but entire turnover cannot be added to the income of the Assessee.

The Tribunal, while concluding, observed that “the case in hand is squarely covered by the judgments of the Coordinate benches as referred above and therefore, we are inclined to accept the said decisions and consequently while taking into consideration the net profit rate of the previous year, in our considered view, the justice would be met by confirming the addition only to the extent of 5% of the undisclosed turnover. Hence, the AO is directed to restrict the addition to such extent only.”

To Read the full text of the Order CLICK HERE

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