Difference in Sales between Ledger and P&L Account Explained by VAT, Service Tax and other receipts: ITAT Deletes ₹13.61 Cr Addition [Read Order]

The Delhi Bench of Income Tax Appellate Tribunal (ITAT) deleted an addition of ₹13,61,47,346 made by the Assessing Officer (AO) on account of alleged differences between sales registered in the ledger and those declared in the Profit and Loss (P&L) account. It held that the discrepancy was fully reconciled by statutory taxes and specific service receipts.

NCR Vehicles Pvt. Ltd. (assessee), an automobile dealer, filed a return for the Assessment Year 2011-12. During the assessment, the AO noted that the total sales declared in the trading account amounted to ₹83,62,78,576, while the sales ledgers across three locations (Faridabad, MCIE, and Delhi) totaled ₹97,24,25,922.

The AO concluded there was an unexplained excess of sales amounting to ₹13,61,47,346 and added this amount to the assessee's income, citing a lack of documentary evidence for reconciliation during the initial assessment.

Aggrieved by the AO’s order, the assessee appealed to the Commissioner of Income Tax (Appeals) [CIT(A)]. During these proceedings, the assessee provided a detailed reconciliation chart demonstrating the "excess" amount in the ledger.

It was actually consisted of VAT amounted to ₹9,59,40,087 (as per VAT returns), Labour Receipts amounted to ₹1,97,10,422 (shown separately as 'Other Income'), Claims/Schemes amounted to ₹1,02,84,421, Logistics & Insurance Receipts amounted to over ₹77 lakhs (shown as 'Other Income') and Service Tax amounted to ₹24,49,431 (as per Service Tax returns).

The CIT(A) accepted this reconciliation and noted that these figures were verified against the audited financials and tax returns, and subsequently deleted the addition.

Aggrieved by the CIT(A)’s order, the Revenue challenged the CIT(A)'s decision before the ITAT. The Revenue argued that the admission of this reconciliation constituted a violation of Rule 46A regarding additional evidence.

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The two-member bench comprising Mahavir Singh (Vice President) and Krinwant Sahay (Accountant Member), observed that the assessee had previously submitted sale invoices, purchase invoices, and audited accounts during the assessment.

The tribunal observed that the reconciliation chart was not "new evidence" but merely a summary of data already present in the existing records. The tribunal observed that the Revenue could not find any factual fault in the reconciliation provided.

The Tribunal concluded that the assessee had successfully reconciled the entire sales figure. It affirmed the CIT(A)'s order. The tribunal dismissed the Revenue's appeal.

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