Income Cannot be Taxed on Current Year When Sales Relates to Other AYs: ITAT Deletes Addition on Mismatch of Sales [Read Order]

The Jaipur Bench of the Income Tax Appellate Tribunal (ITAT) deleted an addition of ₹8,87,104 made on account of the alleged mismatch of sales for the Assessment Year (A.Y.) 2021-22 and held that since the sales in question pertained to assessment years other than the current year, the income could not be taxed in A.Y. 2021-22.

Silver & Arts Palace (assessee), a partnership firm engaged in the business of precious and semi-precious stones, Jewellery, textile, and handicraft items. During the search proceedings, various digital sheets were found and impounded by the department.

The Assessing Officer (AO) inferred that these sheets indicated unrecorded cash sales on which unrecorded cash commission had been paid. Out of the total alleged sales of ₹76,14,771, the assessee managed to match sales amounting to ₹47,43,884 with its regular books of accounts.

However, the AO held that the remaining sales of ₹28,70,887 did not exactly match the books as per the specific criteria set by the AO. The AO applied a Gross Profit rate of 30.90% on this unmatched sales amount and added ₹8,87,104 to the assessee's total income.

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Aggrieved by the AO’s order, the assessee filed an appeal before the Commissioner of Income Tax (Appeals) [CIT(A)]. The CIT(A) accepted the AO’s addition. Aggrieved by the CIT(A)’s confirmation, the assessee filed an appeal before the ITAT.

The two-member bench, comprising Dr. S. Seethalakshmi (Judicial Member) and Gagan Goyal (Accountant Member), noted that the primary contention of the assessee was that the remaining sales of ₹28,70,887 were matched.

The tribunal observed that these were rejected due to minor differences arising from deductions (like VAT/GST, Bank Charges) or a slight delay in recording the sales (gap of 2-5 days due to operational formalities).

The Tribunal observed that upon examining the excel sheets submitted by the assessee pertaining to the alleged sales all the entries pertain to years other than the year under consideration.

The Tribunal found that since the income derived from these sales was not related to A.Y. 2021-22, it could not be assessed in the current year. The bench underscored the settled legal principle that each assessment year is independent and separate and income, if any pertaining to other years, cannot be taxed in the current year.

The Tribunal deemed the addition to be untenable on the sole basis of jurisdiction over the assessment year and deleted the entire addition of ₹8,87,104. In the Result, the appeal filed by the assessee was allowed.

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