Case Law Details
ITO Vs Sambhav Shelter (ITAT Mumbai)
Introduction: The Income Tax Appellate Tribunal (ITAT) Mumbai recently adjudicated a case between the Income Tax Officer (ITO) and Sambhav Shelter. The dispute revolved around the rejection of books of account by the Assessing Officer (AO) due to discrepancies in the Tax Audit Report (TAR). This article provides a detailed analysis of the case, examining the grounds for rejection, arguments presented, and the final ruling by the ITAT Mumbai.
Background and Main Grievance: The revenue filed an appeal against the order of the Commissioner of Income Tax (Appeals) [CIT(A)] dated 17.01.2023. The primary contention was the deletion of an addition of Rs.1,73,36,141 made by the AO. The AO had rejected the books of account, estimating the profit at 8% of the recognized revenue.
AO’s Basis for Rejection: The AO, during scrutiny, identified discrepancies in turnover figures between the tax audit report and the Income Tax Return. The AO also raised concerns about the proper maintenance of stock records, pointing to a closing stock provision of Rs.1,14,63,282. Consequently, the AO rejected the books of account under Section 145(3) of the Income Tax Act, 1961.
CIT(A)’s Decision: The CIT(A) reversed the AO’s action, accepting the explanation provided by the assessee. The CIT(A) highlighted that the mismatch in turnover figures was due to a data entry error in the TAR, as clarified by the auditor. Additionally, the CIT(A) addressed concerns about closing stock, emphasizing the unique methodology followed by the assessee in real estate development.
Please become a Premium member. If you are already a Premium member, login here to access the full content.
