ITAT Upholds ₹5.97 Cr Addition Due to Non-Disclosure of TDS-Linked Contract Receipts

Virgo Softech Limited Vs DCIT (ITAT Delhi)

The appeal was filed before the Income Tax Appellate Tribunal (ITAT), Delhi against the order of the Commissioner of Income Tax (Appeals) dated 07.01.2025 for Assessment Year 2018–19. The assessee challenged additions made by the Assessing Officer (AO), primarily on the grounds of lack of proper opportunity and incorrect taxation of contractual receipts.

On the issue of procedural fairness, the assessee contended that no show-cause notice or draft assessment order was issued prior to making additions. However, the Tribunal noted that multiple statutory notices under Section 143(2) had been issued and complied with. The AO had discussed show-cause notices, replies, and conclusions in detail in the assessment order. Further, this issue was not raised before the CIT(A). The Tribunal held that adequate opportunity had been provided and rejected this ground.

The core dispute related to addition of ₹6.10 crore (partly reduced to ₹5.97 crore by CIT(A)) based on contract receipts reflected in Form 26AS on which tax had been deducted at source, but which were not disclosed as income. The assessee argued that the receipts pertained to services rendered in earlier financial years (2011–12 and 2012–13) and were adjusted against work-in-progress (WIP) due to disputes with clients and uncertainty of collection. It followed the completed service contract method, recognizing revenue only upon fulfillment of certain conditions.