Limited Scrutiny for turnover Difference in ITR & ST Return – AO can verify with Form 26AS

SNS Constructions P. Ltd. Vs ITO (ITAT Delhi)

In this case there was a difference of Rs. 14,25,463/- between books of account and the payment received as per Form 26AS. The Assessing Officer treated the amount of Rs. 14,25,463/- as undisclosed receipts and added the same to the income of the assessee. Thereby the Assessing Officer computed the income of the assessee at Rs. 18,16,383/- against the declared income at Rs. 3,90,920/-. Aggrieved against this the assessee preferred appeal before the learned CIT(Appeals), who after considering the submissions dismissed the appeal. Now, the assessee is in appeal before this Tribunal.

Revenue contended that there was mis-match of figures in the service tax  (ST) return and income tax return (ITR). Therefore, the issue was related to turn over and same was required to be verified. Hence, the Assessing Officer did not exceed its jurisdiction. He correctly verified the turnover of the assessee.

Assessee submitted that the case was selected for limited scrutiny. The basis for limited scrutiny was that turn over declared by the assessee in the return of income was at Rs. 6,01,95,473/- as against the turn over shown in the Service Tax return at Rs. 1,68,92,947/-. Therefore, it was contended that the issue was regarding difference in the turn over.

The contention of the assessee is that Assessing Officer exceeded the mandate of limited scrutiny. As per assessee, the Assessing Officer ought to have confined itself to the issue of turnover declared in the service tax return and income-tax return. I do not see any merit into the contention of the assessee that the Assessing Officer travelled beyond jurisdiction, since the assessee failed to explain nature of payment received from Freyssinet Prestressed Concrete Co. Ltd., whether such receipt was part of service tax return or not. The assessee was required to explain regarding nature of contract with the Freyssinet Prestressed Concrete Co. Ltd., in order to verify the correct figure of the turnover. In the absence of the relevant evidences, the Assessing Officer was justified in making the addition. Hence, the grounds raised by the assessee are devoid of any merit.

FULL TEXT OF THE ORDER OF ITAT DELHI

This appeal, by the assessee, is directed against the order of the learned Commissioner of Income-tax (Appeals), Karnal, dated 07.02.2019, pertaining to the assessment year 2014-15. The assessee has raised following grounds of appeal:

“On the facts and in the circumstances of the case and in law the Assessing Officer (or’ the Commissioner of Income-tax (Appeals)’where an appeal is filed before the Tribunal against the order of Commissioner (Appeals)) erred in:

1. Passing order u/s 143(3) of the Income Tax Act, 1961. The Assessing Officer had travelled beyond the points of which the case of scrutiny was selected under CASS module.

2. Making an addition of Rs. 14,25,463/- in the total income of the appellant.

3. Passing order u/s 143(3) of the Income Tax Act, 1961 determining the taxable income at Rs. 18,16,383/-;

4. Initiating proceedings u/s 274 r.w.s 271(1) (C) of the Income Tax Act, 1961.

All the above actions being arbitrary, fallacious, unwarranted and illegal must be quashed with directions for relief. In this regard the appellant submits here all the grounds of appeal in detail through the following submissions:

That the case of the appellant was selected for limited scrutiny under section 143(2)(i) of the Income Tax Act, 1961 through CASS for verification of the following issues:

a. Higher turnover reported in Service Tax Return compared to ITR.

b. Mismatch in sales turnover reported in Audit report and ITR.

c. Mismatch in amount paid to related persons u/s 40A(2)(b) reported in Audit report and ITR.”

2. Facts giving rise to the present appeal are that in this case return declaring total income at Rs. 3,90,920/- and book profit u/s 115JB of the Income Tax Act, 1961, hereinafter referred to as the “Act”, at Rs. 10,46,254/- was e-filed by the assessee on 27.11.2014. The return was processed u/s 143(1) of the Act and the case was selected for limited scrutiny through CASS and notice u/s 143(2) of the Act was issued and duly served upon the assessee. In response to this notice learned Authorized Representative of the assessee attended the proceedings. During the course of assessment the Assessing Officer noticed that the assessee was engaged in the business of civil construction and works contract. On perusal of Form 26AS it was noticed that the assessee had received payments u/s 194C of the Act from the following parties:

3. Further, the Assessing Officer noticed that on perusal of copy of account of The Freyssinet Prestressed Concrete Co. Ltd., the assessee had shown receipt of Rs. 1,46,09,381/- only in its books of account from the said party, whereas as per Form 26AS the assessee had received payment of Rs. 1,60,34,844/-. Therefore, there was a difference of Rs. 14,25,463/- between books of account and the payment received as per Form 26AS. The Assessing Officer treated the amount of Rs. 14,25,463/- as undisclosed receipts and added the same to the income of the assessee. Thereby the Assessing Officer computed the income of the assessee at Rs. 18,16,383/- against the declared income at Rs. 3,90,920/-. Aggrieved against this the assessee preferred appeal before the learned CIT(Appeals), who after considering the submissions dismissed the appeal. Now, the assessee is in appeal before this Tribunal.

4. Apropos to ground nos. 1 to 3, learned counsel for the assessee submitted that before the learned CIT(Appeals) it was stated that the Assessing Officer travelled beyond the scope of limited scrutiny. It was submitted that the case was selected for limited scrutiny. The basis for limited scrutiny was that turn over declared by the assessee in the return of income was at Rs. 6,01,95,473/- as against the turn over shown in the Service Tax return at Rs. 1,68,92,947/-. Therefore, it was contended that the issue was regarding difference in the turn over. This plea of the assessee was not accepted by the learned CIT(Appeals), who dismissed the appeal. Learned counsel submitted that the learned CIT(Appeals) failed to consider the facts in right perspective. He submitted that the action of Assessing Officer is highly unjust, arbitrary and illegal.

5. Per contra learned Sr. DR heavily relied on the orders of the authorities below. He contended that the contention of assessee is misplaced. He submitted that there was mis-match of figures in the service tax return and income tax return. Therefore, the issue was related to turn over and same was required to be verified. Hence, the Assessing Officer did not exceed its jurisdiction. He correctly verified the turnover of the assessee.

6. I have heard the rival submissions and perused the material available on record. The contention of the assessee is that Assessing Officer exceeded the mandate of limited scrutiny. As per assessee, the Assessing Officer ought to have confined itself to the issue of turnover declared in the service tax return and income-tax return. I do not see any merit into the contention of the assessee that the Assessing Officer travelled beyond jurisdiction, since the assessee failed to explain nature of payment received from Freyssinet Prestressed Concrete Co. Ltd., whether such receipt was part of service tax return or not. The assessee was required to explain regarding nature of contract with the Freyssinet Prestressed Concrete Co. Ltd., in order to verify the correct figure of the turnover. In the absence of the relevant evidences, the Assessing Officer was justified in making the addition. Hence, the grounds raised by the assessee are devoid of any merit. Hence, grounds are rejected. The reliance placed on the decisions of the Tribunal do not apply to the facts of the present case.

7. The appeal of the assessee is dismissed.

Order pronounced in open court on 29th April, 2022.