Shriwin Construction Vs Assessment Unit (Madras High Court)
The petitioner, engaged in civil and structural works contracts, filed its AY 2024-25 return under Section 139(1) of the Income Tax Act, 1961, declaring total income of ₹12.50 lakh. During scrutiny, the Assessing Officer noticed a difference between receipts reported in Form 26AS and income offered for taxation. The petitioner stated that the difference represented advances received for under-construction projects.
The petitioner submitted that such advances should not be treated as income until completion of the projects. Alternatively, it contended that related expenditure should be considered before determining taxable income. The petitioner stated that its disclosed profit was about 7.6% and offered to remit ₹6.13 lakh as a condition for remand, representing tax if 10% profit were attributed to the differential receipts of ₹2,04,31,471.
The Madras High Court noted that the assessment order had treated the entire difference of ₹2,04,31,471 between the profit and loss account and Form 26AS as undisclosed income. This resulted in a net tax liability of ₹75,76,373 and total demand of ₹90,74,690. The Court observed prima facie that expenditure relating to the differential amount reflected in Form 26AS had not been considered.
Accordingly, subject to the petitioner remitting ₹6.13 lakh within 30 days, the Court set aside the impugned assessment order and remanded the matter to the Assessment Unit for reconsideration. The petitioner was to receive a reasonable opportunity, including a video-conference hearing, and be permitted to file its profit and loss account. A fresh order was directed to be issued within three months from remittance of the amount. The writ petition was disposed of with no order as to costs.
FULL TEXT OF THE JUDGMENT/ORDER OF MADRAS HIGH COURT
The petitioner is engaged in the business of executing civil and structural works contracts. In relation to assessment year 2024 — 2025 (corresponding to financial year 2023 — 2024), the petitioner filed the return of income under Section 139(1) of the Income Tax Act, 1961 (the I-T Act) declaring a total income of Rs.12,50,000/-. Upon the case being selected for scrutiny, the assessing officer noticed the difference between receipts, as per Form 26AS, and the income offered for tax. The petitioner asserted that the difference arose on account of advances received in relation to under construction projects. This culminated in the impugned assessment order.
2. Learned counsel for the petitioner submits that amounts received on adhoc basis in relation to under construction projects should not be treated as income and that the same is liable to be treated as such only upon completion of said projects. In the alternative, he submits that the taxable income in relation thereto could not have been treated as undisclosed income without taking into consideration the expenditure relating thereto.
3. On instructions, he submits that the profit disclosed by the petitioner in relation to returned income is about 7.6%. Even if the profit in respect of the advance receipts of Rs.2,04,31,471/- were to be treated as income, he submits that a maximum of 10% profit may be attributed in relation to such income. If tax were to be computed on such profit, he submits that it would not exceed WEB Rs.6,13,000/- at the slab rate of 30%. He submits that the petitioner agrees to remit this amount as a condition for remand.
4. Dr. C. P. Priya, learned Senior Standing Counsel, appears for both the respondents.
5. On perusal of the impugned assessment order, it is clear that the entire difference between the receipts disclosed in the profit and loss account and Form 26AS, i.e. a sum of Rs.2,04,31,471/- has been treated as undisclosed income and added to the total income of the petitioner. This has resulted in arriving at net tax liability of Rs.75,76,373/- and a total demand of Rs.90,74,690/-.
6. It appears prima facie from such assessment order that expenditure relating to the differential amount of Rs.2,04,31,471/-, which was reflected in Form 26AS, has not been taken into account. Therefore, subject to the petitioner remitting a sum of Rs.6,13,000/-, re-consideration is warranted in the interest of justice.
7. For reasons aforesaid, subject to the petitioner remitting the sum of Rs.6,13,000/- within thirty days from the date of receipt of a copy of this order, the impugned assessment order is set aside and the matter is remanded to the assessment unit for re-consideration. After providing a reasonable opportunity to the petitioner, including a hearing through video-conference, and after permitting the petitioner to file its profit and loss account, a fresh order shall be issued within three months from the date of remittance of the aforesaid amount.
8. The writ petition is disposed of on the above terms. Consequently, connected miscellaneous petitions are closed. There shall be no order as to costs.
