Priya Construction Vs PCIT (Central) (ITAT Chennai)
ITAT Chennai held that only profit embedded to creditors written off and discount receipts is needed to be added since both i.e. creditors written off and discount receipts are inextricably linked with business of assessee. Hence, appeal partly allowed.
Facts- The assessee is a partnership Firm engaged in the business of undertaking civil construction/real estate. The assessee firm converted itself into a Private Company and the partners of the Firm, became the Directors of the Company. There was a survey u/s.133A of the Act conducted on 05.02.2020 in the business premise of the company; and during the course of search, vouchers/receipts for some of the expenses claimed in the books of accounts of the Firm/Company couldn’t be found/discovered in its premises. In such a situation, the managing partner of the erstwhile assessee Firm [who was the Managing Director of the company] agreed to declare 8% of the total turnover as profit and agreed to declare the net profit on the basis of such an undertaking after claiming interest on partners’ capital and partners remuneration for AY 2019-20.
However, the action of AO has been interfered by the Ld.PCIT exercising his revisional jurisdiction u/s.263 of the Act by observing that assessee-firm had in addition to its income from contract receipts had “other income” of Rs.43,60,829/- comprising of (i) Interest on deposits of Rs.11,70,534/- ; (ii) Discount receipt of Rs.14,999/- and (iii) Creditors written off of Rs.31,75,296/-. But the AO while completing the assessment for the AY 2019-20 on 24.09.2021, had only considered the contract receipts for arriving at the net profit but omitted to bring the entire “other income” of Rs.43,60,829/- for tax.
