Pranava Electronics Private Limited Vs ACIT (ITAT Bangalore)
An Invoice Raised by Mistake Cannot Create Income; Rule 8D Cannot Be Applied by Default
A difference between two tax returns may justify an enquiry. But does it justify an addition even after the underlying agreement, books and actual receipts explain the difference? Similarly, can the Assessing Officer apply Rule 8D merely because an assessee has earned exempt income and made only a small disallowance on its own? The Bangalore Tribunal addressed both questions in favour of the assessee.
Higher rent in service tax return: what had happened?
Pranava Electronics Private Limited had reported rental receipts of ₹9,00,93,330 in its income-tax return, whereas its service tax return reflected ₹9,10,39,362. The Assessing Officer treated the difference of ₹9,46,032 as rental income that had escaped assessment.
The company explained that, for June to August 2016, it had mistakenly raised monthly invoices of ₹36,11,533, although the correct monthly rent was ₹32,96,186. The excess of ₹3,15,347 per month accounted for the entire difference. Service tax had been paid on the higher invoiced amount, and the excess service tax was adjusted subsequently. The company maintained that its books and income-tax return reflected the rent actually received.
The AO made the addition on the ground that supporting evidence had not been furnished before him. The CIT(A) sustained it. Before the Tribunal, however, the assessee placed the invoices and evidence of the actual rent receipts alongside its explanation.
