Accrued income dispute under consultancy agreement restored for verification of contract terms and later-year tax treatment.

Dispute arose over whether the difference between the invoiced amount and income recorded in the books was taxable in the relevant year. The assessee said the balance represented an advance under a consultancy arrangement and was offered to tax later, while the lower authorities treated the full invoice value as accrued income based on the invoice, service tax return, and payer's accounting treatment. A certificate produced at the hearing indicated the consultancy agreement had been executed and signed on 26 March 2013, with the date omitted inadvertently. Because this material was not before the lower authorities and the agreement's effect, together with the subsequent year's tax position, required verification, the matter was restored for fresh adjudication.

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Issues: Whether the addition made by treating the difference between the invoiced amount and the income recognised in the books as taxable income for the assessment year was sustainable, or whether the matter required restoration for verification of the consultancy agreement and related facts.

Analysis: The assessee had recognised income on the basis of the consultancy arrangement and claimed that the balance amount was only an advance, later offered to tax in a subsequent year. The lower authorities treated the entire invoiced amount as accrued income mainly on the basis of the invoice, service tax return, and the payer's accounting treatment. However, a certificate produced at the hearing stated that the consultancy agreement had been executed and signed on 26 March 2013 and that the date had been inadvertently omitted from the agreement. As this material was not before the lower authorities, and since the nature and effect of the agreement needed verification along with the subsequent year's assessment position, the issue required fresh examination.

Conclusion: The addition was not finally sustained and the matter was restored to the Assessing Officer for verification and fresh adjudication after due opportunity to the assessee.

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