ITAT reduces income addition due to discrepancies in Form 26AS & P&L account, citing unjustified rejection.

The ITAT partially allowed the appeal against the CIT(A)'s decision, reducing the addition made by the Assessing Officer due to discrepancies in income as per Form 26AS and profit and loss account. The ITAT found the rejection of the appellant's explanation for sales differences without proper justification unsustainable and directed that the addition should be limited to the difference accepted by the assessee in its explanation, resulting in a reduced addition of Rs. 3,13,698 + Rs. 6,28,000. The judgment was pronounced on 28/07/2021.

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Issues:
Difference in income as per Form 26AS and profit and loss account leading to addition by Assessing Officer without proper justification.

Analysis:
The appeal was against the order of the Ld. CIT(A) for the Assessment Year 2014-15. The grounds of appeal included the contention that the appellate order was passed without giving the appellant an opportunity to be heard and that the addition made by the Assessing Officer of Rs. 12,50,251 was confirmed solely based on the discrepancy between income in Form 26AS and the profit and loss account. The Assessing Officer noted the differences in income for various parties and reasons for such differences, including service tax and sales amounts. The Assessing Officer held that since the income was under the mercantile system, the difference should be considered as income for the year, resulting in the addition. The CIT(A) upheld the Assessing Officer's decision, stating that the appellant had claimed full TDS credit despite the income discrepancy. The appellant then appealed to the ITAT.

Upon hearing the arguments and examining the records, the ITAT noted that the Assessing Officer accepted the explanation for the service tax difference but rejected the explanation for sales differences without providing any justification. The ITAT found the rejection without proper reasoning unsustainable and directed that the addition should be restricted to the difference accepted by the assessee in its explanation, amounting to Rs. 3,13,698 + Rs. 6,28,000. As a result, the appeal was partly allowed, and the addition was reduced accordingly. The judgment was pronounced on 28/07/2021.

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