Tribunal allows appeal, directs deletion of Rs.25,24,873 addition for sales difference. Delay condoned.

The Tribunal allowed the appeal of the assessee, directing the deletion of the addition of Rs.25,24,873/- on account of the difference in sales as reflected in the books of the assessee and in Form 26AS. The Tribunal found the delay in filing the appeal to be reasonable and bonafide, condoning the delay of 63 days. Additionally, the Tribunal accepted the assessee's explanations regarding the accounting treatment of receipts as work-in-progress and subsequent year booking, concluding that the addition was not justified.

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Issues Involved:

1. Condonation of delay in filing the appeal.
2. Legality of the addition of Rs.25,24,873/- due to alleged short receipts.
3. Difference in receipts between books and Form No. 26AS.
4. Accounting treatment of receipts as work-in-progress (WIP) and subsequent year booking.

Issue-wise Detailed Analysis:

1. Condonation of Delay in Filing the Appeal:

The assessee filed an appeal delayed by 63 days and sought condonation of delay, citing the reason as having filed a rectification application to the Assessing Officer (AO) against the addition confirmed by the CIT(A). The affidavit stated that the incomes added were returned to tax in the subsequent year, leading to a delay. The Tribunal found the cause reasonable and bonafide, considering the short period of delay, and condoned the delay.

2. Legality of the Addition of Rs.25,24,873/- Due to Alleged Short Receipts:

The assessee challenged the addition of Rs.25,24,873/- towards alleged short receipts, arguing that the CIT(A) erred in law and facts by not considering the explanations and evidence properly. The Tribunal noted that the assessee had declared a total turnover of Rs.1.09 crores with a gross profit rate of 9.16% and a net profit rate of 3% during the year.

3. Difference in Receipts Between Books and Form No. 26AS:

The difference in contractual receipts was attributed to two parties: Apple Wood Estate Ltd. (Rs.3,31,228/-) and CONCORD Biotech Ltd. (Rs.21,93,645/-). The assessee explained that the difference was due to the method of accounting, where certain amounts were booked as WIP and reflected as sales in the subsequent year. The Tribunal found that the assessee had substantiated this explanation with necessary evidence, including subsidiary ledger accounts and payment release notes.

4. Accounting Treatment of Receipts as Work-in-Progress (WIP) and Subsequent Year Booking:

The CIT(A) had rejected the assessee's explanation, stating that under the accrual system of accounting, the sales should have been booked in the impugned year when the job was completed and the bill was raised. However, the Tribunal disagreed, stating that income accrues only when the other party accepts its liability. The Tribunal found that the assessee had rightly booked the income in the subsequent year when the bills were accepted by CONCORD Biotech Ltd. For the amounts booked as WIP, the Tribunal saw no reason to reject the explanation as the assessee had substantiated it with ledger accounts.

The Tribunal also noted that the difference in turnover was minimal compared to the total sales booked from the parties, and the assessee had disclosed a significant turnover with appropriate net profit. Therefore, the addition of Rs.25,24,873/- was not justified.

Conclusion:

The Tribunal directed the deletion of the addition of Rs.25,24,873/- on account of the difference in sales as reflected in the books of the assessee and in Form 26AS. The appeal of the assessee was allowed.

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