TaxTMI 
TaxTMI 
2026 (9) TMI 243
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....Act, 1961 for the assessment year 2016-17. The assessee is principally aggrieved by the confirmation of addition of Rs.4,84,82,721, representing the difference between the contract receipts reflected in the information furnished by M/s Tata Chemicals Ltd. and the turnover disclosed by the assessee in its books of account. Since all the grounds raised in the appeal emanate from this common issue, they are taken up together. 2. Brief facts are that the assessee is a partnership firm engaged in the business of providing transport services on a contractual basis. It filed its return of income on 19.10.2016 declaring a total income of Rs.13,35,480. The case was selected for limited scrutiny under CASS for examining whether the contract receip....
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.... been diverted by one of its partners, Shri Mohan Laxman Dhanawade, to two other bank accounts opened and operated by him without the knowledge or consent of the other partners. It was further alleged that the said partner had used the name and PAN of the assessee-firm for an unauthorised or forged partnership firm and proprietary concern and, therefore, the corresponding receipts did not belong to the assessee. The Assessing Officer, however, observed that despite a specific opportunity, the assessee did not furnish any contemporaneous correspondence with M/s Tata Chemicals Ltd., the returns of income of the concerned partner or the alleged other concerns, or any other reliable material to establish that the differential receipts had been ....
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....hat the assessee had accounted for the amount of Rs.2,35,81,839 actually received in its disclosed bank account and that the remaining amount had been diverted by the errant partner by opening and operating separate bank accounts through concerns created by him. It was submitted that merely because the assessee's PAN had been used for deduction of tax, the corresponding receipts could not be regarded as the income of the assessee when the amounts had neither been received by it nor accrued for its benefit. The learned DR, on the other hand, strongly relied upon the orders of the authorities below and submitted that the explanation concerning the alleged diversion of receipts had remained wholly unsubstantiated. He pointed out that M/s Tata ....
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....r concern or the partner had declared the corresponding receipts or income in their respective returns. In the absence of such corroboration, the explanation remains no more than an unverified assertion and cannot displace the direct confirmation furnished by M/s Tata Chemicals Ltd. or the assessee's own conduct in claiming the entire TDS credit. We, therefore, uphold the finding of the authorities below that the differential receipts of Rs.4,84,82,721 are attributable to the business of the assessee. 7. However, the further conclusion of the Assessing Officer that the entire differential turnover constitutes the taxable income of the assessee cannot be sustained. There is a fundamental distinction between gross business receipts and inc....
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.... margin provides a relevant factual reference, but the same cannot be applied mechanically to the unaccounted turnover, particularly when the assessee has failed to furnish a reliable account of the receipts and the expenditure relatable thereto. A reasonable upward adjustment is, therefore, warranted to account for the absence of supporting records and the attendant possibility that the undisclosed segment yielded a higher margin than the recorded business. 9. Considering the nature of the transport business, the profit disclosed on the accounted turnover, the absence of verifiable details of the expenditure pertaining to the differential receipts and the entirety of the surrounding circumstances, we are of the considered opinion that e....