Difference in P&L Account and 26AS Due to Declaration of Amount, Mumbai ITAT Upholds Deletion of Addition

The decision of the Commissioner of Income Tax (Appeals) (CIT (A)) is upheld by the Mumbai ITAT to annul an addition made, quoting a discrepancy between Form 26AS and the Profit & Loss Account, attributable to the declaration of service tax amounts.

On 27/11/2012 when the assessee filed its income tax return the case appeared, reporting a taxable income of ₹.Nil, after allowing for the carry forward of the current year’s losses totalling to ₹.1,94,48,261/-.

The case was assigned for scrutiny under CASS, and notices under sections 143(3) & 142(1) of the Income Tax Act, 1961 were issued and served on the taxpayer. Answering that an Authorised Representative of the taxpayer attended and filed the pertinent information as needed.

The department representative, Mr. Chetan Kacha, argued that the CIT (A) discussed the remand report from the Assessing Officer (AO) and stressed that the taxpayer is unable to submit supporting documents concerning the chart presented before the authorities. He leaned on the Assessing Officer’s orders.

On the opposite side the taxpayer’s counsel, Mr. Pratik Sha, contended that the difference between the amount asserted by the taxpayer in its Profit & Loss account and the amount declared in Form 26AS derived from the approach of accounting adopted by the taxpayer, concerning service tax. He described that the difference emerged because of the taxpayer recording net income in its Profit & Loss Account, while Form 26AS reflected gross income inclusive of service tax. The CIT (A) duly recognized this difference.

The tribunal, including Amjit Shukla (Judicial member) and S. Rifaur Rahman (Accountant member), analyzed the records and remarked that the major opinion revolved around the disparity between the amounts stated in the Profit & Loss Account and Form 26AS. The noteworthy difference, amounting to ₹.2,82,98,438/-, was subject to service tax.

It was shown that the taxpayer recorded the difference pertinent to the income proposed in the previous year’s returns and the specific income pertinent to the AY 2013-14 which was shown in the gross income shown in Form 26AS.

On analyzing the detailed reconciliation statement that the taxpayer furnished to the CIT (A), the ITAT discovered no basis to overturn the CIT (A) findings. Therefore, the grounds raised by the Revenue were dismissed.