The Madras High Court has quashed an income tax assessment order where the difference between the receipts shown in Form 26AS and the receipts recorded in the books of account was considered as undisclosed income without considering the related expenditure.
The court remanded the case to the AO for passing a fresh order after considering the Profit & Loss Account submitted by the applicant on condition of remitting Rs.6,13,000.
Shriwin Construction, a partnership firm, has submitted the petition, which is in the business of executing civil and structural works contracts. The taxpayer submitted the return for AY 2024-25 showing a total income of Rs 12.50 lakh.
The officer discovered a discrepancy between the receipts shown in Form 26AS and those revealed in the profit and loss account. They considered the differential amount of Rs 2.04 crore as undisclosed income and added the complete amount to the taxpayer’s taxable income. This caused a tax obligation of Rs 75.76 lakh and a total demand of ₹90.74 lakh.
The applicant mentioned that the differential receipts shown as advances obtained for the ongoing construction projects could not be considered as income till the completion of the projects.
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In another way, it was claimed that even if these advances were considered as taxable receipts, the department could not evaluate the entire gross receipts as undisclosed income without permitting deduction for the expenditure incurred in earning such receipts.
The petitioner stated that it had reported a profit margin of nearly 7.6%. Even if the differential receipts were considered taxable, only the profit portion should be subject to taxation, resulting in a significantly lower tax liability. The assessee also expressed a willingness to deposit ₹6.13 lakh as a condition for remand.
The High Court determined merit in the applicant’s claim and observed that the officer considered the whole difference between Form 26AS and the books of account as undisclosed income without analysing whether expenditure had been incurred concerning those receipts.
Justice Senthilkumar Ramamoothy observed
“It appears prima facie from such assessment order that expenditure relating to the differential amount of Rs.2,04,31,471/-, which was reflected in Form 26AS, has not been taken into account. Therefore, subject to the petitioner remitting a sum of Rs.6,13,000/-, reconsideration is warranted in the interest of justice.”
The Court quashed the assessment order and remanded the case for fresh consideration after furnishing hearing chances, including through video conferencing, and after allowing it to place on record its profit and loss account and other relevant materials.
| Case Title | Shriwin Construction Vs Assessment Unit |
| Case No. | WP No. 17896 of 2026 |
| For the Petitioner | Mr T.Ramesh |
| For Respondent | Dr C.P.Priya |
| Madras High Court | Read Order |
