This document presents a comprehensive analysis of the appellate decision in the case of Purna Chandra Rout versus ITO Ward-1(4), New Delhi, for the assessment year 2014-15. The case revolves around the addition of Rs. 41,40,753 due to discrepancies between the taxpayer’s books and Form No. 26AS.
The appeal by Purna Chandra Rout challenges the decision upheld by the Ld. CIT(A) -18, New Delhi. The issue at hand was the mismatch in the gross receipts reported by the assessee in his books of account and the income reflected in Form No. 26AS.
The Assessee’s counsel argued based on precedents that if there is a discrepancy between the books of account and Form No. 26AS, only a portion of the profit embedded in the unreported turnover should be considered for taxation, rather than the entire turnover. Citing similar judgments, the Tribunal agreed with this line of reasoning and directed that the addition should only account for 5% of the undisclosed turnover, thereby substantially reducing the assessee’s tax liability.
The decision highlights the importance of maintaining precise and consistent accounting records and the implications of discrepancies between reported income and tax documents like Form No. 26AS. This case sets a precedent on how such discrepancies should be treated, emphasizing that not the entire unreported turnover is taxable but only the profit derived from it.
The ITAT’s decision in ITA 1087/DEL/2020 provides critical insights into handling cases of income mismatch in tax filings, offering some relief to taxpayers by recognizing the principle of taxing only the profit portion of unreported sales.
ITA 1087/DEL/2020: Purna Chandra Rout vs. ITO Ward-1(4), New Delhi
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