Addition due to Mis-match b/w books & Form 26AS can be made only on embedded portion of profit: ITAT

The issue raised in this appeal by the Assessee pertains to the affirmation of the addition of Rs. 41,40,753/- made by the AO on account of unaccounted sales arises due to difference in receipts between the Assessee’s books of account and as per Form No. 26AS. The Ld. CIT(A) affirmed the amount of Rs. 41,40,753/- on account of mismatch of amounts as per Form No. 26AS and gross receipts as per audited accounts on the ground that said amount was not accounted for by the Assessee in its gross receipts.

In this case the Taxpayer argued that Hon’ble Courts have clearly held that in case of the difference between the Assessee’s books of account and Form No. 26AS, then on the said difference, only an embedded portion of the profits is to be taken into consideration and the addition is to be made thereon but entire turnover cannot be added to the income of the Assessee.

ITAT Order:

5. We have given thoughtful consideration to the peculiar facts and circumstances of the case and are of the considered view that the case in hand is squarely covered by the judgments of the Hon‟ble Coordinate benches as referred above and therefore, we are inclined to accept the said decisions and consequently while taking into consideration the net profit rate of the previous year, in our considered view, the justice would be met by confirming the addition only to the extent of 5% of the undisclosed turnover. Hence, the AO is directed to restrict the addition to such extent only.