Element of profit involved in unaccounted receipts is to be calculated and added in total income in case it is ascertained that expenditure allocable to such unaccounted receipts are also unexplained, and not claimed in regular accounts.

Held Assessee agreed before the AO for the addition of this amount in the total income. Before the CIT(A), the assessee agitated addition of entire amount, but the CIT(A) did not accept contentions of the assessee. The element of profit involved in unaccounted receipts is to be calculated and added in the total income in case it is ascertained that expenditure allocable to such unaccounted receipts are also unexplained, and not claimed in the regular accounts. Here is a case where the assessee has debited all the expenditure in the audited accounts, but failed to account for the correct figure of the gross amount. The assessee has placed on record profit & loss account, but nothing in this regard has been pin-pointed in the written submissions. For example, if during the course of survey a document is found, which contained details of unaccounted receipts as well as expenditure, then, only element of profit involved in those unaccounted receipts is to be added to the total income of the assessee. This is not the case. Here the expenditure responsible for earning this differential amount has already been claimed by the assessee in the audited accounts. Therefore, total of the differential amount is to be added as the income of the assessee. Assessee’s ground dismissed. (para 4)

Present appeal is directed at the instance of assessee against order of ld. CIT(A), Ahmedabad-6 dated 28.11.2018 for Asstt. Year 2015-16.

2. In the appeal memo, the assessee has raised two grounds including sub-grounds, which supports the main ground. In the first ground, the grievance of the assessee is that the ld.CIT(A) has erred in sustaining addition of Rs.5,62,893/- on the ground of undisclosed contract receipts, despite alternative submission of the assessee that the ld.CIT(A) ought to have alteast restricted the addition to 8% of the undisclosed contracts receipts as per the provisions of section 44AD (of Income Tax Act, 1961).

3. A brief facts in this regard are that the assessee is a proprietor of “First Care Corporation” and engaged in the business of providing manpower supply services and also derives income from remuneration from Ask Me LAB Con Services P.Ltd. The assessee has e-filed his return of income on 29.10.2016 declaring total income of Rs.11,58,840/-. The case of the assessee selected for scrutiny assessment and notice under section 143(2) (of Income Tax Act, 1961) was issued and served upon the assessee. During the assessment proceedings, the ld.AO noticed difference in gross receipt of contract income as showed in the Form No.26AS and Audit report submitted by the assessee. In other words, as per Form No.26AS total receipt of contract income from various parties during the financial year 2014-15 was Rs.27,09,34,480/-; whereas as per audit report it was Rs.27,03,71,588/-; thus there was undisclosed receipt of Rs.5,62,893/- being the differential amount. The ld.AO sought explanation from the assessee in this behalf. The assessee vide reply letter dated NIL did not dispute the same and agreed to add back the differential amount to the total income of the assessee. On that basis, the ld.AO made the impugned addition. However, the impugned addition was challenged by the assessee before the first appellate authority by pleading that the ld.AO ought to have restricted the additions to the extent of profit element embedded in the undisclosed receipts, and not the entire undisclosed receipts. The ld.CIT(A) did not accept this contention of the assessee and held that since the assessee has conceded the factum of difference in gross receipts as reflected in the Form NO.26AS and audit report, and since being agreed to add back the same to the total income, then there was no merit in this contention of the assessee. The ld.CIT(A) accordingly confirmed order of the AO on this issue. Now, the assessee is in second appeal before the Tribunal.

4. Heard the ld.DR and gone through the material available on record. In response of notice of hearing no one has come present on behalf of us. However, Shri Ajit Sandesara has filed written submissions, which has been taken on record. According to the assessee, there was difference in the gross receipts in the audit report as well as reported in form no.26AS; when this discrepancy was brought to the notice of the assessee, the assessee has agreed for addition of the differential amount in the total income. However, before the ld.CIT(A) he disputed its inclusion on gross basis. Similarly, before the Tribunal, it has been pleaded by the assessee that only element of profit embedded in the gross receipt be considered. The assessee has also submitted details of net profit disclosed by him in the year which ranges in between 1.22% to 0.91% in the Asstt.Year 2013-14 to 2015-16. Before the ld.CIT(A), the assessee has relied upon decision of Hon’ble Gujarat High Court in the case of CIT Vs. Pesidnet Industries, 258 ITR 654 as well as other decisions of the Tribunal, to buttress his contentions that only element of profit embedded in such receipts be added to the total income. After perusal of these records, I am of the view that the assessee agreed before the AO for the addition of this amount in the total income. Before the ld.CIT(A), the assessee agitated addition of entire amount, but the ld.CIT(A) did not accept contentions of the assessee. The element of profit involved in unaccounted receipts is to be calculated and added in the total income in case it is ascertained that expenditure allocable to such unaccounted receipts are also unexplained, and not claimed in the regular accounts. Here is a case where the assessee has debited all the expenditure in the audited accounts, but failed to account for the correct figure of the gross amount. The assessee has placed on record profit & loss account, but nothing in this regard has been pin-pointed in the written submissions. For example, if during the course of survey a document is found, which contained details of unaccounted receipts as well as expenditure, then, only element of profit involved in those unaccounted receipts is to be added to the total income of the assessee. This is not the case before me. Here the expenditure responsible for earning this differential amount has already been claimed by the assessee in the audited accounts. Therefore, total of the differential amount is to be added as the income of the assessee. I find no merit in this ground of appeal; it is dismissed.

5. Now comes second ground i.e. addition of Rs.10,69,021/- made by the AO by invoking provisions of section 36(1)(va) (of Income Tax Act, 1961) and confirmed by the ld.CIT(A) in respect of payment made towards employees’ provident fund contribution.

6. With the help of the ld.DR, we have gone through the record. We find that both the Revenue authorities have found that the assessee has not deposited the employees’ PF contribution within the due date prescribed under section 36(1)(va) (of Income Tax Act, 1961). The ld.CIT(A) by relying upon the decision of Hon’ble jurisdictional High Court in the case of CIT Vs. Gujarat State Road Transport Corporation, held that employees’ contribution in the Employees’ Provident Fund deposited beyond the due date prescribed under section 36(1)(va) (of Income Tax Act, 1961), would not be eligible for deduction under section 43B (of Income Tax Act, 1961), even if it is deposited before the due date of filing of the return. On this issue, the ITAT, Ahmedabad Benches are consistently following the decision of jurisdictional High Court on this issue and disallowing such claims of assessees, and that being so, we do not find any infirmity in the order of ld.CIT(A) on this issue, more so, when nothing is placed before me whether the judgment of Hon’ble Gujarat High Court cited (supra) was overruled or not. Thus this ground stands rejected.

7. In the result, appeal of the assessee is dismissed.

Pronounced in the Open Court on 9th November, 2021.

Sd/-

(RAJPAL YADAV)

VICE-PRESIDENT

LEGAL REFERENCES

Section 10 Form 16 UDIN Section 27 Section 5 Income Tax Act Section 11 ITAT Section 143(2) Section 36(1)(va) Section 43B Section 44AD Form 26AS

CONCEPTS

Gujarat High Court 258 ITR 654

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Element of profit involved in unaccounted receipts is to be calculated and added in total income in case it is ascertained that expenditure allocable to such unaccounted receipts are also unexplained, and not claimed in regular accounts.

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Held

Assessee agreed before the AO for the addition of this amount in the total income. Before the CIT(A), the assessee agitated addition of entire amount, but the CIT(A) did not accept contentions of the assessee. The element of profit involved in unaccounted receipts is to be calculated and added in the total income in case it is ascertained that expenditure allocable to such unaccounted receipts are also unexplained, and not claimed in the regular accounts. Here is a case where the assessee has debited all the expenditure in the audited accounts, but failed to account for the correct figure of the gross amount. The assessee has placed on record profit & loss account, but nothing in this regard has been pin-pointed in the written submissions. For example, if during the course of survey a document is found, which
contained details of unaccounted receipts as well as expenditure, then, only element of profit involved in those unaccounted receipts is to be added to the total income of the assessee. This is not the case. Here the expenditure responsible for earning this differential amount has
already been claimed by the assessee in the audited accounts. Therefore, total of the differential amount is to be added as the income of the assessee. Assessee’s ground dismissed.

(para 4)

Present appeal is directed at the instance of assessee against order
of ld. CIT(A), Ahmedabad-6 dated 28.11.2018 for Asstt. Year 2015-16. 
2. In the appeal memo, the assessee has raised two grounds
including sub-grounds, which supports the main ground. In the first
ground, the grievance of the assessee is that the ld.CIT(A) has erred in
sustaining addition of Rs.5,62,893/- on the ground of undisclosed
contract receipts, despite alternative submission of the assessee that the
ld.CIT(A) ought to have alteast restricted the addition to 8% of the
undisclosed contracts receipts as per the provisions of section 44AD (of Income Tax Act, 1961). 
3. A brief facts in this regard are that the assessee is a proprietor of
“First Care Corporation” and engaged in the business of providing
manpower supply services and also derives income from remuneration
from Ask Me LAB Con Services P.Ltd. The assessee has e-filed his
return of income on 29.10.2016 declaring total income of Rs.11,58,840/-.
The case of the assessee selected for scrutiny assessment and notice
under section 143(2) (of Income Tax Act, 1961) was issued and served upon the assessee.
During the assessment proceedings, the ld.AO noticed difference in
gross receipt of contract income as showed in the Form No.26AS and
Audit report submitted by the assessee. In other words, as per Form
No.26AS total receipt of contract income from various parties during the
financial year 2014-15 was Rs.27,09,34,480/-; whereas as per audit report
it was Rs.27,03,71,588/-; thus there was undisclosed receipt of
Rs.5,62,893/- being the differential amount. The ld.AO sought
explanation from the assessee in this behalf. The assessee vide reply
letter dated NIL did not dispute the same and agreed to add back the
differential amount to the total income of the assessee. On that basis,
the ld.AO made the impugned addition. However, the impugned
addition was challenged by the assessee before the first appellate
authority by pleading that the ld.AO ought to have restricted the
additions to the extent of profit element embedded in the undisclosed
receipts, and not the entire undisclosed receipts. The ld.CIT(A) did not
accept this contention of the assessee and held that since the assessee has
conceded the factum of difference in gross receipts as reflected in the
Form NO.26AS and audit report, and since being agreed to add back the
same to the total income, then there was no merit in this contention of
the assessee. The ld.CIT(A) accordingly confirmed order of the AO on
this issue. Now, the assessee is in second appeal before the Tribunal. 
4. Heard the ld.DR and gone through the material available on
record. In response of notice of hearing no one has come present on
behalf of us. However, Shri Ajit Sandesara has filed written
submissions, which has been taken on record. According to the
assessee, there was difference in the gross receipts in the audit report as
well as reported in form no.26AS; when this discrepancy was brought to
the notice of the assessee, the assessee has agreed for addition of the
differential amount in the total income. However, before the ld.CIT(A)
he disputed its inclusion on gross basis. Similarly, before the Tribunal,
it has been pleaded by the assessee that only element of profit
embedded in the gross receipt be considered. The assessee has also
submitted details of net profit disclosed by him in the year which ranges
in between 1.22% to 0.91% in the Asstt.Year 2013-14 to 2015-16. Before
the ld.CIT(A), the assessee has relied upon decision of Hon’ble Gujarat
High Court in the case of CIT Vs. Pesidnet Industries, 258 ITR 654 as
well as other decisions of the Tribunal, to buttress his contentions that
only element of profit embedded in such receipts be added to the total
income. After perusal of these records, I am of the view that the
assessee agreed before the AO for the addition of this amount in the
total income. Before the ld.CIT(A), the assessee agitated addition of
entire amount, but the ld.CIT(A) did not accept contentions of the
assessee. The element of profit involved in unaccounted receipts is to be
calculated and added in the total income in case it is ascertained that
expenditure allocable to such unaccounted receipts are also
unexplained, and not claimed in the regular accounts. Here is a case
where the assessee has debited all the expenditure in the audited
accounts, but failed to account for the correct figure of the gross amount.
The assessee has placed on record profit &amp; loss account, but nothing in
this regard has been pin-pointed in the written submissions. For
example, if during the course of survey a document is found, which
contained details of unaccounted receipts as well as expenditure, then,
only element of profit involved in those unaccounted receipts is to be
added to the total income of the assessee. This is not the case before me.
Here the expenditure responsible for earning this differential amount
has already been claimed by the assessee in the audited accounts.
Therefore, total of the differential amount is to be added as the income
of the assessee. I find no merit in this ground of appeal; it is dismissed. 
5. Now comes second ground i.e. addition of Rs.10,69,021/- made by
the AO by invoking provisions of section 36(1)(va) (of Income Tax Act, 1961) and
confirmed by the ld.CIT(A) in respect of payment made towards
employees’ provident fund contribution. 
6. With the help of the ld.DR, we have gone through the record. We
find that both the Revenue authorities have found that the assessee has
not deposited the employees’ PF contribution within the due date
prescribed under section 36(1)(va) (of Income Tax Act, 1961). The ld.CIT(A) by relying
upon the decision of Hon’ble jurisdictional High Court in the case of CIT
Vs. Gujarat State Road Transport Corporation, held that employees’
contribution in the Employees’ Provident Fund deposited beyond the
due date prescribed under section 36(1)(va) (of Income Tax Act, 1961), would not be
eligible for deduction under section 43B (of Income Tax Act, 1961), even if it is deposited
before the due date of filing of the return. On this issue, the ITAT,
Ahmedabad Benches are consistently following the decision of
jurisdictional High Court on this issue and disallowing such claims of
assessees, and that being so, we do not find any infirmity in the order of
ld.CIT(A) on this issue, more so, when nothing is placed before me
whether the judgment of Hon’ble Gujarat High Court cited (supra) was
overruled or not. Thus this ground stands rejected. 
7. In the result, appeal of the assessee is dismissed. 
Pronounced in the Open Court on 9th November, 2021.
 
Sd/- 
(RAJPAL YADAV) 
VICE-PRESIDENT

Present appeal is directed at the instance of assessee against order
of ld. CIT(A), Ahmedabad-6 dated 28.11.2018 for Asstt. Year 2015-16. 
2. In the appeal memo, the assessee has raised two grounds
including sub-grounds, which supports the main ground. In the first
ground, the grievance of the assessee is that the ld.CIT(A) has erred in
sustaining addition of Rs.5,62,893/- on the ground of undisclosed
contract receipts, despite alternative submission of the assessee that the
ld.CIT(A) ought to have alteast restricted the addition to 8% of the
undisclosed contracts receipts as per the provisions of section 44AD (of Income Tax Act, 1961). 
3. A brief facts in this regard are that the assessee is a proprietor of
“First Care Corporation” and engaged in the business of providing
manpower supply services and also derives income from remuneration
from Ask Me LAB Con Services P.Ltd. The assessee has e-filed his
return of income on 29.10.2016 declaring total income of Rs.11,58,840/-.
The case of the assessee selected for scrutiny assessment and notice
under section 143(2) (of Income Tax Act, 1961) was issued and served upon the assessee.
During the assessment proceedings, the ld.AO noticed difference in
gross receipt of contract income as showed in the Form No.26AS and
Audit report submitted by the assessee. In other words, as per Form
No.26AS total receipt of contract income from various parties during the
financial year 2014-15 was Rs.27,09,34,480/-; whereas as per audit report
it was Rs.27,03,71,588/-; thus there was undisclosed receipt of
Rs.5,62,893/- being the differential amount. The ld.AO sought
explanation from the assessee in this behalf. The assessee vide reply
letter dated NIL did not dispute the same and agreed to add back the
differential amount to the total income of the assessee. On that basis,
the ld.AO made the impugned addition. However, the impugned
addition was challenged by the assessee before the first appellate
authority by pleading that the ld.AO ought to have restricted the
additions to the extent of profit element embedded in the undisclosed
receipts, and not the entire undisclosed receipts. The ld.CIT(A) did not
accept this contention of the assessee and held that since the assessee has
conceded the factum of difference in gross receipts as reflected in the
Form NO.26AS and audit report, and since being agreed to add back the
same to the total income, then there was no merit in this contention of
the assessee. The ld.CIT(A) accordingly confirmed order of the AO on
this issue. Now, the assessee is in second appeal before the Tribunal. 
4. Heard the ld.DR and gone through the material available on
record. In response of notice of hearing no one has come present on
behalf of us. However, Shri Ajit Sandesara has filed written
submissions, which has been taken on record. According to the
assessee, there was difference in the gross receipts in the audit report as
well as reported in form no.26AS; when this discrepancy was brought to
the notice of the assessee, the assessee has agreed for addition of the
differential amount in the total income. However, before the ld.CIT(A)
he disputed its inclusion on gross basis. Similarly, before the Tribunal,
it has been pleaded by the assessee that only element of profit
embedded in the gross receipt be considered. The assessee has also
submitted details of net profit disclosed by him in the year which ranges
in between 1.22% to 0.91% in the Asstt.Year 2013-14 to 2015-16. Before
the ld.CIT(A), the assessee has relied upon decision of Hon’ble Gujarat
High Court in the case of CIT Vs. Pesidnet Industries, 258 ITR 654 as
well as other decisions of the Tribunal, to buttress his contentions that
only element of profit embedded in such receipts be added to the total
income. After perusal of these records, I am of the view that the
assessee agreed before the AO for the addition of this amount in the
total income. Before the ld.CIT(A), the assessee agitated addition of
entire amount, but the ld.CIT(A) did not accept contentions of the
assessee. The element of profit involved in unaccounted receipts is to be
calculated and added in the total income in case it is ascertained that
expenditure allocable to such unaccounted receipts are also
unexplained, and not claimed in the regular accounts. Here is a case
where the assessee has debited all the expenditure in the audited
accounts, but failed to account for the correct figure of the gross amount.
The assessee has placed on record profit & loss account, but nothing in
this regard has been pin-pointed in the written submissions. For
example, if during the course of survey a document is found, which
contained details of unaccounted receipts as well as expenditure, then,
only element of profit involved in those unaccounted receipts is to be
added to the total income of the assessee. This is not the case before me.
Here the expenditure responsible for earning this differential amount
has already been claimed by the assessee in the audited accounts.
Therefore, total of the differential amount is to be added as the income
of the assessee. I find no merit in this ground of appeal; it is dismissed. 
5. Now comes second ground i.e. addition of Rs.10,69,021/- made by
the AO by invoking provisions of section 36(1)(va) (of Income Tax Act, 1961) and
confirmed by the ld.CIT(A) in respect of payment made towards
employees’ provident fund contribution. 
6. With the help of the ld.DR, we have gone through the record. We
find that both the Revenue authorities have found that the assessee has
not deposited the employees’ PF contribution within the due date
prescribed under section 36(1)(va) (of Income Tax Act, 1961). The ld.CIT(A) by relying
upon the decision of Hon’ble jurisdictional High Court in the case of CIT
Vs. Gujarat State Road Transport Corporation, held that employees’
contribution in the Employees’ Provident Fund deposited beyond the
due date prescribed under section 36(1)(va) (of Income Tax Act, 1961), would not be
eligible for deduction under section 43B (of Income Tax Act, 1961), even if it is deposited
before the due date of filing of the return. On this issue, the ITAT,
Ahmedabad Benches are consistently following the decision of
jurisdictional High Court on this issue and disallowing such claims of
assessees, and that being so, we do not find any infirmity in the order of
ld.CIT(A) on this issue, more so, when nothing is placed before me
whether the judgment of Hon’ble Gujarat High Court cited (supra) was
overruled or not. Thus this ground stands rejected. 
7. In the result, appeal of the assessee is dismissed. 
Pronounced in the Open Court on 9th November, 2021.
 
Sd/- 
(RAJPAL YADAV) 
VICE-PRESIDENT

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Element of profit involved in unaccounted receipts is to be calculated and added in total income in case it is ascertained that expenditure allocable to such unaccounted receipts are also unexplained, and not claimed in regular accounts.