Whether difference between turnover reflected in CBEC / Service Tax data and turnover recorded in the books of account can, by itself, justify an addition for under-reported revenue without independent enquiry by the Assessing Officer.
Case Citation – ITAT Delhi – Deepsons (India) Pvt. Ltd. vs Assistant Commissioner of Income Tax, Circle 7(1), Delhi
ITA No. 3741/Del/2025
Order dated: 23 January 2026
Brief Facts:
The assessee filed return declaring total income of ₹1,02,48,020.
The case was selected for scrutiny and assessment was completed by making an addition of ₹4,21,34,712 alleging under-reporting of revenue, based on CBEC / Service Tax data.
The AO compared service tax turnover with turnover as per books and treated the difference as undisclosed income.
The assessee explained that:
Customer advances are taxable under Service Tax law, but
Revenue under Income-tax law is recognized only upon execution of conveyance deed / actual sale.
Reverse charge payments and non-revenue items were also included in CBEC data.
A detailed reconciliation statement was furnished before the AO and CIT(A).
No defect was found or pointed out in the books of account.
Brief Statutory Provision:
Section 28 of the Income-tax Act, 1961 – Income chargeable to tax must represent real income.
Section 145 of the Income-tax Act, 1961 – Income shall be computed in accordance with the method of accounting regularly followed.
Service Tax law and Income – tax law operate independently, and figures under one statute cannot be mechanically adopted under another.
Principles of natural justice mandate independent verification when third-party data is disputed.
Case Laws Relied Upon:
DM Estates (P) Ltd. vs DCIT – ITA No. 372/Bang/2019 (ITAT Bangalore) – Held that addition cannot be sustained merely on the basis of mismatch between departmental data and books without enquiry.
TUV India Pvt. Ltd. vs DCIT – 2019 (8) TMI 1050 (ITAT Mumbai) – Held that once the assessee furnishes reconciliation and explanation, the onus shifts to the department to verify correctness of third-party data.
Principle reiterated:
Assessee cannot be asked to do an impossible task of verifying or correcting information maintained in government databases.
No addition is permissible in absence of defects in books of account.
Finding (ITAT):
The AO relied mechanically on CBEC data without making any enquiry.
The assessee had discharged its primary onus by submitting reconciliation and supporting details.
CBEC data is not conclusive evidence of taxable income under the Income-tax Act.
Differences arose due to advances, reverse charge mechanism, and timing of revenue recognition, and not due to suppression.
In absence of any defect in books, the addition was held to be unsustainable.
Conclusion:
Mere mismatch between CBEC / Service Tax data and turnover as per books does not justify addition for under-reported revenue.
Revenue must be assessed on the basis of real income supported by enquiry and evidence, not on unverified third-party data.
Ground allowed and addition deleted in favour of the assessee.
By,
Ajay Kumar Agarwal, FCA (Sr. Partner)
(Ajay K. Agarwal & Associates Chartered Accountants, New Delhi)
Disclaimer:
This article is intended solely for academic and professional discussion. It does not constitute legal advice or a formal opinion. The views expressed are personal and based on the author’s understanding of the statutory provisions, CBDT instructions and judicial precedents as on the date of writing. Readers are advised to consult the relevant statutory provisions and professional advisors before acting on the basis of this article.
