ITAT Delhi: Revenue Recognition Mismatch Between Service Tax Returns and Books of Account Cannot Justify Additions Without Enquiry
The Income Tax Appellate Tribunal (ITAT), Delhi Bench, has delivered a significant ruling in the case of Deepsons (India) Pvt. Ltd. Vs ACIT, addressing the legality of additions made by Assessing Officers (AO) based purely on discrepancies between Service Tax (CBEC) data and the income reported in Income Tax Returns. The Tribunal also adjudicated on the applicability of Section 115BBE regarding cash deposits made during the demonetization period.
Factual Background of the Dispute
The appeal arose from an assessment order for the Assessment Year 2017-18. The assessee, a private limited company, had filed its return declaring a total income of ₹1,02,48,020. Upon scrutiny, the Revenue authorities passed an assessment order on December 26, 2019, making substantial additions to the returned income.
The primary points of contention were:
- Under-reporting of Revenue: An addition of ₹4,21,34,712 was made after the AO observed a mismatch between the turnover reflected in the CBEC/Service Tax database and the turnover recorded in the assessee's books of account.
- Cash Deposits: An addition of ₹56,65,000 was made under Section 68 read with Section 115BBE of the Income-tax Act, 1961, pertaining to cash deposits made during the demonetization period.
Consequently, the assessed income was determined at ₹5,80,47,732. The assessee challenged this order before the Ld. CIT(A), who dismissed the appeal via an order dated April 30, 2025. The matter subsequently reached the Tribunal.