Addition for reconciliation difference in closing balance of debtor deleted by ITAT

Addition for reconciliation difference in the closing balance of debtor as per books of account of the assessee and that of the debtor deleted by ITAT

ABCAUS Case Law Citation
ABCAUS 3491 (2021) (04) ITAT

Addition for reconciliation difference in the closing balance of debtor

In the instant case, the assessee had challenged the order passed by the CIT(A) in confirming an addition on account of reconciliation difference in the closing balance of debtor as per books of account of the assessee and that of the debtor.

The return of income of the assesse was selected for scrutiny. During the assessment proceedings the Assessing Officer (AO) noticed that under the “sundry debtors” the assessee had inter alia shown receivable in the name of one debtor.

However, as per letter submitted by Chartered Accountant on behalf of the sundry debtor, the balance outstanding in debtors book was more than the balance shown in the books of the assessee.

Not satisfied with the replies of the assessee the AO made the impugned addition of the difference between the two balances.

The assessee challenged the order of the CIT(A) and contended that the CIT(A), without taking note of the glaring facts confirmed the stand of the AO by way of cryptic and non speaking order.

In support of its case, the assessee raised the following contentions:

(i) The AO did not collect the copy of ledger account of the assessee in the books of the debtors while relying upon the outstanding balance declared by the Chartered Accountant.

(ii) No transaction had been carried out during the year with sundry debtor and the difference in balance, if any, related to some earlier year and therefore no taxable event occurred in the current year.

(iii) The excess balance if any when received by the debtor by the assessee would be eventually become taxable in the year of receipt and therefore, the entire exercise is tax neutral.

The Tribunal found great force in the above contention and ordered reversal of the addition made on account of difference in balances.

The appeal was allowed in favour of the assessee.

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