Facts of the Case

The assessee, a civil contractor, originally filed its return declaring contract receipts of ₹5.46 crore and income of ₹18.67 lakh. The return was processed under section 143(1). Subsequently, the assessee filed a revised return showing enhanced receipts of ₹12.54 crore while retaining the same income figure.

During scrutiny, the Assessing Officer noted that the additional receipts of ₹7.08 crore were not reflected in Form 26AS, bank statements, or supporting documentation. Treating these as unexplained, the Assessing Officer added the amount as income from other sources and estimated profit at 8% on verifiable receipts after rejecting the books.

Before the CIT(A), the assessee contended that the inflated turnover had been disclosed only to satisfy eligibility criteria for NTPC tenders and did not represent actual business receipts.

Issues Involved

  1. Whether a revised return filed after processing under section 143(1) is valid under section 139(5).
  2. Whether inflated turnover disclosed for external purposes can be treated as real income.
  3. Whether additions can be made in absence of evidence of actual receipts.
  4. Whether profit estimation is justified when turnover itself is disputed.

Petitioner’s Arguments (Assessee)

The assessee submitted that the revised return was filed on the advice of a Chartered Accountant solely to match a manipulated balance sheet submitted to NTPC authorities to avoid disqualification and forfeiture of earnest money deposit.

It asserted that no such additional construction activity or receipts had actually occurred. Supporting material from NTPC vigilance proceedings indicated that the balance sheet submitted to the tender authority was found to be false. Therefore, the revised return did not reflect true income.

The assessee also argued that once the original return had been processed under section 143(1), the revised return should be treated as invalid.

Respondent’s Arguments (Revenue)

The Revenue contended that the revised return was validly filed within statutory time limits and constituted a voluntary disclosure. Since the assessee failed to substantiate that the additional receipts were fictitious, the Assessing Officer was justified in treating them as undisclosed income.

Court Order / Findings (ITAT Allahabad)

The Tribunal held that processing of a return under section 143(1) does not amount to completion of assessment. Therefore, filing a revised return thereafter within the prescribed time is legally permissible.

On Addition of Alleged Excess Receipts

The Tribunal observed that the Assessing Officer had not found any evidence of actual transactions corresponding to the alleged additional receipts—no bank entries, no identifiable parties, and no proof of construction activity.

The assessee had subsequently retracted the revised figures and produced material indicating that the inflated turnover was disclosed only for tender qualification purposes. The Tribunal held that in such circumstances, the authorities must verify whether the receipts actually existed before treating them as income.

Accordingly, the matter was restored to the Assessing Officer for a fresh assessment to determine the true income of the assessee after considering the NTPC vigilance reports and related evidence.

 Important Clarification

The Tribunal emphasized that taxation must be based on real income supported by evidence. Disclosure of exaggerated figures in a return does not automatically establish taxable income if the figures do not correspond to actual transactions. However, the Department is free to take action under penal provisions if false statements are established.

Link to download the order - https://www.mytaxexpert.co.in/uploads/1771062530_MSNCHAURASIAASSOCIATESSONEBHADRAVS.ACITMIRZAPUR.pdf

Disclaimer

This content is shared strictly for general information and knowledge purposes only. Readers should independently verify the information from reliable sources. It is not intended to provide legal, professional, or advisory guidance. The author and the organisation disclaim all liability arising from the use of this content. The material has been prepared with the assistance of AI tools.