When assessee claimed that there was wrong credit entry by payer-client in Form 26AS, AO has to examine its genuineness

short overview : Where assessee claimed that there was wrong credit entry by payer-client in Form 26AS, AO was required to examine its genuineness before making any addition on account of mismatch between receipts reflected in Form 26AS and in profit and loss account. Thus, matter was remanded for re-adjudication.

Pursuant to scrutiny assessment completed under section 143(3), based on the AIR information, AO made addition on account of mismatch of income shown in profit and loss account and in Form 26AS. Assessee contended that there was certain wrong entry and filed reconciliation of the same which was rejected by AO alleging that no supporting evidences were not produced.

it is held that When assessee claimed that there was wrong credit entry by payer-client in Form 26AS, AO has to examine its genuineness. Also it has been laid down by CBDT in its Instruction No. 5/2013 dated 8-7-2013 that AO may also, if deemed necessary, issue a notice to the deductor to compel him to file correction statement as per the procedure laid down. Therefore, the matter was remanded back to AO to make an order afresh after giving reasonable opportunity of being heard to assessee.

Decision: In assessee’s favour by way of remand.

Referred: Rakesh Kumar Gupta v. UOI & Anr. (2014) 46 taxmann.com 447 (All) : 2014 TaxPub(DT) 2437 (All-HC), P.K. Rajasekar v. ITO (2016) 74 taxmann.com 151 (Chen-Trib) : 2016 TaxPub(DT) 4585 (Chen-Trib)

IN THE ITAT, MUMBAI BENCH

SANDEEP GOSAIN, J.M. & N.K. PRADHAN, A.M.

I2I Telesource (P.) Ltd. v. ITO

ITA No. 6823/MUM/2017

18 February, 2019

Assessee by: N.H. Gajria, AR

Revenue by: Abi Rama Kartikiyen, DR

N.K. Pradhan, A.M.

This is an appeal filed by the assessee. The relevant assessment year is 2012-13. The appeal is directed against the order of the Commissioner (Appeals)-17, Mumbai [in short ‘CIT (A)’] and arises out of the assessment completed under section 143(3) of the Income Tax Act 1961, (the ‘Act’).

2. The grounds of appeal read as under :–

1. On the facts and circumstances of the case, the Commissioner (Appeals) has erred in confirming the additions of Rs. 1,44,75,355 as undisclosed income based upon mis-match of AIR Information and Books of accounts of the company on account of TDS deducted by these customers of the appellant company.

2. On the facts and circumstances of the case, the Commissioner (Appeals) has erred in confirming the additions of Rs. 30,00,000 under section 69 of the Act as Undisclosed Investments based upon AIR Information as reported by banks on account of FDR held with them.

3. On the facts and circumstances of the case, the Commissioner (Appeals) has erred in confirming the additions of Rs. 1,74,75,355 without assessing officer verifying whether the explanation offered by the appellant is correct or incorrect.

4. On the facts and circumstances of the case, the Commissioner (Appeals) has erred in not hearing the appellant during the course of hearing and without considering the explanation offered by the appellant during such hearing/without giving appellant opportunity to make an application for submission of additional evidence which could not be submitted as assessment proceedings were getting time barred.

3. Briefly stated, the facts are that the assessee filed its return of income for the assessment year (AY) 2012-13 on 27-7-2013 declaring total income of Rs. 23,464. During the course of assessment proceedings, the assessing officer (AO) observed that in the P&L account the assessee has shown revenue of Rs. 5,24,78,250 from operations and other income of Rs. 2,20,282 totalling to Rs. 5,26,98,532. However, the assessing officer noticed from the AIR information that the assessee had received total amount of Rs. 7,18,68,796. In response to a query raised by the assessing officer, the assessee filed a reconciliation statement which has been extracted at para 4.1 of the assessment Order, dated 26-3-2015. However, the assessing officer was not convinced with the said reconciliation statement of the assessee for the reason that no supporting document or evidence was filed. The assessing officer, after considering the reply of the assessee that the gross amount in 26AS is inclusive of service tax which is chargeable @ 12.36%, reduced the claim of service tax element of Rs. 79,06,616 from the gross receipt. Thus, the assessing officer made an addition of the balance amount of Rs. 1,44,75,355 (Rs.2,23,81,971 minus Rs. 79,06,616).

3.1 Also the assessing officer found that the assessee failed to file any supporting document or evidence in respect of mismatch of Rs. 30,00,000 with regard to AIR reconciliation for FDR with bank. In response to a query raised by the assessing officer, the assessee submitted that “as the time gap is too short to get the details from bank, we are unable to submit the reconciliation of bank FDR”.

As the assessee failed to file any supporting document/evidence, the assessing officer made an addition of Rs. 30,00,000 under section 69 of the Act.

4. Aggrieved by the order of the assessing officer, the assessee filed an appeal before the learned Commissioner (Appeals). During the course of appellate proceedings, the assessee filed additional evidence to prove that income offered for few of the parties viz. Aircel Group, United Wireless & Sistema Shyam Teleservices Ltd. for the cumulative period from assessment year 2010-11 to 2012-13 is more than the income appearing in Form 26AS for the corresponding cumulative period. The learned Commissioner (Appeals) observed that the assessee has not filed any application under rule 46A as to why these documents should be accepted at that stage. He held that even otherwise, the assessee who is into the business with these parties has also failed to file their confirmation of accounts to prove his case. As the assessee failed to discharge its primary onus by filing correction statement or detailed confirmation from the concerned parties, the learned Commissioner (Appeals) confirmed the addition of Rs. 1,44,75,355 made by the assessing officer.

Regarding the addition of Rs. 30,00,000 made by the assessing officer under section 69 of the Act, the assessee filed before the learned Commissioner (Appeals) ledger copies of FDR and bank statements. These additional evidences filed by the assessee were rejected by the learned Commissioner (Appeals) for the reason that no application was made for admitting it. Observing that the assessee has failed to discharge its primary onus to explain its case with complete record of FDRs created and matured over the period, the learned Commissioner (Appeals) confirmed the addition of Rs. 30,00,000 made by the assessing officer under section 69 of the Act.

5. Before us, the learned counsel of the assessee files a Paper Book (PB) containing (i) Comparative statement of gross receipts as per 26AS and Ledger Accounts, (ii) Copy of 26AS for the financial year 2009-10 relevant to the assessment year 2010-11, (iii) Copy of 26AS for the financial year 2010-11 relevant to the assessment year 2011-12, (iv) Copy of 26AS for the financial year 2011-12 relevant to the assessment year 2012-13, (v) Copy of the ledger account of Dishnet Wireless – Aircel for the financial year ended 31-3-2010, 31-3-2011, 31-3-2012, (vi) Copy of ledger account of Unitech Wireless for the financial year ended 31-3-2010, 31-3-2011, 31-3-2012, (vii) Copy of ledger account of Sistema Shyam Teleservices Ltd. for the financial year ended 31-3-2010, 31-3-2011, 31-3-2012, (viii) Copy of ledger account of Huawei Telecommunication for the financial year ended 31-3-2012, (ix) Copy of ledger account of Vodafone Essar Mobile Services Ltd. for financial year ended 31-3-2012 and (x) Copy of the balance-sheet for the year ended 31-3-2012.

Also the learned counsel files a copy of the CBDT Instruction 5/2013 dated 8-7-2013, the decision in Rakesh Kumar Gupta v. UOI (2014) 46 taxmann.com 447 (All) : 2014 TaxPub(DT) 2437 (All-HC) and P.K. Rajasekar v. ITO (2016) 74 taxmann.com 151 (Chen-Trib) : 2016 TaxPub(DT) 4585 (Chen-Trib).

6. On the other hand, the learned Departmental Representative submits that as the assessee failed to file the documents/evidence in support of its case, the learned Commissioner (Appeals) has rightly confirmed the disallowance of Rs. 1,44,75,355 made by the assessing officer on account of mismatch of AIR information and books of accounts. It is stated by him that as the TDS has been claimed by the assessee, as a natural corollary, the assessee is bound to show the corresponding income. Therefore, the learned Departmental Representative submits that the order passed by the learned Commissioner (Appeals) be confirmed.

In respect of the addition of Rs. 30,00,000 made by the assessing officer under section 69 of the Act, the learned Departmental Representative agrees with the contentions of the assessee that the same may be sent to the assessing officer for verification.

7. We have heard the rival submissions and perused the relevant materials on record. The issue here is mismatch in gross amount as reflected in 26AS statement and the P&L account of the assessee. In the case of P.K. Rajasekar (supra), the assessee received a sum of Rs. 64,85,397 from company TTPL. While filing the TDS return, TTPL claimed that a sum of Rs. 1.26 lakhs was paid to the assessee. However, the assessee claimed that out of the above amount, a sum of Rs. 58.3 lakh was being credited to the assessee wrongly and actually the assessee received Rs. 64.84 lakh from TTPL. The assessee claimed that credit of Rs. 58.36 lakh was a wrong entry and TTPL had not filed revised TDS return electronically. The assessing officer addressed letter to TTPL. As the said letter was not responded, the assessing officer treated the particulars contained in Form 26AS as correct and treated Rs. 56.36 lakhs shown in Form 26AS as undisclosed received of the assessee. On appeal, the Commissioner (Appeals) confirmed the order of the assessing officer. On further appeal, the Tribunal held that :–

“6. This Tribunal is of the considered opinion that even though the burden of proof is initially on the shoulder of the assessee, the assessing officer is also equally responsible to find out whether the credit entry found on 1-7-2010 is genuine or not. The assessing officer cannot take advantage of the ignorance or handicap of the assessee and say that there was undisclosed receipt by the assessee. When the assessee claims that the entry as on 1-7-2010 is a wrong entry, the assessing officer in all fairness has to examine the same and find out whether there was genuine entry or not. The assessing officer was conferred the power of civil court to examine and find out the real nature of transaction. If the assessing officer could not exercise the power conferred on him, it is not known how the individual citizen of this country will be able to find out the genuineness of the transaction. Therefore, in order to meet the ends of justice, this Tribunal is of the considered opinion that the assessing officer has to find out the address of M/s Tulip Telecom (P.) Ltd. and its Directors and thereafter find out whether so-called credit of Rs. 58,36,556 said to be given on 1-7-2010 is a genuine transaction or it is a wrong entry. Thereafter, the assessing officer has to decide the same in accordance with law. Accordingly, the orders of the authorities below are set aside and the entire issue is remitted back to the file of the assessing officer.

The assessing officer shall re-examine the matter afresh in the light of the material available on record and thereafter decide the same in accordance with law after giving a reasonable opportunity to the assessee.”

7.1 Thus as held in the above case, where assessee claimed that there was wrong credit entry by payer-client in Form 26AS, the assessing officer has to examine its genuineness. Also it has been laid down by the CBDT in its Instruction No. 5/2013 dated 8-7-2013 that the assessing officer may also, if deemed necessary, issue a notice to the deductor to compel him to file correction statement as per the procedure laid down.

Therefore, we set aside the order of the learned Commissioner (Appeals) and restore the matter to the file of the assessing officer to make an order afresh after giving reasonable opportunity of being heard to the assessee. We also direct the assessee to file the relevant documents/evidence before the assessing officer.

8. In the result, the appeal is allowed for statistical purposes.