Assessment Orders solely based on AIR information is unsustainable: ITAT Mumbai
- The assessee company is in the business of providing services of developing, installing and maintenance of software to the hospitality, food service and various other general industry segments and also carry out trading in hardware and software. It had more than 300 clients (mainly restaurant & hotel) and according to assessee, in the course of business by its clients more than 2000 invoices were raised during the year under consideration.
- The AO, relying on the AIR information and finding discrepancies in the 26AS statement, directed the assessee to reconcile the income. Despite reconciling a significant portion, a mismatch of Rs.8,42,331/- remained, leading to an addition of Rs.10,34,287/- by the AO.
- According to assessee, it is evident from the AIR information itself that revenue as per the 26AS was only to the tune of Rs.5,88,84,001/- and the assessee has been unable to reconcile only Rs.3,67,773/- and has shown revenue to the tune of Rs.10,89,33,540/-. In this regard, it is found that the revenue shown by assessee in its P & L account far exceeds the amount shown in the AIR information.
- The CIT(A) partially allowed the appeal, directing the deletion of Rs.6,66,514/-. The assessee argued that reconciling 1100 out of approximately 1200 items was a substantial effort, and the remaining discrepancy was due to unintentional mistakes, urging against additional tax. The appellant highlighted its substantial revenue, the nature of its business, and the difficulty in reconciling all entries
ITAT Mumbai held as below:
- An assessment order based only on the strength of the AIR information would not be sustainable in case, the assessee disputes the receipt of income from a particular source. In such an event the AO need to prove that the assessee has received income because the assessee cannot be expected to prove the negative.
- Therefore, considering the peculiar facts of the case, we direct deletion of the addition. In the result, appeal filed by the assessee is allowed.