Assessee has no control over data base of IT department in Form No. 26AS – ITAT

Assessee has no control over data base of Income-tax department as reflected in Form No. 26AS – ITAT

In a recent judgment, the ITAT Jaipur has held that assessee has no control over the data base of the Income-tax department as is reflected in Form No. 26AS and at best the assessee could do is to offer bonafide explanations for difference

ABCAUS Case Law Citation:
ABCAUS 4089 (2024) (06) ITAT

In the instant case, the assessee had challenged the order passed by the CIT(A) National Faceless Appeal Centre in confirming addition to the income of the assessee on account of difference of income reported in ITR with Form 26AS.

The Assessing Officer (AO) had reopened the assessment due to difference of income reported as as appearing in Form 26AS.

The assessee was engaged in the business of aadatiya (broker) earning commission income. Books of the assessee were duly audited by a Chartered Accountant and the audit report has been filed on the income tax portal. The assessee had filed his ITR on the basis of these audited final accounts, which was accepted by the AO.

However, the AO doubted the correctness and genuineness of Aadat account. On account of mismatch of Aadat receipts in P&L account and Form 26A, the case of the assessee was reopened and addition to the gross income was made solely on the basis of mismatch of receipts with Form 26As.

Further during the relevant financial year, the assessee has both paid and received interest from various parties and banks. The assesee had debited the net interest charges in P&L Account under the account head financial expenses.

Further, the AO noted from Form 26AS that an interest income is not included in the interest receipts by the assessee.  The assessee contended that the said interest was neither received nor credited into the bank account or books of the assessee. It was also stated that the assessee had not done any transaction with the said deductor, from whom the above interest was claimed to be received by the assessee. It was also submitted that there might be some typographical error in filling the PAN at the time of filing TDS return by the deductor appearing in Form 26AS and anything could not be added to the total income of the assessee on the basis of mistake of others.

However, not paying heed to the submissions of the assessee, the AO made the impugned additions.

The CIT(A) confirmed the action of the AO. He held the information in respect of TDS amount shown in Form 26AS from the TDS deductor as conclusive against the assessee.

The Tribunal observed that various judicial forums have held time and again that addition solely based on mismatch between receipts in P&L and in 26AS is unsustainable.

The ITAT Delhi has held that only because there was mismatch between TDS certificate/26AS and the turnover/receipts shown by the assessee in its P&L account cannot be a sole basis for making addition in hands of assessee to bring the difference to tax.

Further, ITAT Kolkata has held that only because there is a mismatch between TDS certificate (26AS) and turnover shown by the assessee in its P& L account cannot be the sole basis on which the entire addition of the difference could have been brought to tax.

The Tribunal opined that in the given facts, the AO/ CIT(A) were duty bound to conduct further inquiries before making the impugned addition but they cast the onus on the assessee to prove the negative. The burden is on the AO to prove the alleged fact. On the contrary in the assessment proceedings, the AO demanded the assessee to prove that the amount appearing in Form 26AS did not belong to the assessee..

The Tribunal opined that Form 26AS alone cannot lead to addition of income if claims are made of wrong data entry/information and lack of corresponding services by the deductee to the deductor. The AO/ CIT(A) had sufficient time to conduct necessary enquiries to rebut the version of the assessee that his interest income stood duly disclosed in return of income filed with Revenue and no additions were warranted for this TDS mismatch.

The Tribunal observed that the powers of CIT(A) are co-terminus with the powers of the AO. Despite, neither AO nor CIT(A) had considered it appropriate to conduct enquiries with the party who had deducted TDS on behalf of the assessee wherein there is difference between information as per Form No. 26AS per income-tax data base and TDS as per books of accounts of the assessee, despite having all information in their possession which was submitted by assessee. No notice u/s 133(6) or summons u/s 131 of the 1961 Act were issued by any of these authorities to alleged deductor whom TDS credit was reflected in 26AS, while assessee was denying to have dealt with this person.

The Tribunal opined that the assessee had discharged its onus by submitting ledger account of Interest as well explaining the reasons for difference between income as was reported in Form No. 26AS information per data base maintained by income tax department and income as is reflected in its books of accounts.

The Tribunal stated that the assessee has no control over the data base of the Income-tax department as is reflected in Form No. 26AS and at best the assessee could do is to offer bonafide explanations for these differential which assessee did in this case during appellate/assessment proceedings. On the other hand, the Income-tax department has all the information and data base in its possession and control.

The Tribunal opined that CIT(A)/AO ought to have conducted necessary enquiries to unravel the truth but asking assessee to do impossible is not warranted. No defect in the books of accounts is pointed out by the authorities nor were books of accounts rejected. No cogent incriminating material was brought on record to evidence/prove that the assessee had received/earned any income outside its books of accounts. The authorities also did not rebut the contentions of the assessee. The assessee’s case was also scrutinized under the provisions of Section 143(3) of the 1961 Act for the same assessment year but no such additions were made on account of mismatch of income vide TDS as is reflected in Form No. 26AS information per income-tax data base maintained by department and the income as is reflected in assessee’s books of accounts.

Accordingly, the Tribunal allowed the appeal of the assessee.

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