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Income Tax Appellate Tribunal, NAGPUR BENCH : : NAGPUR
Before: SHRI S.S.GODARA & DR. DIPAK P. RIPOTE
ORDER
PER DR. DIPAK P. RIPOTE, AM:
This is an appeal filed by the Assessee against the order of ld.Commissioner of Income Tax(Appeals)[NFAC], dated 30.3.2022 emanating from assessment order under section 143(3) dated 30.06.2016 for A.Y.2014-15. The grounds of appeal raised by the Assessee are as under :
“1. In the facts and circumstances of the case and in law, learned CIT(A), has erred in confirming the action of learned AO; in making addition of Rs.2,00,000 as alleged receipts reflected in Form 26AS but not recorded in books of-account of the assessee.
In the facts and circumstances of the case and in law, learned CIT(A) and learned AO erred in not appreciating that, the assessee did not enter into any transaction with deductor party i.e M/s V S Lignite Private Ltd and the alleged receipt of Rs.2,00,000 was not received by the assessee.
In the facts and circumstances of the case and in law, learned CIT(A) and learned AO erred in not appreciating that, entries reflected in Form 26AS are not sacrosanct and credit of Rs.200,000 was being reflected due to wrong TDS return filed by deductor party i.e M/s V S Lignite Private Ltd.
4. In the facts and circumstances of the case and in law, learned CIT(A) and learned AO erred in not appreciating that, TDS amount of Rs.20,000 was inadvertently claimed by the assessee in return filed due to import of TDS data from Form 26AS whereas, the corresponding receipt did not relate to the assessee.
5. In the facts and circumstances of the case and in law, learned CIT(A) and learned AO should have disallowed TDS credit of Rs.20,000 rather than making addition of Rs.200,000 to total income of the assessee.
The Appellant prays leave of the Hon’ble Tribunal to add, amend, alter any of the Grounds of Appeal.”
Brief facts of the case : 2. In this case the Assessing Officer has made addition of Rs.2,00,000/- to the Income of the assessee on the ground that the said amount was reflected in the Form Number 26AS generated by the Income Tax Department. During the Assessment proceedings the assessee denied that any such amount was received by the assessee from M/s.V.S.Lignite Private Ltd. The Assessee explained to the Assessing Officer that assessee had not entered into any transaction with M/s.V.S.Lignite Private Ltd. However, Assessing Officer added the impugned amount to the total income of the assessee. The relevant paragraph of the assessment order is reproduced here under : “5. During the course of assessment proceedings it was noticed from the 26As statement that the assessee has received amount of Rs.2,00,000/- from M/s V S Lignite Private Ltd. on which TDS of Rs. 20,000/- was deducted. The assessee was asked to reconcile the receipts front M/s V S Lignite Private Ltd. in the books of account. In response to this the assessee submitted that it has not done any transaction with M/s V S Lignite Private Ltd. and has not included the receipts in the profit and loss account. Further the assessee submitted that it has not claimed the credit of TDS of Rs.20,000/- also. However from the TDS statement it is clear that the assessee has already claimed TDS credit of Rs.20,000/- without showing the corresponding receipts. Further the assessee is taking plea that TDS is wrongly posted under his PAN. In such ease the assessee could have applied for correction the IDS returns of the deductor earlier, which has not been done by the assessee. 26AS is tax credit statement of the assessee, in which the amount credited to him is mentioned and is readily available to the assessee. The assessee has not proved that the amount credited does not belong to him and instead claimed the TDS credit. The assessee has come forward with the explanation only when confronted during the assessment proceedings. Therefore an amount of Rs.2,00,000/- is added back to total income of the assessee. Penalty proceeding u/s 271 (l)(c) initiated separately.”
3. Aggrieved by the order of the Assessing Officer(AO), the assessee filed appeal before the Ld.CIT(A). The Ld.CIT(A) confirmed the addition. The ld.CIT(A) in the order has reproduced assessee’s submission in para 7. The submission of the assessee which is appearing in para 7 is reproduced here as under: “3. Further during the assessment proceedings, the leaned A.O. sought reconciliation statement of sales turnover of the assessee vis-a-vis the TDS statement of the assessee hosted by the Income Tax department on its web-site for the previous year relevant to the assessment year 2014-2015. On production of such reconciliation statement, the learned A.O. pointed out that, one entry of TDS appearing in the Department’s statement was not appearing in the records of the assessee. He further contended that the turnover or the credit against which such TDS was made by the deductor has also not been included in the sales
turnover of the assessee. It was explained by the assessee, that the said entry in no way pertained to his business. To substantiate, the assessee produced his audited books of accounts (audited u/s 44AB of the Income Tax Act 1961) wherein the assessee had never accounted either any such credit or had accounted for any such TDS made. Also it was clarified that, the assessee was not in receipt of any sum of Rs.2,00,000/- or Rs.1,80,000/- (Rs.2,00,000/- less Rs.20,000 TDS) which remained as an un-reconciled amount in his books and records. It was further pointed out to the learned A.O. that, the assessee is a contractor and therefore his deductors usually deducted the TDS at the rate of 2% under section 194C unlike in this case wherein the said party had deducted TDS at the rate of 10% under section 194J (a section applicable when payee is a professional/ technical service provider). It was also stated that, the entries in the TDS statement hosted by the Department are based on the TDS returns filed by the deductors and as such the assessee has no control whatsoever on the entries made in such statements. Despite the forgoing explanations, the learned A.O. contended that, the credit of Rs.2,00,000/- should have been included in the turnover since the assessee has availed the TDS credit of 20,000/- relevant to such credit turnover of Rs.2,00,000/-. To this proposition of the A.O., the assessee explained the factual position that, the assessee had in no manner claimed the credit for TDS of Rs.20,000/- in its return of income. The department’s computer system automatically picks up the credit available as per their own TDS statements and effects the same at the time of processing the return. To this explanation, the learned A. O. confronted the assessee, as to why he had not rectified the TDS credit. To this assessee explained that it was beyond his control to change Page 3 of 4 the TDS return filed by somebody else. It is only the deductor who has the authority to change the TDS return filed by it. It was further explained that the deductor in this case was completely unknown to him. However the A.O. was not convinced with any of the explanations offered by the assessee and therefore proceeded to add an amount of Rs.2,00,000/- to the total income of the assessee.
4. The A.O. ought to have ascertained the facts from the said deductor who had filed the incorrect and inaccurate TDS return showing the impugned turnover in the name of the assessee. The assessee should also have been given an opportunity to cross examine the said deductor if the deductor continued to claim that the assessee indeed was the recipient of the impugned income. The learned A.O. has made the addition without carrying out any cross verification whatsoever and merely relying upon the incorrect and inaccurate data pushed by the department’s systems to the AO. In the case of Sree Sankeswara Foundations and Investments Vs ACIT (ITAT Chennai), I. T.A. NO.3288/CHNY/2019, dated 09/03/2020 it has been held by the Hon. ITAT that no addition can be made based on mere difference between form 26AS and the amount shown in the profit and loss account and in the absence of any reconciliation and corroborative evidence. In the case of Dr Swati Mahesh Vinchurkar, [2021] 130 taxmann.com 320 (Surat-Trib.), it has been held that where a payment was reflected in Form-26AS and was shown to have been made to assessee, it could not be brought to tax if it could not be established that assessee was actual beneficiary of said payment. In the case of Star Consortium [2021] 127 taxmann.com 681 (Kolkata - Trib.), it has been held that where difference between amount shown as turnover by assessee and as reflected in Form 26AS took place due to wrong data entry/information and lack of corresponding
services by deductee to deductor, Form 26AS alone could not lead to addition of income.
5. It is therefore most respectfully submitted before your kind honour that the learned A. O. was not correct in making the aforesaid addition of Rs.2,00,000/- in the case of the assessee without carrying out any cross verification whatsoever and by merely relying upon the incorrect and inaccurate data pushed by the department's systems to the AO. The learned A.O. has erred in disregarding the fact that the Page 4 of 4 impugned income of Rs.2,00,000/- has never been earned/ received by the assessee and therefore no addition on this count could be made.”
In spite of assessee’s elaborate submissions, the ld.CIT(A) confirmed the addition in paragraph 12.4 and 12.5, without discussing submission of the assessee; which is reproduced here as under : “12.4 It is seen from acknowledgment of ITR 4 for A.Y.2014-15 submitted by the appellant that the appellant claimed Rs.22,81,101/- as TDS under taxes paid. Hence, it is clear that the appellant had taken into account the amount of Rs.20,000/- as TDS credit in the return of income filed for A.Y.2014-15 deducted by VS Lignite Power Limited. Therefore the appellant submission that he had never accounted for any such TDS credit is not correct.
12.4.1 Since it is clear that the appellant had taken into account the amount of Rs.20,000/- as TDS credit (deducted by VS Lignite Power Private Limited) in the return of income for A.Y.2014- 15, the case laws relied on by the appellant are distinguishable on this fact.
12.5 If the appellant has taken credit of TDS deducted by VS Lignite Power Limited for Rs.20,000/-, the appellant should also have corresponding receipt as part of his total receipts as mentioned by Assessing Officer. The appellant has not done so, hence, I do not have any reason to interfere in the assessment order u/s 143(3) of the Assessing Officer on this issue.”
Aggrieved by the order of ld.CIT(A), assessee has filed appeal before ITAT. Submission of the ld.Authorised Representative(ld.AR) : 6. The ld.AR also filed an affidavit of the assessee that assessee has not received any amount from V.S.Lignite Power Private Limited.
6.1 The ld.AR submitted that the assessee did not enter any transaction with deductor party i.e. M/s V S Lignite Private Ltd. Hence, the alleged receipt or the credit against which such TDS was wrongly made by the deductor party has also not been included in the sales/turnover of the assessee. The ld.AR further submitted that the said entry in no way pertained to assessee’s business. To substantiate this preposition, during assessment proceedings the assessee produced audited books of accounts before Assessing Officer (audited u/s 44AB of the Income-Tax act, 1961) and had not accounted any such credit/ receipt in his books of accounts. Regarding TDS Credit of Rs.20,000/- the assessee agreed that the receipt was mistakenly claimed in the return of income filed, due to auto- population of TDS credit entries in return form, based on Form 26AS. He further clarified that, the assessee was not in receipt of any sum of Rs.2,00.000/- or Rs.1,80,000/- (Rs.2,00,000/- less(-) Rs. 20,000/- TDS). Hence, no income accrues or arises to the assessee from the alleged credit/receipt from deductor i.e. M/s V S Lignite Private Ltd in assessment year 2014-15 and the deductor in this case was completely unknown to assessee.
6.2 The ld.AR relied on the following case laws : Dr.Swati Mahesh Vinchurkar Vs. DCIT (130 taxmnn.com 320) (Surat ITAT) Ito Vs. Star Consortium 127 (taxmann.com 681) (Kolkata ITAT) Ito Vs. Smt.Darshiniben M.Adani (2019 (11) TMI 356) (Ahmedabad ITAT). Submission of ld.Departmental Representative(ld.DR) : 7. The ld.DR relied on the order of the AO & ld.CIT(A). The ld.DR has not rebutted any of the case laws relied by Assessee. The ld.DR has not rebutted contents of the Affidavit of the assessee.
Findings & Analysis : 8. We have heard both the parties and perused the records. In this case, as it is clear from the order of the ld.CIT(A), that assessee had made elaborate submission before ld.CIT(A) as well as AO. Assessee categorically denied any transaction with M/s.V.S.Lignite Power Private Limited. The AO has mentioned the impugned entity as V.S.Lignite Private Limited, whereas ld.CIT(A) has mentioned the impugned entity as V.S.Lignite Power Limited. However, the actual name of the entity seems to be V.S.Lignite Power Private Limited. Be it as it may be, the fact is that assessee denied any transaction with V.S.Lignite Power Private Limited. Assessee claimed that erroneously the TDS credit of Rs.20,000/- was taken as the system automatically picks up the credit and assessee do not have control on such automatic credits. Here, the AO has not verified from the impugned entity M/s.V.S.Lignite Power Private Limited. Neither ld.CIT(A) has bothered to verify from M/s.V.S.Lignite Power Private Limited. Merely certain amount is appearing in Form No.26AS does not mean that it is income of the assessee, if assessee has denied it. The Data in Form No.26AS is picked up from TDS Returns of the TDS Deductor. The assessee do not have any control on the amounts reflected as credits in Form No.26AS. The onus is on Revenue to prove that income is taxable. The Hon’ble Supreme Court in Parimisetti Seetharmamma Vs. CIT 57 ITR 532 (SC) has held as under : Quote “By sections 3 and 4 the Act imposes a general liability to tax upon all income. But the Act does not provide that whatever is received by a person must be regarded as income liable to tax. In all cases in which a receipt is sought to be taxed as income, the burden lies upon the department to prove that it is within the taxing provision. Where however a receipt is of the nature of income, the burden of proving that it is not taxable because it falls within an exemption provided by the Act lies upon the assessee. The appellant admitted that she had received jewellery and diverse sums of money from Sita Devi and she claimed that these were gifts made out of love and affection. The case of the appellant was that the receipts did not fall within the taxing provision : it was not her case that being income the receipts were exempt from taxation because of a statutory provision. It was therefore for the department to establish that these receipts were chargeable to tax.” Unqoute.
The Hon’ble Supreme Court in the case of K.P.Varghese Vs.ITO 1981 AIR 1922 has observed as under :
Quote, “It is a well settled rule of law that the onus of establishing that the conditions of taxability are fulfilled is always on the Revenue”. Unquote.
Assessee’s books of accounts were audited. Assessee had filed Profit and Loss Account, Balance Sheet before the Lower Authorities. Assessee is a electrical contractor as mentioned in the assessment order. The total turnover of the assessee during the assessment year was Rs.12,30,35,743.50 as shown in the Trading Account which is duly audited. The assessee has repeatedly denied any transaction with M/s.V.S.Lignite Power Private Limited. Assessee had filed TDS reconciliation statement & produced audited books before the AO. In these facts and circumstances of the case, the onus was on the Revenue to prove that assessee had received Rs.2 lakhs from M/s.V.S.Lignite Power Private Limited and the impugned Rs.2 lakhs is taxable as income. Revenue has not brought on record any evidence to demonstrate that Rs.2 lakhs was received or accrued from M/s.V.S.Lignite Power Private Limited to assessee and the impugned Rs.2 lakhs is taxable as income. The Co-ordinate Bench of ITAT Ahmedabad in the case of ITO Vs. Smt.Darshiniben M. Adani [2019] 11 TMI 356 – ITAT Ahmedabad in dated 15.10.2019 held as under : “It is settled position of the law that no addition can be made on the basis of receipts shown in the ITS alone, unless the AO is able to show with evidence that such income forms part of the income of the assessee. The assessee cannot be expected to prove negative, rather it is for the Revenue to prove that the assessee has understated its income, and for that matter, received undisclosed income”
Similarly, the Co-ordinate Bench of ITAT Surat Bench in Dr.Swati Mahesh Vinchurkar Vs. DCIT, Bangalore [2021] 191 ITD 434 (Surat Tribunal) has held as under : “5. We have considered the rival submissions of the parties and have gone through the orders of the lower authorities carefully. There is no dispute that the assessee is resident of Surat. The assessee is qualified Doctor being Pediatric (Child Specialist). While filing her return of income the assessee has shown income from profession and other sources. During the process by CPC, the additions were made in the hand of assessee on the basis of TDS shown in Form-26AS. We find that in response to the notice of CPC, the assessee denied of having such income and that her response was ignored. Before ld CIT(A) the assessee again specifically contended that she has not earned such income nor any work was performed by her. We find that despite specific contention of the assessee, the ld CIT(A) instead of verifying the facts confirmed the additions by taking view that it seems that CPC had considered the appellant explanation before making disallowance and that there is prima
facie evidence. We find that both the authorities below acted in a mechanical way. There is no consideration of the contentions raised by the assessee that she has not worked or earned any income from such deductor. In our view once the assessee denied that she has not earned such income as reflected in her Form-26 AS, the onus shift on the revenue authorities to prove such income of the assessee. The addition is based solely on the basis of TDS shown in Form-26AS, ignoring the submissions of the assessee. The ld. AR for the assessee vehemently argued before us that the deductor if more than 1000 KM away from the place of practice of assessee. Considering the peculiar facts of the present case, we find merit in the submissions of the ld AR for the assessee that the assessee had entered into any such transactions and the lower authorities have not made any verification or effort to verify such transactions and there is certain mistake of entering the wrong PAN, which belongs to the assessee and the addition made in the income is uncalled for.”
We have already observed in earlier para that the Revenue has not proved by evidence that impugned amount of Rs.2 lakhs is income of the assessee which is taxable. As held by the Hon’ble Supreme Court(supra), the onus was on the Revenue to prove that it is income of the assessee. Therefore, respectfully following the Hon’ble Supreme Court and ITAT(supra), we hold that the impugned amount of Rs.2 lakhs is not income of the assessee. Accordingly, Assessing Officer is directed to delete the addition of Rs.2 lakhs. However, assessee will not be eligible for credit of TDS amount of Rs.20,000/- which has been admittedly claimed by assessee as erroneous. Accordingly, grounds of appeal raised by the assessee are allowed.
In the result, appeal of the assessee is allowed.
Order pronounced in the open Court on 30th January, 2024.