ROOTS CORPORATION LTD,MUMBAI vs. DCIT 1(3)(1), MUMBAI

The only issue in the appeal of the assessee is regarding sustaining the addition of ₹.29,00,474/- on account of unreconciled receipts as per Annual Information Report.

Assessee is into hospitality business, filed return on 29.09.2010 declaring loss of ₹.21,11,14,381/-. Assessment was completed on (A. Y: 2010-11) M/s. Roots Corporation Ltd. 12.02.2013 determining the loss at ₹.20,82,13,910/-. In the course of completion of assessment, the Assessing Officer based on the AIR information noticed that assessee received commission or brokerage amounting to ₹.34,03,733/- as on 31.03.2003 from various parties. Assessee was asked to reconcile its receipts with AIR information. However, with the observation that the assessee not able to reconcile the difference agreed for the addition the Assessing Officer added the said amount of ₹.29,00,474/- as income of the assessee.

On appeal Ld.CIT(A) sustained the addition observing that assessee was not able to reconcile the difference and failed to furnish proofs and assessee itself agreed for the addition before the Assessing Officer.

Before us, Learned Counsel for the assessee submitted that assessee never agreed for any addition before the Assessing Officer and it is a wrong observation made by the Assessing Officer in the Assessment Order. He further referring to Page No. 12 of the Paper Book submitted that the assessee could reconcile 95% of its receipts amounting to ₹.58.23 Crores and further referring to Page No.13 of the Paper Book Ld. Counsel for the assessee submitted that in fact the assessee requested the Assessing Officer to provide some more information/data such as invoices Nos. with which transaction is entered into etc., to reconcile the difference

Ld.DR vehemently supported the orders of the authorities below.

We have heard the rival submissions, perused the orders of the authorities below. The letter written to the Assessing Officer clearly states that the assessee requested the Assessing Officer to provide necessary information to reconcile the balance entries. However, in spite of request the Assessing Officer could not provide any information and moreover he made addition stating that the assessee agreed for the same. Assessing Officer made addition solely on the basis of AIR information and we see no other information is brought on record by the Assessing Officer to show that the assessee had in fact received this income from the said parties. We also see that the assessee reconciled 95% of the transactions leaving only 4.76% of the transactions unreconciled due to lack of data.

We find that almost an identical situation aroused in the case of M/s. Yahoo India Pvt. Ltd. (supra) and the Coordinate Bench held as under: - “7. We have considered the submissions of the parties and perused the material available on record. Undisputedly, out of 1,479 entries as per AIR data, only 161 entries, according to the allegation of the Assessing Officer, remained un–reconciled by the assessee. It is also not disputed that apart from AIR information, there is no other evidence or material available before the Assessing Officer to indicate that assessee has received income more than what is declared in Profit & Loss account. It is also a fact on record that in (A. Y: 2010-11) M/s. Roots Corporation Ltd. course of hearing of appeal, assessee has reconciled 161 un– reconciled entries by furnishing all necessary details. It is not the case of the Department that the information / details submitted by the assessee in respect of unreconciled entries are not genuine or unbelievable. Therefore, when the learned Commissioner (Appeals) has directed the Assessing Officer to verify the reconciliation of entries by examining the details submitted by the assessee, there is no reason why the Department should be aggrieved. Prima–facie, as could be seen, the learned Commissioner (Appeals) has directed the Assessing Officer to give effect only to the entries reconciled by the assessee. Moreover, on a perusal of the relevant case laws cited by the learned counsel, we find that the consistent view of the Tribunal in these decisions are, only on the basis of AIR information no addition can be made when there is no other materials before the Assessing Officer to demonstrate that assessee has received income more than what is declared by him. In the present case also, a perusal of the assessment order reveals that apart from the AIR information, there is no other material / evidence available before the Assessing Officer to establish that assessee has received more income than what is shown in the Profit & Loss account. In the aforesaid view of the matter, we do not find any infirmity in the direction of the learned Commissioner (Appeals) which is upheld. Ground no.1, is dismissed.”

In view of what is discussed above, we do not find any valid reason for the Assessing Officer to make addition towards unreconciled income as the addition was solely based on AIR information and without making proper enquiries, without submitting the information as requested by the assessee. In the circumstances, we direct the Assessing Officer to delete the addition. Grounds raised by the assessee are allowed.

In the result, appeal of the assessee is allowed