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Facts
The assessee, engaged in manufacturing and selling sweets, filed a return declaring income and tax liability. The CPC processed the return under Section 143(1) and created a demand due to discrepancies identified in Form 26AS regarding salary income and other sources income. The assessee contended that the income reported in Form 26AS was due to incorrect reporting by a third party and not related to their actual transactions.
Held
The Tribunal held that the addition of Rs.98,93,046/- was based on incorrect reporting by Avas Evam Vikas Parishad, a UP State Government authority with whom the assessee had no transaction. The assessee had proactively informed the party to rectify their returns and had also denied any such transaction. The Tribunal emphasized that the onus was on the Revenue to prove the income, and in the absence of such proof, the assessee could not be penalized for incorrect reporting by another entity. The adjustment made by the CPC was deleted.
Key Issues
Whether the addition of Rs. 98,93,046/- on account of alleged income from other sources, as reflected in Form 26AS due to incorrect reporting by a third party, is sustainable when the assessee has no transaction with the said party and has denied such income. Also, whether credit for TDS should be granted in accordance with Section 199.
Sections Cited
143(1), 199, 194C
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Income Tax Appellate Tribunal, ‘B‘ BENCH
आदेश / O R D E R PER AMIT SHUKLA (J.M): The aforesaid appeal has been filed by the assessee against order dated 23/01/2024 passed by Addl./JCIT(A), Madurai in relation to adjustment made u/s.143(1) for the A.Y.2017-18. 2. In the grounds of appeal assessee has raised following grounds:-
Late Nitinkumar Swaminarayan (Represented by Shobha Swaminarayan As a Legal Heit) “In the facts and circumstances of the case and in law, the Ld. Addl/Jt. CIT(A) erred in holding that the amount of Rs. 98,93,046/- reported by Avas Evam Vikas Parishad (the party) in the appellant's Form 26AS is appellant's income, without considering the submissions of the appellant that the same is not an income of the appellant. Accordingly, the order under appeal is based on surmises, conjectures, assumptions and presumptions and should be quashed/annulled. Without prejudice to the above and in the alternate 11 In the facts and circumstances of the case and in law, the Ld. Addl/Jt. CIT(A) erred in holding that the issue of wrong reporting of income of Rs. 98,93,046/-by the party in the appellant's Form 26AS should be resolved at the party's end only by way of filing of revised ETDS return as the said issue is beyond the jurisdiction of the Ld. Addl/Jt. CIT(A). The Ld. Addl/Jt. CTT(A) ought to have held that addition to total income of Rs. 98,93,046/- cannot be made solely on the basis of incorrect information reported in Form 26AS of the appellant and accordingly, ought to have directed the Ld. AO to delete the said addition in assessing the total income. 2 In the facts and circumstances of the case and in law, the Ld. Addl/Jt. CIT(A) erred in not directing the Ld. AO to grant credit for the short tax deducted at source (TDS) of Rs. 5,85,829/- notwithstanding that the same is appearing in Form 26AS of the appellant. Accordingly, the Ld. Addl/Jt. CIT(A) ought to have directed the Ld. AO to grant credit of TDS of Rs. 5,85,829/- in accordance with the provisions of section 199 of the Income-tax Act, 1961.”
The brief facts are that assessee is in the business of manufacturing and selling of sweets (Mithai) and had filed his return of income declaring total income of Rs.35,24,910/- and has shown tax liability of Rs.9,06,039/-, against which tax paid were as under:-
Late Nitinkumar Swaminarayan (Represented by Shobha Swaminarayan As a Legal Heit) Sr. Particulars Amount (in Rs.) No. 1. Tax Deducted at Source 8,85,196 (TDS) 2. Self Assessment Tax 20,840 Total 9,O6,036
However, the CPC while processing the return u/s.143(1) have created a demand in the following manner:- SI. Head of Income Amount Variance Error No. Income as per paid/ {Rs.} Description Income credited as Tax per Form Return 26AS (Rs.) (Rs.) (i) (ii) (iii) (iv)= (ii)-(iii) (v) 1 Salary 28,12,500 34,03,200 5,90,700 There is Income inconsistency between salary income in return and Form 26As 2 Other 4,46,603 1,03,39,649 98,93,046 There is Sources- inconsistency (Other between Other than Source income 115BB in return and and Form 26AS 115BBE)
Late Nitinkumar Swaminarayan (Represented by Shobha Swaminarayan As a Legal Heit) 5. The case of the assessee for the difference was on account of the following:- a) In case of salary, in view of excess amount reported by Mohanlal S. Mithaiwala & Sons Pvt. Ltd (the employer), while filing the ETDS Returns; b) In case of income from other sources, wrongly reported by Avas Evam Vikas Parishad, as the relevant item does not relate to the Appellant.
In so far as income reprted by Avas Evam Vikas Parishad, the assessee had even intimated the party, to rectify their ETDS returns. The First Appellate Authority despite noting this fact held that assessee has to pursue this issue with a TDS filer whom assessee has found that the party has incorrectly filed statement. In so far as addition of Rs.98,93,046/-, it was specifically stated that there is incorrect reporting by Avas Evam Vikas Parishad which is a UP State Government authority functioning in UP and had no co-relation with the assessee. The assessee had categorically denied that he has no transaction with UP Avas Evam Vikas Parishad as assessee is in mumbai engaged in manufacturing of sweets and no work has been done for this U.P. State organisation in UP. Assessee had even written a letter dated 30/02/2020 to the said party which reads as under:-
Late Nitinkumar Swaminarayan (Represented by Shobha Swaminarayan As a Legal Heit)
Late Nitinkumar Swaminarayan (Represented by Shobha Swaminarayan As a Legal Heit)
Further, in the case of excess salary, assessee had duly intimated the salary of the said employee was Rs.28,12,500/- and he has shown rental income of Rs.3,84,000. The excess salary of Rs.5,90,700/- has already been reported by the employee and has paid the taxes which is also evident from Form Late Nitinkumar Swaminarayan (Represented by Shobha Swaminarayan As a Legal Heit) 26AS. Thus, on this ground, no adjustment should have been made. In so far as adjustment of huge amount of Rs.98,98,046/- assessee clearly intimated to the First Appellate Authority that it is a statutory body of UP Government which is registered in the city of Agra and assessee had no co-relation of transaction because such statutory authority in the past or even during the A.Y. under reference. In the business of making and selling of sweets (Mithai) and has no transaction with the statutory authority of Avas Evam Vikas Parishad which entity is engaged in the construction of houses. Despite assessee writing the letter to the said party, and informing the department to get it clarified, the said adjustment has not been deleted by the First Appellate Authority on the ground that assessee should ask the TDS filer to rectify it.
Once this fact has been pointed out to the Revenue authorities, their satnd is assessee should pursue the TDS filer to rectify the 26AS even when assessee has no co-relation and the Income Tax Department with all its machinery and powers is helpless to resolve the issue or there is no system to correct the 26AS or ask the TDS Filer to rectify the TDS return. Thus, if the assessee has denied having such income and no such amount is reflected in the bank account of assessee and assessee made all his effort to writing the party, then the onus lies on the Revenue to prove that assessee had earned such income and in absence of such inaction by the Revenue, assessee cannot be fastened with the liability of an income which assessee had not even Late Nitinkumar Swaminarayan (Represented by Shobha Swaminarayan As a Legal Heit) earned. If there is a wrong reporting by Avas Evam Vikas Parishad, assessee cannot be penalized. Accordingly, the adjustment / addition made by the CPC is deleted. 8. In the result, appeal of the assessee is allowed.
Order pronounced on 28th June, 2024.