Assessee wins Rs. 2 lakhs addition case as Revenue fails to prove receipt despite Form 26AS entries

ITAT Nagpur ruled in favor of assessee regarding Rs. 2 lakhs addition based on Form 26AS entries not recorded in books. Assessee, an electrical contractor with audited turnover of Rs. 12,30,35,743.50, denied any transaction with deductor party. ITAT held that Revenue failed to prove receipt or accrual of amount to assessee, citing K.P.Varghese SC precedent that onus lies on Revenue to establish taxability. Addition deleted but assessee not entitled to TDS credit of Rs. 20,000 as erroneously claimed. Appeal allowed.

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Issues Involved:
1. Addition of Rs. 2,00,000 based on Form 26AS.
2. Non-receipt of the alleged amount by the assessee.
3. Incorrect TDS return filed by the deductor.
4. Inadvertent claim of TDS credit by the assessee.
5. Disallowance of TDS credit versus addition to total income.

Issue-wise Detailed Analysis:

1. Addition of Rs. 2,00,000 based on Form 26AS:
The Assessing Officer (AO) added Rs. 2,00,000 to the income of the assessee based on the amount reflected in Form 26AS, which indicated a transaction with M/s V.S. Lignite Private Ltd. The AO noted that the assessee had claimed a TDS credit of Rs. 20,000 without showing the corresponding receipt in the books of account. Despite the assessee's denial of any transaction with M/s V.S. Lignite Private Ltd, the AO proceeded with the addition, emphasizing that the assessee had not applied for correction of the TDS returns of the deductor.

2. Non-receipt of the alleged amount by the assessee:
The assessee consistently denied receiving any amount from M/s V.S. Lignite Private Ltd and produced audited books of accounts to substantiate this claim. The assessee argued that the TDS credit of Rs. 20,000 was mistakenly claimed due to auto-population of TDS credit entries in the return form based on Form 26AS. The assessee maintained that no income accrued or arose from the alleged credit/receipt from the deductor.

3. Incorrect TDS return filed by the deductor:
The assessee argued that the entries in Form 26AS were due to incorrect TDS returns filed by the deductor, M/s V.S. Lignite Private Ltd. It was contended that the assessee had no control over the entries made in Form 26AS, which are based on the TDS returns filed by the deductors. The assessee cited case laws to support the argument that no addition could be made based on discrepancies between Form 26AS and the books of account without corroborative evidence.

4. Inadvertent claim of TDS credit by the assessee:
The assessee admitted that the TDS credit of Rs. 20,000 was inadvertently claimed due to the auto-population feature in the return form. The assessee clarified that no corresponding receipt of Rs. 2,00,000 or Rs. 1,80,000 (after deducting TDS) was received. The AO and the CIT(A) did not verify the claim from M/s V.S. Lignite Private Ltd and relied solely on the data in Form 26AS.

5. Disallowance of TDS credit versus addition to total income:
The CIT(A) upheld the addition of Rs. 2,00,000, noting that the assessee had claimed the TDS credit in the return of income. The CIT(A) argued that if the assessee had claimed the TDS credit, the corresponding receipt should also be part of the total receipts. The ITAT, however, found that the Revenue had not provided evidence to demonstrate that the amount was received by the assessee. The ITAT emphasized that the burden of proof lies with the Revenue to establish that the amount is taxable income.

Conclusion:
The ITAT concluded that merely appearing in Form 26AS does not establish that the amount is income of the assessee, especially when the assessee has denied it. The Revenue failed to verify the claim from M/s V.S. Lignite Private Ltd or provide evidence that the amount was received by the assessee. The ITAT held that the impugned amount of Rs. 2,00,000 is not income of the assessee and directed the AO to delete the addition. However, the assessee will not be eligible for the TDS credit of Rs. 20,000, which was admitted to be erroneously claimed. The appeal of the assessee was allowed.

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