2024 (8) TMI 485 - AT - Income Tax

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 ... Addition as alleged receipts reflected in Form 26AS but not recorded in books of account of the assessee - onus of establishing that the conditions of taxability are fulfilled - AR submitted that the assessee did not enter any transaction with deductor party, 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 HELD THAT:- 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 deductor party /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 deductor party and the impugned amount is taxable as income. Revenue has not brought on record any evidence to demonstrate that sum was received or accrued to assessee and the impugned sum is taxable as income. As held in K.P.Varghese case [1981 (9) TMI 1 - SUPREME COURT] the onus was on the Revenue to prove that it is income of the assessee. Therefore we hold that the impugned amount of Rs. 2 lakhs is not income of the assessee. Accordingly, AO 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. 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.