2015 (4) TMI 1195 - AT - Income Tax

Addition on account of interest received - addition on basis of AIR information - Held that - Addition in this case has been made solely on the basis of AIR information and without any corroborative evidence regarding the receipt of any interest by the assessee from the said M/s. Essar Oil Ltd. The assessee has specifically denied the receipt of such an interest income. The Revenue has not made any enquires to find out whether the AIR information was correct or not. It has been held time and again by this Tribunal that the additions made solely on the basis of AIR information are not sustainable in the eyes of law. If the assessee denies that it is in receipt of income from a particular source it is for the AO to prove that the assessee has received income as the assessee cannot prove the negative. As Representatives of both the parties have agreed before us that the issue be restored to the file of the AO for consideration afresh in this respect we accordingly restore it. Appeal of the assessee allowed for statistical purposes.

Summary

Issues:
Dispute over addition of interest received from M/s. Essar Oil Ltd. based on AIR information for assessment year 2009-10.

Analysis:
The appeal was filed by the assessee against the order of the Commissioner of Income Tax (Appeals) regarding the addition of interest received from M/s. Essar Oil Ltd. The Assessing Officer added Rs. 51,46,606 based on AIR information, as the assessee claimed to have no information on the interest amount. The assessee argued that it held non-convertible debentures of M/s. Essar Oil Ltd. in earlier years but did not earn any income during the relevant assessment year. The CIT(A) upheld the addition, stating that the AIR information, linked to the PAN number, was reliable. The assessee presented the acknowledgment of return for A.Y. 2005-06 to prove the sale of debentures and the absence of interest income post-sale.

The Tribunal noted that the addition was solely based on AIR information without corroborative evidence of interest receipt. The assessee denied receiving the interest income, and the Revenue did not verify the accuracy of the AIR information. Referring to precedents, the Tribunal emphasized that additions based solely on AIR information are legally unsustainable. The burden of proof lies with the AO to establish income receipt when the assessee denies it, as the assessee cannot prove the negative. Citing relevant cases, the Tribunal directed the issue to be reconsidered by the AO, emphasizing the need for confirmation from Allied Digital Services Ltd. regarding the AIR information.

Both parties agreed to restore the issue to the AO for fresh consideration. Consequently, the Tribunal allowed the appeal of the assessee for statistical purposes, ordering the issue to be decided by the AO in accordance with the law.