2016 (9) TMI 1498 - AT - Income Tax

Undisclosed receipt by the assessee - difference as per the credit shown in Form 26AS - HELD THAT - Under the scheme of Income-tax Act, the assessee is expected to pay tax after completion of assessment. In order to ensure the recovery of tax, the Income-tax Act provides payment of tax in advance, before completion of assessment and also provides for deduction of tax at source. When the payer deducted the tax as per the scheme of the Income-tax Act in respect of the payment made by them, the amount deducted by the payer towards TDS has to be treated as payment of tax. If the assessee claims that there was wrong entry and wrong credit, the Assessing Officer has to examine the same with open mind and find out whether there was a genuine credit as found in Form 26AS. M/s Tulip Telecom P. Ltd. is also a tax payer in this country. Therefore, the Revenue cannot shift the burden to the assessee on the ground that M/s Tulip Telecom P. Ltd. could not be contacted. M/s Tulip Telecom P. Ltd. is a company registered under the provisions of Companies Act and the Directors can very well be contacted by the Assessing Officer and find out what is the error in TDS return. This Tribunal is of the considered opinion that even though the burden of proof is initially on the shoulder of the assessee, the Assessing Officer is also equally responsible to find out whether the credit entry found on 01.07.2010 is genuine or not. AO cannot take advantage of the ignorance or handicap of the assessee and say that there was undisclosed receipt by the assessee. When the assessee claims that the entry as on 01.07.2010 is a wrong entry, the Assessing Officer in all fairness has to examine the same and find out whether there was genuine entry or not. The Assessing Officer was conferred the power of civil court to examine and find out the real nature of transaction. If the Assessing Officer could not exercise the power conferred on him, it is not known how the individual citizen of this country will be able to find out the genuineness of the transaction. - Matter restored before the tribunal.

Summary

Issues:
Assessment of undisclosed receipt based on TDS discrepancy.

Analysis:
The appeal pertains to the assessment year 2011-12 where the assessee, engaged in laying cables, received a sum from a company, which the company claimed to have paid a higher amount in the TDS return compared to what the assessee received. The assessee contended that the discrepancy was due to a wrong entry by the company and that the amount was not actually received, hence should not be considered as income. On the other hand, the Revenue argued that since the company did not rectify the TDS return despite communication attempts, the amount shown in Form 26AS should be considered correct. The Assessing Officer treated the difference as an undisclosed receipt by the assessee.

The Tribunal observed that under the Income-tax Act, the assessee is expected to pay tax after assessment completion, with provisions for advance tax payment and TDS. It emphasized that if the assessee disputes a credit entry, the Assessing Officer must verify its genuineness, especially when the other party is a registered taxpayer. The Tribunal noted that the burden of proof initially lies with the assessee, but the Assessing Officer must also independently verify disputed entries. It highlighted that the Assessing Officer's role is crucial in determining the authenticity of transactions and cannot shift the burden to the assessee based on the other party's unavailability.

Consequently, the Tribunal held that the Assessing Officer failed to adequately investigate the disputed entry and directed a fresh examination of the matter. It instructed the Assessing Officer to locate the company and its directors to ascertain the veracity of the credit entry and make a decision in accordance with the law. The Tribunal emphasized that the Assessing Officer must fulfill his duty to ensure a just outcome and set aside the previous orders, remitting the issue back to the Assessing Officer for reevaluation.

In conclusion, the Tribunal allowed the appeal for statistical purposes, emphasizing the Assessing Officer's responsibility to thoroughly investigate disputed entries and make decisions based on accurate information and legal provisions.