2018 (4) TMI 1698 - AT - Income Tax

Addition on account of unreconciled receipts as per Annual Information Report - Income received more than what is declared - HELD THAT - The letter written to the Assessing Officer clearly states that the assessee requested the Assessing Officer to provide necessary information to reconcile the balance entries. However in spite of request AO could not provide any information and moreover he made addition stating that the assessee agreed for the same. Assessing Officer made addition solely on the basis of AIR information and we see no other information is brought on record by the Assessing Officer to show that the assessee had in fact received this income from the said parties. We also see that the assessee reconciled 95% of the transactions leaving only 4.76% of the transactions unreconciled due to lack of data. See .YAHOO INDIA PVT. LTD. (FORMERLY KNOWN AS YAHOO WEB SERVICES INDIA PVT. LTD.) 2016 (1) TMI 1129 - ITAT MUMBAI No valid reason for the Assessing Officer to make addition towards unreconciled income as the addition was solely based on AIR information and without making proper enquiries without submitting the information as requested by the assessee. In the circumstances we direct the Assessing Officer to delete the addition. Grounds raised by the assessee are allowed.

Summary

Issues:
Sustainability of addition of unreconciled receipts based on Annual Information Report.

Analysis:
1. The appeal was filed by the assessee against the order of the Commissioner of Income-tax (Appeals) for the Assessment Year 2010-11, specifically challenging the addition of ?29,00,474 on account of unreconciled receipts as per the Annual Information Report.

2. The assessee, engaged in the hospitality business, had initially declared a loss of ?21,11,14,381, which was later determined at ?20,82,13,910 by the Assessing Officer. The addition in question was made based on the AIR information indicating commission or brokerage received by the assessee from various parties, which the assessee failed to reconcile satisfactorily.

3. The Commissioner (Appeals) upheld the addition, noting the failure of the assessee to reconcile the difference and provide necessary proofs, despite the assessee's assertion that no such agreement was made before the Assessing Officer.

4. During the appeal before the ITAT, the assessee contended that it had reconciled 95% of its receipts, amounting to ?58.23 crores, and requested further information from the Assessing Officer to reconcile the remaining ?29,00,474. The assessee argued that without the required data, no valid addition could be made solely based on the AIR information.

5. The ITAT observed that the Assessing Officer solely relied on the AIR information without providing the necessary data requested by the assessee. The tribunal highlighted that 95% of the transactions were reconciled, leaving only 4.76% unreconciled due to the lack of information.

6. Citing a similar case involving M/s. Yahoo India Pvt. Ltd., where the Tribunal held that additions based solely on AIR information without corroborative evidence were not justified, the ITAT directed the Assessing Officer to delete the addition in the present case.

7. Consequently, the ITAT allowed the appeal of the assessee, emphasizing the importance of providing necessary information to reconcile discrepancies and the inadequacy of making additions based solely on AIR data without further verification.

This detailed analysis showcases the progression of the case, the arguments presented by both parties, and the ultimate decision of the ITAT based on legal principles and precedents.