2021 (6) TMI 1123 - AT - Income Tax

Additions made under the head salary u/s 143(1) based on entry in Form-26AS - additions were made in the hand of assessee on the basis of TDS shown in Form-26AS - assessee contended that she has not earned such income nor any work was performed by her - HELD THAT - We find that both the authorities below acted in a mechanical way. There is no consideration of the contentions raised by the assessee that she has not worked or earned any income from such deductor. In our view once the assessee denied that she has not earned such income as reflected in her Form-26 AS, the onus shift on the revenue authorities to prove such income of the assessee. The addition is based solely on the basis of TDS shown in Form-26AS, ignoring the submissions of the assessee. The ld. AR for the assessee vehemently argued before us that the deductor if more than 1000 KM away from the place of practice of assessee. We find merit in the submissions of assessee that the assessee had entered into any such transactions and the lower authorities have not made any verification or effort to verify such transactions and there is certain mistake of entering the wrong PAN, which belongs to the assessee and the addition made in the income is uncalled for. As decided in Ravindra Pratap Thareja case 2015 (10) TMI 1487 - ITAT JABALPUR that merely because a payment was reflected in Form-26AS and was shown to have been made to the assessee, it could not be brought to tax as it could not be established that the assessee was actual beneficiary of said payments and the additions was liable to be deleted. As no purpose would serve to restore the matter back to the file of assessing officer or to Income tax Officer (TDS), as prayed by ld Sr.DR for the revenue. In the result, the grounds of appeal raised by the assessee are allowed.

Summary

Issues:
1. Addition of income based on Form-26AS entries under section 143(1) of the Income Tax Act.
2. Denial of income by the assessee and subsequent confirmation of additions by the authorities.
3. Verification of transactions and onus of proof on revenue authorities.

Analysis:

Issue 1: Addition of income based on Form-26AS entries under section 143(1) of the Income Tax Act
The appeal was against the order of the Commissioner of Income Tax (Appeals) confirming additions made by the Central Processing Centre (CPC) under section 143(1) of the Income Tax Act for the assessment year 2017-18. The additions were based on entries in Form-26AS, specifically TDS entries related to salary income. The assessee denied earning such income, emphasizing that the entries were incorrect. Despite the denial, the authorities made the additions, leading to the appeal.

Issue 2: Denial of income by the assessee and subsequent confirmation of additions by the authorities
The assessee, a Doctor residing in Surat, denied rendering services to the organizations mentioned in the Form-26AS entries, which were located over 1000 kilometers away. The assessee provided details of consultation charges and interest earned to support the denial of additional income. However, both the CPC and the Commissioner of Income Tax (Appeals) confirmed the additions without verifying the facts adequately. The onus was on the revenue authorities to prove the income, especially when the assessee explicitly denied earning it.

Issue 3: Verification of transactions and onus of proof on revenue authorities
The Tribunal emphasized that the mere presence of a payment in Form-26AS does not automatically make it taxable, as the actual beneficiary must be established. In this case, the authorities failed to verify the transactions or provide evidence that the assessee was the beneficiary of the payments reflected in Form-26AS. The Tribunal found merit in the assessee's arguments, highlighting the lack of verification by the lower authorities and the possibility of errors, such as entering the wrong PAN. Consequently, the Tribunal allowed the appeal, stating that no purpose would be served by remanding the matter back to the assessing officer.

In conclusion, the Tribunal allowed the appeal, emphasizing the importance of verifying transactions and placing the onus of proof on revenue authorities when adding income based on Form-26AS entries. The judgment highlighted the need for thorough examination before confirming additions and the significance of establishing the actual beneficiary of payments reflected in tax documents.