2020 (2) TMI 135 - AT - Income Tax

Difference in receipts shown as per books of accounts and as per AS-26 - gross revenue under Facility Income - As far as the Assessee is concerned, the receipts of rents as recorded in the books of accounts is in consonance with the agreement between the assessee and the lessee - HELD THAT - Assessee firstly held that the assessee has done all what best it could do to discharge its onus/burden which lay under the provisions of the 1961 Act by submitting reconciliation statements as well explaining the reasons for differential between the income as is reported in Form No. 26AS information as per the data base maintained by the Income-tax Department and the income as is reflected in its books of account. The assessee has discharged its primary onus/burden and the assessee could not be asked to do impossible. Secondly the Tribunal held that there could be differences in the accounting policy followed by the taxpayer and its clients who have deducted Income-tax at source on behalf of the taxpayer as well wrong mention/punching of the permanent account number of the tax payers by the clients while filing the TDS returns with the Department. One of the reasons for differential could be that the clients have deducted TDS on the gross amount inclusive of service tax while the income is reflected by the taxpayers exclusive of service tax. Thirdly, the tribunal held that the assessee has no control over the data base of the Income-tax Department as is reflected in Form No. 26AS and at best the assessee could do is to offer bona fide explanations for these differential which the assessee did in this case during the appellate/remand proceedings. Fourthly, it held that the Income-tax Department has all the information and data base in its possession and control. The learned Commissioner of Income-tax (Appeals)/Assessing Officer ought to have conducted necessary enquiries to unravel the truth but asking the assessee to do impossible is not warranted. The tribunal finally concluded that no additions to the income are warranted in the hands of the assessee owing to differential in income based on Form No. 26AS and the income as is reflected in the books of account maintained by the assessee - See TUV INDIA PVT. LTD., C/O KALYANIWALLA AND MISTRY LLP VERSUS DCIT 15 (3) (1) , MUMBAI 2019 (8) TMI 1050 - ITAT MUMBAI - the impugned addition cannot be sustained and the same is directed to be deleted. The appeal of the assessee is accordingly allowed.

Summary

Issues:
Appeal against CIT(A) order for Assessment Year 2014-15 regarding Rental Facility Income discrepancy.

Analysis:
The appellant, a construction and property development company, filed a return declaring income of ?99,80,689. During assessment, the AO noted a discrepancy in Rental Facility Income from various customers as per books and 26AS. The difference totaled ?5,98,398. The Assessee argued that its books were audited, all income was disclosed, and discrepancies arose due to different tax treatment in 26AS. The AO rejected the contentions and added the amount to the income. The CIT(A) upheld the addition, leading to the appeal. The Assessee argued that out of 29 customers, discrepancies were found in only 7, and the gross revenue was ?5.49 crores, making non-disclosure of ?5,98,398 improbable. They explained that 26AS included "Other Services" income, not part of Rental Facility Income. Citing a Mumbai ITAT case, the Assessee contended that the Department should verify data accuracy, not burden the Assessee. The DR supported the CIT(A) order.

The Vice President noted that the addition was based solely on the income difference in 26AS and books. The Assessee's books aligned with lease agreements, and no defects were found. Referring to the Mumbai ITAT case, it was held that the Assessee fulfilled its burden by explaining discrepancies and that differences could stem from varying accounting policies or incorrect TDS filings by clients. The Assessee lacked control over 26AS data, and the Department should investigate instead of imposing additions. Consequently, the addition was deemed unsustainable, and the appeal was allowed. The Vice President found the case analogous to the Mumbai ITAT decision, leading to the deletion of the addition. Thus, the Assessee's appeal was allowed, overturning the CIT(A) order.