2019 (2) TMI 1355 - AT - Income Tax

Addition on account of undisclosed income as alleging that undisclosed TDS was not shown in ITR - AR has submitted that it may be a TDS deducted by the said party on amount of service tax and therefore, the same cannot be treated as income of the assessee - HELD THAT - Variation of receipts shown in the two Form No. 26AS first taken on 18/8/2015 at the time of filing of return of income and another taken on 21/11/2017 clearly manifests that some amounts were subsequently added in the traces. The Assessing Officer has made addition without verification of the nature of the receipt and even without verification whether any incorrect details are uploaded in the account of the assessee. Therefore, merely because there is a TDS details uploaded by the other party would not ipso facto amounts to an additional receipt by the assessee which can be considered as income. The assessee has submitted that the additional amount shown as receipt from Capital First was never received by the assessee, therefore, it requires a proper verification from the other party as to what this amount of ₹ 20,970/- on which the TDS of ₹ 2,098 was deducted U/s 194H of the Act is actually representing. Accordingly we direct the Assessing Officer to verify the correctness of the details and the nature of the alleged receipts. Receipts from the TVS motors on which the TDS u/s 194A is deducted - HELD THAT - We find that if the interest if any was became due and payable by the said company to the assessee then it would be an income of the assessee as it was credited only during the year under consideration. However, the actual receipt of the said income or whether the said amount of ₹ 5,548/- is actually payable to the assessee by the TVS motors or not is to be verified from the other party. Hence, the Assessing Officer is directed to verify whether the said amount was payable by the said company to the assessee or actually paid during the year under consideration or not and then consider the same after giving an opportunity of hearing to the assessee. Receipt as rent from Worldwide Machinery Solution Pvt. Ltd - HELD THAT - We find that the assessee has already shown an interest income of ₹ 1,43,400/- from Worldwide Machinery Solution Pvt. Ltd., therefore, a lessor amount shown in the Form No. 26AS would not lead to the conclusion that this is an additional income of the assessee when the assessee has already declared the interest income from the same party. Accordingly, we delete the addition Amount shown as receipt from Raj Motors on which the TDS of ₹ 851/- was deducted U/s 194C - AR has submitted that the assessee is not working under contract of the said company but the assessee purchases spare parts from the said party and there is no question of any receipt but the assessee has been paying against the purchases made from the said party - HELD THAT - Once, there is no business between the parties which would fall under the provisions of Section 194C of the Act then the said amount of ₹ 42,556/- shown as receipt under contract is required to be verified from the other party. Accordingly, we direct the Assessing Officer to verify the correctness of the said entry in the Form 26AS from the other party and then consider the issue after giving an opportunity of hearing to the assessee. - Appeal of the assessee is partly allowed for statistical purposes.

Summary

Issues:
1. Addition of undisclosed income based on Form 26AS entries not shown in the income tax return.

Analysis:
The appeal was against an order confirming the addition of undisclosed income of ?1,29,074 due to alleged discrepancies in Form 26AS entries not declared in the income tax return for the assessment year 2015-16. The Assessing Officer noted ?9,504 of undisclosed TDS related to the income and treated ?1,29,074 as undisclosed income. The assessee contended that the entries were reconciled but the CIT(A) upheld the addition. The assessee argued that the discrepancies were due to TDS not part of the initial Form 26AS when the return was filed. The AR detailed discrepancies for various parties: Capital First Ltd., TVS Motors, Worldwide Machinery Solution Pvt. Ltd., and Raj Motors, explaining why certain amounts were not income. The AR emphasized that the Assessing Officer failed to verify these details properly.

The tribunal found that the Form 26AS entries were subsequently updated, indicating the discrepancies were rectified by the deductors. The tribunal directed the Assessing Officer to verify the correctness and nature of the alleged receipts, especially for Capital First Ltd. and TVS Motors. Regarding Worldwide Machinery Solution Pvt. Ltd., as the interest income was already declared, the addition of ?60,000 was deleted. For Raj Motors, where the assessee only purchased spare parts, the tribunal directed verification of the entry and the nature of the transaction. The tribunal partially allowed the appeal for statistical purposes, emphasizing the need for proper verification before making additions based on Form 26AS entries not reflected in the return.

The judgment highlights the importance of thorough verification before treating discrepancies in Form 26AS as undisclosed income. It underscores the need for assessing officers to investigate the nature of transactions and verify entries with the other party involved. The tribunal's decision focused on ensuring accurate assessment and avoiding unjust additions based solely on updated Form 26AS entries not initially disclosed.