2023 (12) TMI 494 - AT - Income Tax

Addition on the basis of entries found in form No. 26AS - addition under the head income from other sources - CPC compared the interest income reflected in Form No. 26AS and net interest income shown in the computation of income and added the difference - HELD THAT - On examination of computation of income which, is made a part of order by ld. CIT(A), we find that the assessee has shown bank interest under the head income from other sources and net difference of interest income earned and interest income incurred is reduced from business income. Thus, find merit in the written submission that the CPC has not considered or unable to consider the allowability of interest income earned and interest incurred due to mechanical working. As also find merit in the written submission that no addition on 26AS alone can be a basis for making addition without verification of fact as has been held by various Benches of the Tribunals, therefore, the addition/adjustment made by AO and confirmed by ld. CIT(A) is deleted. In the result grounds of appeal raised by the assessee are allowed.

Summary

Issues involved:
The appeal challenges the adjustment made by CPC based on entries in Form No. 26AS, alleging double taxation and lack of compliance with natural justice.

Summary:
1. The assessee filed a return for A.Y. 2017-18, showing income from various sources. CPC adjusted income by Rs. 4,12,541 based on Form No. 26AS entries.
2. Assessee contended that interest income was correctly declared, expenses accounted for, and CPC adjustment lacked justification or compliance notice.
3. CIT(A) upheld the adjustment citing unexplained advances, lack of nexus, and high unsecured loan balance, leading to correct adjustment.
4. Assessee appealed to ITAT, submitting detailed written arguments and relying on case laws favoring her position.
5. Despite adjournments and absence of the assessee, ITAT reviewed submissions and CIT(A)'s order.
6. Assessee reiterated income details, CPC's mechanical adjustment, and legal precedents against adjustments based solely on Form No. 26AS.
7. ITAT found merit in the assessee's arguments, noting CPC's failure to consider the allowability of interest income and expenses, deleting the adjustment.
8. Consequently, ITAT allowed the appeal, ruling in favor of the assessee.

Separate Judgment:
The ITAT, in its decision announced on 27th September 2023, allowed the appeal of the assessee, overturning the adjustment made by CPC and CIT(A) based on entries in Form No. 26AS.