Addition shall not be sustained solely on basis of AIR information and when Receipt declared by Assessee far exceeds the Amount: ITAT [Read Order]

The Mumbai bench of the Income Tax Appellate Tribunal (ITAT) held that addition shall not be sustained on the basis of Annual Information Return (AIR) information and when the receipt declared by the assessee far exceeds the amount mentioned in the information. 

The assessee company filed its return of income declaring a loss of Rs.2,83,48,393/-. The assessee company is in the business of providing services of developing, installing, and maintaining software to the hospitality, food service, and various other general industry segments and also carries out trading in hardware and software. It had more than 300 clients and according to the assessee, in the course of business by its clients, more than 2000 invoices were raised during the year under consideration.

The Assessing Officer (AO) based on the AIR information (mismatch in 26AS) directed the assessee to reconcile the income appearing in the books of the assessee. The assessee reconciled the same, but since there was still a mismatch of Rs.8,42,331/- as well as Rs.1,91,956/- the AO made an addition of Rs.10,34,287/-.

The Commissioner of Income Tax (Appeal) [CIT(A)] directed the AO to verify the fact and delete Rs.1,91,956/-. Thus, out of Rs.10,34,287/- made by AO, the CIT(A) directed AO to delete a total of Rs.6,66,514/-. Thus, the assessee is aggrieved by confirmation of the balance addition of Rs.3,67,773/-.

According to the assessee, it is evident from the AIR information itself that revenue as per the 26AS was only to the tune of Rs.5,88,84,001/- and the assessee has been unable to reconcile only Rs.3,67,773/- and has shown revenue to the tune of Rs.10,89,33,540/-. In this regard, it is found that the revenue shown by the assessee in its P & L account far exceeds the amount shown in the AIR information.

The Two-member bench comprising of Aby T Varkey (Judicial member) and Amarjit Singh (Accountant member) held that “the additions were made solely on the basis of AIR information, especially in the absence of full details of parties and when the receipts declared by the assessee far exceeds the amount mentioned in the AIR information, was not sustainable in the eyes of law”. Thus, the addition was deleted and the appeal of the assessee was allowed.

To Read the full text of the Order CLICK HERE

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