Case Law Details
A.F. Ferguson & Co. Vs JCIT (ITAT Mumbai)
The Income Tax Appellate Tribunal (ITAT), Mumbai allowed the assessee’s appeals for Assessment Years 2008-09 and 2009-10, holding that additions made solely on the basis of Annual Information Report (AIR) information were not sustainable.
For Assessment Year 2008-09, the Assessing Officer observed that the AIR reflected professional receipts of Rs. 34,49,43,172, which required reconciliation with the books of account. Although the assessee reconciled a major portion of the receipts, an amount of Rs. 2,32,75,363 remained unreconciled. The Assessing Officer treated this as concealed income and added it to the total income. During appellate proceedings, the assessee reconciled a further Rs. 74,41,057, but the Commissioner (Appeals) confirmed the balance addition of Rs. 1,58,34,306. The assessee contended that all professional fees were received through banking channels, duly recorded in the books, and that the professional receipts disclosed in the profit and loss account amounted to Rs. 50,36,03,971, which exceeded the AIR figure of Rs. 40,02,84,680. The assessee also submitted that the AIR did not contain complete details of the parties, making complete reconciliation impossible.
The Tribunal noted that the Revenue did not dispute that the AIR lacked complete party details and that the assessee had reconciled most of the receipts. It further observed that the professional receipts declared by the assessee exceeded the receipts reflected in the AIR information. The Tribunal held that an addition made solely on the basis of AIR information, particularly when complete party details were unavailable and no evidence existed to show receipt of income beyond what was disclosed, could not be sustained. It also observed that if the assessee denied receipt of income from a particular source, it was for the Assessing Officer to establish such receipt and the assessee could not be expected to prove a negative. Accordingly, the Tribunal deleted the addition.
For Assessment Year 2009-10, the Tribunal found identical facts. The AIR reflected receipts of Rs. 27,57,07,136, whereas the assessee had disclosed professional receipts of Rs. 34,80,07,270 in the profit and loss account. Applying the same reasoning, the Tribunal held that the addition based solely on AIR information was unsustainable and allowed the appeal.
Accordingly, both appeals of the assessee were allowed.
FULL TEXT OF THE ORDER OF ITAT MUMBAI
The above titled appeals preferred by the assessee against the orders of the Commissioner of Income Tax (Appeals) [(hereinafter referred to as CIT(A)] dated 21.06.12 and 28.12.12 relevant to assessment years 2008-09 and 2009-10 respectively have been heard on the dates as mentioned above.
However, since both the appeals are relating to the same assessee and even the facts and issues involved therein are identical in nature, hence the same are being disposed of with this common order. For the sake of convenience facts have been taken from the ITA No.5037/M/2012 for Assessment Year 2008-09.
ITA No.5037/M/2012 (Assessment Year 2008-09):
2. The assessee through its grounds of appeal has agitated the confirmation of the addition of Rs.1,58,34,306/- which was made on the basis of information from the Annual Information Report (AIR).
3. The facts in brief are that the Assessing Officer (hereinafter referred to as the AO) noted that the AIR information showed professional receipts of Rs.34,49,43,172/- by the assessee which were required to be reconciled with the books of accounts. The assessee reconciled major portion of the amount but could not reconcile the amount of Rs.2,32,75,363/-. It was stated by the assessee that these receipts were not received by the assessee. However, the AO observed that since the assessee had failed to reconcile the above stated receipts, he treated the same as concealed income of the assessee and added the same to the total income of the assessee.
4. During the appellate proceedings before the ld. CIT(A), the assessee filed some additional reconciliation statements as additional evidence. The matter was remanded to the AO. The assessee further reconciled the receipts amounting to Rs.74,41,057/- out of total unreconciled amount of Rs.2,32,75,363/- as per AIR information. It was submitted by the assessee before the ld. CIT(A) that the AIR information did not provide full details of the parties, hence it was difficult for the assessee to reconcile the same. It was also submitted that professional receipts were received by the assessee only through banking channel and were duly recorded in the books of accounts and offered to tax, hence there was no undisclosed income. However, the ld. CIT(A) rejected the contentions of the assessee and confirmed the addition of the remaining unreconciled professional receipts of Rs.1,58,34,306/-.
5. Before us, the ld. A.R. of the assessee has submitted that all the professional fees were received by the assessee through banking channels only and all the receipts were duly recorded in the books of accounts and there was no undisclosed income of the assessee. He has further submitted that the professional fees shown, as per AIR information, was Rs.40,02,84,680/-whereas professional fees disclosed in the P&L account and offered for tax was Rs.50,36,03,971/- which was much higher than the professional fees shown in the AIR information. He has further submitted that out of the professional receipt of Rs.40,02,84,680/- as shown in the AIR information, the assessee had reconciled the professional receipts to the extent of Rs.37,70,09,317/- before the AO. Further, during the appellate proceedings before the ld. CIT(A), the assessee had reconciled a sum of Rs.74 lakh. In the AIR information the full details of the parties were not mentioned and as such it was not possible for the assessee to produce further reconciliation. On the other hand, the ld. D.R. has relied upon the findings of the lower authorities.
6. We have considered the rival contentions of the ld. representatives of the parties. It is an undisputed fact on the file that the professional fees shown by the assessee in its P&L account far exceeds than the amount shown in the AIR information. Even the assessee has reconciled the major portion of the receipts. It has not been denied by the Revenue Authorities that full and complete details of the parties are not mentioned in the AIR information. The addition in this case has been made by the lower authorities solely on the basis of AIR information. In our view, the addition, made solely on the basis of AIR information, especially in the absence of full details of parties and when the professional receipts declared by the assessee far exceeds than the amount mentioned in the AIR information, is not sustainable in the eyes of law. Our above view is fortified with the decision of the Bangalore Bench of the Tribunal in the case of “DCIT vs. Shree G. Selva Kumar” in ITA No.868/Bang/2009 decided on 22.10.10 and another in the case of “Mrs. Arati Raman vs. DCIT” in ITA No.245/Bang/12 decided on 05.10.12 wherein it has been held that the assessment order based only on the AIR information would not stand in the eyes of law. If the assessee denies that he is in receipt of income from a particular source, it is for the AO to prove that the assessee has received income as the assessee cannot prove the negative. Reliance can also be placed on the decision of Mumbai Bench of Tribunal in the case of Shri S. Ganesh vs. ACIT” in ITA No.527/M/2010 decided on 08.12.10 wherein the Tribunal has held that in the absence of any material brought by the revenue authorities that the assessee has received amount more than the professional fees which has been declared by him in the P&L account and when the professional income declared by the assessee far exceeds the professional fees shown in the AIR information, then additions solely based on the AIR information are not sustainable.
7. In view of our above observations and in the facts and circumstances of the case, the additions made by the Revenue solely based on the AIR information are not sustainable and the same are hereby ordered to be deleted.
ITA No. 437/M/2013 (Assessment Year: 2009-10):
8. In this case, receipts shown as per AIR information was Rs.27,57,07,136/- whereas receipts disclosed in the P&L account and offered for tax was Rs.34,80,07,270/- which was higher than the receipts shown in the AIR information. The facts of this case also being identical, hence, in view of our findings given above, this appeal of the assessee is also hereby allowed.
9. In the result both the appeals of the assessee are allowed.
Order pronounced in the open court on 17.10.2014.
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