Form 26AS Mismatch Cannot Automatically Justify Income Addition Without Corresponding Bank Credit: ITAT Mumbai Ruling

Overview of the Case

The Mumbai Bench of the Income Tax Appellate Tribunal delivered a significant ruling in Bimal Dilip Samani Vs ITO (ITAT Mumbai) pertaining to Assessment Year 2012-13, partially ruling in favour of the assessee. The dispute centred on whether an addition to income could be sustained purely on the basis of TDS entries appearing in Form 26AS, without any corresponding credit in the assessee's bank account and without the assessee having claimed credit for such TDS.

The case raises important questions around the evidentiary value of Form 26AS in reassessment proceedings, and the obligations of the Assessing Officer to conduct independent inquiry before treating TDS entries as proof of income receipt.

Background: Who Is the Assessee and What Was the Business?

Mr. Bimal Dilip Samani was an individual assessee operating as the proprietor of Prisha Enterprises, a distribution business dealing in SIM cards and prepaid recharge coupons. The enterprise functioned as a distributor for Unitech Wireless (Tamilnadu) Private Limited — the telecom entity operating under the brand name Uninor — covering the Dahisar (East and West) area of Mumbai.

The nature of the assessee's role is crucial to understanding the dispute:

  • The assessee did not own the recharge coupons independently; they were supplied by Unitech Wireless (Tamilnadu) Private Limited.
  • He functioned primarily as a collection agent, gathering payments from retailers for recharge coupons and SIM cards and remitting them to the telecom company.
  • He also handled KYC documentation for new SIM card activations and submitted them to Unitech for processing.
  • For each successfully activated SIM card, the assessee earned a variable commission ranging from Rs. 10/- to Rs. 50/- per card depending on parameters set by Unitech.
  • His actual declared commission income for the year stood at Rs. 21,15,375/-, comprising activation commissions of Rs. 18,17,360/- and other retail commissions of Rs. 2,98,015/-.

Reassessment Proceedings: How Did the Case Come to Light?

No return of income had been filed by the assessee for AY 2012-13. The Assessing Officer came into possession of information indicating:

  1. Cash deposits of Rs. 23,29,130/- in the assessee's bank account.
  2. Commission transactions of approximately Rs. 1.99 crores reflected in the assessee's Form 26AS, linked to his PAN.

After securing prior approval from the Principal Commissioner of Income Tax, the Assessing Officer reopened the assessment on 07.03.2019 by invoking Section 147 read with Section 148 of the Income Tax Act, 1961.

In response to the notice issued under Section 148, the assessee filed a belated return of income on 09.10.2019 — approximately six months after the notice was served — declaring total income of Rs. 8,51,554/–.

What Did the Assessing Officer Find and What Addition Was Made?

Upon examination of the bank statements and Form 26AS data, the Assessing Officer noted:

  • Total bank credits aggregating Rs. 3.09 crores across Bank of India and Dena Bank accounts.
  • Form 26AS reflected commission entries totalling Rs. 99,75,969/- after the AO himself identified and corrected duplicate transaction entries. The AO specifically recorded: "However, on further verification of 26AS, it is observed that the actual commission/brokerage made amounting to Rs. 99,75,969/- as most of the transactions entered twice which is confirmed through TRACES/Form 26AS."
  • The assessee's declared commission income was Rs. 21,15,375/-.