No Assessment on basis of AIR database without giving primary information to Assessee: ITAT

The Income Tax Appellate Tribunal (ITAT), Mumbai, has recently issued an assessment order in which the additions were made based on third-party data from the Annual Information Return (AIR) system, which the assessee had not been provided access to.

Based on the Annual Information Return (AIR) database, which showed several large transactions, the Assessing Officer made additions to the assessee’s income. These transactions included agreements with builders, cash deposits, stock market and equity shares transactions, and contracts in the commodities exchange.

The Assessee, Bobby Yogendra Sharma, argued that he could not respond meaningfully to the notices because the specific details of the AIR entries were never given to him. He had requested copies of the AIR information, including the transaction-wise details and the reporting source identity. However, the Income Tax Department did not respond to these requests, and both the assessment and the appellate proceedings resulted in passing ex parte orders.

The Tribunal found that the additions were made only on the information received from the AIR database. It also agreed with the assessee’s claim that he was never provided the primary information. The tribunal highlighted that in cases where the additions are made on the basis of third-party data, the assessee must be given the relevant information to respond properly. Since, in the present case, the assessee was not given any such information, it affected his ability to reply properly.

Based on these observations, the Tribunal set aside the assessment order and directed the Assessing Officer to provide the full particulars of each AIR entry to the assessee. The AO was instructed to pass a fresh order after giving a proper opportunity for a hearing.