ITAT Grants Relief in Reassessment Based on Third-Party Inputs

In Major Suresh Yadav v. Income Tax Officer, the assessee, engaged in cable TV operations under the name M/s World Vision India, was subjected to reassessment for AY 2001–02 based on information from the Entertainment Tax Department alleging around 28,000 subscribers against the declared 2,000 connections.

The assessing officer, relying on inspector reports and third-party inputs, estimated annual receipts at Rs. 6.72 crore and determined taxable income at Rs.3.36 crore on an ex parte basis under Sections 144/147. The CIT(A) partly reduced the addition to Rs 1.20 crore by applying estimated profit margins.

The assessee contended that the entire addition was based on assumptions without verifying the actual subscriber base or past records and relied on favourable tribunal rulings in earlier years.

Issue Before Court: Whether an addition based on an estimated number of subscribers and income without independent verification is sustainable under the law.

Tribunal Decided: The ITAT allowed the appeal and deleted the addition of Rs.12,006,010/-. The Tribunal held that the Assessing Officer made the addition purely on estimation without verifying the correctness of the assessee’s claim regarding the actual subscriber base and receipts.

It noted that in identical facts for subsequent years, the Coordinate Bench had either deleted similar additions or restored the matter for proper verification, and in remand proceedings, the Department itself accepted the returned income. Following these precedents, the Tribunal concluded that estimation without corroborative evidence is unsustainable. Accordingly, the addition was deleted, and the appeal of the assessee was allowed, rendering other grounds academic.

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