2018 (5) TMI 1012 - AT - Income Tax

Undisclosed investment in FD - CIT-A deleted addition accepting the revised Balance Sheet which according to revenue, was an additional evidence thus violation of Rule 46A - Held that - As brought to our notice that interest accrued on the existing FD savings bank was transferred to the FD as investment, thus increasing the value of investment in FD by an amount of ₹ 3,76,65,625.26/- as evident from perusal of page 10 of the paper book. Thus, we note that the Ld. CIT (A) has rightly noted that the increase of her investment in FD with Bank of India was not her undisclosed income as alleged by the AO and we do not find any infirmity in this finding of Ld. CIT(A) and we concur with the same. Coming to the ground raised by the revenue in respect of violation of Rule 46A, we note from the impugned order of the Ld. CIT (A) that the Ld. CIT (A) has called for a remand report from the AO. Our attention was drawn to page nos. 22 and 23 of the paper book which is the remand report forwarded by the AO dated 02.12.2015 wherein the AO has given his remand report, therefore, there is no violation of Rule 46A of the Rules. Thus, this ground of appeal of revenue is dismissed. Claim of exemption regarding principal sum of investment in mutual fund - assessee had voluntarily offered the said sum in her return of income - CIT-A allowed the claim - Held that - CIT(A) has decided the issue raised by the assessee and has directed the AO to go through the details of the mutual fund investment and tax only the amount which is taxable after excluding the principal sum of investment which was mistakenly shown as income in the facts as narrated above is fair and reasonable order. Taking into consideration the facts discussed above, we note that the legal issue that has been raised by the assessee that only the right income has to be taxed has been rightly decided by the Ld. CIT(A) which does not call for any interference. Coming to the question as to whether the assessment can be completed below the returned income CIT(A) s direction even if it results in an assessment below the returned income and consequently refund arises, it is valid as per law. Moreover we note that the relief sought cannot be refused merely because the assessee has omitted to claim the relief as held by the Hon ble Supreme Court in Anchor Pressings P. ltd. Vs. CIT 1986 (7) TMI 1 - SUPREME Court . Therefore, for the aforesaid reasons given above, the revenue s ground of appeal is dismissed.

Summary

Issues Involved:
1. Deletion of addition on account of undisclosed investment in Fixed Deposits (FD).
2. Alleged violation of Rule 46A of the Income Tax Rules, 1962.
3. Allowance of exemption regarding the principal sum of investment in mutual funds.
4. Assessment below the returned income and refund of admitted tax without a revised return of income.

Issue-wise Detailed Analysis:

1. Deletion of Addition on Account of Undisclosed Investment in FD:
The revenue challenged the deletion of ?44,81,738/- added as undisclosed investment. The Assessing Officer (AO) noted a discrepancy between the FD amount in the balance sheet (?3,31,83,887/-) and the ITS details (?3,76,65,625/-). The assessee claimed the discrepancy was due to an inadvertent error by her accountant and submitted a revised balance sheet. The AO added the differential amount as undisclosed income. However, the assessee demonstrated that the increase in FD was covered by her savings account balance from the previous year. The Tribunal concurred with the CIT(A)'s finding that the increase in FD was not undisclosed income, as the funds were traceable to the savings account.

2. Alleged Violation of Rule 46A:
The revenue claimed that the CIT(A) violated Rule 46A by accepting additional evidence (revised balance sheet). However, the Tribunal noted that the CIT(A) had called for a remand report from the AO, who provided his report dated 02.12.2015. Hence, there was no violation of Rule 46A, and this ground of appeal was dismissed.

3. Allowance of Exemption Regarding Principal Sum of Investment in Mutual Funds:
The assessee inherited UTI Mutual Funds worth ?21,88,300/- and offered the entire redemption value (?22,63,639/-) to tax instead of only the profit (?2,63,639/-). The CIT(A) allowed the exemption of the principal sum, directing the AO to tax only the profit. The Tribunal upheld this decision, emphasizing that only the correct taxable amount should be assessed.

4. Assessment Below the Returned Income and Refund of Admitted Tax:
The revenue argued that the assessment should not be below the returned income and that tax admitted in the return should not be refunded without a revised return. The Tribunal referred to the Gujarat High Court's decision in CIT Vs Milton Laminates Ltd, which allowed assessment below the returned income. The legislative history of Section 143(3) was discussed, noting that the AO is empowered to determine the sum payable or refundable. The Tribunal concluded that the CIT(A)'s direction, even if resulting in a refund, was valid as per law. The Tribunal also cited the CBDT Circular No. 14(XL-35) dated 11.04.1955, highlighting the duty of officers to assist taxpayers in claiming refunds and reliefs.

Conclusion:
The Tribunal dismissed the revenue's appeal, upholding the CIT(A)'s decisions on all grounds. The deletion of the addition for undisclosed investment, the handling of additional evidence under Rule 46A, the exemption of the principal sum in mutual funds, and the assessment below the returned income were all affirmed. The order was pronounced in the open court on 14.05.2018.