2018 (8) TMI 917 - AT - Income Tax

Assessment u/s 153A - undisclosed income - addition based on statement of the assessee during search which was not retracted - incriminating material - Although, the assessee has admitted undisclosed income for AY 2012-13, failed to disclose such income in the return of income; however, disclosed the same in the assessment year 2013-14. According to the assessee, it has admitted undisclosed income for AY 2012-13 by mistaken understanding of facts, whereas the said income, in fact, pertains to AY 2013-14. Held that - The disclosure of undisclosed income for AY 2013-14 has not been disputed by the AO. The AO has made addition only on the basis of declaration in the statement recorded u/s 132(4). Except this, the AO has not given any reasons for not accepting return filed by the assessee for AY 2013-14 admitting undisclosed income of ₹ 50 lakhs. No doubt, the assessee has not filed any retraction not to admit undisclosed income for AY 2012-13, but that by itself would not be a ground for the AO to make addition towards undisclosed income in the current assessment year, when he has not disputed the fact that the assesee has disclosed undisclosed income in the assessment year 2013-14. Therefore, we are of the considered view that when there is no difference in rate of tax for both the assessment years, i.e. AYs 2012-13 and 2013-14, there is no reason for the AO to make further addition of ₹ 50 lakhs in the current assessment year when the assessee has already disclosed undisclosed income for AY 2013-14. AO directed to verify the facts - Decided in favor of assessee.

Summary

Issues:
1. Whether the addition of undisclosed income of ?50 lakhs made by the Assessing Officer for the assessment year 2012-13 is justified based on the statement recorded during the search proceedings.

Analysis:
1. The appeal was filed against the order of the CIT(A)-11, Thane, pertaining to the assessment year 2012-13. The assessee, a partnership firm in real estate development, was part of a group subjected to a search action under section 132 of the Income Tax Act. During the search, incriminating material revealed undisclosed cash payments, leading to the admission of ?50 lakhs of undisclosed income for AY 2012-13 by a partner of the firm. Subsequently, the Assessing Officer issued a notice under section 153A, and the assessee filed its return admitting the undisclosed income for AY 2013-14, not for 2012-13. The AO, despite the admission during search, made an addition of ?50 lakhs to the total income for 2012-13, as the undisclosed income was not admitted in the return for that year.

2. The CIT(A) upheld the AO's decision, stating that the incriminating material and the partner's statement clearly indicated that the undisclosed income related to AY 2012-13. The assessee argued that the admission was due to a mistaken understanding of facts and that the income was actually disclosed for AY 2013-14. The CIT(A) rejected this argument, leading to the appeal before the ITAT.

3. During the ITAT hearing, the assessee contended that the addition for 2012-13 was unjustified as the undisclosed income was admitted and taxed for 2013-14. The ITAT noted that the AO solely relied on the statement from the search proceedings and did not dispute the disclosure for 2013-14. Given the consistent tax treatment for both years, the ITAT held that making a further addition for the same undisclosed income in a different year was unwarranted. The ITAT directed the AO to verify the disclosure for 2013-14 and delete the addition for 2012-13 if the income was already offered for taxation in the subsequent year.

4. The ITAT allowed the appeal, emphasizing that once income is offered for taxation in one year, no additional addition should be made for the same income in another year. The decision was based on the tax neutrality of the situation, where the income was subjected to the same tax rate for both assessment years. The case was remanded to the AO for verification and necessary action based on the disclosure for AY 2013-14.