2022 (4) TMI 484 - AT - Income Tax

Unexplained cash credit u/s 68 - increase in proprietor s Capital - inadvertent mistake on the part of the employee - HELD THAT - We find that the assessee not only before the AO but also before the CIT(A) duly explained that the increase in proprietor s Capital was reported due to inadvertent mistake on the part of the employee as he inadvertently consolidated the assets and liabilities of the personal file of the assessee with the assets and liabilities of the proprietorship concern M/s Selfcare - The Natural Way . The audited accounts of the assessee were duly verified by the AO during the assessment proceedings. So far as the objection of the Assessing Officer that the assessee repeated his mistake in the return for assessment year 2017-18 is concerned the assessee duly replied that by the time the aforesaid mistake came to the notice of the assessee the return for assessment year 2017- 18 was already filed. It was also explained that the assessee has filed the correct Income Tax Return for assessment year 2018-19 wherein the assets/liabilities of the personal file of the assessee were not consolidated with the assets/liabilities of her proprietorship firm and true picture of the account has been presented and the mistake has been rectified. CIT(A) considering the accounts of the assessee as well as the circumstances leading to the aforesaid mistake has deleted the addition observing that it was not a case of unexplained credits u/s 68 - Decided against revenue.

Summary

Issues:
- Appeal against order of Commissioner of Income Tax (Appeals)-10, Kolkata regarding unexplained cash credit deletion.
- Explanation of difference in capital between assessment years.
- Allegation of unexplained cash credit under section 68 of the Income Tax Act.
- Reconciliation of accounts and submission of revised Income Tax Return.
- Interpretation of inadvertent mistake by employee in consolidation of assets and liabilities.
- Justification of increase in proprietor's capital.
- Assessment of mala fide intention.
- Consideration of alternate claim under section 68.
- Decision on deletion of addition under section 68.

Analysis:
The appeal was filed by the Revenue against the order of the Commissioner of Income Tax (Appeals)-10, Kolkata, challenging the deletion of unexplained cash credit amounting to ?9,80,05,649. The Assessing Officer questioned the difference in the Proprietor's Capital between assessment years 2015-16 and 2016-17. The assessee explained that the discrepancy arose due to the inadvertent consolidation of personal and proprietorship assets and liabilities in the Income Tax Return, leading to an incorrect capital figure. The Assessing Officer treated the increase in capital as unexplained cash credit under section 68 of the Act.

During the appeal process, the assessee provided reconciled accounts and clarified the source of the assets and liabilities, rebutting the Assessing Officer's allegations. The Commissioner of Income Tax (Appeals) reviewed the submissions and deleted the addition, stating that it was not an unexplained cash credit situation. The Commissioner noted the inadvertent mistake made by the employee in consolidating the financials, leading to the incorrect reporting of capital. The Commissioner also found no basis for the invocation of section 68 in this case.

The Tribunal upheld the decision of the Commissioner, emphasizing that the mistake was rectified in subsequent Income Tax Returns and that there was no unexplained influx of funds. The Tribunal dismissed the Revenue's appeal, affirming the deletion of the addition under section 68. The judgment highlighted the importance of accurate reporting and reconciliation of financial data to avoid misinterpretations and unjustified allegations.