2024 (2) TMI 1435 - HC - Income Tax

Retraction of additional income disclosed under the head 'income from other sources/undisclosed income/undisclosed investment' - whether such a retraction was impermissible and unsustainable in law? - ITAT sustaining the deletion of Addition on account of retraction of additional income disclosed HELD THAT - What has weighed upon the ITAT is the fact that the waiver of INR 86 crores was in any case not chargeable in the hands of the individual assessees. It also appears to have taken into consideration the fact that Cellcap Securities being a foreign company was not taxable in India. With regards to the retraction or modulation of the original offer which was made, the ITAT observes that the same was based on incorrect legal advice and was retracted soon thereafter. More importantly, the ITAT notes that the appellant had not relied upon any material including that which may have been gathered in the course of the search and which may have justified taxation of INR 86 crores. We thus find that the view as taken by the ITAT was clearly one which could be said to be reasonable and just in view of the facts that obtained.

Summary

Issues:
Appeal against ITAT judgment on deletion of additional income under undisclosed sources.

Analysis:
The Commissioner of Income Tax appealed against the ITAT judgment regarding the deletion of INR 4.2 crores of additional income disclosed under undisclosed sources. The issue stemmed from a search and survey operation on Aryan Sainik Group in 2012, where additional income of INR 150 crores was offered, later detailed with INR 86 crores linked to a loan waiver. However, when filing returns, the INR 86 crores was not included, leading to the AO's adverse decision. The ITAT considered various case laws, emphasizing the lack of seized material or incriminating evidence to justify taxing the INR 86 crores. It highlighted that the waiver was not taxable for individual assessees and Cellcap Securities, being a foreign company, was not taxable in India. The retraction of the amount was based on incorrect legal advice and lack of credible evidence for taxation.

The ITAT's reasoning was deemed reasonable, considering the facts presented, leading to the dismissal of the appeals. The court found no substantial question of law warranting interference with the ITAT's decision. The judgment upheld the ITAT's ruling on the deletion of the additional income under undisclosed sources, emphasizing the lack of grounds for taxation and the retraction based on incorrect legal advice.