2017 (5) TMI 1319 - AT - Income Tax

Addition u/s 68 - arithmetic mistake committed while uploading the amounts in the return filed for AY. 2009-10 - reopening of assessment - Held that - We are satisfied that assessee has the capacity to advance the amounts earlier and as confirmed by the parties, assessee received the amounts on 01-04- 2008. It was a simple mistake in uploading the data, while filing the return of income for AY. 2009-10 and there is no unaccounted income which was brought to capital account. The allegations of AO are unfounded and the presumptions of the CIT(A) are equally unfounded. Being a senior officer of the department it is not expected from the CIT(A) to give wrong findings, so as to confirm the order of the AO. Since we have examined the facts, we are satisfied that there is no unaccounted income brought to capital account by assessee. Accordingly, grounds are accepted. Even though assessee contended that the proceedings are wrongly initiated, we are of the opinion that prima-facie there seems to be some discrepancy, on the basis of which AO has reopened the assessment. Be that as it may, as we are satisfied that there is no unaccounted income to be brought to tax u/s. 68 of the Act, the issue of reopening becomes academic. - Decided in favour of assessee.

Summary

Issues Involved:
1. Legality of re-assessment proceedings under Section 147.
2. Justification of addition under Section 68 for unexplained capital increase.

Issue-wise Detailed Analysis:

1. Legality of Re-assessment Proceedings under Section 147:

The primary contention raised by the assessee was the absence of fresh tangible material after the initial assessment under Section 143(3). The assessee argued that the initiation of re-assessment proceedings under Section 147 was legally unsound. The Tribunal admitted this additional ground as it was a legal issue. The assessee's counsel emphasized that all relevant information had been provided during the original assessment, and the discrepancy was due to an arithmetic mistake in uploading the return. The Tribunal noted that the original assessment had indeed examined the purchase transaction, and the discrepancy was due to a mistake in data entry. The Tribunal concluded that while there might have been a prima facie discrepancy justifying the reopening, the issue became academic as there was no unaccounted income to be brought to tax under Section 68.

2. Justification of Addition under Section 68 for Unexplained Capital Increase:

The assessee was aggrieved by the addition of ?33,33,088/- and ?27,81,761/- under Section 68 for unexplained capital increase. The Tribunal examined the facts and found that the assessee had advanced amounts for land purchases in earlier years, which were returned and credited to the capital account on 01-04-2008. The discrepancy arose from the incorrect uploading of the opening balance in the return. The Tribunal noted that the Assessing Officer (AO) had initially accepted the assessee's contentions during the original assessment. However, the re-assessment was initiated based on an audit objection regarding the sudden increase in capital. The AO alleged that the repayment of advances was not genuine, but the Tribunal found that the advances were indeed returned and confirmed by the parties involved. The Tribunal criticized the AO's wild allegations and the CIT(A)'s erroneous findings. It concluded that the assessee had the capacity to advance the amounts and received them back legitimately, and the addition under Section 68 was unjustified. Consequently, the Tribunal allowed the assessee's appeal, expunging the addition made by the AO.

Conclusion:

The Tribunal allowed both appeals, concluding that the re-assessment proceedings were not justified due to the absence of fresh tangible material and that the addition under Section 68 was unwarranted as the assessee had adequately explained the source of the capital increase. The Tribunal emphasized the importance of accurate fact-finding and criticized the erroneous and unfounded allegations made by the AO and CIT(A).