2021 (8) TMI 336 - AT - Income Tax

Addition u/s 68 - mistake of introduction of authorized capital - assessed the income as different from returned income - Assessee argued that it typographical eror at the time of filing up the Form of return of income and the same ought to have been considered - HELD THAT - We notice that the mistake made by the tax consultant at the time of filing return of income that he had cut and pasted the same capital and investment details of some other assessee and this mistake was appreciated and taken note by the respective Assessing Officers in the case of Ms. Leena Joseph Lopes, and Shri Jani Navani. Even in this case also, the Assessing Officer and the learned CIT(A) should have verified the financial records of the assessee of earlier assessment years and after due verification, they could have identified the mistake, but they failed to reconcile the actual capital and investment of the assessee. After considering the above facts on record, we are of the view that tax practitioner had made the above inadvertent mistake while filing the return of income which is not the real capital and investment of the assessee. Therefore, we direct the Assessing Officer to delete the addition made under section 68 of the Act. Accordingly, grounds raised by the assessee are allowed.

Summary

Issues:
1. Addition made by Assessing Officer and confirmed by CIT(A) under section 68 of the Act.
2. Justification of discrepancies in the return of income by the assessee.

Issue 1: Addition made under section 68 of the Act
The appeal was filed by the assessee challenging the order passed by the Commissioner of Income Tax (Appeals) for the assessment year 2013-14. The Assessing Officer observed discrepancies in the balance sheet, particularly regarding the capital introduced during the year. Despite the assessee filing a revised return to rectify the errors, the Assessing Officer treated the amount as unexplained income under section 68 of the Act and added it to the total income. The CIT(A) upheld this addition, considering the explanations provided by the assessee as insufficient to justify the discrepancies.

Issue 2: Justification of discrepancies in the return of income
The assessee claimed that the discrepancies in the return of income were due to mistakes made by the tax practitioner while filing the return. An affidavit was submitted stating that the errors were unintentional and that the assessee, being a person of limited means, could not have introduced such high capital. The CIT(A) was not convinced by these submissions, considering them an attempt to mislead the Revenue. However, the Tribunal found that similar mistakes were made by the tax practitioner in other cases as well, where the Assessing Officer accepted the real income after cross-verification. The Tribunal noted that the errors were inadvertent and directed the Assessing Officer to delete the addition made under section 68 of the Act, as the discrepancies were not reflective of the actual capital and investments of the assessee.

In conclusion, the Tribunal allowed the appeal filed by the assessee, directing the deletion of the addition made under section 68 of the Act. The judgment highlighted the importance of verifying financial records and considering inadvertent mistakes made during the filing of returns, ultimately leading to a favorable decision for the assessee.