2022 (9) TMI 1103 - HC - Income Tax

Addition u/s 69 - addition of peak balance - relevant assessment year - ITAT deleted the addition holding that there is no loss to revenue as assessee has shown the said income for Assessment Year 2007-08 and paid taxes on such undisclosed income - HELD THAT - This Court is of the view that even assuming that the statement of the assessee is paramount and sacrosanct, then also there is no denial by the revenue authorities that the assessee has honoured his statement and offered Rs.2,23,68,000/- in his return of income for the Assesment Year 2007 08 and has paid taxes thereon. The peak credit had been calculated by the tax authorities and at the behest of the tax authorities, the assessee had offered the amount calculated by them in his income for the Assessment Year 2007 08 and paid taxes thereon, which return of income has been accepted by the Revenue. Since the tax rate in both the Assessment Years i.e. 2006-07 and 2007-08 was same, this Court is of the view that if the present appeals are allowed and an amount is added to the assessee s income in the assessment year 2006-07, it would amount to double taxation, inasmuch as, the said amount is admittedly a part of the amount offered to taxation in the assessment year 2007-08. The learned predecessor Division Bench in PCIT(Central) Vs. Krishan Kumar Modi 2021 (2) TMI 1182 - DELHI HIGH COURT has held, In our view of the aforesaid, the learned ITAT has rightly held that there could not be any dispute on the legal proposition that the very same amount cannot be taxed twice in the two assessment years . The amount offered for by assessee for taxation is also not in dispute. The dispute has arisen only with respect to the relevant assessement year. However, the ITAT has held that the said amount was declared at the behest of the revenue and the calcualtion of the peak credit was also at the behest of the tax authorities. There is no challenge to the said finding of the ITAT in the grounds of appeal. No substantial question of law arises

Summary

Issues:
Challenging ITAT's deletion of addition under Section 69 of the Income Tax Act, 1961 for peak balance in bank account; Dispute over bifurcating undisclosed income in two assessment years; Application of legal principles regarding taxation of income in relevant year; Discharge of assessee under Sections 276C and 277 of the Act by Additional Chief Metropolitan Magistrate; Interpretation of Supreme Court judgment in Commissioner of Income Tax vs. British Paints India Ltd.

Analysis:

1. Challenging ITAT's Deletion of Addition:
The appellant contested the ITAT's decision to delete the addition of peak balance under Section 69 of the Income Tax Act for the financial years 2005-06 and 2006-07. The appellant argued that the ITAT erred in holding that there was no revenue loss since the income was disclosed for the assessment year 2007-08. The appellant also claimed that bifurcating the undisclosed amount between two assessment years was unnecessary due to identical tax rates. The appellant relied on the Supreme Court's judgment in Commissioner of Income Tax vs. British Paints India Ltd. to support their position.

2. Dispute Over Bifurcation of Undisclosed Income:
The court examined the issue of bifurcating the undisclosed income between two assessment years. It was noted that the tax rates for both years were the same, and taxing the same amount in both years would lead to double taxation. The court referenced a previous decision where it was established that the same amount cannot be taxed twice in different assessment years.

3. Application of Legal Principles on Taxation:
The court analyzed the legal principles governing the taxation of income in the relevant year. It emphasized that the case involved a one-time declaration of income by the assessee, and the amount offered for taxation was undisputed. The court differentiated the facts of the case from the Supreme Court judgment in British Paints India Ltd., highlighting that the issue at hand was not about shifting profits between years but rather about the declaration of income in a specific assessment year.

4. Discharge of Assessee under Sections 276C and 277:
The respondent argued that the addition was based on the admission in a statement recorded under Section 132(4) of the Act and sheets received from the French government. However, the Additional Chief Metropolitan Magistrate discharged the assessee under Sections 276C and 277, citing lack of verification and authentication of the evidence presented by the prosecution.

5. Interpretation of Supreme Court Judgment:
The court clarified that the Supreme Court judgment in British Paints India Ltd. was not directly applicable to the present case. It highlighted that the judgment addressed issues related to accounting methods affecting profit assessment, which differed from the current matter involving a one-time income declaration by the assessee.

6. Conclusion:
Ultimately, the court found no substantial question of law in the case and dismissed the appeals. The court upheld the ITAT's decision, emphasizing that taxing the same amount in two assessment years would lead to double taxation, especially when the income had been disclosed and taxes paid for the relevant year.

This detailed analysis covers the various issues raised in the legal judgment, providing a comprehensive understanding of the court's reasoning and decision-making process.