ITAT Mumbai rules in favor of assessee, deletion of incorrect tax addition & penalty. The Appellate Tribunal ITAT Mumbai ruled in favor of the assessee in a case involving the addition of Rs. 23,78,000 under section 68 of the Income Tax Act ...
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ITAT Mumbai rules in favor of assessee, deletion of incorrect tax addition & penalty.
The Appellate Tribunal ITAT Mumbai ruled in favor of the assessee in a case involving the addition of Rs. 23,78,000 under section 68 of the Income Tax Act without incriminating material. The tribunal directed the AO to delete the addition as it was made without reference to any seized material, deeming it incorrect and void ab-initio. Additionally, the penalty imposed under section 271(1)(c) for the same addition was also deemed not to survive following the deletion of the quantum addition, resulting in both appeals of the assessee being allowed.
Issues Involved: 1. Addition of Rs. 23,78,000 under section 68 of the Income Tax Act without incriminating material. 2. Penalty imposed under section 271(1)(c) for the same addition.
Issue 1: Addition of Rs. 23,78,000 under section 68 of the Income Tax Act without incriminating material: The appeal was filed by the assessee against the order passed by the ld.CIT(A) regarding the addition of Rs. 23,78,000 under section 68 of the Income Tax Act. The AO added this amount to the total income of the assessee, considering it non-genuine. The assessee received this amount as a gift in the financial year 2003-04. The FAA dismissed the appeal, stating that the genuineness of the gift was not proven. The assessee argued that the assessment was already finalized before the search, and no incriminating material was found during the search. The assessee relied on previous tribunal decisions and case laws to support their claim. The tribunal noted that the assessment can only be disturbed if incriminating material is found during the search, as per section 153A of the Act. Referring to a similar case involving the assessee's husband, the tribunal concluded that the addition made by the AO without reference to any seized material was incorrect and void ab-initio. The tribunal also cited relevant case laws to support its decision. Consequently, the tribunal directed the AO to delete the addition of Rs. 23,78,000 made under section 68 of the Act.
Issue 2: Penalty imposed under section 271(1)(c) for the same addition: The second appeal by the assessee was against the penalty of Rs. 7,84,740 imposed under section 271(1)(c) for the addition of Rs. 23,80,000. Since the tribunal had already deleted the quantum addition in the previous appeal for the assessment year 2004-05, the penalty levied under section 271(1)(c) was deemed not to survive. Therefore, the penalty imposed was also allowed in favor of the assessee. Both appeals of the assessee were ultimately allowed by the tribunal.
This judgment by the Appellate Tribunal ITAT Mumbai addressed the issues of addition under section 68 of the Income Tax Act without incriminating material and the penalty imposed under section 271(1)(c) for the same addition. The tribunal ruled in favor of the assessee, directing the AO to delete the addition of Rs. 23,78,000 and allowing the appeal against the penalty imposed.
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