ITAT rules on undisclosed income, emphasizing tax neutrality and directing AO to verify disclosures.

The ITAT allowed the appeal, ruling that adding undisclosed income for the assessment year 2012-13, already admitted and taxed for 2013-14, was unwarranted. The ITAT emphasized tax neutrality, directing the AO to verify the disclosure for 2013-14 and delete the addition for 2012-13 if the income was already offered for taxation in the subsequent year.

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Issues:
1. Whether the addition of undisclosed income of Rs. 50 lakhs made by the Assessing Officer for the assessment year 2012-13 is justified based on the statement recorded during the search proceedings.

Analysis:
1. The appeal was filed against the order of the CIT(A)-11, Thane, pertaining to the assessment year 2012-13. The assessee, a partnership firm in real estate development, was part of a group subjected to a search action under section 132 of the Income Tax Act. During the search, incriminating material revealed undisclosed cash payments, leading to the admission of Rs. 50 lakhs of undisclosed income for AY 2012-13 by a partner of the firm. Subsequently, the Assessing Officer issued a notice under section 153A, and the assessee filed its return admitting the undisclosed income for AY 2013-14, not for 2012-13. The AO, despite the admission during search, made an addition of Rs. 50 lakhs to the total income for 2012-13, as the undisclosed income was not admitted in the return for that year.

2. The CIT(A) upheld the AO's decision, stating that the incriminating material and the partner's statement clearly indicated that the undisclosed income related to AY 2012-13. The assessee argued that the admission was due to a mistaken understanding of facts and that the income was actually disclosed for AY 2013-14. The CIT(A) rejected this argument, leading to the appeal before the ITAT.

3. During the ITAT hearing, the assessee contended that the addition for 2012-13 was unjustified as the undisclosed income was admitted and taxed for 2013-14. The ITAT noted that the AO solely relied on the statement from the search proceedings and did not dispute the disclosure for 2013-14. Given the consistent tax treatment for both years, the ITAT held that making a further addition for the same undisclosed income in a different year was unwarranted. The ITAT directed the AO to verify the disclosure for 2013-14 and delete the addition for 2012-13 if the income was already offered for taxation in the subsequent year.

4. The ITAT allowed the appeal, emphasizing that once income is offered for taxation in one year, no additional addition should be made for the same income in another year. The decision was based on the tax neutrality of the situation, where the income was subjected to the same tax rate for both assessment years. The case was remanded to the AO for verification and necessary action based on the disclosure for AY 2013-14.

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