The Mumbai Bench of Income Tax Appellate Tribunal (ITAT) recently made a ruling highlighting the importance of correctly citing the relevant section in tax assessments. The bench, comprising Anikesh Banerjee (Judicial Member) and Padmavathy S (Accountant Member), emphasized that simply citing the wrong section isn’t enough reason to delete an addition. They stressed the need to examine the merits of the case.
The addition in question was made because the taxpayer failed to provide sufficient details to verify the authenticity of certain transactions, thus failing to meet the burden of proof. Additionally, the taxpayer didn’t appear before the CIT(A) to address the issue on legal grounds or on its merits.
The taxpayer operates in the manufacturing of display items and filed an income return for AY 2011-12, showing a loss of Rs. 7,96,993. However, the Assessing Officer (AO) reopened the assessment upon discovering alleged bogus purchases totaling Rs. 15,51,506. The taxpayer requested treating the original return as a response to the notice under section 148.
During the reassessment proceedings, the AO found that the taxpayer had invested in immovable property worth Rs. 52,23,570 and asked for details regarding the source of funds. The taxpayer claimed the source was withdrawals from their business and loans from other parties. However, the AO deemed the loan as non-genuine due to lack of supporting documents and made additions accordingly.
The CIT (A) upheld the additions made by the AO as the taxpayer failed to appear or make submissions. On appeal to the tribunal, the taxpayer argued that the addition under section 69 for the loan transactions shouldn’t have been made since they were recorded in the books of accounts.
The tribunal, considering principles of natural justice, remitted the matter back to the CIT(A) for a fresh review. The taxpayer was instructed to provide necessary details to prove the genuineness of the loans without seeking adjournments and to cooperate fully with the appellate proceedings.
In essence, the ruling underscores the importance of both procedural correctness and substantive merit in tax assessments. It also emphasizes the taxpayer’s obligation to provide sufficient evidence to support their claims and to actively participate in the appeals process.
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