ITAT Curbs Rs 1.47 Cr Addition to Rs 10 Lakh, Rejects 115BBE Applicability to Avoid Double Taxation

ITAT Delhi held that, even though the assessee failed to fully prove transactions with a suspicious party, taxing the entire Rs 1.47 crore would cause double taxation. It restricted the addition to Rs 10 lakh and ruled Section 115BBE inapplicable, taxing income under normal provisions.

The key issue involved an addition of Rs 1.47 crore made on the assessee’s income on the grounds of unexplained credit from a trading firm, Kangna Agro Product, under Section 68 of the Income Tax Act. The said company was found to be fake by the tax authorities during a survey.

When the aggrieved assessee filed an appeal before the Commissioner of Income Tax (Appeals) [CIT(A)], the impugned addition of Rs 1.47 crore was sustained. Thereafter, the assessee filed the present appeal before the ITAT Delhi.

When the tribunal analysed the entire case, it noted that the assessee had submitted all the relevant documents, like VAT returns, a copy of Form C, a stock register, Bank Statement, etc., proving that the entire credits in question belonged to M/s Kangna Agro Products only and were the cash sales made to the said company.

After reviewing all the submitted evidence, the tribunal observed that the assessee had made enough and reasonable efforts to prove the impugned transaction. However, the explanation cannot be fully considered valid, since during the survey conducted by the tax authority, the company in question was found to be suspicious.

Simultaneously, the Tribunal noted that taxing the entire amount would result in double taxation, as the sales were already recorded in the books. Further, the VAT return of the said entity cannot be dismissed at hand without solid reasons. As a result, the tribunal decided to reduce the impugned addition amount to Rs 10 lakh. It noted that it was relevant to address the possible discrepancies in the present matter.

Moreover, on the issue concerning taxation under Section 115BBE, the tribunal held that the higher tax rate would not apply, as the provision was effective only for transactions after April 1, 2017. Accordingly, the tax authorities have been directed to tax the addition under normal provisions of tax and not under the provisions of 115BBE. With these directions, the appeal was partly allowed.