ITO Vs Dahyalal Gagjibhai Jiwani (ITAT Mumbai)
Section 68 Addition Deleted: ITAT Mumbai Upholds CIT(A)’s Finding that Capital Increase Was Only ₹1.95 Crore and Not Unexplained ₹10.63 Crore
The Mumbai ITAT dismissed the Revenue’s appeal and affirmed the deletion of an addition of ₹10.63 crore made under Section 68 for AY 2022-23. The Assessing Officer had compared the assessee’s total personal capital (₹27.05 crore) with his capital in the partnership firm (₹16.42 crore) and treated the difference as unexplained. The Tribunal held that this comparison was erroneous. On record, the assessee had consistently disclosed substantial opening capital in earlier years (AYs 2018-19 to 2020-21), and the omission of capital in AY 2021-22 was a clerical error. Based on returns and financials, the actual increase during the relevant year was only about ₹1.95 crore—largely from exempt share of profit and remuneration from the firm. Non-audit of personal books was not a default for an individual not liable under Section 44AB, and no defects were found in the books. Relying on continuity of capital and settled law that accumulated capital of earlier years cannot be taxed merely because it appears in a later year, the ITAT found no infirmity in the CIT(A)’s order and dismissed the Revenue’s grounds.
