ACIT Vs Ram Kapoor (ITAT Lucknow)
Summary: The Revenue appealed against the order of the ld. CIT(A), NFAC dated 25.02.2025, which had allowed the assessee’s appeal against the assessment order passed under section 143(3) of the Income Tax Act, 1961 for A.Y. 2018-19. The Assessing Officer had treated Rs. 2,82,44,223/- as investment from unexplained sources under section 69A and brought the amount to tax under section 115BBE. The addition arose primarily from a substantial increase in the proprietor’s capital reflected in the original audited financial statements.
The assessee explained that the original audit report and financial statements contained accounting errors. In particular, the auditor had treated the sauda value of derivatives as closing stock and had introduced an opening capital balance to balance the accounts, which also incorporated losses of earlier assessment years. The assessee subsequently filed a revised audit report and rectified return. The CIT(A) accepted the explanation, noting supporting evidence including the affidavit, revised audit report, financial statements and records relating to derivative transactions and sources used to meet the losses.
Before the Tribunal, the Revenue contended that the assessee had failed to substantiate the alleged mistakes in the original audited financial statements and had not adequately explained the source of the substantial capital increase and F&O losses. The Revenue also questioned the subsequent revision of the financial statements and relied on the principle that res judicata does not strictly apply to income-tax proceedings.
