ITO Vs Asok Kumar Jain (ITAT Kolkata)
Substance Over Form: ITAT Protects Assessee from Erroneous Double Taxation Due to Audit Report Error
Kolkata ITAT dealt with an appeal filed by the Revenue against the order of CIT(A), Thiruvananthapuram, relating to AY 2021-22. CPC had processed the return u/s 143(1) & made an addition of ₹2.63 crore by treating capital receipts reported in Point 16 of the Tax Audit Report as taxable “other income”. Assessee explained that this was an inadvertent reporting error, since the receipts mainly consisted of share of profit from partnership firms, gifts from relatives & income-tax refund, all of which were exempt. A revised audit report was also filed correcting the mistake.
CIT(A), after verifying the capital account movements, concluded that only a small sum of ₹7.24 lakh was liable to tax & deleted the balance addition.
On further appeal by Department, Tribunal observed that the error was purely clerical & that CIT(A) had correctly appreciated the facts. As the partnership profit was already taxed at the firm level, its taxation again in the hands of the partner would amount to double taxation. Upholding the principle of substance over form, the ITAT dismissed the Revenue’s appeal & affirmed the relief granted to Assessee.
