Eagle Fashions Private Limited Vs Deputy Director of Income Tax (ITAT Surat)
The Income Tax Appellate Tribunal (ITAT), Surat Bench, in the case of Eagle Fashions Private Limited Vs Deputy Director of Income Tax, has condoned a significant delay in the assessee’s filing of an appeal before the Commissioner of Income Tax (Appeals) [CIT(A)] and restored the matter for a decision on its merits. The Tribunal ruled that the delay was justified as the assessee was diligently, and in good faith, pursuing an alternative remedy of rectification for what was claimed to be a simple clerical error in its tax return that resulted in a substantial and incorrect increase in capital gains.
Factual Background and Origin of the Dispute
The dispute originated from the processing of the assessee’s Income Tax Return (ITR) for the Assessment Year (AY) 2011-12. The assessee filed its return on September 25, 2011. The core issue arose from a discrepancy in the Schedule ‘DOA’ (Depreciation on Assets) of the ITR form, specifically concerning the written down value (WDV) of land & building and furniture.
The assessee reported the opening WDV for land & building at Rs.3,25,295/−, whereas the preceding year’s closing balance was Rs.33,59,795/−. Similarly, the opening WDV for furniture was shown as ‘NIL’ against the preceding year’s closing balance of Rs.79,528/−. This resulted in a total unexplained difference of Rs.30,34,500/− (Correction based on text: The total difference noted in the text is Rs.21,14,028/−, which is the figure the AO used). The Assessing Officer (AO), while processing the return under Section 143(1) of the Income Tax Act, 1961, interpreted this difference of Rs.21,14,028/− as an undisclosed increase in capital assets. Consequently, the AO enhanced the reported capital gain of Rs.2,45,918/− by this amount, computing the total capital gain at Rs.23,59,946/−. This enhancement led to a tax demand of Rs.7,20,280/−.
