Account of inadvertent mistake or ignorance included in income any amount is exempt from Income Tax Act: ITAT [Read Order]

The Mumbai bench of the Income Tax Appellate Tribunal ( ITAT ) observed that Account of inadvertent mistake or ignorance included in income any amount is exempt from Income Tax Act

The assessing officer noted that the assessee, a private limited company, filed its income tax return for the assessment year 2015-16, declaring a loss of Rs.(-) 68,405/-. The case was selected for scrutiny under the Computer Assisted Scrutiny Selection ( CASS ) process due to discrepancies in reported capital gains compared to the figures in the Annual Information Return (AIR) statement. The assessing officer requested details of properties sold during the relevant period, to which the assessee provided information on seventeen immovable properties sold, involving agreements between developer M/s Coredelia Realty Pvt Ltd (CRPL) and purchaser M/s Religare Finvest Ltd ( RFL ).

The assessing officer also sought information from CRPL, which clarified that while an initial allotment agreement was made with the assessee for twenty-four flats, only seventeen were sold to RFL during the year, with the assessee as one of the confirming parties, while the remaining seven flats remained unsold.

The counsel for the assessee Ritu Kamal Kishor argued that an incorrect admission made by the assessee’s representative during assessment does not automatically render the income taxable if it is not legally taxable. Emphasizing a specific clause in the allotment agreement dated 04.10.2010, which allowed the developer to cancel the agreement if the full payment was not made,

The counsel for the assessee highlighted that since the assessee failed to make full payment, the developer rightfully claimed ownership and subsequently sold the flats to another buyer. Therefore, the developer, being the seller, declared the sale consideration as its income for the relevant assessment year.

The two member bench of the tribunal comprising Amarjith Singh ( Accountant member ) and Aby T. Varkey ( Judicial member ) observed that the assessee that if taxation was not permitted under the law, tax cannot be imposed using the Doctrine of Estoppel. Article 265 of the Constitution of India states that no tax shall be levied or collected except by authority of law. Our position is further supported by the judgment of the Honorable Supreme Court in the case of CIT Vs. Shelly Products, where the Court stated that if an assessee unintentionally included in their income any amount exempt from income tax or not considered income under the law, they can bring this to the attention of the tax authorities. If satisfied, the authorities may provide relief and refund any excess taxes paid.

In the result, the appeal of the Revenue was dismissed.

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