The Chennai Bench of Income Tax Appellate Tribunal(ITAT) upheld the ruling of the Commissioner of Income Tax (Appeals) [CIT(A)] regarding accounting manipulation and tax evasion due to insufficient evidence.
The revenue-appellant filed an appeal for Assessment Year (AY) 2015-16 against the order of the CIT(A), dated March 5, 2024, concerning an assessment made by the Assessing Officer (AO) under Section 143(3) read with Section 153A of the Act, finalized on February 18, 2021.
V.V. Titanium Pigments Pvt.Ltd ,the respondent-assessee, founded in 1994 and specializing in the production of titanium dioxide, was subjected to a tax assessment following a search action on October 25, 2018. Notices were issued for various assessment years, prompting the company to file income returns.
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The AO made two key additions during the assessment of the respondent-assessee’s income. First, the AO alleged manipulation in accounts based on an email from October 24, 2018, which suggested adjustments in stock and asset values, resulting in an addition of ₹1,930.36 lakhs for AY 2018-19.
Second, a cash discrepancy was noted, where ₹1.49 lakhs in physical cash was found, while the books recorded ₹0.93 lakhs, leading to a treatment of ₹0.56 lakhs as undisclosed income for AY 2019-20.
The CIT(A) reviewed these additions and determined that they were unsupported by sufficient evidence. The CIT(A) highlighted that the email lacked incriminating evidence of tax evasion and merely reflected the views of the tax handler. The assessee’s books had been independently audited, revealing no adverse findings regarding asset valuation or depreciation. Consequently, the CIT(A) deleted the additions, prompting the revenue to file an appeal.
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The tribunal upheld the CIT(A)’s ruling, asserting that the AO had not demonstrated any tax evasion through a thorough examination of the books. It reaffirmed that the email only suggested accounting adjustments and that no evidence linked the alleged manipulations to tax evasion.
The two member bench comprising Mahavir Singh (Vice President) and Manoj Kumar Aggarwal(Accountant Member) found no reason to overturn the CIT(A)’s decision, dismissing the grounds raised by the revenue.
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