The Mumbai bench of the Income Tax Appellate Tribunal observed that Mistakes from typographical error not leading to tax evasion is not unexplained cash credit.
The assesse, having filed his income return on 25.07.2016, declared a total income of Rs. 17,02, 174. The return underwent scrutiny, and during the process, the Assessing Officer noted an inconsistency. The declared exempted share of profit from partnership firms was Rs. 97,17, 502, but a verification under Section 133(6) of the Income Tax Act 1961 revealed the actual exempted amount as Rs. 13,11,128. The assesse attributed this discrepancy to a typographical error by their tax consultant’s clerical staff.
The counsel for the assesse Ridhisha Jain explanation, citing a typographical error by the tax consultant’s staff, was considered unconvincing. While such errors could be human, systematic discrepancies in substantially increasing exempt income posed challenges.
The Commissioner of Income Tax (Appeals) dismissed the appellant’s appeal on grounds of typographical errors, expressing skepticism over the systematic increase in exempt income. The substantial revision of profit share figures, particularly in non-audited firms, after section 133(6) notices, raised concerns. The unnoticed large discrepancy in reported figures and the potential for claiming higher exempt income without tax implications were highlighted. Consequently, the Assessing Officer’s observation that the unexplained excess exemption of Rs. 84,06,374/- under section 10(2A) remains valid, led to the dismissal of the appeal on grounds 1 & 2.
After reviewing arguments and records, the two member bench of the tribunal comprising Rahul Choudhari (Judicial member) and Om Prakash Kant (Account member) concluded that the key question was whether a discrepancy in declaring a higher value for the share of profit from partnership firms, compared to the actual share, qualified as an unexplained cash credit under Section 68 of the Income Tax Act 1961.
The Assessing Officer had asserted taxability, fearing potential misuse. The assesse had attributed it to a typographical error, promptly rectifying it. Had agreed that human error was plausible, as there was no tax liability due to exempted profit. The Assessing Officer’s concerns lacked evidence of wrongdoing or tax evasion. Consequently, the claim of an intentional mistake was rejected, and the decisions of the lower authorities were overturned, accepting the grounds raised by the assesse.
In the result, appeal of the assesse was allowed
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