No Income Tax Addition u/s 68 Based On Mistaken Identity and Third Party Confirmation: ITAT Sets Aside ₹20 L Addition Against Finance Co. [Read Order]

The Income Tax Appellate Tribunal (ITAT) Mumbai Bench recently held that an addition based upon a third party confirmation in a case of mistaken identity cannot be sustained and proceeded to delete an addition of ₹20 lakh made under Section 68 of the Income Tax Act, 1961.

The appellant M/s Blue Chip Financial Services Private Limited’s financials for the Assessment Year 2012-13 saw an addition of ₹20,00,055 being made by the Assessing Officer (AO). The addition was made based upon a confirmation received from the Central Bank of India in respect of a transaction entered into with a third party namely M/s Anubhav Commosale Private Limited.

The assessee claimed that the addition had taken place due to mistaken identity because of the similar names. They cited that their name is Blue Chip Financial Services Private Limited but the actual entity in the bank confirmation had a different name, namely Blue Chip Financial Consultants Private Limited.

The Appellant produced evidence in the form of their bank statement from Abhyuday Bank, where they have only one account, and claimed that no such entry existed. But the revenue department relied on the bank's initial reporting to sustain the addition.

​The order of the National Faceless Appeal Centre (NFAC) has been set aside by the Tribunal, which consisted of Amit Shukla [Judicial Member] and Girish Agrawal [Accountant Member] stating that the assessee had proved the non-existence of the transaction.

Thus, the ITAT found that the addition had taken place due to a fundamental mistake where the AO had confused the assessee with another entity that had a similar name. They held that when the assessee had produced corroborative documentary evidence to prove that the bank entry did not belong to them the burden of proof had shifted.

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