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Facts
The assessee reported a net income from cattle feed business. The Assessing Officer (AO) completed the assessment by adding a significant amount to the income, attributing it to an increase in proprietor's capital, arising from a reporting error where fixed assets were included in the proprietor's capital.
Held
The Tribunal held that the Ld. CIT(A) erred in not appreciating the principle of taxing real income and misinterpreted the Goetze (India) Limited decision. It was held that if there was a reporting error and no remedy before the AO, the appellate authority has jurisdiction to entertain the additional claim.
Key Issues
Whether the CIT(A) erred in sustaining the AO's order despite a admitted reporting error by the assessee without allowing an opportunity to rectify it or entertaining the claim before appellate authorities.
Sections Cited
143(3), 144B
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, “A” BENCH, DELHI
Before: SHRI ANUBHAV SHARMA & SHRI MANISH AGARWAL
This appeal is preferred by the assessee against the order dated 26.06.2025 of the ld. National Faceless Appeal Centre (NFAC) Delhi in DIN & Order No: ITBA/NFAC/S/250/2025-26/1077853674(1) arising out of the order dated 10.05.2021 passed u/s 143(3) r.w.s 144B of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) by the National e- Assessment Center for AY: 2018-19.
Heard and perused the records. The assessee is an individual drawing income from cattle feed business. The return was filed showing net income of Rs.6,45,510/-. The assessment was completed on income of Rs.3,20,35,491/- by adding Rs.3,13,89,981/- to the income of the applicant. Assessing Officer examined the issue of increase in proprietors capital from what declared in ITR filed for AY: 2017-18 i.e. Rs.1,14,12,003/- and declaration made in ITR for present AY: 2018-19 of Rs.4,21,40,652/-. The assessee has asserted that there is no increase in proprietors capital per se and difference came in existence due to reporting error since in ITR filed for the present AY appellant included fixed assets of Rs.3,13,89,981/- as part of proprietors capital. inclusion of item of assets side of the balance sheet mistakenly added on liability side is not acceptable in the assessment proceedings as there is no provision to consider claim otherwise by way of a revised return of income filed within due time.
Now before the Ld. CIT(A) all these facts were asserted that assessee could not succeed and ld. CIT(A) has sustained the impugned order of AO on following reasons:
“7.1 Appellant is primarily submitting that while filing return of income for AY: 2018- 19, appellant has adopted a consolidated statement and hence has included the cost of fixed assets to the proprietor's capital. Appellant has placed details and documents related to fixed assets that are in name of appellant and forms part of the consolidated balance sheet. Appellant also admits that cost of fixed assets have been erroneously included in the share capital.
There is no dispute in the fact that there has been a reporting error on part of the appellant while filing return of income for AY 2018-19. Appellant was however statutorily entitled to rectify the error by way of revising the ROl within time limit as specified in the Act. Appellant did not avail the benefit of revision provided to taxpayers. In view the same, judgment in case of Goetze (India) Limited vs. CIT(2006) 284, ITR 323 (SC) is squarely applicable in appellant's case. Appellant however contends the applicability of judgment, but, in view of the appeal, the moot point of the judgment is not the allowability of deduction but allowability of change in particular of ROI when the time of revising the ROl has elapsed. On that front, appellant has failed to revise the particulars in the return of income.
Prabha Devi (AY: 2018-19) 7.2. The submission of the appellant that there was no increase in fixed asset during the FY 2017-18 is also not true. As verified from the consolidated balance sheet of AY 2017-18 and AY 2018-19, there is an increase of an asset 'Vinayak Associates' of Rs.3,49,725/- in the fixed assets schedule as against claim by the appellant that no addition in fixed assets other than variables like mutual funds/bank balance/advances etc.
In view of the discussion above, I am inclined to confirm the assessment order dated 10.05.2021. In the result, appeal stands dismissed.”
We are of the considered view that Ld. CIT(A) has fallen an error in not appreciating the fundamental principle of taxing real income only and misinterpreted the decision of Hon’ble Supreme Court in Goetze (India)
Limited Vs. CIT (supra). Once, the Ld. CIT(A) concluded that there was reporting error only then, if, there was absence of a remedy before AO then Ld. CIT(A) certainly had jurisdiction to entertain additional claim and reliance of this can be placed on the decision of Hon’ble Delhi High Court in order dated 28.11.2011, passed in titled CIT vs. Aspentech India Pvt. Ltd. as relied in decision dated 07.04.2021 in ITA 35/2019 case titled International Tractors Ltd. Versus DCIT, where Hon’ble High Court has held that if a claim is otherwise sustainable in law, then the appellate authorities are empowered to entertain the same. addition to the capital account, we sustain the ground no. 4 in favour of the assessee. However, as the facts require verification the issue on merits are restored to the files of the AO to give an opportunity of hearing to the assessee and decide the issue afresh on merit.
The appeal of the assessee is allowed for statistical purposes.
Order pronounced in the open court on 05.12.2025