ITAT Kolkata Deletes INR 1 Crore Addition, Says Amount Refunded Cannot Be Treated as Income

While deleting an addition of ₹1 crore made by the tax authorities on advances received by the company, the Income Tax Appellate Tribunal (ITAT), Kolkata Bench, ruled in favour of Lahoti India Ltd., stating that since the money was refunded before the parties, it cannot be considered taxable income.

The taxpayer, Lahoti India Ltd, has obtained the cash advances of Rs 1,00,02,000 (1 crore) via 4 companies for the land sale. But on the same day the money was obtained, an armed robbery occurred in the office of the company, and the whole amount was stolen.

A police complaint was filed by the company, and thereafter, the authorities recovered the cash. The sale of land agreement was cancelled, and the taxpayer refunded the advances to the companies via the account payee cheques.

It was discovered in the tax survey that the director of the company mentioned that the amount was under the company’s income, leading officials to add Rs 1 crore to its taxable income. The company said that the same statement was made under pressure, and as the money was returned, the same must not be imposed as tax.

Read Also: Easy Explanation on TDS for Property Sale by NRI

The ITAT bench, Pradip Kumar Choubey (Judicial Member ) and Rajesh Kumar (Accountant Member), analysed the particulars and discovered that money was refunded to the original parties. The tribunal said that the income could merely be taxed if the taxpayer retained it, not if it was returned.

The claim of the tax department that the transaction was a fraud has been rejected by the tribunal, specifying that the police investigation validated the robbery and the refunds were appropriately recorded. As Lahoti India does not retain the money, ITAT held that it cannot be deemed as income.

In conclusion, the appeal was permitted.