Typist and CA affidavits acknowledging a typographical error are insufficient to remove an addition for unaccounted purchases.

ACIT v. Kantilal Exports Surat – [2023] (SC)[20-04-2023]

Importing rough diamonds, producing polished diamonds, and exporting polished diamonds were the three business activities of the assessee-firm. The Assessing Officer (AO) discovered a discrepancy between the assessee’s reported consumption of rough diamonds in his books of accounts and the consumption noted in the Audit Report during the assessment procedures. The AO went ahead and made amendments as unexplained spending in accordance with section 69C after taking into account the difference and pattern in consumption over the past few years.

CIT(A) removed the additions following an appeal. The affidavits of a typist and a chartered accountant asserting that the audit report’s changes were the result of a typographical error were also relied upon by the Tribunal. When the aggrieved-assessee chose to appeal to the High Court, the High Court erased the amendments after taking the provided affidavits into account.

The Indian Supreme Court was then addressed in the subject.

The Apex Court ruled that no other evidence was presented to the AO during the assessment hearings indicating the amount was a typing error, except than the assessee’s testimony. The AO concluded that the yield percentage in the year under review was significantly higher than that in previous assessment years after comparing the yield figures from various assessment years.

Additionally, it was noted that the assessee and its group were the subject of a search operation. Duplicate cash books, ledgers, and other books documenting the assessee’s unreported manufacture and trade of diamonds were discovered throughout the search process. As a result, it was discovered that the assessee was keeping accounting records aside from the usual books.

In the current instance, it should be noted that the High Court reversed the AO and Tribunal’s and Typist’s findings entirely on the basis of their respective testimony. The fact that the affidavits were submitted for the first time to the Tribunal was not properly acknowledged and taken into account by the High Court.

The Supreme Court overturned the decision issued by the High Court and upheld the amendments made by the AO because the AO and Tribunal both confirmed them based on all the evidence at their disposal.