AVDHUT VASANT GHODGAONKAR,,JALGAON vs. ACIT, CIRCLE -1,, JALGAON

The only issue raised in this appeal is against the confirmation of the addition of Rs.10,03,332/-, which was the amount of provision of income-tax written back by the assessee to his capital account.

Briefly stated, the facts of the case are that the assessee credited his capital account with a sum of Rs.10,03,332/- on account of reversal of provision for tax. On being called upon to explain the reasons for crediting the capital account, the assessee submitted that the provision created for the earlier assessment years was written back. Not satisfied, the Assessing Officer treated this sum as cash credit u/s.68 of the Act. He, therefore, made addition for this sum, which came to be sustained in the first appeal.

Having heard both the sides and perused the relevant material on record, it is seen from the assessee’s annual accounts that Provision for tax in the balance sheet as on 31-03-2014 stood at Rs.8,49,832/-. For the year under consideration, the assessee created a further provision for Rs.1,53,506/-. At the end of the year, the assessee reversed the amount of provision for taxation and credited the amount to the capital account. Apart from that, there was an amount of Advance tax/TDS appearing in the assessee’s balance sheet, which ought to have been adjusted against the amount of provision for taxation. Instead of adjusting the amount of provision with the amount of TDS/advance tax, the assessee straight away carried the amount of provision for taxation to his capital account. The ld. AR submitted that the accounts have been revised and the amount of advance tax/TDS for the earlier years has now been debited to the capital account of the assessee. Since the amount of provision has been credited to the capital account by means of debit to the provision for taxation account, there can be no question of making addition for this sum u/s.68 of the Act. In view of the foregoing discussion, I am satisfied that the authorities below were not justified in treating the credit to the capital account, arising from the reversal of provision of taxation, as cash credit u/s.68 of the Act. I, therefore, delete the addition.

In the result, the appeal is allowed.