ANIL VIJAYKUMAR KOTECHA,JALGAON vs. ASSISTAN COMMISSIONER OF INCOME TAX CENTRAL CIRCLE 1, NASHIK, NASHIK

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ITSSA 40/PUN/2022Status: DisposedITAT Pune10 April 20235 pages
AI SummaryPartly Allowed

What did the Tribunal hold?

The Tribunal held that while the income offered by the assessee for assessment years 2006-07 to 2009-10 was low, the cash flow statement showed a gradual increase in capital from Rs.10,50,833/- in FY 2005-06 to Rs.20,40,560/- as on 31-03-2010. The Tribunal noted that the CIT(A) had already allowed Rs.5,00,000/- as genuine capital. Considering the income of Rs.6,46,880/- returned for the immediately preceding year (A.Y. 2010-11) and allowing for reasonable withdrawals, the Tribunal accepted a further sum of Rs.5,00,000/- as genuine capital. This made the total accepted genuine opening capital Rs.10,00,000/-, leaving an unexplained opening capital of Rs.10,40,560/-. The impugned order was modified to this extent. The ratio decidendi is that previous year's income and reasonable withdrawals must be considered when assessing the genuineness of opening capital, even if earlier years' income was low, and that a partial acceptance of genuine capital is permissible.

What were the facts?

The assessee, Anil Vijaykumar Kotecha, is in appeal before the Income Tax Appellate Tribunal (ITAT) Pune Bench against an order dated 31-03-2022 passed by the CIT(A)-12, Pune, for the assessment year 2011-12. A search and seizure action was conducted on the Kotecha group on 09-08-2011, which included the assessee's residential premises. Consequently, a notice under section 153A of the Income Tax Act, 1961 (the Act) was issued. The assessment was finalized under section 144 read with section 153A, wherein the Assessing Officer (AO) made an addition of Rs.20,40,560/- towards the assessee's opening capital. The AO inferred that the assessee's income from assessment years 2006-07 to 2009-10 was too low to justify this opening capital. The CIT(A) allowed partial relief of Rs.5,00,000/-, sustaining the addition at Rs.15,40,560/-.

What were the issues?

1. Whether the Tribunal had to decide on the genuineness of the opening capital of Rs.20,40,560/- claimed by the assessee for the assessment year 2011-12, which was added by the AO as income from other sources, and sustained at Rs.15,40,560/- by the CIT(A). Assessee's Contention: The assessee argued that the AO and CIT(A) did not consider the income for the immediately preceding year, 2010-11, which returned an income of Rs.6,46,880/-, and that a reasonable amount of withdrawals should be considered. Revenue's Contention: The revenue, through the AO and CIT(A), contended that the assessee's income from assessment years 2006-07 to 2009-10 was abysmally low, suggesting no income was left to carry forward for the opening capital. The cash flow statement and the swelling of capital did not inspire confidence in the savings.

Which sections of the Income-tax Act were involved?

Section 153A,Section 144

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, PUNE BENCH, ‘A’ PUNE

Before: SHRI R.S. SYAL & SHRI S.S. VISWANETHRA RAVI

For Appellant: Shri Kishor B. Phadke
For Respondent: Shri Keyur Patel

आदेश / ORDER

PER R.S. SYAL, VP :

This appeal by the assessee is directed against the order

passed by the CIT(A)-12, Pune on 31-03-2022 in relation to the

assessment year 2011-12.

2.

The only issue pressed by the ld. AR is the confirmation of

addition of Rs.15,40,560/- out of the addition made by the

Assessing Officer (AO) towards opening capital at Rs.20,40,560/-

3.

Briefly stated, the facts of the case are that a search and

seizure action was taken on Kotecha group of cases of Jalgaon on

2 IT(SS)A No.40/PUN/2022 Anil Vijaykumar Kotecha

09-08-2011. As a part of this search action, the residential

premises of the assessee was also searched. Based on that, notice

u/s.153A of the Act was issued and the assessment for the year

under consideration was finalized u/s.144 r.w.s.153A by making an addition, inter alia, of Rs.20,40,560/- towards opening capital

shown by the assessee, which was assessed by the AO under the

head ‘Income from other sources’. In reaching this conclusion

about taxability of the opening capital, the AO noticed that the

assessee had credited salary of Rs.4,20,000/- and certain other

small amounts towards the interest and commission. He took

note of the assessee’s gross total income from assessment years

2006-07 to 2009-10 totaling to Rs.6,72,198/- (Rs.1,08,300/- for

the A.Y. 2006-07; Rs.1,33,904/- for the A.Y. 2007-08;

Rs.1,19,000/- for the A.Y. 2008-09; Rs.3,10,994/- for the A.Y.

2009-10). Since the level of income was abysmally low during

such years, the AO inferred that no income was left for carry

forward so as to form opening balance of capital for the year

under consideration. Addition for such an amount was made. The

ld. CIT(A) called for a remand report from the AO. On the basis

of such remand report and other connecting material, the ld.

3 IT(SS)A No.40/PUN/2022 Anil Vijaykumar Kotecha

CIT(A) allowed relief of Rs.5.00 lakh and sustained the addition

at Rs.15,40,560/-, against which the assessee has come up in

appeal before the Tribunal.

4.

We have heard the rival submissions and gone through the

relevant material on record. It can be seen from the income

offered by the assessee for the A.Y. 2006-07 onwards, as recorded

in the assessment order, that level of income shown is too low.

Cash Flow statement has also been provided at page 24 of the

paper book for the A.Yrs. 2006-07 to 2010-11. The opening

capital for the F.Y. 2005-06 is shown at Rs.10,50,833/- which has

gradually swelled to Rs.14,91,787/- as on 01-04-2009 and

Rs.20,40,560/- as on 31-03-2010, which is opening capital for the

year under consideration. Level of profits declared by the

assessee and the corresponding withdrawals and payments

towards LIC during such years do not inspire much confidence of

savings so as to justify the level of opening capital claimed by the

assessee to that extent. However, it is pertinent to note that the

AO as well as the ld. CIT(A) considered the assessee’s profits for

the assessment years 2006-07 to 2009-10 and on that basis the ld.

CIT(A) allowed relief of Rs.5.00 lakh by treating such amount as

4 IT(SS)A No.40/PUN/2022 Anil Vijaykumar Kotecha

genuine capital. The assessee’s income for the immediately

preceding year 2010-11 returned at Rs.6,46,880/- has not been

taken into consideration. Considering a reasonable amount of

withdrawals, we accept the genuineness of the availability of

capital from such profit as forming part of the opening capital by

a further sum of Rs.5.00 lakh, making total opening capital

accepted as genuine at Rs.10.00 lakh with the unexplained

opening capital at Rs.10,40,560/-. The impugned order is

modified to this extent.

5.

In the result, the appeal is partly allowed. Order pronounced in the Open Court on 10th April, 2023.

Sd/- Sd/- (S.S. VISWANETHRA RAVI) (R.S.SYAL) JUDICIAL MEMBER VICE PRESIDENT पुणे Pune; िदनांक Dated : 10th April, 2023 सतीश

IT(SS)A No.40/PUN/2022 Anil Vijaykumar Kotecha

आदेश की �ितिलिप अ�ेिषत/Copy of the Order is forwarded to: अपीलाथ� / The Appellant; 1. ��थ� / The Respondent 2. 3. The Pr.CIT (Central), Nagpur 4. DR, ITAT, ‘A’ Bench, Pune गाड� फाईल / Guard file. 5.

आदेशानुसार/ BY ORDER,

// True Copy // Senior Private Secretary आयकर अपीलीय अिधकरण ,पुणे / ITAT, Pune

Date 1. Draft dictated on 03-04-2023 Sr.PS 2. Draft placed before author 10-04-2023 Sr.PS 3. Draft proposed & placed before JM the second member 4. Draft discussed/approved by JM Second Member. 5. Approved Draft comes to the Sr.PS Sr.PS/PS 6. Kept for pronouncement on Sr.PS 7. Date of uploading order Sr.PS 8. File sent to the Bench Clerk Sr.PS 9. Date on which file goes to the Head Clerk 10. Date on which file goes to the A.R. 11. Date of dispatch of Order. *

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