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Facts
The assessee's assessment for AY 2015-16 was reopened due to a discrepancy in the capital balance. A difference of Rs. 1,77,118/- was noticed between the closing capital of FY 2009-10 and opening capital of FY 2010-11, which the AO treated as an unexplained cash credit under Section 68.
Held
The Tribunal agreed with the assessee that the difference was due to an omitted credit of stamp duty refund and was related to FY 2010-11. Therefore, it could not be assessed in AY 2014-15, leading to the deletion of the addition.
Key Issues
Whether the addition made by the AO under Section 68 of the Act for unexplained cash credit is valid when the difference pertains to a prior financial year and has been explained by the assessee.
Sections Cited
68, 143(3), 148
AI-generated summary — verify with the full judgment below
The assessee has filed this appeal challenging the order dated 08-07-2024 passed by the Ld CIT(A), NFAC, Delhi and it relates to the Assessment Year (AY.) 2015-16. The only issue urged in this appeal relates to the addition of Rs.1,77,118/- made by the AO u/s 68 of the Income Tax Act, 1961 („the Act‟). 2. The facts relating to the above said addition are stated in brief. The assessee derives income Salary and also income from jewellery valuation.
The original assessment in the hands of the assessee was completed u/s 143(3) of the Act on 09-12-2017. Subsequently it was noticed that the assessee had declared Capital balance as on 31-03-2015 as Rs.10,20,19,630/-, while no balance sheet was filed for earlier years. Hence the AO reopened the assessment of AY 2015-16 by issuing notice u/s 148 of the Act.
In the reopened the assessment, the assessee furnished the details of construction of capital account of the assessee on the basis of income declared by him in the returns of income of earlier years. The AO noticed that there was a discrepancy in the said computation given by the assessee, i.e., the Capital balance as on 31.3.2010 was shown at Rs.9,23,77,531/-, while the Opening capital balance as on 1.4.2010 was shown at Rs.9,25,54,649/-. Under the Accounting principles, the closing capital balance of the immediately preceding year shall become opening capital balance of succeeding year. In this case, there was difference of Rs.1,77,118/- between the two balances and the AO assessed the same as unexplained cash credit u/s 68 of the Act in AY 2014-15. The Ld CIT(A) also confirmed the same.
The Ld A.R submitted that the above said difference actually represents the refund of stamp duty amount of Rs.1,78,900/- credited in bank account on 30-11-2009 and it was omitted to be credited to the Capital account for the year ending 31.3.2010. Hence the said mistake was corrected while recording capital balance as on 1.4.2010. The Ld A.R further submitted that the refund of stamp duty is not liable to tax, as the assessee has not claimed the payment of stamp duty as expenditure. Accordingly, he submitted the difference in capital account has been duly explained by the assessee and hence no addition is called for.
In the alternative, the Ld A.R submitted that the difference is related to the opening capital balance as on 1.4.2010 and hence the addition, if any, can be made only in AY 2011-12 and not in AY 2014-15.
We heard Ld D.R and perused the record. We agree with the alternative contentions of the assessee. The difference in capital balance is related to the financial year 2010-11. Hence the said difference is assessable to tax only in AY 2011-12, if the explanation given by the assessee is not acceptable. However, the AO has assessed the same in AY 2014-15, which is not permitted under the Act, as the said income does not pertain to AY 2014-15. On this reasoning alone, the impugned addition of Rs.1,77,118/- is liable to be deleted.
In view of the above, we set aside the order passed by the Ld CIT(A) and direct the AO to delete the above said addition. 8. In the result, the appeal filed by the assessee is allowed.