PUTTAPPA T.K ,BANGALORE vs. INCOME TAX OFFICER WARD-2(3)(1), BANGALORE

The assessee has filed this appeal challenging the order dated 19.12.2018 passed by Ld. CIT(A)-2, Bengaluru and it relates to the assessment year 2012-13. All the grounds urged by the assessee are aggrieved by the decision of Ld. CIT(A) in confirming the various additions made by the A.O.

The facts relating to the case are stated in brief. The assessee is an advocate. He filed its return of income for the year under consideration on 5.1.2013 declaring total income of Rs.2,15,720/-.

The A.O noticed that the assessee has filed the return of income for the assessment year 2011-12 & 2012-13 for the first time on 5.1.2013. The A.O. noticed that the assessee has shown huge amount as opening capital as on 1.4.2010. For the sake of Page 3 of 9 convenience, we extract below the capital account pertaining to AY 2011-12 and 2012-13:- Capital account F.Y. 2010-11* F.Y. 2011-12 (A.Y. 2011-12) (A.Y. 2012-13) Opening balance 45,45,151 48,44,051 (+) Net profit 2,24,900 2,82,059 (+) Agricultural 2,75,000 2,75,000 income 50,45,051 54,01,110 (-) Drawings 2,01,000 2,03,600 48,44,051 51,97,510 (*) As per para 4 of assessment order in page 4) Hence the AO asked the assessee to prove sources of the capital balance introduced by him. The assessee submitted that he had accumulated balance of his past professional and agricultural income and furnished details. It was submitted that the agricultural operations were looked after by his father in law and brother in law, who handed over money to him every year. He also claimed to have received gifts from his father and during his wedding. Accordingly, the assessee gave break up details of opening balance of Rs.45,45,151/- as on 1.4.2010. The AO examined those details and did not accept the explanations given by the assessee. Accordingly, the AO added a sum of Rs.47,95,000/- out of the sources explained by the assessee. The details of addition made by the AO in this regard are tabulated below:- Amounts received from father of the Rs.10,70,000 assessee Amounts received from Shri T.S. Srinivasa Rs.18,00,000 Gowda father-in-law of the assessee Amounts received from Shri T.K. Satisha, Rs.16,25,000 brother-in-law of the assessee Wedding gifts received Rs.3,00,000 Rs.47,95,000

The Ld. CIT(A) dismissed the appeal of the assessee. We notice from the order passed by the Ld. CIT(A) that the first appellate authority has adjudicated the grounds relating to the Page 4 of 9 addition of Rs.22 lakhs only. He has not adjudicated the ground relating to the addition of Rs.47,95,000/-.

We heard the parties and perused the record. We shall first take up the issue of addition of Rs.47,95,000/- referred above. The A.O. has made this addition on the ground that the assessee was not able to explain the sources for the opening capital balance of Rs.45,45,151/- introduced by the assessee as on 1.4.2010. The present appeal pertains to the assessment year 2012-13 relevant to the financial year 1.4.2011 to 31.3.2012. We earlier noticed that the assessee has filed return of income for the immediately preceding year i.e for assessment year 2011-12, which pertains to the financial year 1.4.2010 to 31.3.2011. The closing balance as on 31.3.2011 disclosed in the return of income filed for assessment year 2011-12 has been carried forward to the current year as opening balance of capital. Hence, so far as the opening balance of capital of the current year i.e. opening balance as on 1.4.2011, the same would get support from the return of income filed by the assessee for assessment year 2011-12, i.e., the opening balance of capital as on 1.4.2011 stands proved by the return of income filed for the immediately preceding year.

We noticed earlier that the A.O. has asked for sources of opening capital as on 1.4.2010, which pertains to the assessment year 2011-12. There is no dispute that the assessee has filed return of income for assessment year 2011-12. Hence, the explanations called for the opening capital balance as on 1.4.2010 would pertain to assessment year 2011-12 and not to the year under consideration. In that case, if the A.O. was not satisfied with the explanations given with regard to sources of opening capital introduced on 1.4.2010, the cause of action, if any, shall arise only

We shall now take up the issue relating to the addition of Rs.22 lakhs. The assessee had explained before the A.O. that he had given hand loans to certain persons in the earlier years and they have returned back the money aggregating to Rs.22 lakhs during the year under consideration. In the absence of any evidence, A.O. made the addition and the same was confirmed by Ld. CIT(A).

We notice that the explanations given by the assessee with regard to the sources of cash deposits made into the bank accounts have been tabulated by the A.O. at page 2 of the assessment order. The AO has accepted certain explanations and made the addition aggregating to Rs.22 lakhs, the break-up details of which were given in an earlier paragraph. We notice that the assessee has offered following explanations with regard to the deposit of Rs.6,90,000/- made by him on 21.2.2012:- “Rs.6,90,000/-. The assessee had received Rs.5,43,200/- from the parties to whom advances were given as on 31.3.2011. He has also received Rs.9,00,000/- from parties who were grouped under other advances Rs.19,50,000/- as on 31.3.2011 and deposited Rs.6,90,000/- to bank.”

With regard to the sources for making deposit of Rs.6,90,000/-, the assessee has stated that he has received a sum of Rs.9.00 lakhs from parties who were grouped under “Other Advances” of Rs.19,50,000/- as on 31.3.2011. This amount of Rs.9.00 lakhs is included in the above given break-up details of Rs.14,43,200/-. Thus the opening balance of “Other Advances” as on 1.4.2011 was Rs.19,50,000/- and after receipt of Rs.9.00 lakhs during the year under consideration, the closing balance of “Other Advances” as on 31.3.2012 stood at Rs.10,50,000/-. The assessee has filed Balance sheet as on 31.3.2012 along with the return of income filed for AY 2012-13. A perusal of the same would show that “Other Advances” balance stand at Rs.10,50,000/- in the Assets side of Balance Sheet. Since the return of income relating to AY 2011-12 has been filed by the assessee showing “Other advances” of Rs.19,50,000/-, the explanation with regard to collection of Rs.9.00 lakhs out of the Page 7 of 9 above said opening balance would stand proved, because the closing balance of “Other Advances” as on 31.3.2012 has been shown at Rs.10.50 lakhs, i.e., after reduction of collection amount of Rs.9.00 lakhs. Hence there is no reason to doubt the explanation of the assessee that the deposit of Rs.6,90,000/- made on 21.2.2012 was out of the above said collection amount of Rs.9.00 lakhs.

We have earlier noticed that the addition could not have been made more than the deposit amount of Rs.6.90 lakhs, while the AO has made the addition to the tune of Rs.14,43,200/-. With regard to the deposit of Rs.6.90 lakhs, we have noticed that the assessee has explained the sources. Accordingly, we are of the view that the AO was not justified in making the addition of Rs.14,43,200/-. Accordingly, we direct the AO to delete this disallowance.

With regard to the remaining amount of Rs.7,56,800/- (out of the addition of Rs.22.00 lakhs), we notice that the assessee could not furnish any evidence to substantiate his claim that the same represents collection of advances given by him earlier. Before us, the Ld A.R submitted details of agricultural lands held by the assessee and contended that the advances were given by the assessee in the earlier years out of his savings from professional and agricultural income. However, we notice that the assessing officer has already given credit for the same while examining the sources for the deposit of aggregate amount of Rs.89,60,022/-. Hence the claim for credit for past savings cannot be given again. Accordingly, we confirm the addition of Rs.7,56,800/- made by the AO and confirmed by Ld CIT(A).

In the result, the appeal of the assessee is partly allowed.