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Before: Shri A.D. Jain & Shri Dr. Mitha Lal Meena
In the Income-Tax Appellate Tribunal, Agra Bench, Agra
Before : Shri A.D. Jain, Judicial Member And Shri Dr. Mitha Lal Meena, Accountant Member
ITA No. 71/Agr/2017 Assessment Year: 2005-06
ACIT, Circle-2(1), vs. Shri Shyam Garg, Gwalior Flat No.C-2, Plot No.-C-05, Bhamashah Marg, Near Nanak Pluau Gurudwae, Delhi
PAN : ACLPG 8795 M (Appellant) (Respondent)
Appellant by Shri Inderjeet Singh, CIT DR Respondent by Shri Manuj Sharma, Advocate
Date of Hearing 04.06.2018 Date of Pronouncement 30/07/2018
ORDER Per Dr. Mitha Lal Meena, A.M.: This appeal by the Revenue is directed against the order of the ld. CIT(A), Gwalior, 29.11.2016, where the Revenue has raised the following grounds of appeal: “1. Whether on the facts and in the circumstances of the case, the Ld. CIT(A) has erred in law and in fact in allowing a relief of Rs.1,65,51,880/- which were added on account of unexplained opening capital, during the relevant financial year, in spite of the facts on records that the assessee has failed to produce any admissible evidence during the course of assessment proceeding before the AO.
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Whether on the facts and in the circumstances of the case, the Ld. CIT(A) has erred in law and in fact in deleting the addition of Rs.4,01,310/- made by the AO, on account of unexplained unsecured loan, in spite of the facts on records that the assessee has failed to produce any admissible evidence during the course of assessment proceeding before the AO.” 2. That the Ld. CIT(A)-1, Agra has erred in law and on facts ignoring the fact that as per provisions objection 2(14) " Capital Asset" Means-property of any kind held by the assessee.” 2. Apropos Ground No.1, the department objected the action of the Ld.
CIT(A), in allowing the relief of Rs.1,65,51,880/- on account of unexplained
opening capital contending that the assessee has failed to produce any
admissible evidence during the course of assessment proceeding before the
AO.
Brief facts of the case are that a search and seizure operation was
carried on u/s 132(1) of the Act in the residential premises of the assessee on
11.03.2011. During the course of assessment proceedings, the assessee was specifically asked to establish the genuineness of the proprietor’s capital shown at Rs.1,65,51,880/- in the return of income along with documentary
evidences. The AO found that the assessee did not furnish the source of the opening capital and that the assessee’s income from director remuneration of Rs.2,40,000/- was hardly sufficient to meet his household expenditure.
Accordingly, the AO held that it was beyond imagination that there could be
opening balance of Rs.1,65,51,880/- with meager income from remuneration
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and hence the same was added to the income returned as unexplained capital.
The Ld. CIT(A) has allowed relief to the assessee by observing as under:
5.2.5. Decision: I have carefully considered the facts of the case, the finding of the Assessing Officer, and the submissions put forth on behalf of the appellant as also the remand report and rejoinders thereon on the issue. The Assessing Officer has categorically admitted that there is no relation between the income earned during the year and the opening capital balance, particularly when the closing balance for preceding previous year has not been disturbed. There is, therefore, merit in the contention of the A/R that the opening capital of Rs.16551880/- is the capital existing on 31.03.2004, which has been brought forward as on 01.04.2004 in A.Y. 2005-06 and that the opening capital so brought forward cannot be taxed u/s 68 to 69 B of the Income Tax Act during the relevant assessment year. In the case of Ramesh Chandra Ravindra Kumar Rai Vs. ITO (2010) 14 ITJ 34 (Tribunal-Jabalpur), the Hon*ble Tribunal held that no addition on account of cash credit not taken during relevant P.Y. but representing opening balance can be made in relevant P.Y. In this view of the matter, the addition of Rs. l,65,51,880/: made by the Assessing Officer on account of unexplained opening balance as the income of the assessment year under consideration is unjustified and unwarranted. The same is deleted.”
The Ld. Counsel for the assessee has reiterated the submissions filed before the Ld. CIT(A). He has filed a synopsis (APB, Pgs.1 and 2) relevant part of which is extracted as hereunder:
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“That as regards the addition for Rs. 1,65,51,880/- which represents the capital appearing in the balance sheet as on 01.04.2004 which are nothing but the balances are being brought forward from the previous year i.e. from 31.03.2004 to the current year (year under consideration) cannot be brought to tax in the year under consideration and could only be considered and taxed in the year for which they are pertain i.e. for the Asstt. year 2004-05 being the opening balances as on 01.04.2004 are pertain to Asstt. year 2004- 05 and are brought forward from Asstt. Year 2004-05 cannot be added treating the same as unexplained income in the Asstt. Year 2005-06 i.e. Asstt. Year under consideration. That as regards the addition for Rs. 401301/- made by the AO, treating the creditors as unexplained, it was submitted that these creditors are old loans were taken in the Asstt. year 2004-05 which are brought forwarded to this year and same can be considered in the Asstt. year 2004-05 in which the same were taken and not in the Asstt. Year 2005-06, That leaned CIT Appeals after taking into considerations the assessee's submissions and remand report of the AO, As discussed by learned CIT Appeals at page 22 para 5.2 to page 25 para 5.2.5 of their order in respect of addition for Rs. 1,65,51,880/- and at page 26 para 5.3.1 to page 28 para 5.3.4 in respect of addition for Rs. 4,01,310/- by which he has deleted the addition. No addition is liable to be made in the Asstt. Year 2005-06 (under considerations)because the capital as on 01.04.2004 and creditors at Rs. 4,01,310/- are related with the Asstt. Year 2004-05 and are brought forwarded to the year under appeal i.e. 2005-06, The CIT Appeals has rightly deleted the additions made by the AO, The appellant is relied upon the order of CIT appeals.” 6. The Ld. Counsel for the assessee submitted before the CIT(A) that the AO has admitted personal statement of affairs of the assessee as on 31.03.2005 as filed by the assessee, during the course of assessment proceeding for AY 2005-06. The Ld. Counsel further submitted that it was open to the AO to have asked clarification of the statement of affairs of the
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assessee as on 31.03.2004, if he was not satisfied with the opening balance in the capital account declared in the statement of affairs as on 31.03.2005, but no such query was raised by the AO in respect of assessment proceeding for the AY 2005-06 for the plain and simple reason that this has already been examined by him in the assessment proceedings of the AY 2004-05, which had been undertaken simultaneously. It is further contended by the ld. Counsel for the assessee that he has been an old assessee and has been regularly filing his returns of income for over two decades and that in fact for some years the assessments were even framed u/s 143(3) of the Act to the beginning of search check period. Thus, it cannot be presumed that there did not exist any capital balance as on 01.04.2003 or 01.04.2004 which had in fact got accumulated from year to year in the hands of the assessee.
In compliance to direction of CIT(A), the AO submitted remand report dated 12.08.2016 which is reproduced hereunder:
“On going through the submission of the assessee as well as facts available on record, it is submitted that assessment relevant for AY 2004-05 has also been completed under s. 143(3) r.w.s. 153A of the IT Act, 1961 in the case of the assessee on the same day i.e. as on 05.12.2011 and returned income of Rs.2,63,809/- has been accepted by the A.O.” 1.3 During the course of assessment proceedings relevant for AY 2004-05 the assessee vide his written dated 16.07.2011, submitted the copy of acknowledgements for
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filing return of income and computation of income etc. for AY 2004-05 to 2009-10. 1.4 The undersigned is of the opinion that there is no relevancy between the present income of the assessee and the opening capital of the assessee of the any financial year.” 8. The Ld. AR placed strong reliance on the assessment order. He contended that the Ld. CIT(A) was not justified in allowing a relief of Rs.1,65,51,880/- against unexplained opening capital, during the relevant financial year, in spite of the facts on records that the assessee has failed to produce any admissible evidence during the course of assessment proceeding before the AO. The Ld. DR further submitted that as noted by the AO in the assessment order that assessee was specifically asked to establish genuineness of proprietors opening capital and unsecured loans with the support of documentary evidence. The Ld DR also contended that the AO has correctly made addition of the same as unexplained income of the assessee.
We have heard both the parties and perused the records of the case. 10. The ld. CIT(A) after going through the findings of the AO, submissions of the assessee as also the remand report and rejoinders thereon on the issue. The AO has categorically admitted that there is no relation between the income earned during the year and the opening balance, particularly even the closing balance of the preceding financial year has not been disturbed.
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Therefore, the finding of the CIT(A) that there is no merit in the contention of AR that the opening capital of Rs.1,65,51,880/- is the capital existing on 31.03.2004, which has been brought forward as on 01.04.2004 in AY 2005-06 and that the opening capital so brought forward cannot be taxed u/s 68 and 69 of the Act, during the relevant assessment year is in conformity to the facts and the provisions of law. The CIT(A) has rightly relied upon the decision in the case of Ramesh Chand Ravindra Kumar Rai vs. ITO (2010) 14 ITJ 34 (Trib. Jabalpur) wherein it was held that no addition on account of cash credit not taken during relevant financial year represents the opening balance can be made in the relevant financial year. 11. A synopsis filed by the Ld. DR and the decision relied therein are distinguishable on peculiar facts of those cases as in the present case issue is related to opening capital whereas in those cases, the issue was related to cash credit. 12. In view of above, we hold that the CIT(A) was justified in deleting the addition of Rs. 1,65,51,880/- on account of addition made by the AO and therefore, no interference is called for in the order of the Ld. CIT(A). Accordingly, this ground of revenue’s appeal is rejected. 13. The next issue is related to addition of Rs.4,01,310/- made by the AO on account of unexplained cash credit towards unsecured loan received from
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Shyam Kumar Rahul Kumar HUF, Mr. Rahul Garg and Mrs. Soni Garg for
want of documentary evidence to establish the identity, genuineness and
creditworthiness of the persons.
The ld. CIT(A) noted that the unsecured loans from these three parties
were taken during the previous year relevant for assessment year 2004-05
and these were only opening balances in the assessment year 2005-06 which
is under consideration. This issue was also remanded to the AO for calling for
his comment where the AO has stated that as per the facts relevant on record
the said unsecured loan have been accepted by the assessee during the F.Y.
2003-04 relevant to A.Y. 2004-05 that means this addition does not pertain
assessment year under consideration. The Ld. Counsel for the assessee
reiterated the submission for unsecured loan related to A.Y. 2004-05, he has
endorsed the remand report by reiterating that the unsecured loan related to
financial year relevant financial year 2004-05 and thus, no fresh loan were
obtained by the assessee during the assessment year under consideration.
The Ld. CIT(A) has held that the assessee has furnished the complete
addresses and PAN and details of outstanding unsecured loan creditors. After
considering remand report as well as the submission put forth on behalf of the
assessee the Ld. CIT(A) has rightly arrived at the finding that these are only
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opening balances and no fresh loans on credit were being received by the
assessee.
In the light of the decision of ITAT, Jabalpur in the case of Ramesh
Chand Ravindra Kumar Rai vs. ITO (Supra), and the remand report, the
CIT(A) is justified in deleting the addition of Rs.4,01,310/- made on account of
unexplained unsecured loans. Therefore, no interference is called for in the
order of the CIT(A) on this issue. Accordingly, this ground is also rejected.
In the result, the appeal of the Revenue is dismissed.
(Order pronounced in the open court on 30/07/2018)
Sd/- Sd/- (A.D. Jain) (Dr. Mitha Lal Meena) Judicial member Accountant Member
Dated: 30 /07 /2018 Aks DOC
Copy of order forwarded to: (1) The appellant (2) The respondent (3) Commissioner (4) CIT(A) (5) Departmental Representative (6) Guard File By order Assistant Registrar Income Tax Appellate Tribunal Agra Bench, Agra
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Date 1. Draft dictated / 25.07.2018 PS 2. Draft placed before author 30.07.2018 PS 3. Draft proposed & placed before the second member JM/AM 4. Draft discussed/approved by Second Member. JM/AM 5. Approved Draft comes to the Sr.PS/PS PS/PS 6. Kept for pronouncement on PS 7. File sent to the Bench Clerk PS 8. Date on which file goes to the AR 9. Date on which file goes to the Head Clerk. 10. Date of dispatch of Order.