Loading judgment…
Facts
The assessee's proprietor's capital significantly increased from Rs. 54,57,103/- in AY 2011-12 to Rs. 2,31,66,442/- in AY 2014-15, without filing returns for AYs 2012-13 and 2013-14. The Assessing Officer added the unexplained increase of Rs. 1,77,09,339/- to the assessee's income.
Held
The Tribunal held that the additional evidences furnished by the assessee were unreliable and an afterthought to justify the increase in capital. The assessee failed to substantiate the huge increase in capital with credible evidence, and thus, the CIT(A)'s order confirming the addition was upheld.
Key Issues
Whether the substantial increase in proprietor's capital was sufficiently substantiated by the assessee, or if the addition made by the AO and confirmed by CIT(A) was justified.
Sections Cited
68, 143(2), 142(1), 234A, 234B
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, PUNE BENCH “A”, PUNE
Before: SHRI R. K. PANDA & Ms. ASTHA CHANDRA
Assessment year : 2014-15 Nitin Naryan Keskar ITO, Ward-12(1), Pune 999-C/B-1, Sunderban Society, Vs. Navi Peth, Pune – 411030 PAN: ABXPK0862G (Appellant) (Respondent) Assessee by : None Department by : Shri Vidya Ratna Kishore Date of hearing : 18-12-2025 Date of pronouncement : 29-12-2025 O R D E R PER R.K. PANDA, VP:
This appeal filed by the assessee is directed against the order dated 20.02.2025 of the Ld. CIT(A) / NFAC, Delhi relating to assessment year 2014-15.
Although a number of grounds have been raised by the assessee, however, these all relate to the order of the Ld. CIT(A) / NFAC confirming the addition of Rs.1,70,64,449/- made by the Assessing Officer u/s 68 of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) on account of increase in capital.
None appeared on behalf of the assessee at the time of hearing. A perusal of the order sheet entries shows that this appeal was fixed for hearing first time on 14.08.2025. However, due to non-appearance of anybody, the case was adjourned to 28.10.2025. Again due to non-appearance on the part of the assessee on 28.10.2025, the case was adjourned to 18.12.2025. However, on 18.12.2025 also when the name of the assessee was called, none appeared on behalf of the assessee nor any application seeking adjournment of the case has been filed. Under these circumstances, we deem it proper to decide this appeal on the basis of material available on record and after hearing the Ld. DR.
This is the second round of litigation before the Tribunal. Facts of the case, in brief, are that the assessee is an individual and filed his return of income on 17.07.2015 declaring total income of Rs.6,44,890/-. The case was selected for scrutiny and notice u/s 143(2) of the Act was issued and served on the assessee. Thereafter, notice u/s 142(1) along with a detailed questionnaire was also issued and served on the assessee in response to which the assessee attended before the Assessing Officer from time to time and filed certain details.
The Assessing Officer during the course of assessment proceedings noted that the assessee is a registered contractor with Military Engineering Services and carried out electrical repairs and maintenance work. He noted that an amount of Rs.2,31,66,442/- has been shown as ‘proprietor’s capital’. On further verification, the Assessing Officer noted that the assessee has not filed any return for the last 2 assessment years i.e. assessment years 2012-13 and 2013-14. The latest return available on record was for assessment year 2011-12 and as per the said return an amount of Rs.54,57,103/- was shown as ‘proprietor’s capital’. Thus, the assessee’s capital has been increased by an amount of Rs.1,77,09,339/- from assessment year 2011-12 i.e. the year for which the last return has been filed. He further noticed that for assessment year 2014-15 the income disclosed is Rs.6,44,890/- only as per the computation of income. He, therefore, asked the assessee to explain the source for increase in capital as worked out along with necessary supporting documentary evidence. The assessee in response to the same submitted that the capital increase is due to increase in sundry creditors and sundry debtors which is already reflected in ITR 2014-15. Since the Assessing Officer was not satisfied with the explanation given by the assessee, he again gave an opportunity to the assessee to substantiate the increase in capital. Rejecting the various submissions made by the assessee the Assessing Officer made addition of Rs.1,70,64,449/-.
The assessee filed an appeal before the Ld. CIT(A) who dismissed the same. On further appeal the Tribunal vide order dated 11.03.2020 restored the issue to the file of the Ld. CIT(A) for de novo adjudication with a direction to admit the additional evidences produced by the assessee and adjudicate the issue in accordance with law.
Before the Ld. CIT(A) / NFAC the assessee filed certain additional evidences which were forwarded by him to the Assessing Officer. After considering the remand report of the Assessing Officer and the rejoinder of the assessee to such remand report, the Ld. CIT(A) / NFAC upheld the action of the Assessing Officer by observing as under:
“3.4 I have gone through the facts of the case, maternal available on record, remand report during the 1st stage appellate proceedings, CIT(A) order dated 26.09.2018, Hon'ble ITAT order dated 11.03.2020 and remand report which has been furnished by the AO during the 2nd stage of appellate proceedings alongwith the submissions and impugned assessment order. It is seen that there was substantial increase in "Proprietors capital”. The proprietors capital in the concerned assessment year was Rs.2,31,66,442/- whereas for the AY 11-12, the "Proprietor's Capital” had been shown at Rs.54,57,103/-. The appellant's capital had increased by Rs.1,77,09,339/- as compared to the "proprietors capital” shown in the last filed income tax return i.e. AY 2011-12. The stand of the appellant during the concerned assessment year was that the capital had increased due to increase in sundry creditor and sundry debtors which was already reflected in ITR 14-15. However, not content with the appellant's submission and reply, the AO held that the only amount that could be considered was the income offered for AY 2014-15 which was at Rs.6,44,890/- and it was held that the increase in capital to the extent of Rs.1,70,64,499/- remained unexplained. Now, the said addition was contested by the appellant before the CIT(Appeals), who confirmed the said addition. However, it is noteworthy, that the appellant changed the track before the CIT(Appeals) and furnished certain balance sheets as capital account. The appellant argued that the substantial increase in the capital account was due to the accumulated profit of the earlier years. The appellant also produced certain evidences, in this regard, however, the said evidences were found to be lacking in merit and accordingly, the CIT(Appeals) refused to admit the same. The addition was therefore, confirmed by the CIT(A).
3.5 Now, I have gone through the instructions of the Hon'ble ITAT and accordingly, the comments of the AO were sought by way of remand report for the incumbent appellate proceedings. It is seen that the appellant had furnished certain additional evidences which were in the nature of original and revised balance sheets right from AYs 2005-06 to 2013-14 and capital account statement for AYs 2005-06 to AY 2013-14. These evidences were not furnished during the original assessment proceedings but were produced during the 1st stage of appellate proceedings, however the then CIT(A) rejected the admission of the same. However, as per the instructions of the Hon'ble ITAT, the additional evidences are hereby admitted for adjudication.
3.6 Now, I have also gone through the additional evidences furnished by the appellant. In my considered opinion, the said additional evidences are an attempt by the appellant to justify the substantial increase in "proprietor's capital". These ledgers which have been produced by the appellant are unreliable in as much as prima facie these receipts appears to be enhanced and moreover, no action can be taken as per law as the same has already been barred by limitation of time. Moreover, all these receipts are unvouched and unsigned. These documents cannot be relied upon. It is quite surprising that the appellant failed to produce these evidences during the original assessment proceedings and the stand taken by the appellant was polar opposite to the stand taken by the appellant now. The claim of the appellant that the then CA was the one who without consulting the appellant took that stand appears to be a cover-up story as it is beyond belief that any professional CA would act on its own and without any consultation with the appellant. The power of attorney requires the signature of the appellant too and without his approval, the appellant could not have represented the case. Moreover, the appellant was also duty bound to kept himself apprise of the then ongoing proceedings. In my considered opinion, the sudden shift in the stand of the appellant was nothing but an afterthought to justify the substantial increase in the "proprietor's capital. Moreover, both the AO and CIT(A) have clearly pointed out that the receipts furnished by the appellant are in fact enhanced receipts on which no action could be taken due to time barring issue. Therefore, after taking due diligence of the facts available on record, perusal of the additional evidences, I am in consonance with the findings of the CIT(A) that the "stand taken is a clear manipulation of accounts by showing cash receipts to explain the introduction which is actually not the case."
Thus, the evidences furnished by the appellant are not formidable enough to justify the substantial increase in "proprietor's capital” and therefore, I am in agreement with the findings of the then CIT(A). Accordingly, the grounds no.1 and 2 are dismissed and decided in favour of the Revenue.
4. Ground no. 3 is directed against the charging of interest u/s 234A and 234B. Charging of interest is mandatory and consequential in nature. The AO is directed to charge the same as per the IT Act, 1961. Accordingly, the ground raised
by the appellant is dismissed.
5. In the result, appeal is dismissed in totality.”
Aggrieved with such order of the Ld. CIT(A) / NFAC the assessee is in appeal before the Tribunal.
We have heard the Ld. DR and perused the record. We find the Assessing Officer in the instant case made addition to the extent of Rs.1,77,09,339/- being increase in proprietor’s capital on the ground that the assessee was unable to substantiate such increase which remained unexplained. A perusal of the assessment record shows that the last balance sheet was filed for assessment year 2011-12 and the assessee has not filed any return of income for assessment years 2012-13 and 2013-14. Therefore, when the assessee filed the balance sheet for assessment year 2014-15 with a capital of Rs.2,31,66,442/- it was incumbent upon the assessee to explain the source of the huge increase in the capital. Since the assessee in the instant case failed to substantiate with credible evidence and the assessee has not filed any return of income for assessment years 2012-13 and 2013-14, therefore, in absence of any material before us to justify such huge increase in capital, we do not find any infirmity in the order of the Ld. CIT(A) / NFAC confirming the addition made by the Assessing Officer. The grounds raised by the assessee are accordingly dismissed.
In the result, the appeal filed by the assessee is dismissed.
Order pronounced in the open Court on 29th December, 2025.
Sd/- Sd/- (ASTHA CHANDRA) (R. K. PANDA) JUDICIAL MEMBER VICE PRESIDENT पुणे Pune; दिन ांक Dated : 29th December, 2025 GCVSR आदेश की प्रतितिति अग्रेतिि/Copy of the Order is forwarded to: अपील र्थी / The Appellant; 1. 2. प्रत्यर्थी / The Respondent 3. The concerned Pr.CIT, Pune 4. DR, ITAT, ‘A’ Bench, Pune 5. ग र्ड फ ईल / Guard file. आदेशानुसार/ BY ORDER, // True Copy // Assistant Registrar आयकर अपीलीय अदिकरण ,पुणे / ITAT, Pune
S.No. Details Date Initials Designation 1 Draft dictated on 26.12.2025 Sr. PS/PS 2 Draft placed before author 26.12.2025 Sr. PS/PS Draft proposed & placed before the 3 JM/AM Second Member Draft discussed/approved by Second 4 AM/AM Member 5 Approved Draft comes to the Sr. PS/PS Sr. PS/PS 6 Kept for pronouncement on Sr. PS/PS 7 Date of uploading of Order Sr. PS/PS 8 File sent to Bench Clerk Sr. PS/PS Date on which the file goes to the Office 9 Superintendent 10 Date on which file goes to the A.R. 11 Date of Dispatch of order