D.C.I.T.,CIRCLE-36, KOLKATA vs. SMT. SUMAN AGARWAL, KOLKATA

IN THE INCOME TAX APPELLATE TRIBUNAL “A” BENCH KOLKATA Before Shri Sanjay Garg, Judicial Member and Shri Manish Borad, Accountant Member Assessment year: 2016-17 DCIT, Circle-36, Kolkata........….…..…...............……........……...…..….. Appellant vs. Smt. Suman Agarwal...……….…………………..............................…… Respondent Room No.9, 5th Floor, 20B, Abdul Hamid Sarani, Kolkata-1. [PAN: AGIPA7061M] Appearances by: Shri Ravi Tulsiyan, FCA, appeared on behalf of the appellant. Shri Biswajit Das, Addl. CIT-DR, appeared on behalf of the Respondent. Date of concluding the hearing : February 17, 2022 Date of pronouncing the order : March 30, 2022

ORDER

Per Sanjay Garg, Judicial Member:

1. On the facts and circumstances of the case, the Ld. CIT(A) erred in allowing relief to the assessee by deleting the unexplained cash credit of amounting to Rs.9,80,05,649/- by increasing the capital. Since, the assessee had unable to explain the complete and true picture of financial position in the Income Tax return and after issued of notice u/s 143(2) on 06.09.2017 assessee filed her return for the A.Y 2017-18 disclosing proprietor capital of Rs.12,98,33,489/- which shows that the claim of assessee is genuine.”

Assessment year: 2016-17 Smt. Suman Agarwal the source of the difference in capital of Rs.9,80,05,649/- in these two years, i.e. A.Y 2015-16 and AY 2016-17.

In response to this, the assessee submitted that the Proprietor's Capital of the firm 'M/s Selfcare- The Natural Way' as on 31-03-2016 was Rs.1,74,62,669/- and not Rs.11,00,78,276/- as wrongly reported in the ITR. The same was evident from the audited accounts of ‘M/s Selfcare – The Natural Way’. The Proprietor's Capital as on 31- 03-2016 was Rs.1,74,62,669/-. However, in the ITR filed for the year, the employee of the assessee, who prepared the return of income for the subject assessment year, inadvertently consolidated the assets and liabilities of the personal file of the assessee with the assets and liabilities of the proprietorship concern, ‘M/s Selfcare - The Natural Way’ and after such consolidation had arrived at the capital of Rs.11,00,78,276/- of the proprietorship firm which was factually incorrect.

Sr. No. Remand report Reply to Remand Report 1 The AO rightly gave opportunity to During the course of assessment, the assessee the assessee to reconcile; but she requested the learned AO to afford an 2

Assessment year: 2016-17 Smt. Suman Agarwal could not reconcile her capital of opportunity to the assessee to file a revised and proprietorship concern. She also corrected ITR showing the correct Capital A/c. failed to explain the source of her However, neither the request of the assessee to assets/investments in personal file the revised return was acceded to nor the balance sheet. submissions made by the assessee explaining the difference in the Capital A/C were appreciated by the learned AO. A copy of the submissions made before the AO is enclosed at page 9-16. The learned AO has not even bothered to understand and examine the reconciliation of Capital A/c submitted by the assessee. Further with regard to the allegation of the AO that the assessee failed to explain the source of assets in the personal balance sheet, please find enclosed the Capital A/c of the personal file of the assessee for the year at page 1. The opening balance of Capital A/c was Rs.8,50,61,312/- and closing balance of Capital A/c was Rs.9,25,13,566/-. The increase in Capital A/c was attributed to Income from Business/Profession, Interest Income, Dividend Income and Capital Gains. The assessee has duly reported these incomes in the return of income filed for the year. A Copy of the computation of income for the current year is enclosed at page 2. As such, the source of capital is explained. 2 As per mandate of ITR-4, the In the submissions filed before your goodself, assessee showing income exceeding the assessee had herself submitted that the Rs.50 lacs must disclose the personal employee who had prepared the return of assets and liabilities in Schedule AL income should have reported the personal assets and liabilities of the individual file of the assessee under 'Schedule AL but had wrongly clubbed the same with the assets and liabilities of her proprietorship firm in the 'Schedule BS’ which resulted in increase of the Proprietor's Capital to Rs.11,00,78,276/- instead of the correct balance of Rs.1,74,62,669/ which is clearly evident from the audited accounts of the proprietorship firm. As such, this allegation of the learned AO had already been replied to in the submissions filed before your goodself. 3 Disclosing in ITR only some assets In this regard, it is again reiterated that the by increasing Capital of employee of the assessee company has proprietorship firm without inadvertently clubbed the personal assets with considering the liability is violation the assets of the proprietorship firm. The of double entry system. assessee had already submitted the individual accounts and the audited accounts of the firm. 3

Assessment year: 2016-17 Smt. Suman Agarwal

On a perusal of the same, it is evident that both assets and liabilities of proprietorship firm were considered in preparation of the audited accounts of the firm. As such, this is an absurd allegation that the assessee has not considered the liabilities. 4 The assessee filed the return for AY In this regard, it is submitted that notice u/s 2016-17 on 14-10-2016 and notice 143(2) of the Act was issued on 06-09-2017. A u/s 142(1) was served on 06-09- copy of the notice is enclosed at page 17-18. 2017. The return for AY 2017-18 Notice u/s 142(1) was issued on 19-07-2018 and was filed on 28-10-2017 where she 30-08-2018 and replies were on 09-08-2018, 14- also disclosed capital to the tune of 09-2018 and 25-09-2018. Copies enclosed at Rs.12,98,33,489/- in spite of the fact page 3-14. Hence, at the time the replies were that she was informed through notice made to notice issued u/s 142(1) of the Act, the u/s 142(1) ahead. Therefore her mala return for AY 2017-18 was already uploaded on fide intention is substantiated. the e-filing website by the same employee who filed the return for AY 2016-17. Further, with regard to the allegation of the learned AO that the assessee had mala fide intention please note that the assessee had filed the correct ITR for AY 2018-19 wherein the assets/liabilities of the personal file of the assessee were not consolidated with the assets/liabilities of her proprietorship firm and only the capital of the firm was reported in "Schedule BS of the ITR. A copy of the Balance Sheet of the firm and the relevant extract of ITR of AY 2018-19 had been enclosed at page 12-24 of the paper book filed before your goodself. Hence, it is an unfounded assumption on the part of the AO that the assessee has mala fide intention. Neither at the assessment stage not at this appellate stage, the learned AO is willing to understand that the return for AY 2016-17 and AY 2017-18 were inadvertently wrongly filed wherein some of the assets and liabilities of the personal file of the assessee were consolidated with the assets and liabilities of the proprietorship concern, M/s Selfcare - The Natural Way’.

“7. In view of the above discussion, I now proceed to examine the given facts of the case. It is note that in the return of income for the relevant AY 2016-17 the appellant had clubbed and reported her personal individual balance sheet along with the financials of the proprietorship concern, M/s Self Care - The Natural Way, and reported the 4 Assessment year: 2016-17 Smt. Suman Agarwal aggregate capital of Rs.11,00,78,276/- in the Schedule -BS of the Income-tax return in ITR-4 as opposed to the capital of the proprietorship concern on its stand-alone basis being Rs.1,74,62,669/-. The reconciliation provided by the appellant qua the ITR-4 for the earlier AY 2015-16 wherein only the balance sheet and profit & loss account of the proprietorship business was reported with the clubbed balance sheet and profit & loss account of the appellant reported in the relevant year is found to have fully reconciled as well. It is also not a case that the income/revenue generated from the personal assets & liabilities have not been disclosed in the return of income filed for the relevant AY 2016- 17 or the earlier years or that the personal assets & liabilities reported in her individual balance sheet is unexplained/undisclosed. It is a simple case wherein the appellant maintains two profit 8& loss account and balance sheets for her individual self and her proprietorship Business. Under the new e-filing facility, particularly ITR-4, the appellant is only required to report the details of balance sheet and profit & loss account of the proprietorship business. In the relevant year however the appellant clubbed both of her balance sheets and reported the aggregate amount. It is therefore not a case of unexplained cash credit as has been made by the Ld. AO. The averments made by the Ld. AO in the impugned order appear to be superficial without having any cogent basis. For the reasons as aforesaid, the impugned addition made u/s 68 is held to be unsustainable.

Being aggrieved of the above order of the ld. CIT(A), the Revenue has come in appeal before us.

6. We have heard the rival contentions and gone through the records. We find that the assessee not only before the Assessing Officer but also before the CIT(A) duly explained that the increase in proprietor's Capital was reported due to inadvertent mistake on the part of the employee as he inadvertently consolidated the assets and liabilities of the personal file of the assessee with the assets and liabilities of the proprietorship concern, ‘M/s Selfcare - The Natural Way’. The audited accounts of the assessee were duly verified by the Assessing Officer during the assessment proceedings. So far as the objection of the Assessing Officer that the assessee repeated his mistake in the return for assessment year 2017-18 is concerned, the assessee duly replied that by the time, the aforesaid mistake came to the notice of the assessee, the return for assessment year 2017- 18 was already filed. It was also explained that the assessee has filed the correct Income 5 Assessment year: 2016-17 Smt. Suman Agarwal Tax Return for assessment year 2018-19, wherein, the assets/liabilities of the personal file of the assessee were not consolidated with the assets/liabilities of her proprietorship firm and true picture of the account has been presented and the mistake has been rectified. The ld. CIT(A) considering the accounts of the assessee as well as the circumstances leading to the aforesaid mistake has deleted the addition observing that it was not a case of unexplained credits u/s 68 of the Act. We do not find any infirmity in the order of the ld. CIT(A). There is no merit in the appeal of the Revenue and the same is accordingly dismissed.