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Income Tax Appellate Tribunal, BANGALORE BENCHES “ B ” BENCH: BANGALORE
Before: SHRI B.R. BASKARAN & SHRI PAVAN KUMAR GADALEShri Durgoji Jagadeesh, Shri Priyadarshi Misra, JCIT (D.R)
O R D E R
PER SHRI PAVAN KUMAR GADALE, JM :
The assessee has filed an appeal against the order of Commissioner of Income Tax (Appeals), Davangere passed u/s144 r.w.s.263 and u/s 250 of the Income Tax Act, 1961 (‘the Act’).
At the time of hearing, none appeared on behalf of the assessee nor adjournment petition was filed. Considering the material on record and the submissions of Ld.DR ,the appeal was heard..
The assessee has raised the following grounds of appeal :
3. The Brief facts of the case are that, the assessee is an individual and is engaged in the business of retail liquor trade. Earlier the assessment was completed under Section 143(3) of the Act with the total income of Rs.4, 84,630/-vide order dt.27.03.2013. Subsequently, The Commissioner of Income tax Davangere has Revision order under Section 263 of the Act dt.11.3.2014, directing the Assessing Officer to redo the assessment with the observations that (i) withdrawals are made by the assessee for renovation of residential building, but the assessee instead of debiting to the capital account,has debited to purchase account of KSBCL,which resulted in excess of assets over liabilities and same has to be added to the returned income (ii) Further balance of Rs.4,720/- in the bank Account of assessee in State Bank of Mysore, Kumarapatnam Branch was not taken to the Balance Sheet.Therefore, the Assessing Officer has issued notice under section 142(1) of the Act, but there was no response from the assessee in spite of providing several opportunities.Hence the Assessing Officer has made an addition of Rs.5,36,598/- and also an amount of Rs.4,720/- is not disclosed in the balance sheet and assessed the total income of Rs.10,25,948/- and passed the Assessment order under Section 144 r.w.s. 263 of the Act dt.27.3.2015.
Aggrieved by the order, the assessee has filed an appeal with the CIT (Appeals), whereas the CIT (Appeals) has considered the grounds of appeal, statement of facts and submissions of the assessee and find that Hon’ble commissioner of Income tax davangere in the revision proceedings observed that there is a difference of Rs5,36,598/-between payments made to KSBCL in the assessee books of account compared to KSBCL Ledger. The assessee has made withdrawals for renovation of residential building, but instead of debiting to the capital account, the accountant of KSBCL, if such drawings are reduced from capital account, there would be excess of assets over liabilities of equal amount and has to be added to the total income.The CIT(A) found that the assessee is applying new thought to the disputed issue and concurred with the action of the Assessing Officer and dismissed the assessee's appeal. Aggrieved by the CIT (Appeals) order, the assessee has filed an appeal before the Tribunal.
At the time of hearing, none appeared on behalf of the assessee, hence considered the material on record. The assessee has made withdrawals for renovation of residential building, but instead of debiting to the capital account, the accountant has debited to purchase account of KSBCL. Hence there is a difference of Rs5,36,598/-between payments made to KSBCL in the assessee books of account compared to KSBCL Ledger. Further, the contentions of the assessee as per the grounds of appeal are that, due to mistake of the accountant erroneously debited to KSBCL account instead of Drawings account, there will be no bearing on the income of the assessee. The ld.DR supported the orders of CIT (Appeals).
We heard the LdDR and perused the material on record. Prima facie, the sole dispute being addition of Rs.5,36,598/-, where the assessee has utilized the funds for renovation of residential building, but the Accountant of the assessee has debited to KSBCL account instead of drawings account and it is mistake of Books of Accounts and there is no dispute on the genuines of withdrawals. We find in the CIT(A) order at page 4 para 7(a) line 12,the observations that if drawings are reduced from capital account there will be excess of assets over liabilities of equal amount and same has to be added to the total income, But the accounting is a double entry system, whereas the capital account and KSBCL account are disclosed in liabilities side of Balance sheet, and by passing rectifying entries debiting to capital and crediting to KSBCL account, there shall not be any excess of assets over liabilities. Therefore, the mistake committed by the accountant in passing entries can be modified by passing the rectification entries and there is no income element arises due to mistake for making addition. Accordingly, we set aside the order of the CIT (Appeals) and direct the Assessing Officer to delete the addition and allow the grounds of appeal of the assessee.
In the result, appeal of the assessee is allowed.