Loading judgment…
Facts
The assessee's appeal challenges an order confirming an addition of Rs. 45,56,375/- under section 68 of the IT Act for AY 2015-16. The addition was made by the AO and confirmed by the CIT(A) due to an unexplained increase in capital, which the assessee failed to properly substantiate with evidence.
Held
The CIT(A) upheld the AO's action, finding that the assessee's explanation regarding the increase in capital was inconsistent and lacked documentary evidence. The Tribunal found that the assessee failed to satisfactorily demonstrate how the CIT(A)'s observations were perverse and upheld the lower authorities' order.
Key Issues
Whether the addition of Rs. 45,56,375/- as unexplained cash credit under section 68 of the IT Act was justified given the assessee's inability to substantiate the increase in capital with proper evidence.
Sections Cited
68, 234A, 234B, 234C
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, NAGPUR BENCH, NAGPUR
Before: SHRI V. DURGA RAO & SHRI K.M. ROY, ACCOUNTANT, MEMBER
Date of Hearing – 27/01/2025 Date of Order – 10/02/2025
O R D E R PER K.M. ROY, A.M.
The present appeal has been filed by the assessee challenging the impugned order dated 23/05/2024, passed by the learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi, [“learned CIT(A)”], for the assessment year 2015–16.
In its appeal, the assessee has raised following grounds:–
“1. That keeping in view the facts of the case, the addition of Rs.45,56,375/- u/s 68 of the IT Act made by AO and confirmed by CIT (Appeals) is improper, unjust and deserves to be cancelled.
2 Late Bhimandas Lahorimal Khatri Ita no.391/Nag./2024 2. The assessment made at Rs.51,76,480/- as against returned income of Rs.6,20,100/- is improper, unjust and deserves to be modified. The demand raised at Rs. 18,30,300/- is absolutely improper and deserves to be cancelled.
3. That the charging of penal interest under section 234A, 234B and 234C is improper, unjust and same be cancelled.
4. That the assessment by AO is bad-in-law. improper, unjust and deserves to be cancelled.
That any other ground/s as may be raised at the time of hearing.”
Facts in Brief:– The assessee is an individual and during the year under consideration, the assessee was involved in the business of stone crushing. The assessee filed his return of income on 10/02/2016, declaring total income of ` 6,20,102. It is observed that there is substantial increase in capital during the year. The assessee was asked to explain the capital so increased in response to which the assessee filed affidavit and stated that unsecured loan and subsidiaries investment was included in the capital doubly. As it was double accounting, thus he arrived at capital of ` 1,61,68515, instead of ` 3,56,60,213. It was found that there was double entry for capital and he also given confirmations of unsecured loan which was part of capital. However, the difference of ` 46,56,375, has remained as it was. The assessee filed his submissions which were considered by the Assessing Officer and while concluding the assessment the Assessing Officer held that the assessee always filed lopsided reply even to show cause. He further observed that the assessee did not arrive at proper conclusion. During the proceedings, the assessee was given ample opportunities to arrive at proper capital and explain it with all business affairs. Capital cannot be formed in one instance. It has many connotations. Capital represents the accumulated wealth of a business, represented by its assets less liabilities. Thus, the asset & liabilities
3 Late Bhimandas Lahorimal Khatri Ita no.391/Nag./2024 ought to have been explained with proper evidences which the assessee failed to do so. He further observed that opportunity was given to the assessee to explain the capital with assets; however, he never explained the asset and liabilities with evidence. From the following table it reveals that assessee never showed his business affairs in the return of income. He has not taken balance sheet seriously and hides the true affairs from the Department. Inadvertent mistake can be happened once or double, but here, the assessee has been doing so from many earlier years.
Liabilities Assets Total Share Secured / A.Y. Fixed Asset Other Asset Capital Unsecured loan 2010–11 46,45,507 14835035 67,18,623 12761919 2011–12 78,72,998 1265856 61,99,687 2939167 2012–13 68,41,130 849433 53,40,782 2349781 2013–14 93,16,445 1170160 95,75,497 911108 2014–15 1,13,82,974 1349937 1,16,05,236 1127675 2015–16 3,56,60,213 1829830 1,45,28,166 22961877
The Assessing Officer further held that the assessee has no proper explanation to offer and misleading the Department and not to offer correct picture of the total business. He held that even the assessee is not firm on his submission i.e., Capital Account. Therefore opening balance as shown below as on 01/04/2014, and closing balance as on 31/03/2014, shown in the return of income was considered by the Assessing Officer for calculating the unexplained cash credit to Balance Sheet and the difference which come to ` 45,56,375, which was added to the income of the assessee unexplained cash credit under section 68 of the Act.
4 Late Bhimandas Lahorimal Khatri Ita no.391/Nag./2024
5. On appeal, the learned CIT(A) observed that the assessee during the assessment proceedings tried to justify the increase in capital from ` 1,13,82,974 to ` 1,61,68,515, which is shown in the table below:–
Share Capital without including personal capital as ` 1,13,82,974 on 31/03/2014 Share Capital after including personal capital as on ` 1,59,39,349 31/03/2014 Opening Balance as on 01/04/2014 ` 1,59,39,349 Add: Credits = ` 729102 Less: Debits = ` 499936 Difference = ` 2,29,166 Capital as on 31/03/2015 [` 159339349 + ` ` 1,61,68,515 2,29,166]
5 Late Bhimandas Lahorimal Khatri Ita no.391/Nag./2024
In view of the above, the learned CIT(A) held that dismissed the appeal of the assessee by observing as under:–
“The appellant has tried to reconcile the discrepancy by adopting figures from so called books of accounts claimed to have been separately maintained by him. However, this issue of books has been suddenly raised during the year under consideration and they were not part of the earlier return of income. Verification of the consolidate balance sheet filed by the appellant reproduced above reveals that the appellant has claimed unsecured loans to the tune of Rs.85,20,496/-. However, perusal of the return of income reveals that no such unsecured loans are reflected in the return of income. The appellant has not filed any explanation regarding this discrepancy. The supplementary details filed by the appellant have no basis or documentary evidential value. In view of the above the contention of the appellant can not be accepted. Therefore, the action of AO in making addition of Rs. 45,56,375/- i.e. difference of opening balance of capital as on 01.04.2014 of Rs. 1,59,39,349/- and closing balance as on 31.03.2014 of Rs. 1,13,82,974/- is upheld. Ground no.1 and 2 of appeal is dismissed.”
The assessee being aggrieved is in appeal before the Tribunal.
Before us, the learned Authorised Representative submitted following documents which are listed below:–
“1. Points in brief 2. Consolidated Balance sheet as per Books 3. Consolidated Balance sheet as per ITR 4. ITR of AY 2015-16 showing capital reported in Balance sheet 5. ITR of AY 2014-15 showing capital reported in Balance sheet 6. Balance sheet as on 31/03/2014 of proprietorship firm Siddhishri Stones, Shri Ganesh Stones & personal Balance sheet 7. Capital accounts as on 31-03-2014 8. Affidavit sworn by assessee filed before AO 9. AO's Notice dated 17/11/17 & its reply dated 23-11-2017 10. AO's Notice dated 20/12/17 & its reply dated 27-12-2017
6 Late Bhimandas Lahorimal Khatri Ita no.391/Nag./2024 11. Submission before CIT (Appeals) dated 29/04/2024 12. Submission before AO dated 12/09/2017.”
However, the learned Authorised Representative for the assessee could not satisfactorily demonstrated as to how the observations of the learned CIT(A) are perverse. The learned Authorised Representative for the assessee failed to demonstrate that personal balance sheet is maintained for earlier years i.e., 31/03/2011, 31/03/2012. Sudden jump in Capital Account by mistake in balances creates an onerous responsibility upon the assessee to reconcile the same. He has miserably failed to do so. No interference is required in the order passed by the authorities below which are upheld by dismissing the grounds raised by the assessee.
In the result, appeal by the assessee stands dismissed. Order pronounced in the open Court on 10/02/2025