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Income Tax Appellate Tribunal, MUMBAI BENCH “A”, MUMBAI
Before: Shri D.T. Garasia & Shri G Manjunatha
O R D E R Per G Manjunatha, AM : This appeal filed by the assessee is directed against the order of CIT(A)- 33, Mumbai dated 01-05-2014 and it pertains to assessment year 2009-10.
The assessee raised the following grounds of appeal:-
On facts and circumstances of the case and in law the Ld. 1) CIT(A) erred in confirming addition of Rs 631260/- out of total addition of Rs 32,58,130/- as unexplained investment in flat. On facts and circumstances of the case and in law the Ld. 2) CIT(A) erred in confirming addition3,49,355/representing difference in 2 ITA 462/Mum/2015 net profits of two different P& L account for the same period us 69A and 69C. On facts and circumstances of the case and in law the Ld. 3) CIT(A) erred in confirming addition or Rs 8,14,904 which represents difference in cash on hands as per cash book and cash on hand as per Balance Sheet us 69A as unexplained cash on hand. On facts and circumstances of the case and in law the Ld. 4) CIT(A) erred in confirming additions us 69B and 69 of Rs 4,50,000/- representing premature withdrawals of FDR as unexplained investments.
The brief facts of the case are that the assessee filed his return of income for AY 2009-10 on 15-10-2010 declaring total income at Rs.4,64,226. The case was selected for scrutiny and notices u/s 143(2) and 142(1) were issued. In response to notices, authorized representative of the assessee appeared and furnished the details as called for. Assessment was completed u/s 143(3) on 29-12-2011 determining the total income at Rs.80,88,270 interalia making additions towards investment in purchase of flat u/s 69B, difference in net profit from P&L Account filed before AO u/s 69A & 69C, difference in cash in hand as per cash book and cash in hand as per balance-sheet, difference in fixed deposits, difference in security deposit and difference in turnover.
Aggrieved by the assessment order, assessee preferred appeal before the CIT(A) and filed elaborate written submissions challenging all additions made by the AO. The CIT(A), for the reasons recorded in his order dated 01-05-2014 partly allowed appeal filed by the assessee wherein he confirmed additions of 3 ITA 462/Mum/2015 Rs.6,31,260 out of total additions made by the AO of Rs.32,58,130 towards investment in flat. The CIT(A) confirmed additions made by the AO towards difference in net profit as per two P&L Accounts filed by the assessee and difference in cash balance as per cash book and cash balance as per balance- sheet. The CIT(A) further upheld additions made by the AO towards unexplained fixed deposit in bank account; however, deleted additions made by the AO towards lease deposits and set aside the issue of addition made towards difference in turnover and service tax paid u/s 69C of the Income-tax Act, 1961. Aggrieved by the order of C IT(A) assessee is in appeal before us.
The first issue that came up for our consideration is addition of Rs.6,31,2650 towards investment in flat. The assessee has purchased a flat for Rs.58,61,490. The investment has been made in three financial years. During the financial year relevant to AY 2009-10 assessee has made total payment of Rs.25,05,440. The source for the above payment is shown out of loans from ICICI Bank of Rsa.18,74,180 and remaining amount of Rs.6 lakhs has been paid by cheque of HDFC bank current account by cheque No.362408 dated 03-04- 2008. The registration expenses of Rs.31,260 has been paid in cash. The AO made addition by taking into account the total investment made in flat after allowing credit for loan borrowed from ICICI Bank of Rs.26,20,000. According to the AO, the assessee has not proved the source for balance investment. The 4 ITA 462/Mum/2015 CIT(A) has allowed relief of Rs.18,74,180 out of total additions made by the AO of Rs.32,58,130. Insofar as remaining amount of Rs.6,31,260, the assessee has failed to produce any cogent evidence with regard to the sources for such investments. The assessee claims that the payment of Rs.6 lakhs from HDFC Bank current account has been made out of loan proceeds received from ICICI Bank Ltd. The assessee further contended that the bank has released an amount of Rs.7,45,820 which was credited to HDFC Bank account out of which Rs.6 lakhs has been paid to the builder. The assessee has filed paper book explaining the sources for investment of Rs.6 lakhs.
Having heard both the sides and considered materials on record, we find that the AO has made additions towards investment in flat by taking into account the total investment in flat excluding amount received from ICICI Bank Ltd. The AO has not examined the investment made by the assessee with reference to year of investment to ascertain whether the said amount has been made in the financial year relevant to AY 2009-10. The CIT(A) also confirmed additions made by the AO without having recourse to the explanation with regard to the source of investment. Therefore, we are of the view that the issue needs to be re-examined by the AO in the light of explanation of the assessee with regard to the sources of investment. Hence, we set aside the issue to the file of the AO and direct him to examine the 5 ITA 462/Mum/2015 source of investment more particularly with reference to year of investment.
Hence, the ground raised by the assessee is allowed for statistical purpose.
6. The next issue which came up for our consideration is addition made by the AO towards difference in net profit as per two P&L Accounts filed before the AO and additions in respect of difference in cash balance as per cash book and cash balance as per balance sheet. The AO has made these two additions based on the two sets of P&L Accounts filed before AO. According to the AO, assessee has failed to explain the difference in net profit shown in two P&L Accounts. Assessee claims that his staff has filed draft P&L Account which shows a net profit of one figure whereas final P&L Account filed before AO is in conformity with the return of income filed by the assessee. However, the AO has failed to examine the P&L Account filed by the assessee with reference to books of account. The AO has made addition merely on the basis of draft papers filed by the employees. therefore, requested to set aside the issue to the AO to explain the difference between two P&L Accounts. As regards difference in cash balances, the assessee contends that he had explained cash balance as per balance-sheet filed before AO. However, the AO has ignored the reconciliation filed and made additions simply on the basis of cash book and balance-sheet filed at the time of assessment proceedings.
7. Having heard both the sides we find merits in the argument of the 6 ITA 462/Mum/2015 assessee for the reason that the AO has made these two additions based on the documents submitted at the time of assessment proceedings without bringing out any facts with regard to the financial statements and books of account of the assessee. The AO never pointed out any difference in books of account. He made additions only on the basis of papers filed at the time of assessment ignoring the reconciliation filed by the assessee explaining difference. Therefore, we set aside the issues to the file of the AO to consider afresh, after affording an opportunity to the assessee.
The next issue that came up for our consideration is addition towards premature withdrawals of FDRs as unexplained investments u/s 69B. The AO made addition of Rs.4,50,000 towards premature FDRs as unexplained investments on the ground that the said FDRs is not included in the books of account. The assessee contends that he had prepared books of account for his business. However, FDR in bank is a personal asset for which a cash flow statement has been prepared explaining the sources of investment. We find force in the argument of the assessee for the reason that the AO has made additions towards FDRs simply on the basis of not disclosing FDRs in the books of account without examining the claim of the assessee with regard to the sources and nature of investment. The assessee has filed paper book explaining the source for investment in FDRs. Therefore, we are of the view
7 ITA 462/Mum/2015 that the issue needs to be re-examined by the AO in the light of the explanation of the assessee; hence, we set aside the issue to the file of the AO and direct him to consider the issue afresh after affording an opportunity of hearing to the assessee. 9. In the result, appeal filed by the assessee is allowed, for statistical purposes. Order pronounced in the open court on 20th September, 2017.