OM CREATIONS,MUMBAI vs. ITO 25(1)(2), MUMBAI

The assessee is engaged in the business of Garment stitching. The original assessment was completed u/s 143(3) of the Act on 12.11.2007. The AO noticed that the assessee has declared trading receipts to the tune of Rs.3.02 crores, whereas the aggregate receipts were shown at Rs.3.06 crores in the TDS certificates. Hence the AO took the view that there is escapement of income and accordingly reopened the assessment. In the reopened the assessment, the AO assessed the difference noticed by him and also assessed a sum of Rs.28.44 lakhs u/s 68 of the Act as unexplained cash credit.

The appeal filed before Ld CIT(A) was dismissed and hence the assessee has filed this appeal.

The first issue relates to the validity of reopening of assessment. The ld A.R submitted that the AO has reopened the assessment on change of opinion and accordingly contended that the reopening of assessment is not valid. However, I notice that the assessing officer has recorded proper reasons to support the reasons for reopening, i.e., the receipts declared by the assessee were lower than that shown in the TDS certificates, which cannot be termed as mere change of opinion. Accordingly I am of the view that the Ld CIT(A) has rightly upheld the validity of reopening of assessment.

The next issue relates to the addition of Rs.3,42,662/-, being the difference in the receipts. The AO added the same on the reasoning that the assessee did not explain the difference. Even though the assessee furnished reconciliation statement before Ld CIT(A), yet the Ld CIT(A) did not consider the same on the reasoning that the assessee did not show sufficient reasons for not furnishing the same before the AO.

I heard the parties on this issue. In my view, in the interest of natural justice, the reconciliation statement prepared by the assessee should be admitted. In fact, consideration of the said material would promote the cause of justice. Accordingly I admit the reconciliation statement prepared by the assessee. However, the same would require consideration of the AO. Accordingly, I set aside the order passed by Ld CIT(A) on this issue and restore the same to the file of the AO for examining the reconciliation statement. After affording adequate opportunity of being heard to the assessee, the AO may take appropriate decision in accordance with law.

The next issue relates to the addition of Rs.28.44 lakhs made by the AO as unexplained cash credit. The AO added the amount of Rs.28.44 lakhs shown as liability under the head “BD-SAPL” as unexplained cash credit u/s 68 of the Act. Before the Ld CIT(A), the assessee submitted that the same is a loan facility (Bill discounting loan) availed by the assessee from Janakalyan Sahakari Bank Ltd. But the same did not find favour with the ld CIT(A) and hence he confirmed the addition.

Before me, the Ld A.R furnished copies of loan sanction letter, copies of bank account, ledger account of the assessee, the reconciliation statement between the bank balance and book balance. A perusal of these statements prima facie shows that there may be merit in the submissions of the assessee. Accordingly I am of the view that this issue also requires fresh examination at the end of the AO. Accordingly I set aside the order passed by Ld CIT(A) on this issue and restore the same to the file of the AO with the direction to examine this issue afresh by considering the documents, information and explanations that may be furnished by the assessee. After affording adequate opportunity of being heard to the assessee, the AO may take appropriate decision in accordance with law.

In the result, the appeal filed by the assessee is treated as partly allowed for statistical purposes. Order has been pronounced in the Court on 20.9.2017.