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Income Tax Appellate Tribunal, SMC BENCH, PUNE
PER D. KARUNAKARA RAO, AM :
This appeal is filed by the assessee against the order of CIT(A)-2, Pune, dated 22-02-2016 for the Assessment Year 2008-09. AO passed the order u/s.147 r.w.s. 143(3) of the Act on 15-02-2013.
Grounds raised by the assessee read as under :
“1. Commissioner (Appeals) has erred in confirming opening Capital Balance of Rs.16,58,835.00. Same may please be deleted. 2. Without prejudice to Ground No.1 above, lower authorities have erred in taxing opening Balance of Capital represented Assets acquired before 31-03-2007. Same may please be deleted. 3. Appellant prays for just and equitable relief. 4. Appellant prays for cancellation of Interest charged. 5. Appellant prays to add, alter, amend, clarify, modify, take Additional Ground/s and/or withdraw the Grounds during Appellate Proceeding.”
Briefly stated relevant facts are that the assessee is an individual
and is engaged in the business of country liquor in Shrirampur, Dist.
Ahmednagar. The assessee filed two returns of income (1) to the ITO,
Malegaon including her income earned at Yerwala and (2) another return is
filed at Ahmednagar for her income earned at Shrirampur. Assessments
were completed independently by both the ITOs. Subsequently, notice
u/s.148 was issued by the ITO, Ahmednagar for the A.Y. 2008-09 for
taxing the balances in capital account. In reply, assessee filed the return
of income clubbing all the streams of income from all sources. At the end
of the re-assessment proceedings, AO determined the assessed income at
Rs.20,83,760/-. Apart from minor additions, the AO made a major
addition of Rs.16,58,835/- on account of “fictitious credit in Capital
Balance” (Para 17 of the re-assessment order). This amount constitutes
the Opening Balance as per the Balance Sheet submitted with return of
income filed at Malegaon. The said amount constitutes the Closing
Balance as on 31-03-2007. AO added the same as unexplained investment
ignoring the fact that the same is basically a Closing Balance as on 31-03-
2007. However, the AO alleged that assessee never filed the Balance Sheet
along with respective returns of income in general and for the assessment
years prior to A.Y. 2008-09 in particular. For the sake of completeness,
Para No.17 is extracted here as under :
“17. In view of the aforesaid facts and discussion of the case, the assessee has never filed balance-sheet with respective return of income which are not filed prior to A.Y. 2008-09 and as such the assessee’s attempt to adopt capital balance so as to explain the investment is not at all acceptable as the fact remained that the balances now adopted in the balance-sheet being not disclosed to the Department are totally unaccounted and even not supported by any documentary evidence for its existence on a particular relevant dates. Accordingly, for the purpose of acceptance of capital balance, at most, credit for the income disclosed in the respective years is only available to the assessee. Since the assessee has not filed any returns of income prior to the A.Y. 2008-09 question of income disclosed for earlier year does not arise. As such, as against the opening balance adopted as on 01-04-2007 at Rs.16,58,835/-, no credit is available to the assessee. Thus, there is deficiency of Rs.16,58,835/- and it is by this amount, there is a fictitious credit in adopting the capital balance. The same has escaped the
assessment within the meaning of section 147 of the I.T. Act and is therefore, brought to tax accordingly. On being satisfied, the penal proceedings u/s.271(1)(c) are initiated on this account for furnishing inaccurate particulars of income.”
During the First Appellate proceedings, the said addition was
agitated on the ground that the same amount constitutes an Opening
Balance which is Closing Balance of the previous year. According to
assessee, such additions are unsustainable in law. On considering the
submission of the assessee, CIT(A) dismissed the appeal of the assessee on
this issue and confirmed the addition as per the discussion given in Para
No.5.2 of his order and the same reads as under :
“5.2 I have considered the facts mentioned in the assessment order as well as submission made on behalf of the appellant. It is a fact that the appellant has never filed any balance sheet prior to the present assessment year. In such a scenario, it is imperative on the part of the appellant to explain with documentary evidences reflecting source of opening capital. Just making submission that the same was acquired out of agricultural income, does not hold any merit. The books of account of the appellant also does not reflect any such opening balance, which were impounded by the Assessing Officer. The appellant has failed to justify the sources of accumulation of opening balance of Rs.16,58,835/- and therefore the Assessing Officer has rightly added this amount as unexplained credit. Hon’ble Calcutta High Court in the case of Durga Kamal Rice mills Vs. CIT (260 ITR 260) has held that “the difference between closing balance in the capital account and opening balance in the following years was assessable as unexplained money in absence of satisfactory explanation by the assessee.”. The addition of Rs.16,58,835/- is accordingly confirmed. Ground of appeal No.2 fails.”
Before us, Ld. AR for the assessee filed a paper book enclosing the
copies of the acknowledgements of original returns of income filed by the
assessee before the income-tax authorities. He also enclosed the Capital
accounts for various years starting from 1999-2000 to 2006-07. Relying on
the said documents, Ld. AR for the assessee submitted that the copies of
the returns as well as the financial statements supports the assessee’s
claim of genuine source of income for the Opening Capital Balance of
Rs.16,58,835/- as on 01-04-2007. This amount constitutes accumulated
capital of the assessee from A.Y. 1994-95 onwards. However, these paper
books do not contain the requisite certification to support that the same
were filed before the lower authorities either at the time of re-assessment
proceedings or First Appellate proceedings. Fairly submitting that this
issue may be remanded to the file of AO for fresh round of examination of
evidences, Ld. AR for the assessee prayed for admitting these papers and
forward the same to the AO for fresh assessment as per the rules.
On the other hand, Ld. DR for the Revenue, on this preliminary issue
of admitting these papers relating to the copies of the returns as well as
financial statements for various years vehemently opposed to the same and
relied on the re-assessment order as well as the order of CIT(A).
We heard both the parties on this preliminary issue of admitting of
the said papers and remanding to the file of AO considering the principles
of natural justice. As such, there is no dispute on the fact of filing two
Returns by the assessee declaring two streams of income at two different
locations. We find the only issue raised by the assessee in the appeal
relates to addition of Rs.16,58,835/- which as per the assessee is an
Opening Balance in the capital account of the assessee. We have also
examined the orders of the AO and the CIT(A) and find that there is a
categorical observation of the officers that the balance sheet of earlier years
were never filed by the assessee prior to the A.Y. 2008-09. From that point
of view, the documents filed before us constitutes additional evidences. As
seen from the paper book filed before us, there are acknowledgments for
returns of income evidencing the filing of the returns for various
assessment years, i.e. 1999-2000 to 2006-07 (Pages 22 to 46 of the paper
book). There are capital accounts of the assessee for all these years which
reflects and support the accumulation of capital that gave rise to the figure
of Rs.16,58,835/- as on 01-04-2007 They were not filed by the assessee
before the AO/CIT(A).
In our view, there is some information gap between the officers of the
Department and the assessee qua the capital account of the assessee for
various assessment years. In our view, there is need for examining the said
additional evidences furnished by the assessee before us. It is in the
interest of justice that all such evidences should be admitted and remanded
to the file of AO. AO shall examine the same and make a fresh assessment
as per law after granting reasonable opportunity of being heard to the
assessee. Accordingly, we order. Thus, the grounds raised by the assessee
are allowed for statistical purposes.
In the result, appeal of the assessee is allowed for statistical
purposes.
Order pronounced on this 23rd day of March, 2018.
Sd/- Sd/- (SUSHMA CHOWLA) (D.KARUNAKARA RAO) �ाियक सद� / JUDICIAL MEMBER लेखा सद� / ACCOUNTANT MEMBER पुणे / Pune; �दनांक Dated : 23rd March, 2018. Satish
आदेश आदेश क� आदेश आदेश क� क� �ितिलिप क� �ितिलिप �ितिलिप अ�ेिषत �ितिलिप अ�ेिषत अ�ेिषत/Copy of the Order is forwarded to : अ�ेिषत
अपीलाथ� / The Appellant; 1. ��यथ� / The Respondent; 2. आयकर आयु�(अपील) / The CIT(A)-2, Pune 3. आयकर आयु� / The CIT-2, Pune 4. िवभागीय �ितिनिध, आयकर अपीलीय अिधकरण, पुणे “एक सद�य 5. एक सद�य एक सद�य” / एक सद�य DR ‘SMC’, ITAT, Pune; गाड� फाईल / Guard file. 6.
आदेशानुसार आदेशानुसार आदेशानुसार/ BY ORDER,स आदेशानुसार
स�यािपत �ित //True Copy// //True Copy// Senior Private Secretary आयकर अपीलीय अिधकरण ,पुणे / ITAT, Pune