ITO, CHENNAI vs. SAHNI MANAGEMENT & FINANCIAL SERVICES, CHENNAI

This appeal by the Revenue is directed against the order passed by the Ld. Commissioner of Income Tax (Appeals)-4, Chennai dated 22.09.2016 in 06/CIT(A)-4 for the assessment year 2005-06 passed u/s.250(6) r.w.s.144, 147 & 143(3) of the Act.

The Revenue has raised the following grounds in its appeal:-

The brief facts of the case are that the assessee is a firm engaged in the business of rendering financial services. The assessee had not filed its return of income for the relevant assessment year and further it was observed from the AIR information that the assessee had purchased mutual funds to the extent of Rs.47,63,158/-. Therefore, the case was reopened U/s.147 / 148 of the Act and finally ex-parte order was passed U/s.143(3) & 144 of the Act on 30.03.2013, wherein the Ld.AO made addition of Rs.47,63,158/- as the unexplained investment.

On appeal, the Ld.CIT(A) examined the issue in detail after obtaining a Remand Report and allowed the appeal of the assessee by observing as under:- “I have verified the above submissions of the appellant in the light of the documents and have arrived at the conclusion that the discrepancies pointed out by the Assessing Officer in the remand reports have resulted on account of improper analysis of the investments. The investments made during the year under consideration have been funded from the bank account of the appellant which were duly reflected in the bank account statement. The remaining investments have emanated from switch in and switch out of the existing old investments. Hence, the submissions of the appellant which are based on the documentary evidences and duly supported by the relevant bank account, are found in order and, hence, does not attract any adverse inference. Therefore, in view of the above facts of the case, the addition effected by the AO on account of unexplained investment at Rs.47,63,158/- in the exparte assessment u/s.144 of the Act, is deleted.”

Before us, the Ld.DR pointed out para 7 of page No.3 of CIT(A) order, wherein it was stated as follows: “In the remand report, it was also pointed out that the figures of investments as reflected by the assessee viz-a-viz the information obtained from the financial institutions, did not match. It was observed by the AO that only two of the investments appearing in the AIR have been shown by the assessee in its Schedule under the investments. However, in that also the amounts did not match.” and thereafter argued by stating that the information received from the financial institution did not match with the investment made by the assessee. He therefore submitted that the matter may be remitted back to the file of Ld.AO for de-nova consideration.

The Ld.AR on the other hand argued stating that he assessee had filed the detailed explanation of the investment made by the firm before the Ld.CIT(A) and the Ld.AR at the time of Remand proceedings and finally the Ld.CIT(A) after verifying the entire records, had arrived at the conclusion that all the investments made by the assessee are in order and the source explained. He further argued stating that there were some investments switched to another investments which was explained during the course of the remand proceedings and the proceedings before the Ld.CIT(A). The Ld.AR further submitted before us a detailed reconciliation of the investment made by the assessee firm during the relevant assessment year which the Ld.DR could not successfully confront. The Ld.AR with the above submission prayed that the order of the Ld.CIT(A) may be sustained.

I have heard the rival submissions and carefully perused the materials on record. From the facts of the case, it is apparent that the Ld.CIT(A) has arrived at the conclusion based 5 on the Remand Report and after examining the reconciliation statements submitted by the assessee. He has further stated in his order that the investment made during the year under consideration have been sourced from the bank account of the appellant which had duly reflected in the bank statement. The Ld.CIT(A) has also verified that the other investments which were switched from the old investments. Further, the Ld.DR could neither find any discrepancy in the reconciliation statement submitted before us nor could point out any investment against which the source was unexplained. In this situation, I do not find it necessary to interfere with the order of the Ld.CIT(A). Therefore the appeal filed by the Revenue is devoid of merits.

In the result, the appeal of the Revenue is dismissed.