MRS. LAKSHMI CHADHA,NEW DELHI vs. ITO, NEW DELHI

Brief facts of the case are that the assessee filed her return of income, declaring an income of Rs. 5,77,768/- in respect of income derived from commission under the head “Business” and also derived income from capital gains and interest. The AO has observed that assessee was required to file the details of source of additions to the proprietor’s capital account, but the 2 same were not provided. He, therefore, made addition of Rs. 9,13,723/- as under: Balance as per last year 31/03/2006 Dr. Rs. 12,32,372/-(-) Profit transferred to Capital Account Cr. Rs. 4,47,548/- Balance: Dr. Rs. 7,84,824/- Balance as per Balance sheet Cr. Rs. 1,28,899/- Addition to the Capital a/c during the year Rs. 9,13,723/-

The assessment was, accordingly, completed, inter alia, by making addition of Rs. 9,13,723/-.

Before ld. CIT(A) the assessee had filed details of additions made to capital a/c and had pointed out that the addition to the capital a/c was of Rs. 3,00,000/- only. Ld. CIT(A) has reproduced details at page 19 of his order, but did not accept the same. Aggrieved, the assessee is in appeal before the Tribunal. 6. Ld. counsel for the assessee pointed out that the AO has taken the balance in capital a/c as on 31.3.2007 at Rs. 1,28,899/-, but debit balance is Rs. 4,85,824/-. In this regard he referred to page 80 of the PB, wherein the balance-sheet as on 31.3.2007 is contained, to substantiate his claim. 7. I find from the balance-sheet that the closing balance is debit Rs. 4,85,823.61. Therefore, apparently, the AO has not taken the correct closing balance of the capital a/c. Further, ld. counsel took me through the balance sheet as on 31.3.2006 to demonstrate that the closing balance was debit Rs. 12,32,372.07 and in the P&L A/c there was credit balance of Rs. 4.47.548.46, which was transferred to capital a/c. 8. Ld. counsel pointed out that if all the adjustments are properly done then the addition to the capital would be only Rs. 2,99,000/- only. He pointed out that a petition u/s 154 is pending in this regard before AO.

I have considered the submissions of both the parties and find that the assessee’s pleas have not correctly been appreciated by both the lower revenue authorities and, therefore, I restore this matter to the file of AO to consider in detail the submissions advanced by ld. counsel for the assessee and then correctly find out the additions made to the capital a/c and then to examine the source of the same. The AO is directed to de novo consider the issue in question in accordance with law.

In the result, assessee’s appeal is allowed for statistical purposes. Order pronouncement in open court on 14/06/2016.