SRI. G. RAVIKUMAR,HOSPET vs. DCIT, BANGALORE

Grievance raised by the assessee is on addition of Rs.17,00,000/-, u/s.68 of the Income-tax Act, 1961 (‘the Act’ in short).

Facts apropos are that there was a search u/s.132 of the Act, in the case of Shri. K. M. Vishwanath, on 10.12.2010. It seems as a part of this, premises of the assessee was also searched. Notice u/s.153A of the Act, was issued on the assessee for filing the return for the impugned assessment year. Assessee filed a return on 08.10.2012 in pursuance to such notice declaring income of Rs.97,860/-. AO noted that the capital account filed by the assessee along with this return filed on 08.10.2012 was at variance with the capital account filed by the assessee along with his return filed u/s.139(1) of the Act on 03.09.2007. As per the AO, opening credit balance in the capital account filed alongwith the return on ITA.1204/Bang/2015 Page - 3 08.10.2012 was Rs.17,19,706/-, whereas such opening balance in the capital account filed along with the original return on 03.09.2007 was only Rs.19,706.07. AO therefore treated the sum of Rs.17 lakhs as unexplained income and completed the assessment by making an addition.

Aggrieved, assessee moved in appeal before the CIT (A). CIT (A) noted that in the statement of affairs filed along with the return, pursuant to notice u/s.153A of the Act, assessee had increased its sundry debtors to off set the increase in capital of Rs.17 lakhs. As per the CIT (A) the increased capital and debtors were shown by the assessee in the balance sheet and the capital accounts filed along with the returns for subsequent A. Ys. 2006-07 and 2007-08 as well. He was of the opinion that this was not a mistake as such, but only a back door introduction of unexplained capital in the books of account. He sustained the additions made by the AO.

Now before us, Ld. AR strongly assailing the orders of lower authorities submitted that the difference in the capital account was only a mistake that the assessee made in the balance sheet filed along with the return on 08.10.2012. According to him the sundry debtors as mentioned by the CIT (A) never existed. There was no enquiry conducted by the lower authorities to substantiate their finding that there was any asset which ITA.1204/Bang/2015 Page - 4 represented the increased capital. As per the Ld. AR assessee could not be penalised for a mistake committed by its representative, while filing the return.

Per contra, Ld. DR submitted that the matter can be once again looked into by the AO for ascertaining the actual facts.

We have perused the orders and heard the contentions. Finding of the CIT (A) is that the increased capital of Rs.17,00,000/- was represented by a similar increase in the sundry debtors and such increased sundry debtors was appearing in the balance sheet for the subsequent assessment years also. The question whether the increased capital, and the enhanced debtors were actual and whether such sundry debtors were there or not, has not been addressed by the lower authorities. In such circumstances, I am of the opinion that the matter requires a fresh visit by the AO. Therefore, orders of the lower authorities are set aside and the issue is remitted back to the AO for consideration afresh.

In the result, appeal of the assessee is allowed for statistical purpose.