SRI. S. GURUSWAMY,MYSORE vs. ASST.C.I.T., MYSORE

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ITA 629/BANG/2015Status: DisposedITAT Bangalore13 January 2016AY 2001-027 pages
AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that additions on account of opening capital and agricultural income can only arise if these amounts were utilized for acquiring assets or meeting expenditure. Since the AO did not provide any such finding, the additions were not sustainable.

What were the facts?

The assessee filed a return of income beyond the time limit, leading to a re-assessment. Additions were made by the AO towards opening capital and agricultural income. The CIT(A) dismissed the assessee's appeal against these additions.

What were the issues?

Whether additions on account of opening capital and agricultural income are justified without establishing their utilization for acquisition of assets or meeting expenditure.

Which sections of the Income-tax Act were involved?

Section 147,Section 144,Section 69

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, BANGALORE ‘A’ BENCH, BANGALORE

Before: SHRI VIJAY PAL RAO & SHRI INTURI RAMA RAO

For Appellant: Shri C.R.Nulvi, CA

This appeal filed by the assessee is directed against the order of the Commissioner of Income-tax (Appeals), Mysore dated 24-02-2015 for the assessment year : 2001-02.

2.

The assessee raised the following grounds in its appeal;

“1. The order of the AO is against the fact and circumstances of the case.

ITA No.629 (B)/2015

2. Whether on the facts and circumstances of the case, the action of the ld.AO is justified to sustain the addition agitated before the Hon’ble Tribunal without contradicting with the assessee for the submission made before him.

3. The AO is erred in passing the order u/s 143 r.w.s.254 on his own assumption and presumptions by ignoring cash flow statement and balance sheet filed before him for all the years. 4.For these and other reasons which may be adduced at the time of hearing your honour is requested to delete the additions made by the AO. 5. The assessee craves leave to add, alter, amend and/or delete any of the grounds during the course of hearing.

3.

Brief facts of the case are that the assessee is an individual. The return of income for the assessment year 2001-02 was filed on 22-02- 2006 declaring an income of Rs.1,32,100/- apart from agricultural income of Rs.1,90,000/-. The said return of income was treated as invalid as it was filed beyond the time limit and subsequently, a notice u/s 147 of the IT Act was issued and the re-assessment was completed u/s 144

ITA No.629 (B)/2015 r.w.s.147 of the IT Act, 1961 on 17-12-2007 determining the total income of Rs.10,25,020/- after making the following additions; a. Sundry income as admitted Rs. 70,000 b. Addition towards excess opening capital above subjected to tax representing excess of assets over liability Rs.3,88,313 c. Excess of agriculture income claimed as discussed above subject to tax as income representing excess of assets over liabilities Rs.1,00,000 d. Finance liabilities discharged as discussed above treated as deemed income u/s 69 Rs.3,93,160

Against the said assessment order, an appeal was preferred before the ld.CIT(A), Mysore, who vide order dated 29-10-2010 partly allowed the appeal by deleting the addition made u/s 69 of the IT Act, 1961 of Rs.3,93,160/- and the addition of Rs.70,000/- sustaining the addition of opening balance to the extent of Rs.3,18,313/-.

4.

On further appeal before the Tribunal, the Tribunal was pleased to set aside the order of the ld.CIT(A) and the matter was remanded back to the file of the AO for fresh adjudication in accordance with law after

ITA No.629 (B)/2015 affording reasonable opportunity of being heard to the assessee. After the order of the Tribunal, there are two surviving additions which were agitated before the AO. One such issue is addition on account of excess of opening capital of Rs.3,88,313/- andRs.1.00 lakh on agricultural income.

Pursuant to the order of the Hon’ble Tribunal assessment was completed vide order dated 5/6/12 the AO by holding that the explanation offered by the assessee does not substantiate the availability of cash balance of Rs.4,73,126/- as on 31-03-2001 and concluded that the opening cash balance of Rs.4,73,126/- was not available and treated Rs.3,88,313/- after deducting a sum of Rs.84,813/- which were treated as explained as unavailable cash balance and brought to tax. The AO also disbelieved the agricultural income of Rs.1.00 lakh and treated it as income from other sources.

5.

Being aggrieved, the assessee preferred an appeal before the ld.CIT(A), who vide impugned order has dismissed the same.

6.

Being aggrieved the assessee is in appeal before us.

ITA No.629 (B)/2015

7.

The learned counsel for the assessee contended that the whole approach of the AO in making additions on account of difference in opening capital does not stand the test of law. It is his contention that the issue of the opening balance can be examined only in the earlier years not during the year under consideration. He further contended that the opening balance adopted by the assessee is true and correct. The difference had arisen, as the amounts of opening balance adopted by the AO had arisen only on account of estimating higher drawings of Rs.1,23,453/- as against Rs.93,455/- and disbelieving the gift received from wife. Likewise, he has listed several discrepancies in the working made by the AO for the purpose of arriving at the opening capital.

8.

On the other hand, learned Sr.DR relied on the orders of the authorities below.

9.

We have heard the rival submissions and perused the material on record. The additions were made by the AO solely by disturbing the amount of opening capital and disbelieving the agricultural income of Rs.1.00 lakh. Without going in to the correctness or otherwise of the ITA No.629 (B)/2015 working adopted by the AO for the purpose of arriving at the opening balance, we adjudicate the issue as follows. The question of addition arises only when opening capital balance and the agricultural income shown as a source for acquisition of asset or for the purpose of meeting expenditure. The AO had not given any finding that opening capital balance and agricultural income was utilized for the purpose of acquisition any asset or meeting any expenditure. In the absence of these findings, the question of addition does not arise and stand the test of law and hence, we set aside the order of the lower authorities and direct the AO to delete the addition of Rs.3,88,313/-on account of difference in opening balance and addition of Rs.1.00 lakh disbelieved the agricultural income.

10.

In the result, the appeal filed by the assessee is allowed.

Order pronounced in the open court on the 13th January, 2016.

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