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Facts
The assessee, engaged in trading metal mixed silver ornaments, filed an ITR declaring Rs. 18,30,520. The case was scrutinized due to a large increase in proprietor's capital. The AO initially accepted the explanation of merging personal accounts but later reopened the assessment, adding Rs. 2,73,65,027 under Section 68. The CIT(A) deleted this addition.
Held
The tribunal upheld the CIT(A)'s decision to delete the addition, finding no sudden increase in capital in prior years and noting that the increase was due to book entries, not cash credit. The revenue failed to demonstrate any error in the CIT(A)'s findings. The revenue's appeal and the assessee's cross-objections were dismissed.
Key Issues
The key legal issue was whether the CIT(A) erred in deleting the addition made under Section 68 for a substantial increase in proprietor's capital, which the assessee attributed to the merger of personal accounts and inherited assets.
Sections Cited
Section 68, Section 148, Section 148A, Section 151, Section 142(1), Section 143(2), Section 250
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Income Tax Appellate Tribunal, AGRA BENCH, AGRA
Before: SHRI S. RIFAUR RAHMAN & SHRI SUNIL KUMAR SINGH
ORDER PER SUNIL KUMAR SINGH, JUDICIAL MEMBER Aforesaid appeal and Cross Objections have been preferred against the impugned order dated 10.09.2025 passed in Appeal no. NFAC/2016-17/10462263 by the Ld. Commissioner of Income– tax(Appeals)/National Faceless Appeal Centre (NFAC), Delhi [hereinafter referred to as the “CIT(A)”] u/s. 250 of the Income-tax Act, 1961 hereinafter referred to as "Act"] for the Assessment Year [A.Y.] 2017-18, C.O. No. 01/Agr/2026 ACIT C(2)(1)(1), Agra v Mahendra Kumar Jain, Agra wherein learned CIT(A) has deleted the additions made vide assessment order dated 06.03.2025 and allowed assessee's appeal.
At the very outset, it is noticed that the main appeal is time barred by 10 days and the cross objection is reported to be time barred by 17 days. In the interest of justice, the said delay is condoned.
3. The brief facts state that the assessee is engaged in the business of trading in metal mixed silver ornaments. The assessee filed return of income for the AY 2017- 18, declaring total income at Rs.18,30,520/-. The case was selected for limited Scrutiny through CASS to examine large increase in proprietor’s capital of Rs. 3,40,57,692/- for A.Y. 2017-18 as against Rs. 61,75,675/- shown in the balance sheet for A.Y. 2016-17. The assessment was completed, accepting the return of income at Rs. 18,30,520/-. During the course of initial assessment proceedings, the assessee had submitted that substantial increase of Rs.2,78,82,287/- in capital was on account of merger of personal set of accounts with M/s. Devi Abhusan Bhandar and the same was accepted by AO. While carrying audit of the same, RAP, Allahabad observed that the reply of the assessee is not tenable as the same was not supported with any authentic documents like revised ITR etc... Thereafter following due procedure as provided u/s 148A of the Act and obtaining necessary approval of the specified authority u/s 151 of the Act, dated 05.04.2023, notice u/s. 148 of IT Act was served upon the assessee on 06.04.2023. Assessee filed ITR on 02.05.2023 in response thereof, declaring same income of Rs. 18,30,520/-. Statutory notices u/s 142(1) r.w. 143(2) were issued. Assessee replied as above. After considering AO assessed the total income at Rs. 2,91,95,580/-.
Aggrieved, assessee filed an appeal before Ld. CIT(A), who deleted the said additions and allowed assessee’s appeal.
Aggrieved, revenue has preferred this appeal on the ground that Ld. CIT(A) has erred in deleting the additions of Rs. 2,73,65,027/- u/s 68 without considering the fact that relevant data in respect of the capital introduced during the year was not declared properly in the income tax return.
C.O. No. 01/Agr/2026 ACIT C(2)(1)(1), Agra v Mahendra Kumar Jain, Agra 6. Perused records. Heard Learned Sr. DR for the appellant revenue and Ld. AR for the respondent assessee.
A very small point for determination under appeal is as to whether Ld. CIT(A) has erred in deleting the addition of Rs. 2,73,65,027/- made by the assessing officer on account of substantial increase in proprietor’s capital during the year under consideration.? 8. Ld. Sr. DR for the appellant revenue has re-iterated the aforesaid ground raised
under appeal supporting the assessment order.
9. Ld. AR for the respondent assessee has supported the impugned order with the submission that there is no sudden increase in the balance even during three years prior to the year under consideration. Prayed to dismiss the appeal.
10. We have perused the impugned order passed by the Ld. CIT(A) carefully. The relevant paras 4.2 and 4.3 of the impugned order read as under: “4.2. At the cost of repetition, the sum total of the appellant's submissions are Summarized as under: (a) the appellant has filed consolidated statement of balance sheet for the financial year 2014-15, 2015-16 and 2016-17 and the year wise closing balances of the proprietor capital account from the consolidated balance sheet is as under: S.No. Financial Year Assessment year Balance (Rs.) 1. 2014-15 2015-16 3,19,16,648/- 2. 2015-16 2016-17 3,35,33,617/- 3. 2016-17 2017-18 3,40,57,962/- (b) The appellant has further claimed that the capital mainly comprised of the following: 1 Accumulated capital of the personal set
2. Inherited properties and investment (movable and immovable)
3. Disclosed in earlier ITR's including Schedule AL
4. Property documented and matched with corroborative ledgers and balances (c) The appellant further submitted that the capital of the appellant in personal set substantially increased during FY 2013-14 on account of assets received from father Shri. Fateh Chand Jain who expired on 20.02.2014 leaving behind will duly registered on 07.12.2013. It was also submitted that Shri. Fateh Chand Jain was assessed to tax vide PAN: ABPPJ6126J and last return filed in his case was for AY 2014-15. Copies of the following documents are enclosed in support and available on record: (i) Copy of will duly registered on 07.12.2013 (ii) Copy of Death certificate (iii) ITR acknowledgement for AY 2014-15.
C.O. No. 01/Agr/2026 ACIT C(2)(1)(1), Agra v Mahendra Kumar Jain, Agra (iv) Computation of income for AY 2014-15 (d) The break-up of the assets declared in ITR for AY 2015-16 are as under 1. Land Rs. 1,04,52,190 2. Building Rs.44,68,100 3. Bank Rs.74,75,536 4. Shares & Securities Rs.2,00,000 5. Insurance Policies Rs.46,62,395 6. Cash in Hand Rs.2,40,920 7. Jewellery & Bullion Rs.6,00,000 8. Vehicles Rs.6.20,000 Rs.2,85,39,141 (-) Liabilities Rs.2,00,000 Rs.2,83,39,141 and the same was merged with balance sheet on 01.04.2016. (e) Copies of GST/VAT returns for FY's 2013-14, 2014-15, 2015-16 and 2016-17 were enclosed, (f) Confirmed copy of unsecured loan account of Chitra Jain and Smt Kalpana Jain are filed along with ITR-V and bank passbook. …………………………………………………………………………. 4.3. All the above details filed by the appellant were verified and the claim of the appellant is found to be in order. It is also pertinent to mention that the increase in capital was not due to any cash credit as founded by the AO in the assessment order and is the result of book entries. Thus, the grounds of the appeal raised on merit namely 6,7,8, and 9 are allowed in favour of appellant”
It transpires from the perusal of the consolidated statement of balance sheet for three earlier years mentioned in the comparative chart contained the impugned order that there is no sudden increase in the balance in the earlier financial year 2016-17 related to AY 2017-18, F.Y. 2015-16 related to AY 2016-17 and F.Y. 2014- 15 related to AY 2015-16. Ld. CIT(A) has verified the details and the claim of the appellant and found the submissions of the assessee in order, stating that cash credit was based on the book entries. Revenue has failed to point out as to which relevant data was ignored by the first appellate authority in coming to the conclusion. We do not find any error or infirmity in the impugned order. The impugned order is sustained. The aforesaid point is accordingly determined in negative against the appellant revenue and in favour of the respondent assessee. This appeal is liable to be dismissed. CO.01/AGR/2016 12. During the course of hearing, Ld. AR for the assessee informed the Bench that the assessee does not intend to press upon his cross objections. The cross objections are thus liable to be dismissed.