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Income Tax Appellate Tribunal, “B” BENCH: KOLKATA
Before: Shri Mahavir Singh, JM & Shri M. Balaganesh, AM]
Per Shri Mahavir Singh, JM: Both these appeals by assessee and revenue are arising out of common order of CIT(A), Asandol vide Appeal No. 151/CIT(A)/Asl/R-2/Asl/12-13 dated 10.06.2013. Assessment was framed by JCIT, Range-2, Asansol u/s. 143(3) of the Income Tax Act, 1961 (hereinafter referred to as “the Act”) for Assessment Years 2010-11vide his order dated 27.11.2012.
The first issue in this appeal of revenue is against the order of CIT(A) deleting the addition of unexplained investment u/s. 69 of the Act in Reliance Mutual fund amounting to Rs. 5 lacs, investment in HDFC Mutual Fund amounting to Rs. 5 lacs, investment in LICI Jeevan Astha amounting to Rs.1,03,260/- and investment in house building amounting to Rs.6.5 lacs. For this, revenue has raised following ground no.1: “1. That the Ld. CIT(A), Asansol has erred in law and on facts by deleting the addition made u/s. 69 of the I. T. Act, 1961 Rs.11,03,260/- and Rs.6,50,000/-”
3. We have heard rival submissions and gone through facts and circumstances of the case. We find that the AO made addition of undisclosed investment in Reliance Mutual fund amounting to Rs. 5 lacs from the statement of affairs of the assessee as on 31.03.2010 wherein the assessee has disclosed investment in Reliance Mutual Fund brought forward amounting to 2 & 2337/Kol/2013 Smt. Pinkey Prasad AY 2010-11 Rs. 5 lacs. According to AO, the assessee could not explain the source and hence, he treated this investment as undisclosed sources. Similarly, the AO also made addition of investment in HDFC Mutual Fund as undisclosed investment u/s. 69 of the Act for the reason that the assessee has made investment in HDFC Equity Fund Growth on 14.12.2009 for a sum of Rs.5 lacs which was not explained. Similarly, the assessee also made investment as is evident from statement of affairs as on 31.03.2010 a sum of Rs.1,03,260/- as brought forward in LIC Jeevan Astha. According to AO, nothing was explained hence, the same was added as unexplained investment u/s. 69 of the Act. Similarly, the assessee has disclosed in its statement of affairs as on 31.03.2010 an amount of Rs.4,99,920/- as brought forward and Rs.6.50 lacs as investment in house building. According to AO, the assessee has reflected a sum of Rs.4,99,920/- as investment in residential house property but not reflected any investment in house building in the statement of affairs for FY 2008-09 amounting to Rs.6.50 lacs. As the assessee failed to explain, the AO treated the same as unexplained u/s. 69 of the Act and added to the returned income of the assessee. The CIT(A) relying on the submissions of the assessee that this investment in Reliance Mutual Fund was never made whereas the investment was made in HDFC Mutual Fund and accordingly, he directed the AO to verify the AIR returns and also conduct enquiry in respect to investment in Reliance Mutual Fund. Accordingly, he directed vide para 5 and 6, which reads as under: “5. Before me it was argued that (a) the entry 'Reliance Mutual Fund (B/F)' is an error, (b) there was no investment in Reliance Mutual Fund and (c) the entry actually is investment in. HDFC Mutual Fund.
6. I had considered all the aspects and material on record. The entry "Reliance Mutual Fund (B/F)" figures in the asset side of Balance Sheet. Therefore even if it is bogus, the entry has effect of increasing income and not reducing. Secondly mare than any recording, if documentary evidence can be brought to record that there indeed is investment in Reliance Mutual Fund (in the background of the statement that the entry was wrongly placed), that would strengthen the case. This is absent. Thirdly, appellant’s submission that the entry was to be HDFC Mutual Fund and not Reliance Mutual Fund (B/F) arguments the argument that latter entry is an error. Taking into account these factors I direct the Assessing Officer to verify AIR returns u/s 285BA of past years or conduct enquiry with Reliance Mutual Fund as to the existence of any investment by assessee subsisting as on 31.03.2009 of Rs.5,00,000/-. If it is confirmed that there is no investment in Reliance Mutual Fund as on 31.03.2009 then the two additions of RS.5,00,000/-- each stands deleted. If it is confirmed that there is investment in Reliance Mutual Fund, then the addition of RS.5,00,000/- out of two additions of like amount stands confirmed. With this direction grounds 4, 5 and 6 are disposed of.”
In respect to unexplained investment in LICI Jeevan Astha, the CIT(A) deleted the addition by taking submissions of the assessee that the entry in the asset side of Balance Sheet is made, he deleted by observing in para 7 as under:
3 & 2337/Kol/2013 Smt. Pinkey Prasad AY 2010-11 “7. Ground 7 is against addition of Rs.1,03,260/- in L1C Jeevan Astha. On the ground that this is not reflected in statement of affairs for F.Y. 2008-09, the Assessing Officer treated it as undisclosed asset. Here also the entry made by Assessing Officer is "investment in LIC Jeevan Astha (B/F)" is confusing because of the part entry"B/F". According to appellant it is erroneous. The entry is in the asset side of Balance Sheet and hence even if bogus goes to increase the income of the appellant. I considering all the aspects and accepting the submission that the part entry 'B/F is an error, allow the-ground 7. The addition stands deleted.”
Similarly, the CIT(A) after comparing the Balance Sheet, deleted the addition of unexplained investment in house building at Rs.6.5 lacs, by observing in para 8 and 9 as under: “8. Ground 8 is against addition of Rs.6,50,000/- as unaccounted investment in building. On the ground that this is not reflected in the Balance Sheet for year ending 31.03.2009, the Assessing Officer made the addition.
9. Comparing the two Balance Sheets one can find that the entry of RS.6,50,000/- is a new entry in asset side of Balance Sheet. It is not claimed as a brought forward asset. Being one figuring in asset side of Balance Sheet, it cannot be an unaccounted asset. The addition is deleted. Ground 8 is allowed.”
We find from the above that none of the authorities below have gone into the actual facts whether there is investment made by assessee in Reliance Mutual Fund or HDFC Mutual Fund. There is no discussion about how the investment in LIC Jeevan Astha is made by the assessee. Similarly, there is no evidence filed before lower authorities, nor before us now, regarding investment made in house building amounting to Rs. 6.5 lacs. We find that the AO and CIT(A) relied on some Balance Sheet prepared by assessee which is authentic or not. As the facts are not clear from the authorities below, we feel that the issue needs re-examination at the level of AO. The assessee will file complete details in respect of the investment made and will make a categorical statement if no investment is made and accordingly, the AO will examine the issue and then decide the taxability. In term of the above, we set aside the orders of the lower authorities and remit the issue back to the file of AO for fresh adjudication.
The next issue in the cross appeal of revenue and assessee is as regards to the order of CIT(A) restricting the addition of undisclosed investment in house building at Rs.17,29,463/- as against the addition made by AO at Rs.40,41,803/-. For this, revenue has raised following ground no.2 and assessee has raised following ground no.1: “Revenue’s ground no. 2:
2. That the Ld. CIT(A), Asansol has erred in law and on facts by restricting the addition of Rs.40,41,803/- made by AO on account of undisclosed investment in House Building to Rs.17,29,463/-.” “Assessee’s ground no.1:
1. For that on the facts of the case the Ld. CIT(A) was not legally justified in sustaining the addition of rs.17,29,463/- on account of alleged extra investment in renovation of residential house property,
We have heard rival submissions and gone through facts and circumstances of the case. We find that the AO has made addition of total withdrawal made from bank i.e. Ing Vysya Bank, Asansol Branch and Axis Bank, Asansol Branch. The total withdrawal according to AO and CIT(A) is Rs.40,41,803/-. The AO during the course of assessment proceedings required the assessee to explain the purpose of withdrawal and assessee explained that the withdrawals are expended for construction of house during the FY 2009-10 relevant to AY 2010-11. According to AO, the investment made in house building was not disclosed in statement of affairs drawn on 31.03.2010 wherein only investment in house building disclosed was brought forward amount of Rs.4,99,920/- and Rs.6.5 lacs. The CIT(A) restricted the addition at Rs.17,29,463/- vide para 11 as under: “11. The appellant has recast the Balance Sheet for year ending 31.03.2009 and 31.03.2010 without incorporating any new entries. The fact that the investment in renovation house is not mentioned in the Balance Sheet for year ending 31.03.2010 is correct w.r.t. originally filed one. The recasting carried out is explained below: (a) In the original Balance Sheet for year ending 31.03.2009, in drawings head there is an entry “HDFC Mutual Fund Rs.24,11,340/-“ (once this is shown as drawings this will not figure in asset side and capital will stand reduced which is Rs.11,65,803/-). (b) In the recast Balance Sheet for year ending 31.03.2010 for the same investment is taken as an asset. Therefore capital account balance goes upto Rs.35,77,143/- (Rs.11,65,803/- + Rs.24,11,340/-). (c) In the original Balance Sheet for year ending 31.03.2009 the asset viz investment in HDFC Mutual Fund of Rs.24,11,340/- is not figuring. (d) In the recast Balance Sheet this asset of Rs.24,11,340/- transforms to investment in residential house.”
We find that none of the authorities below have understood the issue that the AO himself admits that there are withdrawals to the tune of Rs.40,41,803/- and once there is a withdrawal, the assessee made investment in construction of the house building from the same. Whether these are reflected in the statement of affairs or not it is an accounting process. This can be examined and assessee can be asked to explain. In case, the assessee is able to explain the addition should not have been made. Accordingly, we are of the view that this issue needs re- examination at the end of the AO afresh. Accordingly, we set aside the orders of the lower authorities and remand the matter back to the AO for fresh adjudication. Both these grounds of appeal of revenue and assessee are allowed for statistical purposes.
10. The next issue in this appeal of revenue is against the order of CIT(A) deleting the addition of short term capital gain amounting to Rs.1,91,416/-.
5 & 2337/Kol/2013 Smt. Pinkey Prasad AY 2010-11 11. We have heard rival submissions and gone through facts and circumstances of the case. We find that the CIT(A) has remanded the matter back to the file of AO for re-verification vide para 19, which reads as under: “19. Ground 11 is against addition on account of short reposting of income from Mutual Fund. According to appellant the addition represents dividend from Mutual Fund which is exempt from tax u/s. 10(35) and 10(38). In the Remand Report the Assessing Officer has reiterated what is stated in assessment. A decision can come only if character is examined. If the receipts claimed to be dividend by assessee is really so and is covered u/s. 10(35) and 10(38) then it is tax exempt. The Assessing Officer is directed to verify the character and if it is exempt income, delete the addition. Ground 11 is accordingly disposed of.”
We find no infirmity in the order of CIT(A), hence the same is confirmed. This issue of revenue’s appeal is dismissed.
The next issue in this appeal of revenue is against the order of CIT(A) deleting the addition of unexplained investment amounting to Rs.10 lacs. 14. We find from the facts of the case are that the assessee has made two separate investments in UTI Mutual fund i.e. UTI Folio No. 547238160377 of Rs.5,00,000/- and UTI Folio No.547238160402 of Rs.5,00,000/- during the FY on 28.08.2009 (record date being 31.08.2009). According to assessee and the factual position, this investment is duly reflected in the cash book and the same is disclosed. We find that the CIT(A) considering the explanation of the assessee that this investment is explained deleted the addition vide para 21 as under: “21. The first and foremost thing to check is as to whether this figures in the statement of affairs. I find that the sum is disclosed as invested on 28.08.2009 and redeemed on 22.10.2009 and the gain has been disclosed for taxation. Straight away the addition stands explained. The argument that only account payee draft/cheque is permissible in such a transaction has not much value as assessee is in possession of acknowledgment from UTI Mutual Fund by which cash was remitted in account of UTI Mutual Fund in Axis Bank, Asansol Bank on 28.08.2009 and 29.09.2009 amounting to Rs.5,00,000/- each.”
We find that this investment is duly reflected in the cash book and same is disclosed as the assessee has invested Rs. 5 lacs directly and remaining Rs. 5 lacs was invested through one agent Mr. Pravin Kumar. We are of the view that the entire investment of Rs.10 lac has been redeemed within the financial year and the source of investment is explained which came out of available cash as per cash book balance. We find no infirmity in the order of CIT(A) in deleting the addition and the order of CIT(A) is confirmed. This issue of revenue’s appeal is dismissed.
The last issue in assessee’s appeal is as regards to sustenance of addition of Rs.11,35,600/- being sale proceeds brought forward from opening stock. For this, assessee has raised following ground no.2:
6 & 2337/Kol/2013 Smt. Pinkey Prasad AY 2010-11 “2. For that on the facts of the case the Ld. CIT(A) was not legally justified in sustaining the addition of Rs.11,35,600/-, being the sale proceeds of brought forward opening stock, (of textile goods), sold during the year, and the addition may please be deleted.”
We have heard rival submissions and gone through facts and circumstances of the case. We find that the AO has made this addition on account of suppression of sale in view of statement of affairs for the FY 2008-09. According to AO, there was a stock in hand amounting to Rs.11,35,000/- in the hands of the assessee during the FY 2008-09 but the same was not available in FY 2009-10 relevant to this AY 2010-11. We find that the CIT(A) confirmed the addition by observing that this is no sale bills. The CIT(A) confirmed the addition vide para 17 and 18 as under: “17. When stock in trade is sold, the basic evidence is sale bill. If VAT is applicable then VAT return will be an added proof. Here the product is ladies garments and the opening stock value is claimed to be liquidated at the same value. This cash proceeds is claimed to be source for now investments.
I had considered the above. The primary requirement in regard to a sale transaction is sale bill. Before me it was conceded that there are no bills. Hence the availability of cash to explain new investment in FY 2009-10 stands unproved. Hence I uphold the addition made by Assessing Officer. The ground is dismissed.”
18. We find that the CIT(A) has not examined the submissions of the assessee wherein it was claimed that the assessee has shown an amount of Rs.1.20 lacs as commission in her statement of affairs as on 31.03.2010 but actually there was no such commission and these are misc. receipt received from relatives and friends. But subsequently assessee changed her stand and stated that the opening stock valued at Rs.11.35 lacs has been liquidated within the FY 2009-10 and sale proceeds has been realized and closing stock is nil. We find that none of the authorities below have examined these sales. Hence, we restore this issue back to the file of AO for fresh adjudication. This issue of assessee’s appeal is allowed for statistical purposes.
In the result, both the appeals of assessee and that of revenue are partly allowed for statistical purposes. Order pronounced in the open court on 29.04.2016 Sd/- Sd/- (M. Balaganesh) (Mahavir Singh) Accountant Member Judicial Member
Dated : 29th April, 2016 Jd. (Sr. P.S.)