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Income Tax Appellate Tribunal, BENCH ‘A’ KOLKATA
Before: Hon’ble Shri N.V.Vasudevan, JM & Shri M.Balaganesh, AM ]
ORDER PER N.V.VASUDEVAN, JM:
& 483/Kol/2011: These are appeals by the Revenue against two orders both dated 20.1.2011 of CIT(A) XXXVI, Kolkata, relating to AY 2005-06. Since the issue involved in both the appeals are identical and arise out of identical facts and circumstances, we deem it convenient to pass a common order.
The Assessee in Assessee in are individuals. They are partners of a firm by name M/S.Ma Sharadha Rice Mill. The said firm had a bank account with United Bank of India, Midnapur Branch. In the Balance Sheet filed with the bank by the firm an investment of Rs.27,40,000 and Rs.20,00,000 was shown as having been made by the Assessee in ITA No.482/Kol/11 & 483/Kol/11 respectively. In the Balance sheet filed along with ITA Nos.482 & 483/Kol/2011 – Shri Chittaranjan Maity & Smt. Anita Maity,A.Y.2005-06 the return of income the Assessee in ITA No.482/Kol/11 had not shown any such investment and the Assessee in ITA No.483/Kol/11 had shown only Rs.3,00,000/-. The AO called upon the Assessees to show cause as to why the sum of Rs.27,40,000 and Rs.17,00,000 respectively be not added as unexplained investment in the case of the Assessee in ITA No.482/Kol/11 & 483/Kol/11 respectively.
2.1. The Assessee pleaded before the AO that to avail bank loan (cash credit) facility for the firm M/s.Ma Sharadha Rice Mill, the firm was compelled to increase the stock value. To tally the balance sheet corresponding capital accounts were increased. Therefore there was no investment made by either of the Assessees as is shown in the balance sheet submitted to the Bank.
The AO rejected the plea of the Assessees and based on the balance sheet filed by the firm with the bank added a sum of Rs.27,40,000 and 17,00,000 in the assessment of Assessee in & 483/Kol/11 respectively, as unexplained investment.
On appeal by the Assessee, the CIT(A) deleted the addition made by the AO in the case of both the Assessees. In doing so the CIT(A) found that the firm had filed a balance sheet along with the return of income for the corresponding AY in which no such investment as was found in the balance sheet filed with the bank was shown. The CIT(A) was of the view that the said balance sheet filed with the bank could not be the basis to make any addition. The CIT(A) also took note of the fact that in the assessment of the firm addition was made on account of difference between the figures of closing stock submitted to the bank and the one submitted along with the return of income. That addition was deleted by the CIT(A). The relevant observation of the CIT(A) in this regard in the case of both the Assessees was same and the same in the case of Assessee in reads thus: “7. The two balance sheets of appellant's partnership firm M/s. Ma Sarada Rice Mill, one filed with the Department and another with the bank makes interesting readings. ITA Nos.482 & 483/Kol/2011 – Shri Chittaranjan Maity & Smt. Anita Maity,A.Y.2005-06 The stock in the balance sheet filed with the bank was increased by Rs.l.30 crores compared to the stock shown in the balance sheet filed along with the return. Correspondingly, 'capital introduction' of all four partners including appellant's was shown to the extent of Rs.84.30 lakhs and some other adjustments were also made to match increase of stock. The AR of the appellant has brought to my notice that in the case of M/s. Ma Sarada Rice Mill, an addition of Rs.1 ,30,27, 152/- was made by the AO as undisclosed investment in stock but the Ld. CIT(A) deleted the said addition by citing some judicial pronouncements on identical facts and with the final observations as follows: " In the appellant's case books of accounts and other evidences presented by the appellant indicates that the closing stock disclosed in the P&L Account is correct stock. This stock is verified by the F & S Department and is duly recorded in day to day stock register maintained by the appellant. There is a merit in appellant's contention that the stock value disclosed to the bank is inflated for the purpose of obtaining higher credit limit and stock is not verified by bank . ., view of the decision cited above, addition cannot be made based upon the statement made to the . bank without further substantiating evidences regarding unaccounted stock. The difference in the closing stock is not liable to be assessed as the existence of unaccounted stock is not established with evidence. The AO is directed to delete the addition of Rs.l,30,27,152/-."
Thus, the balance sheet of appellant's firm M/s. Ma Sarada Rice Mill submitted to the bank for the purpose of cash credit facility has not been accepted as correct by the CIT(A) and deleted the addition made towards undisclosed investment in stock. Therefore, the addition made y the AO, i.e. Rs.27,40,000/- on account of undisclosed capital introduction, on the basis of an incorrect balance sheet, ought to be deleted. The AO is directed to delete the addition of Rs.27,40,000/-.”
Aggrieved by the order of the CIT(A), the revenue has preferred the present appeals before the Tribunal.
At the time of hearing of the appeal, it was brought to our notice by the learned counsel for the Assessees that the order of the CIT(A) in the case of the firm has since been confirmed by the Tribunal. A copy of the order of the Tribunal and the relevant CIT(A)’s order in the case of the firm was filed before us and placed on record. The learned DR relied on the order of the AO.
We have considered the rival submissions. We are of the view that in the light of the findings of the Tribunal in the case of the firm, it becomes clear that the value of closing stock was increased by the firm to avail of credit facility from the bank and & 483/Kol/2011 – Shri Chittaranjan Maity & Smt. Anita Maity,A.Y.2005-06 correspondingly the liability side of the balance sheet was also increased by showing capital contribution by the two assessees in these appeals. In fact there was no such capital contribution by any of the Assessees to the firm. In the circumstances, there was no question of any explanation regarding any investment by the two Assessees that arises for consideration. Consequently the impugned additions made by the AO was rightly deleted by the CIT(A) in the case of both the Assessees. We are of the view that the orders of CIT(A) are just and proper and call for no interference. Consequently both the appeals are dismissed.
In the result, the appeals are dismissed. Order pronounced in the Court on 02.12.2015.
Sd/- Sd/- [M.Balaganesh ] [ N.V.Vasudevan ] Accountant Member Judicial Member Dated : 02.12.2015. [RG PS] Copy of the order forwarded to: 1.Shri Chittaranjan Maity, At-Sujaganj, Midnapore, P.O.Midnapore, Dist.Paschim Midnapore-721101.
2. Smt.Anita Maity, At-Sujaganj, Midnapore, P.O.Midnapore, Dist.Paschim Midnapore-721101.
2. I.T.O., Ward-1(3), Midnapore.
3. CIT(A)-XXXVI, Kolkata 4. CIT-XIX, Kolkata.