ASSTT COMMISSIONER OF INCOME TAX, CIRCLE-2, PUNE, PMT BUILDING PUNE V. JAIPRAKASH PRAVINCHANDRA SHROFF, PUNE

ITA 1893/PUN/2024

AI Insights

The case involves an appeal by the Revenue against the order of the CIT(A)/NFAC, which had allowed the assessee's appeal and directed the deletion of an addition made by the Assessing Officer. The addition pertained to a substantial increase in the assessee's declared capital from the previous year, which was suspected to be unexplained income. The Assessing Officer had added the difference as unexplained cash credit under section 68 of the Income Tax Act, 1961, citing a data entry error by the assessee. The CIT(A) accepted the assessee's explanation, leading to the Revenue's appeal. The Tribunal found that the CIT(A) had not adequately verified the assessee's claims and had relied on unproduced documents, leading to the decision to remand the case for a detailed examination.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 474206 (ITAT-PUNE)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-03-2025
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: A
• Assessment Year: 2018-2019
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: AMOL KHAIRNAR
• Assessee Lawyers: V.L. JAIN
• Keywords: Unexplained cash credit; Earning of tax free income
• Section: 143(3); 143(2); 68

Judgement Text

" IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH “A”, PUNE BEFORE SHRI R. K. PANDA, VICE PRESIDENT AND SHRI VINAY BHAMORE, JUDICIAL MEMBER आयकर अपील सं. / ITA No.1893/PUN/2024 िनधाᭅरण वषᭅ / Assessment Year : 2018-19 ACIT, Circle-2, Pune. Vs. Jaiprakash Pravinchandra Shroff, 1215/2, Pankaj, Apte Road, Pune- 411004. PAN : ACEPS9112P Appellant Respondent आदेश / ORDER PER VINAY BHAMORE, JM: This appeal filed by the Revenue is directed against the order dated 16.07.2024 passed by Ld. CIT(A)/NFAC for the assessment year 2018-19. 2. The Revenue has raised the following grounds of appeal :- “1. Whether on the facts and circumstances of the case and law, the ld. CIT(A) is not justified taking the view that there has been apparent error in filing return of income without clearly rebutting the findings of the assessing officer? 2. Whether on the facts and circumstances of the case and law, the Ld. CIT(A) is justified in concluding that Rs.41,68,46,544/- is the correct capital balance whereas the assessee himself has declared Rs.77,38,41,557/- as his capital balance in his ITR without clear findings and reasoning. Revenue by : Shri Amol Khairnar Assessee by : Shri V. L. Jain Date of hearing : 16.12.2024 Date of pronouncement : 11.03.2025 ITA No.1893/PUN/2024 2 3. Whether on the facts and circumstances of the case and law, the Ld. CIT(A) is justified in concluding the proceedings without calling remand report or any input from the Assessing Officer. 4. The appellant craves leave to add to, amend and alter any of the above grounds of appeal.” 3. Facts of the case, in brief, are that the assessee is an individual and furnished his return of income on 30.10.2018 declaring total income of Rs.1,35,42,980/-. The case was selected for scrutiny on the issue of Share Capital/Other Capital and notice u/s 143(2) was issued to the assessee and the Assessing Officer requested to substantiate the huge increase in capital by a notice which is as under :- “Kindly substantiate the capital shown in your balance sheet as on 31.3.18 due to under mentioned reason. You have capital as per your ITR for AY 17 – 18 at Rs.34,41,35,317/- and you have earned Rs.2,63,75,812/- during the year under consideration. The total capital cannot exceed Rs.37,05,11,129/-. The maximum capital which you might have, as the revenue has not considered any expenses during year under consideration, which when deducted, capital would be less than Rs.37,05,11,129/- against which you have shown capital in ITR for AY 2018-19 at Rs.77,38,41,557/-. You are requested to substantiate difference between two figures failing which you are requested to clarify as to why the difference amount should not be added to your income as enhanced income as enhanced capital out of undisclosed income.” 4. In reply to above notice, the assessee submitted before the AO that his capital as at As at As per Business As per Personal 31-03-2017 34,41,35,317 39,65,63,516 31-03-2018 36,18,02,195 41,68,46,544 ITA No.1893/PUN/2024 3 5. And in the return for Asstt. Year 2017-18 only Business Balance sheet was feeded/ punched & personal Balance sheet was not feeded / punched. It was further submitted that while preparing return of income for Asstt. Year 2018-19 both the balance sheets seem to have been erroneously incorporated in the ITR resulting in duplication & therefore reflecting a huge increase in the capital. Accordingly, it was submitted that due to the mistake while furnishing return of income for Asstt. Year 2018-19, the capital as at 31-03-2018 as per personal balance sheet Rs.41,68,46,544/- and the capital as per business balance sheet Rs.36,18,02,195/- were added to-gather which resulted in duplication hence the capital was appearing at inflated figure. It was further admitted that some figures were incorrectly punched in the ITR for Asstt. Year 2018-19. It was therefore submitted that the Personal capital of Rs.77,38,41,557/- disclosed in the ITR for Asstt. Year 2018-19 should not be accepted & only Rs.41,68,46,544/- should have been accepted which also includes the capital of Rs.36,18,02,195/- related to business. Not being satisfied with the above explanation of the assessee, the Assessing Officer proceeded to add Rs.33,18,59,405/- [77,38,41,557 - 44,19,82,152] by observing as under :- ITA No.1893/PUN/2024 4 “The assessees' reply is per used. The assessee has admitted in his reply vide serial number 2 himself that the capital as on 31.03.18 should be 416846544 as per his personal balance sheet and Rupees 361802195 as per his business balance sheet due to increase in capital of Rupees 20283028 from the immediate previous Year which was respectively Rupees 396563516 and Rupees 344135317. The admittance of assessee is afterthought because of the fact that the assessee is guided by a qualified chartered accountant. When there was huge increase in capital it should have been doubted by the CA and then and there it should have been modified. The assessee did not even bother to revise the balance sheet after wrongly filing the same. When the issue was raised before the assessee he tried his best to explain his view and substantially reduced the capital in his reply only. The assessee filing return of income year to year and continue the same balances brought forwarded from earlier year. In the assessment year 17-18 the closing personal capital as on 31.3.17 has been shown that 396563516 and business capital 344135317. The assessee has filed schedule AL which signifies the asset and liability other than those declared in schedule A-BS. In schedule part A-BS the assessee business capital is Rupees 344135317 and capital shown in schedule AL is Rupees 77563807 which when added to the business capital it comes to rupees 421699124 whereas the assessee in his reply has taken the figure at Rupees 396563516. Therefore it is crystal clear that the assessee is trying his best to explain his capital without any locus standi. This contention further gets support from the fact that even if assessees' explanation is accepted his personal capital as on 31.03.18 is Rupees 416846544. In the assessment year 2019-20 the assessee has declared income of Rupees 13363590 and exempt income of Rupees 400 53352 which when added to his personal capital of Rupees 416646544 the capital comes to Rupees 470063486 against which assessee has shown his capital at Rupees 558658621 which is also not correct. Therefore in all circumstances assesses' explanation is not acceptable and the unexplained income in assessees case is determined as under- Business capital as on 31st March 17 344135317 Add personal capital other than above as declared in schedule AL 77563807 Add capital balance added during the year FY 17-18 20283028 Personal capital as on 31.03.18 441982152 The assessee has declared personal capital at Rs.773841557. Therefore the assessee has increased his capital by an amount of Rs.331859405 which is being added as unexplained cash credit u/s 68 of the I.T. Act, 1961. ITA No.1893/PUN/2024 5 Penalty u/s 271AAC(1) is being initiated of the I.T. Act, 1961. Assessed u/s 143(3) of the I.T. Act, 1961.” 6. After considering the reply of the assessee, Ld. CIT(A)/NFAC allowed the appeal and accordingly directed the Assessing Officer to delete the addition of Rs.33,18,59,405/- made by him by observing as under :- “8.3 In regard to substantiate the claim, the appellant also submitted the copy the balance sheet along with detailed annexure. The same has been perused and found to be in line with the appellant's clarification made before the AO regarding the apparent mistake while pumping the data in the ITR form. The appellant has also submitted the details of the personal Balance sheet and the same is reproduced as under: xxxxx 8.4 Apart from the same the appellant has also submitted detailed annexure towards the same which shows that the actual Capital as on 31.03.2018 is Rs. 41,68,46,544/- instead of Rs. 77,38,41,557/-. During the course of the assessment proceeding, the AO failed to reject the books of accounts (such as Balance sheet) submitted by the assessee. As checked with the assessment order, the AO has rejected the appellant's claim without even bringing any concrete evidence. The appellant has submitted the detailed clarification in regard to the apparent mistake made at the time of filing of appeal. Moreover, as checked from the ITR filed by the appellant for the AY 2019-20, the Capital is being offered at Rs. 55,86,58,621/- which again shows that the assessing the Capital at Rs. 77,38,41,557/- is not in line with the other years Capital. 8.5 In view of the above discussion, I found force in the appellant's contention and accordingly, the grounds of appeal is hereby allowed. Accordingly, the AO is directed to delete the addition made of Rs. 33,18,59,405/-/- considering the Capital at Rs.41,68,46,544/- for the year under consideration.” 7. It is this order against which the Revenue is in appeal before this Tribunal. ITA No.1893/PUN/2024 6 8. Ld. DR appearing from the side of the Revenue submitted before us that the order passed by Ld. CIT(A)/NFAC is unjustified. Ld. DR submitted before us that the assessee is an individual and not maintaining any regular books of accounts and they were never produced during the course of assessment proceedings even if maintained by him. It was further submitted that the case of the assessee was selected for scrutiny on the basis of addition of huge capital in comparison to capital shown in the income tax return for assessment year 2017-18. It was further submitted by Ld. DR that the assessee himself disclosed capital of Rs.34,41,35,317/- in the income tax return for assessment year 2017-18 and in the immediately succeeding period i.e. for assessment year 2018-19, the assessee declared his capital in the return of income at Rs.77,38,41,557/-. Accordingly, it is apparent that the capital of the assessee has increased with an amount of Rs.42,97,06,240/- in a period of one year only. Therefore, the case of the assessee was selected for scrutiny. When confronted the assessee submitted that upto to assessment year 2017-18 he was only disclosing his business balance sheet in the return of income and upto assessment year 2017-18 no personal balance sheet was disclosed in the return of income by him. But from assessment year 2018-19 i.e. period under consideration, the assessee has started to disclose his ITA No.1893/PUN/2024 7 personal balance sheet also in the return of income. Ld. DR further submitted that the assessee himself admitted before the Assessing Officer that while punching the data in the income tax return for assessment year 2018-19, the mistake has occurred and the figures of personal balance sheet which also includes the balances of business capital were merged together which resulted in this error. It was further submitted by Ld. DR that to verify the correctness of above statement made by the assessee, the Assessing Officer compared the figure provided by the assessee with the figures of income tax return for assessment year 2019-20 and it was discovered by the Assessing Officer that the capital shown by the assessee for assessment year 2019-20 was at Rs.55,86,58,621/- and which also does not matches with the contentions provided by the assessee since the income disclosed by the assessee for assessment year 2019-20 was only Rs.1,33,63,590/- plus exempt income of Rs.4,00,53,352/- which if added to his personal capital of Rs.41,68,46,544/- for assessment year 2018-19 the increased capital comes to Rs.47,00,63,486/- as against which the assessee has shown his capital at Rs.55,86,58,621/- for assessment year 2019-20. Accordingly, the contentions were rightly not accepted by the Assessing Officer and the addition was made. With regard to the order passed by Ld. CIT(A)/NFAC wherein the above ITA No.1893/PUN/2024 8 addition was directed to be deleted, Ld. DR submitted before the Bench that while deciding the ground no.2 at page 7 of his order, Ld. CIT(A)/NFAC has referred income tax return for assessment year 2019-20 but the same return was neither referred nor produced before him by the assessee. Ld. DR further submitted that the assessee in his submission made before Ld. CIT(A)/NFAC has submitted that the return of assessment year 2019-20 is not relevant since we are dealing with assessment year 2018-19 only. From the perusal of this reply submitted by the assessee before Ld. CIT(A)/NFAC it becomes crystal clear that the assessee has not produced any documents or return with relation to assessment year 2019-20 but Ld. CIT(A)/NFAC has referred the balance sheet furnished by the assessee for assessment year 2019-20. Therefore, it was pointed out by Ld. DR that the assessee himself has not shown his personal balance sheet in the return for assessment year 2017-18 and the balance sheet furnished for assessment year 2019-20 also does not match with the figures provided by the assessee there seems to be a series of errors committed by the assessee and without verifying these facts, the Ld. CIT(A)/NFAC has reached to the conclusion, even no remand report was called by Ld. CIT(A)/NFAC with regard to the return of income for assessment year 2019-20 on the basis of which the Assessing ITA No.1893/PUN/2024 9 Officer arrived to the conclusion that there is inconsistency in the figures of capital produced by the assessee. Since it is also evident from the reply of the assessee that he has not produced any documents in connection with assessment year 2019-20 still Ld. CIT(A)/NFAC has based his finding on the basis of return of income for assessment year 2019-20. It was further submitted by Ld. DR that the Assessing Officer has very well demonstrated that neither of the balance sheet matches with the contentions raised by the assessee since the balance sheet of assessment year 2017-18 does not contain the personal balance sheet figures the balance sheet of assessment year 2019-20 does not math with the figures of assessment year 2018-19 as disclosed by the assessee. Therefore, it was contended by Ld. DR before the Bench that Ld. CIT(A)/NFAC has committed serious error in coming to the conclusion that the figures of capital produced by the assessee in assessment year 2018-19 are correct. Ld. DR also pointed out that the assessee himself has admitted that the figures of long term investments, Govt. and other securities, the amount of loans and advances, deposits etc were not correct but Ld. CIT(A)/NFAC has not enquired anything from the assessee and accepted the contentions of the assessee. Ld. DR also submitted that the figures of personal balance sheet were never produced before the ITA No.1893/PUN/2024 10 Department up to the assessment year 2017-18 and according to the assessee personal balance sheet was produced before the Department for the first time for assessment year 2018-19 but the assessee never substantiated the figures which were mentioned by him. Ultimately, it was contended that even if for the time being we accept that there was some data punching error, but the assessee was required to substantiate the figures with the help of proper evidences that same were acquired through the legitimate income and does not represent any unexplained credit u/s 68 of the IT Act. Since this enquiry and verification was not made by Ld. CIT(A)/NFAC, & even no remand report was called for from the AO the order passed by Ld. CIT(A)/NFAC deserves to be cancelled and that the order of Assessing Officer may kindly be upheld. 9. Ld. AR appearing from the side of the assessee submitted before us that there was no big mistake since it was simply a data punching error, the Assessing Officer was not justified in making the addition u/s 68 of the IT Act. Ld. AR reiterated the submission made before Ld. CIT(A)/NFAC and requested to confirm the order passed by him. 10. We have heard Ld. Counsels from both the sides and perused the material available on record. In this regard, we find that the ITA No.1893/PUN/2024 11 assessee is an individual and upto assessment year 2017-18 the balance sheet was showing only capital related to business only but from assessment year 2018-19, the assessee started to disclose business capital as well as personal capital in the balance sheet. The case of the assessee was selected due to the reason that the capital balance appearing in the balance sheet for assessment year 2017-18 was only Rs.34,41,35,317/- whereas the capital balance appearing in the balance sheet for assessment year 2018-19 was disclosed at Rs.77,38,41,557/-, therefore, apparently an addition of Rs 42,97,06,240/- was made in the capital. The assessee himself admitted before the Assessing Officer that the capital balance shown in the income tax return was result of data punching error while furnishing the return of income. It was further explained that the personal balance of capital includes the business capital balance also and only personal balance of capital was required to be disclosed in the return of income but due to mistake both the balances were clubbed together and the balance sheet with increased capital was filled in the income tax return. The reply was considered by the Assessing Officer and the figures were further compared with that of the balance sheet of subsequent assessment year i.e. for assessment year 2019-20. The Assessing Officer again found that the balance disclosed by the assessee in ITA No.1893/PUN/2024 12 the balance sheet for assessment year 2019-20 also does not match with the explanation of the assessee. Therefore, he was of the view that the balance sheet filled by the assessee himself and the explanation is nothing but an afterthought and resultantly after considering the current years income the addition of Rs.33,18,59,405/- was made as unexplained cash credit u/s 68 of the IT Act. Ld. CIT(A)/NFAC in his order accepted the contentions raised by the assessee and directed the Assessing Officer to delete the addition of Rs.33,18,59,405/- and accepted the capital balance as proposed by the assessee at Rs.41,68,46,544/- for the period under consideration. 11. In this regard, we find that admittedly the assesse himself admitted the mistake in data punching. Secondly, the assessee himself admitted that there was error in figures mentioned in the balance sheet with regard to the figures of long term investments, Govt. and other securities, the amount of loans and advances, deposits etc were not correct but Ld. CIT(A)/NFAC has neither enquired anything from the assesse nor called the remand report from the AO with regard to the figures claimed to be wrongly reported in the return by the assesse. It was the contention of Ld. DR that the figures of personal balance sheet were never produced before the Department up to the assessment year 2017-18 and ITA No.1893/PUN/2024 13 according to the assessee personal balance sheet was produced before the Department for the first time for assessment year 2018-19 but the assessee never substantiated the figures which were mentioned by him. According to Ld. DR, the assessee was required to substantiate the figures with the help of proper evidences that same were acquired through the legitimate income and does not represent any unexplained credit u/s 68 of the IT Act. It was also the contention of Ld. DR that the facts & figures with regard to Asstt. Year 2019-20 were never produced before Ld. CIT(A)/NFAC but without verifying the same they were relied on by Ld. CIT(A)/NFAC for allowing the relief to the assesse, whereas the same were used by the AO to demonstrate the inconsistency in the contentions of the assessee. Since this enquiry and verification was not made by Ld. CIT(A)/NFAC, & even no remand report was called for from the AO, we find force in the arguments of the Ld. DR and accordingly considering the totality of the facts of the case & without going into merits of the case, we deem it appropriate to set-aside the order passed by Ld. CIT(A)/NFAC & remand the matter back to him with a direction to decide the issue afresh in the light of our above observations made in the preceding paragraphs after providing reasonable opportunity of hearing to the assesse. ITA No.1893/PUN/2024 14 12. In the result, the appeal filed by the Revenue is partly allowed. Order pronounced on this 11th day of March, 2025. Sd/- Sd/- (R. K. PANDA) (VINAY BHAMORE) VICE PRESIDENT JUDICIAL MEMBER पुणे / Pune; ᳰदनांक / Dated : 11th March, 2025. Sujeet आदेश कᳱ ᮧितिलिप अᮕेिषत / Copy of the Order forwarded to : 1. अपीलाथᱮ / The Appellant. 2. ᮧ᭜यथᱮ / The Respondent. 3. The Pr. CIT concerned. 4. िवभागीय ᮧितिनिध, आयकर अपीलीय अिधकरण, “A” बᱶच, पुणे / DR, ITAT, “A” Bench, Pune. 5. गाडᭅ फ़ाइल / Guard File. आदेशानुसार / BY ORDER, // True Copy // Senior Private Secretary आयकर अपीलीय अिधकरण, पुणे / ITAT, Pune. "