The ITO, Ward-7(2)(2), Ahmedabad V. EAM FRUITS LLP, Ahmedabad

ITA 1835/AHD/2019

• Counselvise Citation: [2022] 105 COUNSELVISE.COM (IT) 0739 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 5 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-05-2022
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2016-2017
• Appeal Filed On: 09-12-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: BIREN SHAH
• Keywords: Unexplained cash credit; Gift; Opportunity of being heard; Additional evidence; Reasonable cause; Set aside
• Section: 131; 68; 144; 143(3); 142(1); 201; 251; 143(2); 208; 43; 20

Judgement Text

आयकर अपीलीय अिधकरण, अहमदाबाद ᭠यायपीठ IN THE INCOME TAX APPELLATE TRIBUNAL, ‘’A’’ BENCH, AHMEDABAD (CONDUCTED THROUGH VIRTUAL COURT AT AHMEDABAD) BEFORE SHRI WASEEM AHMED, ACCOUNTANT MEMBER And SHRI SIDDHARTHA NAUTIYAL, JUDICIAL MEMBER आयकर अपील सं./ITA No.1835/AHD/2019 िनधाᭅरण वषᭅ/Asstt. Year:2016-2017 I.T.O, Ward-7(2)(2), Ahmedabad. Vs. EAM Fruits LLP, 23, New Fruit Market, Naroda Road, Naroda, Ahmedabad-380025. PAN: AADFE6711B (Applicant) (Respondent) Revenue by : Shri Sudhendu Das, Sr. D.R Assessee by : Shri Biren Shah, A.R सुनवाई कᳱ तारीख/Date of Hearing : 19/05/2022 घोषणा कᳱ तारीख /Date of Pronouncement: 31/05/2022 आदेश/O R D E R PER WASEEM AHMED, ACCOUNTANT MEMBER: The captioned appeal has been filed at the instance of the Revenue against the order of the Learned Commissioner of Income Tax (Appeals)-7, Ahmedabad, dated 30/09/2019 arising in the matter of assessment order passed under s. 143(3) of the Income Tax Act, 1961 (here-in-after referred to as "the Act") relevant to the Assessment Year 2016-2017. ITA no.1835/AHD/2019 A.Y. 2016-17 2 2. The Revenue has following grounds of appeal: 1. The Ld.CIT(A) erred in law and on facts in admitting fresh evidence in violation of Rule 46A of the I.T. Rules. 1.1 The Ld.CIT(A) erred in law and on facts by admitting fresh evidences without bringing anything concrete on record but on the basis of bald and unverified assertions made by the appellant. 1.2 The assessee is having more than Rs.132 crore turnover in fruits and the assertions made before Ld.CIT(A) that the accounts were managed by only one accountant aged 65 years and whose alleged resignation rendered them helpless & clueless is unbelievable. 1.3 It is also quite unbelievable assertion that the partners of the assessee firm or any of their employees could not submit regular and routine details during the I.T. assessment proceedings or they could not hire consultant to do their ordinary I.T. work of furnishing of details. 1.4 That the Ld. C1T(A) erred in law by not appreciating that the assessee already had the benefit of the auditor who had audited its accounts and, therefore, his service would have been available. 2. The Ld. CIT(A) erred in law and on facts in deleting the addition made on account of unexplained cash credit u/s 68 of the I.T. Act, 1961 amounting to Rs.78,50,469/- though the assessee was not able to prove the genuineness of these transactions. 3. The Ld. CIT(A) erred in law and on facts in deleting the addition made on account of unexplained Unsecured loan of Rs.47,50,000/- though the assessee was not able to establish the identity, credit worthiness and genuineness that the same was procured from Shermeen S. Memon. 4. The Ld.CIT(A) erred in law and on facts in deleting the addition made by the AO of Rs.15,67,530/- (being difference in Cash and Bank Balance). 5. The Ld.CIT(A) erred in law and on facts in deleting the addition made by the AO of Rs.1,58,36,099/- (being difference in the balance of Current Liabilities). 6. That the department craves, leave to add or alter any further grounds of appeal before or during the course of hearing. 3. The first issue raised by the Revenue is that the learned CIT-A erred in accepting the additional evidences in contravention to the provisions of rule 46A of the Income Tax Rules. 4. The brief fact are that the assessee is a LLP and engaged in the business of wholesale trading of fruits. The assessee in the year under consideration filed return of income dated 30 th November 2016 declaring total income of Rs. 5,02,720/. The ITA no.1835/AHD/2019 A.Y. 2016-17 3 return of the assessee was selected for complete scrutiny vide notice issued under section 143(2) of the Act dated 06 th July 2017. Consequently, there were issued several notices under section 142(1) of the Act. The assessee failed to make any response to the notices except responding to the notice dated 28 th February 2018 where only extension was sought. Thus the AO in absence of any co-operation from the assesse finalized the assessment under section 144 of the Act and assessed the income at Rs. 4,19,77,920/- against the return income of Rs. 5,02,720/- only. 5. The aggrieved assessee filed an appeal before the learned CIT-A and furnished the evidences first time in the appellate proceeding. The assessee claimed that the notices were issued through e-mail which were not noticed by it. As such, the accountant who was looking after the tax affair has resigned due to old age. When notices were physically served to the partner of the assessee LLP, thereafter it was requested to the old accountant to look after the proceeding. Accordingly vide letter dated 10 th December 2018 it had furnished relevant document sought by the AO in physical form as well as uploaded on ITBA portal. The accountant also personally visited the office of the AO dated 24 th December 2018 where he came to know that final show cause notice through e-mail was issued as on 21 st December 2018, thus the accountant prepared all the required document and submitted through email as on 26 th December 2018. However, the AO without considering the submission passed the assessment order dated 26 th December 2018. 5.1 The assessee accordingly contended that it was prevented by sufficient cause to furnish the necessary document during the assessment proceeding. Therefore additional evidences in pursuance to the provision of Rule 46A of the Income Tax Rule should be accepted. 6. The AO in remand report objected the admission of additional evidences and contend that there were sufficient opportunity provided to the assessee to file necessary documents and explanation during the assessment proceeding but the ITA no.1835/AHD/2019 A.Y. 2016-17 4 assessee without any cogent reason failed to comply the notices issued upon it. The explanation furnished by the assessee for non-cooperation during the assessment proceeding and filing of additional evidence is not covered under the provision of Rule 46A of the Income Tax Rule. 7. In rejoinder the assessee reiterated its submission made earlier in this regard. 8. The learned CIT-A after considering the facts in totality accepted the additional evidences furnished under rule 46A of the Income Tax Act Rules by observing as under: On consideration of entire facts it is observed that the Appellant has submitted all the necessary evidences in support of its claim during the course of Appellate Proceedings and requested to admit the same before passing Appellate Order. It is observed that though there was non-compliance on part of appellant LLP, the reasonable cause is submitted wherein it is explained that the person who was handling the income tax matter has resigned during the course of assessment proceedings. When their old accountant rejoined the office of Appellant Firm, it was having less than two days' time to prepare the reply and copy of such reply was filed through e-mail on 25 ffi December, 2018 i.e. the date on which the order was passed. As appellant was not having proper accountant or consultant to handle the income tax matter and there is nothing on record to prove that similar non-compliances are made in the past, it is held that there was reasonable explanation of Appellant before not submitting the evidences during the course of Assessment proceedings and accordingly to provide natural justice to Appellant the additional evidences filed by the Appellant are accepted. The Hon'ble Gujarat High court in the case of CIT VS Dharmdev Finance Pvt Limited 43 Taxman.com 395 has held that "Where Commissioner (Appeals) before admitting fresh evidence, had called for remand report from Assessing Officer and full opportunity was provided to both parties, no interference with Commissioner (Appeals)’s order was called for.” The Hon’ble Gujarat High court in the case of CIT Vs kamlaben Sureshchandra Bhatti 44 taxman.com 459 has held that “Where Commissioner (Appeals) allowed assessee to produce additional evidence after calling remand report and permitting Assessing Officer to comment on such additional evidence, said order of Commissioner (Appeals) did not require any interference.” 9. Being aggrieved by the order of the ld. CIT-A, the Revenue is in appeal before us. 10. The learned DR before us submitted that the learned CIT-A erred in accepting the additional evidences in contravention to the provisions of rule 46-A of Income ITA no.1835/AHD/2019 A.Y. 2016-17 5 Tax Rule. Therefore, the appeal of the assessee should be set aside to the AO for fresh adjudication. 11. On the other hand learned AR before us filed paper book running from pages 1 to 201 and submitted the learned CIT-A has adjudicated the appeal filed by the assessee after calling the remand report from the AO. Thus it is implied that the opportunity of being heard was rendered to the AO in pursuance to the provisions of rule 46A of income tax rules. Hence, there was no violation of the provisions of income tax rule was as alleged by the Revenue. 12. We have heard the rival contention of both the parties and perused the materials available on record. It is an admitted fact that the learned CIT-A has called for the remand report from the AO. However, the AO in the remand report objected on the admission of the additional evidences filed by the assessee before the learned CIT-A. However, we note that the learned CIT-A admitted the additional evidences filed by the assessee after placing reliance on the judgment of Hon’ble Gujarat High Court in the case of CIT vs. Kamlaben Sureshchandra Bhatti 44 taxmann.com 459 wherein it was held as under: 3. With respect to first issue of admission of additional evidence, we notice that the CIT [A] recorded that the notice of hearing issued by the Assessing Officer on 31st October 2011 was received by the assessee on the date of hearing itself. It was therefore that the assessee could not produce necessary evidence on such date. When subsequently, he attended the office of the Assessing Officer on 25th November, 2011 with necessary evidence, he learnt that the order of assessment was already passed on 21st November, 2011. It was on this ground that the CIT [A] permitted additional evidence to be produced before him. While doing so, he also called remand report from the Assessing Officer. 12.1 The facts of the above case are identical to the facts of the case on hand. Therefore respectfully following the principles laid down by the Hon’ble Gujarat High Court in the case cited above, we hold that the revenue erred in objecting the admission of the additional evidences. In view of the above, we do not find any infirmity in the order of the learned CIT-A and accordingly we uphold the same. Hence the ground of appeal of the revenue is hereby dismissed. ITA no.1835/AHD/2019 A.Y. 2016-17 6 13. The next issue raised by the Revenue in ground Nos. 2 & 3 is that learned CIT-A erred in deleting the addition made under section 68 of the Act on account loan which was held as unexplained cash credit. 14. The AO from Form-3C of audit report found that the assessee during the year received loans for Rs. 78,50,469/- from 7 person which were squared up during the year. Likewise loan amount of Rs. 47,50,000/- was received from Smt. Shermeen Samir Menon which was not squared up during the year. The AO in absence of satisfactory explanation and evidences to verify the identity of creditor, genuineness of transaction and credit worthiness of the creditor held the amount of loan for Rs. 78,50,469/- and Rs. 47,50,000/- being squared up loan and non-squared up loan as unexplained cash credit under section 68 of the Act. 15. Aggrieved assessee preferred an appeal before the learned CIT-A 16. The assessee before the learned CIT-A in support of genuineness of loan transaction from 7 person which were squared up during the year furnished copy of PAN, statement of income, ITR acknowledgment, ledger copy in its book and contra ledger, bank statement of lender and copy of reply filed by one the lender namely Devidas G Ramani before AO in response to notice issued under section 131 of the Act. The assessee accordingly claimed that it had discharged its onus by the furnishing the necessary document to establish identity of lender, genuineness of transaction and credit worthiness of the lender. Further, the loans received were repaid during the year and all the transaction of accepting and repaying the loan have been routed through banking channel. Therefore the genuineness of the loan transaction cannot be doubted. 16.1 With regard to the loan amount of Rs. 47.5 lakh credited from Smt. Shermeen Samir Menon furbished copy of ITR, ledger, and bank statement. The assessee submitted that she is wife of one of partner namely Samir Memon. ITA no.1835/AHD/2019 A.Y. 2016-17 7 16.2 The AO in remand with respect to loan of Rs. 78,50,469/- credited from 7 person which were squared during the year found that proof of filing of ITR by one of lender namely M/s DR Fabrics from whom loan amount of Rs. 45,688/- credited was not submitted. Further on perusal of ITR of remaining 6 lenders it was found that income declared were not incommensurate with the amount of loan provided. Thus, the assessee failed to establish the credit worthiness of the lender. With regard to the loan from Smt. Shermeen Samir Menon, there was not found any deficit but raised doubt on low income declared by her. 16.3 The assessee in rejoinder submitted that the AO without pointing any defect in the preliminary document and without conducting enquiring or bringing contrary materials doubted the credit worthiness of the lender. It was the onus of the AO to conduct enquiry to bring contrary materials on record. But the AO merely observing that income declared by the lender is less than the amount advanced reached to the conclusion which is wrong and arbitrary as credit worthiness of the person not merely depends on the income declared in the return. The assessee further contended that the amount of loan was repaid during the year. Therefore, in view of judgment of Hon’ble jurisdictional High court of Gujarat in case of CIT vs. Ayachi Chandrashekhar Narsangji reported in 42 taxmann.com 251 the genuineness of loan transaction cannot be doubted. 17. The learned CIT-A after considering the facts in totality deleted the addition made by the AO by observing as under: 13.3 It is observed that appellant has duly submitted documentary evidences as envisaged in Section 68 of the Act. Even the depositors have duly confirmed these transactions. There is nothing on record to prove that cash credit received during the year represents undisclosed income of the appellant. The AO in the Remand Report has not made any adverse remark regarding loan taken by appellant except stating that depositors have not offered substantial income in their return of income. However, this contention of AO cannot be accepted because amount of loan and income declared by depositors does not have any direct nexus and it can be proved that merely because depositor is offering meagre income or lower income in the. opinion of AO, loan taken by appellant become non-genuine. Even all these loans are squared off during the year which is elaborately discussed in subsequent paras hence it is not the case that amount given as loan to appellant is outstanding at year end ITA no.1835/AHD/2019 A.Y. 2016-17 8 and depositor has no source to give such loan. In some of the cases, loan is taken for merely two-three days or ^duration of loan is even less than one year. When the depositor is assessed to tax they are confirming these transactions with appellant, addition under Section 68 cannot be made. It is also observed that during the course of Appellate Proceedings, appellant has also submitted copy of letter, dated 5 th December, 2018 filed by depositor being Devidas G. Ramani (paper book page No. 128) to Assessing Officer on very same date and from this party appellant has received loan of Rs.5,50,000 is received by appellant. Similar letter was also filed by DaulatramHarjani on 10 th December, 2018 which is submitted at paper book page No. 161 and this letter clearly states that copy of 1TR-V is also filed by depositor with Assessing Officer in assessment proceedings. Thus, observation of AO in the Remand Report that copy of return of income filed by depositor is not available cannot be accepted. So far as loan received from D.R. Fabrics is concerned, it is observed that during the year appellant has taken very meagre loan of Rs. 45,688. The appellant ; has taken loan of Rs.4.96 lacs in earlier assessment year and this entire loan was repaid in current year. When AO is not disputing the opening balance and repayment made in current year, loan taken during the year which is representing only interest payment, cannot be subject matter of addition under Section 68 of the Act only on the ground that return of income qf depositor is not available. It is observed that major loan is received from M.P. Traders for Rs.51,68,781. The appellant has made frequent transactions with this concern which include receipts and payments at multiple level and when AO is accepting entire repayment to be correct, addition under Section 68 cannot be made only for credits appearing in bank account when other details are already on record of AO which are sufficient to prove the genuineness of the transactions as envisaged in Section 68 of the Act. Thus in the light of above facts and decision of Jurisdictional High Court as well as Supreme Court it is held that the Appellant has submitted all the relevant evidences during the course of Appellate Proceedings to discharge onus cast upon u/s 68 of the Act and accordingly addition towards unsecured loan is required to be deleted. 13.4 Further on perusal of the evidences submitted by the Appellant it is observed that the loans received during the year under consideration in respect of above parties have been squared up during the year under consideration and accordingly no addition towards unexplained cash credit is justified u/s 68 of the Act. It is held that the funds received from the lender are used for making repayment of loan and considering such fact the addition towards unexplained cash credit is not justified once it is observed that the loan received during the year under consideration have been squared up. The case of the Appellant is squarely covered by following decision of Jurisdictional high court: XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX 14.2 It is observed that AO has not accepted the explanation of appellant only on the ground that depositor is not offering substantial income. If the Assessing Officer has any doubt regarding the genuineness of transaction than he must have made inquiry under section 133(6) of the Act. In case of doubt Assessing Officer must have carry out investigation from the parties to unsecured loan. In the present case the Assessing Officer has not provided any evidences which demonstrates that the evidences provided by Appellant are not sufficient to explain the genuineness of transaction u/s 68 of the Act and in the absence of such concrete evidences no disallowance towards unexplained cash credit is justified as the primary onus u/s 68 is duly discharged by the Appellant. The case of the Appellant is squarely covered by following decisions of high courts/ supreme court: 18. Being aggrieved by the order of the learned CIT-A the Revenue is in appeal before us. ITA no.1835/AHD/2019 A.Y. 2016-17 9 19. The learned DR before us vehemently supported the stand of the AO by reiterating the findings contained in the assessment order orders which we have already adverted to in the preceding paragraph. Therefore we are not repeating the same for the sake of brevity. 20. On the other hand learned AR submitted that the amount of loan received by it was subsequently repaid. Likewise, all the documents such as identity and creditworthiness of the parties and genuineness of the transactions were furnished. As per the learned AR, the impugned amount of loan cannot be treated as unexplained cash credit as provided under section 68 of the Act. The learned AR vehemently supported the order of the learned CIT-A. 21. We have heard the rival contentions of both the parties and perused the materials available on record. The provision of section 68 of the Act fastens the liability on the assessee to provide the identity of the lenders, establish the genuineness of the transactions and creditworthiness of the parties. These liabilities on the assessee were imposed to justify the cash credit entries under Section 68 of the Act by the Hon’ble Calcutta High Court in the case of CIT Vs. Precision Finance (P) Ltd. reported in 208 ITR 465 wherein it was held as under: “It was for the assessee to prove the identity of the creditors, their creditworthiness and the genuineness of the transactions. On the facts of this case, the Tribunal did not take into account all these ingredients which had to be satisfied by the assessee. Mere furnishing of the particulars was not enough. “ 21.1 Now first we proceed to understand the identity of the party. The identity of the party refers existence of such party which can be proved based on evidences. As such the identity of a party can be established by furnishing the name, address and PAN detail, bank details, ITR etc. 21.2 The next stage comes to verify the genuineness of the transaction. Genuineness of transaction refers what has been asserted is true and authentic. A genuine transaction must be proved to be genuine in all respect not merely on a ITA no.1835/AHD/2019 A.Y. 2016-17 10 piece of a paper. The documentary evidences should not be used as a mask to cover the actual transaction or designed in a way to present the transaction as true but same is not. Genuineness of transaction can be proved by submitting confirmation of the party along details of mode of transaction but merely showing transaction carried out through banking channel is not sufficient. As such the same should also be proved by circumstantial surrounding evidences as held by the Hon’ble supreme court in case of Durga Prasad More reported in 82 ITR 540 and in case of Smt. Sumati Dayal reported in 214 ITR 801. 21.3 The last stage comes to verify the creditworthiness of the parties. The term creditworthiness as per Black Law Dictionary refers as: "creditworthy, adj. (1924) (Of a borrower) financially sound enough that a lender will extend credit in the belief default is unlikely; fiscally healthy- creditworthiness.” 21.4 Similarly in The New Lexicon Webster's Dictionary, the word "creditworthy" has been defined as under:- "creditworthy, adj. of one who is a good risk as a borrower." 21.5 It the duty of the assessee to establish that creditor party has capacity to advance such loan and having requisite fund in its books of account and banks. The capacity to advance loan can be established by the showing sufficient income, capital and reserve or other fund in the hands of creditor. It required by the AO to find out the financial strength of the creditor to advance loan with judicious approach and in accordance with material available on record but not in arbitrary and mechanical manner. 21.6 In the light of the above discussion, we proceed to adjudicate the issue in hand. With respect to the identity of the party, we find that the AO in his remand has given categorical finding that the assessee has furnished the details such as copy of ledger account, bank statements, income tax return, etc. From the above, ITA no.1835/AHD/2019 A.Y. 2016-17 11 there remains no doubt that the identity of the loan parties is not in disputed, as it has been proved beyond doubt. 21.7 With respect to the genuineness of transaction, we note that the assessee has submitted that all the transaction are carried out through banking channel and in support has furnished the copy of bank statement showing the transaction and the same were transferred out of fund available in the bank account. It is also pertinent to note the AO on remand report does not doubt the genuineness of fund available in the bank of the lender. In the given facts and circumstances, the genuineness of the transaction cannot be doubted, 21.8 Coming to the third condition the creditworthiness of the lender. The AO held that the credit worthiness of the lender has not been established merely on the basis that income declared by the lender are not incommensurate to the amount of loan advance by them. We are of the considered view that amount of income declared in return of income may be important ingredient to decide the creditworthiness but same solely cannot be a criteria. It is quite possible that one party in particular has earned less income but have accumulated considerable fund out of previous earning or may have other assets or fund from loan or gift or any other sources which are not part of income declared in return. The AO has not carried out necessary examination to establish that the lender has not the capacity to lend the amount to the assessee. Therefore in absence of necessary examination the primary evidences submitted by the assessee to establish credit worthiness cannot be rejected 21.9 Be that as it may be, the undisputed fact is that the amount of loan received by the assessee was refunded to the loan parties. It implies that the assessee was not the beneficiary of the loan received by it as alleged by the AO. The loan has been repaid by the assessee in the year under consideration itself except one party being wife of partner of assessee LLP, whose loan was repaid in subsequent year, therefore, it is difficult to hold that the assessee was the ultimate beneficiary of the ITA no.1835/AHD/2019 A.Y. 2016-17 12 impugned amount. Thus, we can assume that the impugned transaction was the business transactions between the assessee and the loan parties. We also feel pertinent to refer the judgment of the Hon’ble Gujarat high court in case CIT vs. Ayachi Chandrashekhar Narsangji reported in 42 taxmann.com 251 where it was held as under: It is required to note that as such an amount of Rs. 1,00,00,000 vide cheque No. 102110 and an amount of Rs. 60 lakhs vide cheque No. 102111 was given to the assessee and out of the total loan of Rs. 1.60 crores, Rs. 15 lakhs vide cheque no. 196107 was repaid and therefore, an amount of Rs. 1,45,00,000 remained outstanding to be paid to IA. It has also come on record that the said loan amount has been repaid by the assessee to 'IA' in the immediately next year and the Department had accepted the repayment of loan without probing into it. In the aforesaid facts and circumstances of the case, when the Tribunal has held that the matter is not required to be remanded as no other view would be possible, there was no reason to interfere with the impugned order passed by the Tribunal. [Para 6] 21.10 Before we conclude, we are conscious about the fact that the provisions of Section 68 of the Act are deeming provisions which implies that there are certain transactions which are not the income of the assessee but these are deemed as income under the relevant provisions of the Act. Thus, we have to see the deeming provisions beyond the facts available on record. However, the question arises for the adjudication whether only the credit entries should only be considered for the purpose of cash credit entries as provided under section 68 of the Act after ignoring the debit entries. To our mind the debit entries cannot be set aside for determining the income of the assessee. 21.11 In view of the above, we are of the opinion that, once repayment of the loan has been established based on the documentary evidence, the credit entries cannot be looked into isolation after ignoring the debit entries despite the debit entries were carried out in the year or later years. Thus, in the given facts and circumstances, we hold that there is no infirmity in the order of the Ld. CIT-A. Hence, the ground of appeal of the revenue is hereby dismissed. ITA no.1835/AHD/2019 A.Y. 2016-17 13 22. Next issue raised by the Revenue is that the learned CIT-A erred in deleting the addition of Rs. 15,67,530/- being difference in Cash & Bank balance and Rs. 1,58,36,099/- being differences in current liabilities balances. 23. The AO found that as per the audit report for immediate previous assessment year the closing balance of Cash & Bank was of Rs. 36,93,520/- whereas opening balance declared for the year under consideration is of Rs. 52,61,050/- leading to difference of Rs. 15,67,530/-. However the assessee failed to explain the reason for difference of Cash & Bank balances between closing balance as on 31-03-2015 viz- a-viz opening balance as on 01-04-2015. Thus the AO added the same to the total income of the assessee 23.1 Similarly the AO found that as per the audit report for the immediate previous assessment year, the closing balance of current liabilities was of Rs. 5,81,55,628/- whereas opening balance declared for the year under consideration is of Rs. 4,23,19,529/- leading to difference of Rs. 1,58,36,099/-. However the assessee failed to explain the reason for difference in the amount of current liabilities balances between closing balance as on 31-03-2015 viz-a-viz opening balance as on 01-04- 2015. Thus the AO added the same to the total income of the assessee 24. The aggrieved assessee preferred to appeal before the learned CIT-A. 25. The assessee with regard to difference in cash & bank balance as on 31 st March 2015 reported in audit report of A.Y. 2015-16 and 2016-17 submitted that difference arises on account of closing balance of Cash Credit account for Rs. 15,67,530/-, during the year which was reclassified under the head Current Liabilities whereas in previous assessment year same was shown under the head Cash & Bank. Therefore, there is not any difference in balance of Cash & Bank as on 31 st March 2015 as reported in audit report of 2 different period. ITA no.1835/AHD/2019 A.Y. 2016-17 14 25.1 Similarly one of the debtor account namely “Hoor Fruit Co.” having opening balance (i.e. 31 st March 2015) of 1,74,03,630/- was reclassified as creditor during the year under consideration. Thus considering closing balance of Debtor for Rs. 1,74,03,630 and CC account balance of Rs. 15,67,530/- the difference pointed out by the AO was reconciled. 26. The learned CIT-A sought remand report form the AO and The AO in remand report accepted the explanation furnished by the assessee. 27. The learned CIT-A after considering the facts in totality deleted the addition made by the AO by observing as under: On consideration of entire facts and submission filed by the Appellant during the course of Appellate Proceedings it was observed that the Assessing Officer has made addition towards difference in cash balance on the ground that there is difference of Rs.15,67,530/- between closing cash and Bank Balance as on 31/03/2015 and opening balance of cash and bank account as per audited annual accounts for A.Y. 2016-17. During the course of Appellate Proceedings the Appellant has submitted grouping in support of audited annual accounts. On consideration of entire facts it is observed that the Current Account with HDFC bank which was previously shown under the head Cash and Bank Balance has been reclassified and the same has been regrouped under the head other current liabilities. Thus there is no difference in opening cash and Bank balance as per audited annual accounts of the Appellant for the year under consideration and there is merely reclassification of HDFC overdraft account under the head of Other liabilities which was shown under the head Cash and Bank Balance in Audited accounts of previous year. The same facts have been accepted by Assessing Officer in remand report and it was observed that there is no difference in closing and opening cash and bank balance and there is merely re-classification of accounts. In the light of above facts it is held that the j addition towards difference in cash and bank balance of Rs. 15,67,530/-/ made in the Assessment Order is not justified and hence the same is hereby/ deleted. Thus this ground of appeal of the Appellant is allowed. XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX 12.2 On consideration of entire facts and submission filed by the Appellant during the course of Appellate Proceedings it was observed that the / Assessing Officer has made addition towards difference in current liabilities on the ground that there is difference of Rs.1,58,36,099/- between closing balance of Current Liabilities as on 31/03/2015 and opening balance of Current Liabilities as per audited annual accounts for A.Y 2016-17. During the course of Appellate Proceedings the Appellant has submitted grouping in support of audited annual accounts. On consideration of entire facts it is observed that the Debtor Account of Hoor Fruit Co amounting to Rs.1,74,03,630/- which was previously shown under the head Current Liabilities has been reclassified and the same has been regrouped under the head Sundry Debtors. The balance in HDFC Bank Cash Credit account of Rs.15,67,530/- which was previously shown under the head Cash and Bank Balance has been regrouped and classified under the head Other Current Liabilities. Thus there is no difference in opening balance of Current Liability as per audited annual accounts of the Appellant for the year under consideration and there is merely reclassiflcation of HDFC overdraft account under the head of other liabilities and Hoor Fruit Co debtor account under the head Sundry Debtor ITA no.1835/AHD/2019 A.Y. 2016-17 15 Account. The same facts have been accepted by Assessing Officer in remand report and it was observed that there is no difference in closing and opening balance of Current Liabilities and there is merely re-classification of accounts. In the light of above facts it is held that the addition towards difference in balance of current liabilities amounting to Rs.1,58,36,099/- made in the Assessment Order is not justified and hence the same is hereby deleted. Thus this ground of appeal of the Appellant is allowed. 28. Being aggrieved by the order of the learned CIT-A, the Revenue is in appeal: 29. The learned DR before us vehemently supported the stand of the AO by reiterating the findings contained in the assessment order orders which we have already adverted to in the preceding paragraph. Therefore we are not repeating the same for the sake of brevity. 30. On the other hand learned AR vehemently supported the order of the learned CIT-A. 31. We have heard the rival contentions of both the parties and perused the materials available on record. At the outset we note that the AO in his remand report has submitted that the addition made in the assessment proceedings as discussed above is liable to be deleted. The relevant extract of the remand report reads as under: (iii) On perusal of above argument and details submitted by the assessee, it is observed that balance of "Current account with HDFC bank" of Rs. 15,67,530/- was included in "cash and bank balance" in groupings for A.Y. 2015-16 (Refer page 87 of paper book). However, while finalising accounts of A.Y. 20 16- 17 "Current account with HDFC bank" of Rs. 15,67,530/- was reclassified under the head "Current Liabilities" (Refer page 56 of paper book). In view of same, it is observed that there is no difference in opening and closing balance of cash account and whatever difference was noticed during the course of assessment proceedings was merely due to re-classification of accounts XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX (iii) On perusal of above argument and details submitted by the appellant, the argument of the assessee is found correct. The difference in the opening and closing account of "Current Liabilities" is on account of reclassification of accounts which are already discussed herein above. In view of same, it is observed that there is no difference in opening and closing balance of "Current Liabilities" and whatever difference was noticed during the course of ITA no.1835/AHD/2019 A.Y. 2016-17 16 assessment proceedings was merely due to re-classification of accounts in both the years concerned. 31.1 Based on the above, it is transpired that there is no grievance of the Revenue. Accordingly, no addition in the given case is warranted to be upheld. Thus, we do not find any infirmity in the order of the learned CIT-A, and thus direct the AO to delete the addition made by him. Hence the ground of appeal of the revenue is hereby dismissed. 32. In the result appeal of the Revenue is hereby dismissed Order pronounced in the Court on 31/05/2022 at Ahmedabad. Sd/- Sd/- (SIDDHARTHA NAUTIYAL) (WASEEM AHMED) JUDICIAL MEMBER ACCOUNTANT MEMBER (True Copy) Ahmedabad; Dated 31/05/2022 Manish