D.C.I.T.,Circle-36, Kolkata V. Smt. Suman Agarwal, Kolkata

ITA 2537/KOL/2019

• Counselvise Citation: [2022] 105 COUNSELVISE.COM (IT) 5755 (ITAT-KOLKATA)
• Duration Of Justice: 2 year(s) 3 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-03-2022
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2016-2017
• Appeal Filed On: 03-12-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Unexplained cash credit; Assessment record; Capital Gains
• Section: 68; 142(1); 250

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL “A” BENCH KOLKATA Before Shri Sanjay Garg, Judicial Member and Shri Manish Borad, Accountant Member I.T.A No.2537/Kol/2019 Assessment year: 2016-17 DCIT, Circle-36, Kolkata.................................................................... Appellant vs. Smt. Suman Agarwal...................................................................... Respondent Room No.9, 5 th Floor, 20B, Abdul Hamid Sarani, Kolkata-1. [PAN: AGIPA7061M] Appearances by: Shri Ravi Tulsiyan, FCA, appeared on behalf of the appellant. Shri Biswajit Das, Addl. CIT-DR, appeared on behalf of the Respondent. Date of concluding the hearing : February 17, 2022 Date of pronouncing the order : March 30, 2022 ORDER Per Sanjay Garg, Judicial Member: The present appeal has been preferred by the Revenue against the order dated 19.09.2019 of the Commissioner of Income Tax (Appeals)-10, Kolkata [hereinafter referred to as ‘CIT(A)’] passed u/s 250 of the Income Tax Act (hereinafter referred to as the ‘Act’). The Revenue in this appeal has taken the following grounds of appeal: “1. On the facts and circumstances of the case, the Ld. CIT(A) erred in allowing relief to the assessee by deleting the unexplained cash credit of amounting to Rs.9,80,05,649/- by increasing the capital. Since, the assessee had unable to explain the complete and true picture of financial position in the Income Tax return and after issued of notice u/s 143(2) on 06.09.2017 assessee filed her return for the A.Y 2017-18 disclosing proprietor capital of Rs.12,98,33,489/- which shows that the claim of assessee is genuine.” 2. The brief facts of the case are that during the course of assessment proceedings, the Assessing Officer noted that on verification of the return of income, the Learned Assessing Officer observed that the Proprietor's Capital in ITR filed for the AY 2016-17 was reported at Rs.11,00,78.276/- and in AY 2015-16, the assessee had reported Proprietors Capital at Rs.1,20,72,627/-. Accordingly, the assessee was asked to explain I.T.A No.2537/Kol/2019 Assessment year: 2016-17 Smt. Suman Agarwal 2 the source of the difference in capital of Rs.9,80,05,649/- in these two years, i.e. A.Y 2015-16 and AY 2016-17. In response to this, the assessee submitted that the Proprietor's Capital of the firm 'M/s Selfcare- The Natural Way' as on 31-03-2016 was Rs.1,74,62,669/- and not Rs.11,00,78,276/- as wrongly reported in the ITR. The same was evident from the audited accounts of ‘M/s Selfcare – The Natural Way’. The Proprietor's Capital as on 31- 03-2016 was Rs.1,74,62,669/-. However, in the ITR filed for the year, the employee of the assessee, who prepared the return of income for the subject assessment year, inadvertently consolidated the assets and liabilities of the personal file of the assessee with the assets and liabilities of the proprietorship concern, ‘M/s Selfcare - The Natural Way’ and after such consolidation had arrived at the capital of Rs.11,00,78,276/- of the proprietorship firm which was factually incorrect. 3. However, the ld. Assessing Officer did not get satisfied with the above explanation by the assessee and observed that on verification of earlier years Income Tax Return, it was found that the assessee was not disclosing assets and liabilities. He observed that it was the duty of the assessee to give complete and true picture of the financial position in Income Tax Returns. He further observed that even on verification of Income Tax Return pertaining to assessment year 2017-18, it was found that the assessee disclosed proprietor’s capital of Rs.12,98,33,489/-. He, therefore, observed that the assessee did not rectify the mistake even the subsequent assessment year 2017-18. He, therefore, treated the increase in capital as unexplained cash credit u/s 68 of the Act. 4. In appeal before the ld. CIT(A), the assessee reiterated its submissions and furnished the reconciled accounts, whereupon, the ld. CIT(A) called for remand report from the Assessing Officer. The ld. CIT(A) thereafter called comments of the assessee on the said remand report. The ld. CIT(A) has reproduced in tabulated form the relevant remarks of the Assessing Officer in the assessment records and reply to those remarks of the assessee, the relevant part of which is reproduced as under: Sr. No. Remand report Reply to Remand Report 1 The AO rightly gave opportunity to the assessee to reconcile; but she During the course of assessment, the assessee requested the learned AO to afford an I.T.A No.2537/Kol/2019 Assessment year: 2016-17 Smt. Suman Agarwal 3 could not reconcile her capital of proprietorship concern. She also failed to explain the source of her assets/investments in personal balance sheet. opportunity to the assessee to file a revised and corrected ITR showing the correct Capital A/c. However, neither the request of the assessee to file the revised return was acceded to nor the submissions made by the assessee explaining the difference in the Capital A/C were appreciated by the learned AO. A copy of the submissions made before the AO is enclosed at page 9-16. The learned AO has not even bothered to understand and examine the reconciliation of Capital A/c submitted by the assessee. Further with regard to the allegation of the AO that the assessee failed to explain the source of assets in the personal balance sheet, please find enclosed the Capital A/c of the personal file of the assessee for the year at page 1. The opening balance of Capital A/c was Rs.8,50,61,312/- and closing balance of Capital A/c was Rs.9,25,13,566/-. The increase in Capital A/c was attributed to Income from Business/Profession, Interest Income, Dividend Income and Capital Gains. The assessee has duly reported these incomes in the return of income filed for the year. A Copy of the computation of income for the current year is enclosed at page 2. As such, the source of capital is explained. 2 As per mandate of ITR-4, the assessee showing income exceeding Rs.50 lacs must disclose the personal assets and liabilities in Schedule AL In the submissions filed before your goodself, the assessee had herself submitted that the employee who had prepared the return of income should have reported the personal assets and liabilities of the individual file of the assessee under 'Schedule AL but had wrongly clubbed the same with the assets and liabilities of her proprietorship firm in the 'Schedule BS’ which resulted in increase of the Proprietor's Capital to Rs.11,00,78,276/- instead of the correct balance of Rs.1,74,62,669/ which is clearly evident from the audited accounts of the proprietorship firm. As such, this allegation of the learned AO had already been replied to in the submissions filed before your goodself. 3 Disclosing in ITR only some assets by increasing Capital of proprietorship firm without considering the liability is violation of double entry system. In this regard, it is again reiterated that the employee of the assessee company has inadvertently clubbed the personal assets with the assets of the proprietorship firm. The assessee had already submitted the individual accounts and the audited accounts of the firm. I.T.A No.2537/Kol/2019 Assessment year: 2016-17 Smt. Suman Agarwal 4 On a perusal of the same, it is evident that both assets and liabilities of proprietorship firm were considered in preparation of the audited accounts of the firm. As such, this is an absurd allegation that the assessee has not considered the liabilities. 4 The assessee filed the return for AY 2016-17 on 14-10-2016 and notice u/s 142(1) was served on 06-09- 2017. The return for AY 2017-18 was filed on 28-10-2017 where she also disclosed capital to the tune of Rs.12,98,33,489/- in spite of the fact that she was informed through notice u/s 142(1) ahead. Therefore her mala fide intention is substantiated. In this regard, it is submitted that notice u/s 143(2) of the Act was issued on 06-09-2017. A copy of the notice is enclosed at page 17-18. Notice u/s 142(1) was issued on 19-07-2018 and 30-08-2018 and replies were on 09-08-2018, 14- 09-2018 and 25-09-2018. Copies enclosed at page 3-14. Hence, at the time the replies were made to notice issued u/s 142(1) of the Act, the return for AY 2017-18 was already uploaded on the e-filing website by the same employee who filed the return for AY 2016-17. Further, with regard to the allegation of the learned AO that the assessee had mala fide intention please note that the assessee had filed the correct ITR for AY 2018-19 wherein the assets/liabilities of the personal file of the assessee were not consolidated with the assets/liabilities of her proprietorship firm and only the capital of the firm was reported in "Schedule BS of the ITR. A copy of the Balance Sheet of the firm and the relevant extract of ITR of AY 2018-19 had been enclosed at page 12-24 of the paper book filed before your goodself. Hence, it is an unfounded assumption on the part of the AO that the assessee has mala fide intention. Neither at the assessment stage not at this appellate stage, the learned AO is willing to understand that the return for AY 2016-17 and AY 2017-18 were inadvertently wrongly filed wherein some of the assets and liabilities of the personal file of the assessee were consolidated with the assets and liabilities of the proprietorship concern, M/s Selfcare - The Natural Way’. 5. Considering the submissions of the assessee and the relevant material on record, the ld. CIT(A) deleted the addition so made by the Assessing Officer observing as under: “7. In view of the above discussion, I now proceed to examine the given facts of the case. It is note that in the return of income for the relevant AY 2016-17 the appellant had clubbed and reported her personal individual balance sheet along with the financials of the proprietorship concern, M/s Self Care - The Natural Way, and reported the I.T.A No.2537/Kol/2019 Assessment year: 2016-17 Smt. Suman Agarwal 5 aggregate capital of Rs.11,00,78,276/- in the Schedule -BS of the Income-tax return in ITR-4 as opposed to the capital of the proprietorship concern on its stand-alone basis being Rs.1,74,62,669/-. The reconciliation provided by the appellant qua the ITR-4 for the earlier AY 2015-16 wherein only the balance sheet and profit & loss account of the proprietorship business was reported with the clubbed balance sheet and profit & loss account of the appellant reported in the relevant year is found to have fully reconciled as well. It is also not a case that the income/revenue generated from the personal assets & liabilities have not been disclosed in the return of income filed for the relevant AY 2016- 17 or the earlier years or that the personal assets & liabilities reported in her individual balance sheet is unexplained/undisclosed. It is a simple case wherein the appellant maintains two profit 8& loss account and balance sheets for her individual self and her proprietorship Business. Under the new e-filing facility, particularly ITR-4, the appellant is only required to report the details of balance sheet and profit & loss account of the proprietorship business. In the relevant year however the appellant clubbed both of her balance sheets and reported the aggregate amount. It is therefore not a case of unexplained cash credit as has been made by the Ld. AO. The averments made by the Ld. AO in the impugned order appear to be superficial without having any cogent basis. For the reasons as aforesaid, the impugned addition made u/s 68 is held to be unsustainable. 8. I further note that the Ld. AO was also unable to make out a case that such increase in capital was represented by any unexplained credit in the books of accounts of the appellant by way of influx of cash, funds etc. in the relevant year which could not be explained. I therefore also find merit in alternate claim of the Ld. AR that the invocation of Section 68 in the given facts of the present case was unjustified. 9. For the reasons set out above therefore, the Ld. AO is directed to delete the addition of Rs.9,80,05,6497- made u/s 68 of the Act. These grounds therefore stands allowed.” Being aggrieved of the above order of the ld. CIT(A), the Revenue has come in appeal before us. 6. We have heard the rival contentions and gone through the records. We find that the assessee not only before the Assessing Officer but also before the CIT(A) duly explained that the increase in proprietor's Capital was reported due to inadvertent mistake on the part of the employee as he inadvertently consolidated the assets and liabilities of the personal file of the assessee with the assets and liabilities of the proprietorship concern, ‘M/s Selfcare - The Natural Way’. The audited accounts of the assessee were duly verified by the Assessing Officer during the assessment proceedings. So far as the objection of the Assessing Officer that the assessee repeated his mistake in the return for assessment year 2017-18 is concerned, the assessee duly replied that by the time, the aforesaid mistake came to the notice of the assessee, the return for assessment year 2017- 18 was already filed. It was also explained that the assessee has filed the correct Income I.T.A No.2537/Kol/2019 Assessment year: 2016-17 Smt. Suman Agarwal 6 Tax Return for assessment year 2018-19, wherein, the assets/liabilities of the personal file of the assessee were not consolidated with the assets/liabilities of her proprietorship firm and true picture of the account has been presented and the mistake has been rectified. The ld. CIT(A) considering the accounts of the assessee as well as the circumstances leading to the aforesaid mistake has deleted the addition observing that it was not a case of unexplained credits u/s 68 of the Act. We do not find any infirmity in the order of the ld. CIT(A). There is no merit in the appeal of the Revenue and the same is accordingly dismissed. 6. In the result, the appeal of the Revenue stands dismissed. Kolkata, the 30 th March, 2022. Sd/- Sd/- [Manish Borad] [Sanjay Garg] Accountant Member Judicial Member Dated: 30.03.2022. RS Copy of the order forwarded to: 1. DCIT, Circle-36, Kolkata 2. Smt. Suman Agarwal 3. CIT(A)- 4. CIT- , 5. CIT(DR), //True copy// By order Assistant Registrar, Kolkata Benches