GHEWARCHANDJAIN DILIPKUMAR, ERODE V. ACIT CIRCLE-1, ERODE

ITA 606/CHNY/2020

• Counselvise Citation: [2021] 108 COUNSELVISE.COM (IT) 9210 (ITAT-CHENNAI)
• Duration Of Justice: 9 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-03-2021
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Assessment Year: 2016-2017
• Appeal Filed On: 28-05-2020
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: AN INADVERTENT ERROR PASSED WRONG JOURNAL
• Keywords: Depreciation; Set aside

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL , C B ENCH, CHENNAI . , ! . , ! ' BEFORE SHRI DUVVURU RL REDDY, JUDICIAL MEMBER AND SHRI G. MANJUNATHA, ACCOUNTANT MEMBER ./ I.T.A.NO.606/CHNY/2020 ( / ASSESSMENT YEAR: 2016-17) MR. GHEWARCHANDJAIN DILIPKUMAR 7, MSAM TANNERY STREET, SATHY GROSS ROAD, B.P. AGRAHARAM, ERODE-638 005. VS THE ASSISTANT COMMISSIONER INCOME TAX, CIRCLE-1, ERODE . PAN:ADXPD 5212D ( /APPELLANT) ( /RESPONDENT) / APPELLANT BY : MR. G.BASKAR, ADVOCATE /RESPONDENT BY : MR. G.JOHNSON, ADDL.CIT /DATE OF HEARING : 09.03.2021 /DATE OF PRONOUNCEMENT : 19.03.2021 / O R D E R PER G.MANJUNATHA, ACCOUNTANT MEMBER: THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGA INST ORDER OF THE LEARNED CIT(A), COIMBATORE-3, DATED 03.03.2020 AND PERTAINS TO ASSESSMENT YEAR 2016-17 2. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS O F APPEAL:- 1. THE CIT(A) ERRED IN UPHOLDING THE ADDITION MADE UIS.68 OF THE IT ACT AMOUNTING TO RS.280,56,837/- WITHOUT APPRECIATING THE FACTS OF THE CASE IN PROPE R PERSPECTIVE. 2. THE CIT(A) ERRED IN HOLDING THAT SUM OF RS.2,80,58,837/- IS INFUSION OF CAPITAL WITHOUT 2 ITA NO.606/CHNY/2020 CONSIDERING THE RECONCILIATION STATEMENT FURNISHED BEFORE HIM, WHICH CLEARLY SHOWS NON-APPLICATION OF MIND. 3. THE CIT(A) ERRED IN NOT CONSIDERING THE EVIDENCE S FURNISHED BEFORE HIM AND WENT ON TO HOLD THAT THE ASSESSEE FAILED TO FURNISH EVIDENCES TO SUBSTANTIAT E THE CASE, WHICH IS BAD IN LAW. 4. THE CIT(A) FAILED TO APPRECIATE THE FACT THAT TH E ACCUMULATED DEPREC1ATION REPRESENTS THE CUMULATIVE VALUE OF THE EARLIER YEARS DEPRECIATION CHARGED IN THE BOOKS OF ACCOUNTS, WHICH HAVE BEEN DULY ADDED WITH THE BOOK PROFIT WHILE COMPUTING THE INCOME TAX BY CLAIMING ONLY THE DEPRECIATION ALLOWABLE UNDER THE PROVISIONS OF INCOME TAX ACT. 5. THE CIT(A) FAILED TO CONSIDER THE FACT THAT THE MISTAKE IN ADDITION TO THE CAPITAL ACCOUNT HAS BEEN RECTIFIED BY MAKING A REVERSAL ENTRY MADE IN THE RETURN OF INCOME FILED FOR AY. 2019-20. 3. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS ENGAGED IN THE BUSINESS OF TEXTILE CLOTH BLEACHING UNDER THE NAME & STYLE OF M/S. CENTAURY PROCESSING MILLS FILED HIS RETURN OF INCOME FOR ASSESSMENT YEAR 2016-17 ON 30.09.2016 DECLARING TO TAL INCOME OF ` 25,00,340/- . THE CASE WAS TAKEN UP FOR SCRUTINY AND DURING THE COURSE OF ASSESSMENT PROCEEDINGS, TH E 3 ITA NO.606/CHNY/2020 ASSESSING OFFICER NOTICED THAT THERE IS A DIFFERENC E IN CAPITAL ACCOUNT BALANCE, WHEN COMPARED TO CLOSING BALANCE F OR THE ASSESSMENT YEAR 2015-16, AS PER ITR FILED BY THE AS SESSEE AND HENCE, CALLED UPON THE ASSESSEE TO FILE NECESSARY D ETAILS INCLUDING RECONCILIATION TO EXPLAIN DIFFERENCE IN C APITAL ACCOUNT. IN RESPONSE, THE ASSESSEE VIDE LETTER DATED 21.12.2 018 SUBMITTED THAT BY AN INADVERTENT ERROR PROVISION FOR DEPRECIATION ACCOUNT HAS BEEN WRONGLY CREDITED TO C APITAL ACCOUNT INSTEAD OF FIXED ASSET ACCOUNT, DUE TO THIS , THERE IS DIFFERENCE IN CAPITAL ACCOUNT, WHEN COMPARED TO CL OSING BALANCE FOR THE ASSESSMENT YEAR 2015-16. THE ASSES SEE FURTHER SUBMITTED THAT SAID ANOMALY HAS BEEN RECTIF IED BY PASSING NECESSARY JOURNAL ENTRIES IN THE ASSESSMENT YEAR 2018- 19. IN THIS REGARD, THE ASSESSEE HAS FILED NECESSAR Y LEDGER ACCOUNT COPIES OF CAPITAL ACCOUNT, PROVISION FOR DE PRECIATION AND FIXED ASSET ACCOUNT. THE ASSESSING OFFICER, HOW EVER, WAS NOT CONVINCED WITH THE EXPLANATION FILED BY THE AS SESSEE AND ACCORDING TO HIM, THE ASSESSEE COULD NOT EXPLAIN DI FFERENCE IN CAPITAL ACCOUNT BY FILING NECESSARY RECONCILIATION STATEMENT. THE ASSESSING OFFICER FURTHER WAS OF THE OPINION TH AT ALTHOUGH ASSESSEE CLAIMS THAT ACCOUNTANT HAS PASSED WRONG JO URNAL 4 ITA NO.606/CHNY/2020 ENTRIES IN RESPECT OF PROVISION FOR DEPRECIATION, B UT THE ASSESSEE HAS FAILED TO EXPLAIN HOW AN AMOUNT OF ` 2,91,08,986/- HAS BEEN ARRIVED AT UNDER ACCUMULATED DEPRECIATION . T HEREFORE, HE OPINED THAT CLAIM OF THE ASSESSEE THAT BY INADVERTE NT MISTAKE THE ACCOUNTANT HAS WRONGLY CREDITED PROVISION FOR D EPRECIATION ACCOUNT TO CAPITAL ACCOUNT CANNOT BE ACCEPTED AN D ACCORDINGLY, DIFFERENCE IN CAPITAL ACCOUNT AMOUNTIN G TO ` 2,80,58,837/- HAS BEEN TREATED AS UNEXPLAINED CRED IT AND ADDED TO TOTAL INCOME U/S.68 OF THE INCOME TAX ACT. 4. BEING AGGRIEVED BY THE ASSESSMENT ORDER, THE ASS ESSEE PREFERRED AN APPEAL BEFORE LEARNED CIT(A). BEFORE LEARNED CIT(A), THE ASSESSEE HAS REITERATED HIS SUBMISSION S MADE BEFORE THE ASSESSING OFFICER AND ARGUED THAT ASSESS EE HAS FILED NECESSARY DETAILS INCLUDING RECONCILIATION TO EXPLAIN DIFFERENCE IN CAPITAL ACCOUNT WHEN COMPARED TO CLOS ING BALANCE OF ASSESSMENT YEAR 2015-16, BUT, THE ASSESSING OFFI CER HAS DISCARDED ALL EVIDENCES FILED BY THE ASSESSEE AND M ADE ADDITIONS U/S.68 OF THE ACT WITHOUT BRINGING ON RE CORD HOW AND WHEN ASSESSEE HAS CREDITED A SUM OF ` 2,80,58,837/- TO CAPITAL ACCOUNT. THE LEARNED CIT(A), AFTER CONSIDERING RELE VANT 5 ITA NO.606/CHNY/2020 SUBMISSIONS OF THE ASSESSEE OBSERVED THAT GENUINENE SS OF THE CLAIM OF ACCUMULATED DEPRECIATION ITSELF IS NOT SAT ISFACTORILY PROVED BY THE ASSESSEE WITH NECESSARY EVIDENCE AN D ACCORDINGLY, OPINED THAT THERE IS NO ERROR IN THE REASONS GIVEN BY THE ASSESSING OFFICER TO MAKE ADDITION TOWARDS D IFFERENCE IN CAPITAL ACCOUNT U/S.68 OF THE ACT. AGGRIEVED BY TH E LEARNED CIT(A) ORDER, THE ASSESSEE IS IN APPEAL BEFORE US. 5. THE LEARNED AR FOR THE ASSESSEE REFERRING TO VAR IOUS PAPERS FILED IN THE PAPER BOOK SUBMITTED THAT THE ASSESSEE HAS EXPLAINED THE DIFFERENCE IN CAPITAL ACCOUNT WITH NE CESSARY EVIDENCES INCLUDING RECONCILIATION AND CLARIFIED T HAT ACCOUNTANT OF THE ASSESSEE BY AN INADVERTENT ERROR PASSED WRON G JOURNAL ENTRY TO SQUARE UP PROVISION FOR DEPRECIATION ACCOU NT AND CREDITED THE AMOUNT TO CAPITAL ACCOUNT INSTEAD OF FIXED ASSET ACCOUNT, DUE TO THIS, CAPITAL ACCOUNT OF THE ASSESS EE HAS BEEN OVERSTATED TO THE EXTENT OF ` 2,80,58,837/-. THE SAID ANOMALY HAS BEEN RECTIFIED IN THE ASSESSMENT YEAR 2018-19 BY PASSING NECESSARY RECTIFICATION ENTRIES. ALL THESE EVIDENCE S WERE FURNISHED BEFORE THE ASSESSING OFFICER AS WELL AS L EARNED CIT(A), BUT THE AUTHORITIES BELOW HAVE REJECTED ALL THE 6 ITA NO.606/CHNY/2020 EVIDENCES FILED BY THE ASSESSEE AND MADE ADDITIONS TOWARDS DIFFERENCE IN CAPITAL ACCOUNT U/S.68 OF THE ACT. T HEREFORE, HE SUBMITTED THAT ISSUE MAY BE SET ASIDE TO THE FILE O F THE ASSESSING OFFICER TO GIVE ONE MORE OPPORTUNITY TO THE ASSESSEE TO EXPLAIN DIFFERENCE WITH NECESSARY EVIDE NCES. 6. THE LEARNED DR, ON THE OTHER HAND, STRONGLY SUPP ORTING ORDER OF THE LEARNED CIT(A) SUBMITTED THAT ALTHOUG H THE ASSESSEE CLAIMS THAT IT HAS FILED ALL THE EVIDENCES TO RECONCILE DIFFERENCE BETWEEN CAPITAL ACCOUNT, BUT ON PERUSAL OF REASONS GIVEN BY THE AUTHORITIES BELOW, IT IS VERY CLEAR TH AT THE ASSESSEE IS UNABLE TO RECONCILE THE DIFFERENCE. THEREFORE, T HE ISSUE MAY BE SET ASIDE TO THE FILE OF THE ASSESSING OFFICER T O RECONSIDER THE ISSUE IN LIGHT OF VARIOUS AVERMENTS MADE BY THE ASS ESSEE THAT SAID DIFFERENCE HAS BEEN RECONCILED. 7. WE HAVE HEARD BOTH THE PARTIES, PERUSED MATERIAL S AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF AUTHORITIES BELOW. THE ASSESSEE CLAIMS THAT ACCOUNTANT, WHO PR EPARED FINANCIAL STATEMENT HAS INADVERTENTLY PASSED WRON G JOURNAL ENTRIES IN RESPECT OF PROVISION FOR DEPRECIATION AC COUNT WHICH RESULTED IN OVERSTATEMENT OF CAPITAL ACCOUNT FOR TH E ASSESSMENT 7 ITA NO.606/CHNY/2020 YEAR 2016-17. THE ASSESSEE FURTHER CLAIMED THAT SA ID ANOMALY HAS BEEN RECONCILED AND EXPLAINED BEFORE THE ASSES SING OFFICER WITH NECESSARY EVIDENCES. WE FIND THAT ALTH OUGH, THE ASSESSEE CLAIMED TO HAVE EXPLAINED DIFFERENCE IN CA PITAL ACCOUNT WITH NECESSARY EVIDENCES, BUT REASONS GIVEN BY AUTHORITIES BELOW INDICATE THAT ASSESSEE IS UNABLE TO RECONCILE THE DIFFERENCE WITH NECESSARY EVIDENCES. EVEN BEFOR E US, THE ASSESSEE IS UNABLE TO EXPLAIN AS TO HOW DIFFERENCE IN CAPITAL ACCOUNT AMOUNTING TO ` 2,80,58,837/- WAS RECONCILED WITH REFERENCE TO AMOUNT OUTSTANDING IN PROVISION FOR DE PRECIATION ACCOUNT. IF AT ALL, THE ASSESSEE HAS EXPLAINED DIFF ERENCE AND FILED NECESSARY JOURNAL ENTRIES TO EXPLAIN THE FACT THAT WRONG JOURNAL ENTRIES HAS BEEN PASSED TO CAPITAL ACCOUNT, THEN THERE IS NO REASON FOR AUTHORITIES BELOW TO OBSERVE THAT NO EVIDENCE HAS BEEN FILED TO EXPLAIN THE DIFFERENCE. EVEN BEFORE U S, THE SAID DIFFERENCE IS UNRECONCILED. HOWEVER, CONSIDERING T HE FACT THAT ASSESSEE HAS REQUESTED FOR ONE MORE OPPORTUNITY TO GO BACK TO THE ASSESSING OFFICER TO EXPLAIN DIFFERENCE IN CAPI TAL ACCOUNT, WE ARE OF THE CONSIDERED VIEW THAT THE ISSUE NEEDS TO GO BACK TO THE FILE OF THE ASSESSING OFFICER. HENCE, WE SET ASIDE THE APPEAL TO THE FILE OF THE ASSESSING OFFICER AND DIR ECT HIM TO 8 ITA NO.606/CHNY/2020 RECONSIDER THE DIFFERENCE IN CAPITAL ACCOUNT IN LIG HT OF VARIOUS AVERMENTS INCLUDING RECONCILIATION IF ANY, FILED TO EXPLAIN DIFFERENCE IN CAPITAL ACCOUNT. THE ASSESSEE SHALL F ILE NECESSARY EVIDENCES TO EXPLAIN THE DIFFERENCE IN CAPITAL ACCO UNT. 8. IN THE RESULT, APPEAL FILED BY THE ASSESSEE IS A LLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 19 TH MARCH, 2021 SD/- SD/- ( . ) ( . ) (DUVVURU RL REDDY) (G.MANJUNATHA ) ! $ / JUDICIAL MEMBER $ / ACCOUNTANT MEMBER ! /CHENNAI, ' /DATED 19 TH MARCH, 2021 DS )* +* /COPY TO: 1. APPELLANT 2. RESPONDENT 3. , () /CIT(A) 4. , /CIT 5. * 1 /DR 6. /GF .