DESAI INVESTMENTS P. LTD, MUMBAI V. ITO 2(1)(2), MUMBAI

ITA 679/MUM/2016

• Counselvise Citation: [2017] 126 COUNSELVISE.COM (IT) 8020 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 10 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-12-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: Not Allotted
• Assessment Year: 2012-2013
• Appeal Filed On: 10-02-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SAURABH DESH
• Keywords: Unexplained cash credit; Search and seizure
• Section: 143(3); 133(6); 68

Judgement Text

P A G E | 1 ITA NO. 679 /MUM/201 6 AY: 20 12 - 1 3 DESAI INVESTMENTS PRIVATE LIMITED VS. ITO 2(1)(2) IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, M UMBAI BEFORE SHRI P.K. BANSAL , VICE PRESIDENT AND SHRI RAVISH SOOD, JM ITA NO. 679 /MUM/201 6 ( / ASSESSMENT YEAR: 20 12 - 1 3 ) DESAI INVESTMENTS PRIVATE LIMITED, 24/26, CAMA BUILDING, 1 ST FLOOR, DALAL STREET, FORT, MUMBAI - 400 001 / VS. ITO 2(1)(2), 5 TH FLOOR, AAYAKAR BHAVAN, M.K. ROAD, MUMBAI - 400 020 . ./ ./ PAN NO. AAACD1356M ( / APPELLANT) : ( / RESPONDENT ) / APPELLANT BY : SHRI VIJAY MEHTA , A.R / RESPONDENT BY : SHRI SAURABH DESHPANDE , D.R / DATE OF HEARING : 29.11 .2017 / DATE OF PRONOUNCEMENT : 20 .1 2 .2017 / O R D E R PER RAVISH SOOD, JUDICIAL MEMBER: THE PRESENT APPEAL FILED BY THE ASSESSEE COMPANY IS DIRECTED A GAINST THE ORDER PASSED BY THE CIT(A) - 4 , MUMBAI, DATED 03.12.2015 , WHICH IN ITSELF ARISES FROM THE ORDER PASSED BY THE A.O UNDER SEC. 143(3) OF THE INCOME TAX ACT, 1961 (FOR SHORT ACT), DATED 25.02.2015 . THE ASSESSEE ASSAILING THE ORDER OF THE CIT(A) HAD RAISED BEFORE US THE FOLLOWING GROUNDS OF APPEAL : - P A G E | 2 ITA NO. 679 /MUM/201 6 AY: 20 12 - 1 3 DESAI INVESTMENTS PRIVATE LIMITED VS. ITO 2(1)(2) 1. THE LEARNED CIT(A) HAS ERRED IN LAW AND FACTS IN PASSING THE APPELLANT ORDER, WHICH IS INVALID AND BAD IN LAW 2. THE LEARNED CIT(A) HAS ERRED IN LAW AND FACTS IN UPHOLDING THE ADDITION OF RS. 38,94,880/ - MADE BY THE ASSESSING OFFICER U/S 68 OF THE ACT, W ITHOUT CONSIDERING THE SUBMISSION MADE BY THE APPELLANT IN ITS PROPER PERSPECTIVE. 3. WITHOUT PREJUDICE TO THE ABOVE, HE LEARNED CIT(A) OUGHT TO HAVE DELETED THE AFORESAID ADDITION AS IT WAS ONLY A JOURNAL ENTRY AND BY PASSING SUCH AN ENTRY NOTHING IS CRE DITED IN THE BOOKS OF ACCOUNT IN WHICH CASE ONLY PROVISIONS OF S.68 OF THE ACT, SUBJECT TO FULFILMENT OF CERTAIN CONDITIONS, COULD BE INVOKED. 4. THE APPELLANT CRAVES LEAVE TO ADD TO, AMEND, ALTER OR DELETE ALL OR ANY OF THE FOREGOING GROUNDS OF APPEAL. 2. BRIEFLY STATED, THE FACTS OF THE CASE ARE THAT THE ASSESSEE WHICH IS A NON BANKING FINANCIAL COMPANY ENGAGED IN THE BUSINESS OF BROKERAGE, COMMISSION AND INVESTMENT HAD E - FILED ITS RETURN OF INCOME FOR A.Y. 2011 - 12 ON 08.02.2013 , DECLARING TOTAL INCOME AT RS. NIL. THE CASE OF THE ASSESSEE WAS TAKEN UP FOR SCRUTINY ASSESSMENT U/S 143(2) OF THE ACT. 3. THAT DURING THE COURSE OF THE ASSESSMENT PROCEEDINGS THE A.O OBSERVED THAT AN AMOUNT OF RS. 1,47,54,165/ - WAS CREDITED BY THE ASSESSEE TO THE GENERAL RESE RVE. THE ASSESSEE ON BEING CALLED UPON BY THE A.O TO EXPLAIN THE ADDITION OF RS. 1,47,54,165/ - MADE TO THE GENERAL RESERVE, SUBMITTED THAT DUE TO CERTAIN TYPOGRAPHICAL ERRORS IN THE PREPARATION OF THE ACCOUNTS , CERTAIN AMOUNTS AGGREGATING TO RS. 1,47,54,16 5.50 W ERE WRONGLY TRANSFERRED TO THE GENERAL RESERVE ACCOUNT. THE ASSESSEE FURTHER ELABORATING ON THE ISSUE SUBMITTED THAT THE AMOUNTS FROM THE FOLLOWING ACCOUNTS : A) ARODYNE CHEMICALS LTD. : RS. 1,08,59,288.50 B) AVDHOOT FINANCE & INVESTMENTS LTD. : RS. 3 8,94,877.00 TOTAL : RS. 1,47,54,165.50 P A G E | 3 ITA NO. 679 /MUM/201 6 AY: 20 12 - 1 3 DESAI INVESTMENTS PRIVATE LIMITED VS. ITO 2(1)(2) WERE WRONGLY TRANSFERRED TO THE GENERAL RESERVE ACCOUNT, WHICH THUS EXPLAINED THE ADDITION OF RS. 1,47,54,165.50 TO THE GENERAL RESERVE. THE ASSESSEE FURTHER EXPLAINING THE AFORESAID MISTAKE ON ITS PART , SUBMITTED THAT AT THE TIME OF PASSING THE ENTRIES IN THE ABOVEMENTIONED TWO CASES (VIZ. M/S ARODYNE CHEMICALS LTD. & M/S AVDHOOT FINANCE & INVESTMENTS LTD.) THE AFORE MENTIONED AMOUNTS WERE DIRECTLY CREDITED TO RESERVES AND SURPLUS ACCOUNT, INSTEAD OF INCL UDING THE SAME UNDER THE HEAD S HORT TERM BORROWINGS , AS A RESULT WHEREOF THE CLOSING BALANCES AGAINST THE SAID RESPECTIVE ACCOUNTS WERE SHOWN AS N IL . IT WAS FURTHER SUBMITTED BY THE ASSESSEE THAT THE AFORESAID MISTAKE ON ITS PART WAS RECTIFIED IN THE BOO KS OF ACCOUNT ON 31.03.2012, AND A REVISED AUDIT REPORT DATED 30.06.2014 ALONG WITH THE BALANCE SH EET AND PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED 31.03.2012 , QUALIFIED AS UNDER : IT HAS BEEN SUBSEQUENTLY NOTICES THAT THERE WERE TYPOGRAPHICAL ERRORS WHILE PREPARING AND TYPING THE SCHEDULES FORMING PART TO THE ACCOUNTS FOR THE FINANCIAL YEAR ENDED 31 ST MARCH 2012. AND, ACCORDINGLY, THE AMOUNTS FROM THE FOLLOWING ACCOUNTS : A) ARODYNE CHEMICA LS LTD. : RS. 1,08,59,288.50 B) AVDHOOT FINANCE & INVESTMENTS LTD. : RS. 38,94,877.00 TOTALLING TO RS. 1,47,54,165.50 WERE WRONGLY SHOWN AS TRANSFERRED TO GENERAL RESERVE ACCOUNT. NOW, THE SAID TYPOGRAPHICAL ERRORS HAVE BEEN RECTIFIED IN THE BOOKS OF ACC OUNTS OF THE COMPANY ON 31 ST MARCH 2012. , WAS FURNISHED WITH THE A.O. P A G E | 4 ITA NO. 679 /MUM/201 6 AY: 20 12 - 1 3 DESAI INVESTMENTS PRIVATE LIMITED VS. ITO 2(1)(2) 4. THE A.O AFTER DELIBERATING ON THE AFORESAID EXPLANATION OF THE ASSESSEE , WHEREIN THE LATTER HAD TRIED TO IMPRESS UPON HIM THAT THE ADDITION TO THE GENERAL RESERVE HAD OCCASIONED ON ACCOUNT OF A TYPOGRAPHICAL MISTAKE, HOWEVER , OBSERVED THAT A PERUSAL OF THE RECORDS REVEALED THAT THE ACTUAL FACTS WERE ENTIRELY DIFFERENT FROM WHAT T HE ASSESSEE HAD CLAIMED BEFORE HER . THE A.O OBSERVED THAT A SCRUTINY OF THE DETAILS SUBMITTED BY THE ASSESSEE AND THE BALANCE SHEET AND PROFIT AND LOSS ACCOUNT REVEALED THAT WHILE FOR THE FIGURE OF RS. 1,08,59,288.50 MENTIONED AGAINST M/S ARODYNE CHEMICALS LTD. WAS A LIABILITY FIGURE, HOWEVER , THE FIGURE OF RS. 38,94,877/ - MENTIONED AGAINST M/S AVDHOOT FI NANCE INVESTMENTS P. LTD. WAS INFACT AN ASSET FIGURE WHICH WAS SHOWN UNDER THE HEAD SHORT TERM LOANS AND ADVANCES (I.E. SHOWN AS AMOUNT RECEIVABLE). THE A.O AFTER DELIBERATING ON THE AFORESAID FACTS OBSERVED THAT IT WAS BEYOND COMPREHENSION AS TO HOW T HE ASSESSEE COULD CLAIM TO HAVE ADDED THE SUM TOTAL OF A LIABILITY FIGURE AND THAT OF AN ASSET FIGURE TO BRING THE TOTAL TO RS. 1,47,54,165/ - , AND THEREIN CLAIM THAT THE SAID FIGURE WAS WRONGLY CREDITED TO GENERAL RESERVE. THE A.O FURTHER OBSERVED THAT EVE N IF THE CONTENTION OF THE ASSESSEE WAS TO BE TAKEN AS TRUE AND CORRECT, WHAT COULD AT ALL BE CREDITED TO THE GENERAL RESERVE COULD BE A LIABILITY ACCOUNT WHICH HAD CEASED TO BE A LIABILITY ANY MORE. THE A.O IN THE BACKDROP OF HIS AFORESAID OBSERVATION S CO NCLUDED THAT IF ALONG WITH THE LIABILITY THE ASSET WAS ALSO TO BE ADJUSTED, THEN IN THAT CASE, IT WAS ONLY THE NET LIABILITY, VIZ. THE LIABILITY NET OF THE AMOUNT OF ASSET WHICH WOULD BE TRANSFERRED TO THE GENERAL RESERVE. THUS, THE A.O OBSERVED THAT ON TH E AFORESAID PREMISES ONLY THE NET LIABILITY OF RS. 69,64,411/ - [ I.E. RS. 1,08,59,288.50 ( MINUS ) RS. 38,94,877/ - ] COULD HAVE BEEN ADJUSTED EITHER IN THE GENERAL RESERVE ACCOUNT OR IN THE LONG TERM LOAN ACCOUNT. THE A.O ON THE BASIS OF HIS AFORESAID OBSERVAT ION S CONCLUDED THAT THE ASSESSEE IN THE GARB OF AN EXPLANATION AS REGARD S P A G E | 5 ITA NO. 679 /MUM/201 6 AY: 20 12 - 1 3 DESAI INVESTMENTS PRIVATE LIMITED VS. ITO 2(1)(2) THE ADDITION OF RS. 1,47,54,165/ - CREDIT ED TO THE GENERAL RESERVE , HAD AS A MATTER OF FACT IN THE BACKDROP OF AN AFTERTHOUGHT PROJECTED A CONCOCTED STORY BY CHARACTERIZING THE ADDITIO N TO THE SAID ACCOUNT AS A TYPOGRAPHICAL ERROR . THE A.O THUS CONCLUDED THAT THE ASSESSEE HAD FAILED TO COME FORTH WITH A PLAUSIBLE EXPLANATION AS REGARDS THE ADDITION MADE TO THE GENERAL RESERVE ACCOUNT. 5. THE A.O FURTHER OBSERVED THAT THE STATEMENT OF ACCOUNT OF M/S AVDHOOT FINANCE AND INVESTMENTS PRIVATE LIMITED PLACE D ON RECORD BY THE ASSESSEE REVEAL ED THAT THE AMOUNT RECEIVABLE BY THE ASSESSEE FROM THE SAID CONCERN WAS RS. 8,13,146/ - , WHILE FOR THE ASSESSEE HAD CLAIMED THE TRANSACTION AMOUNT A T RS. 38,94,877/ - . THE A.O OBSERVED THAT IN THE BACKDROP OF THE AFORESAID VARIANCE A DIFFERENCE OF RS. 30,81,731/ - [ RS. 38,94,877/ - ( MINUS ) RS. 8,13,146/ - ] IN ANY CIRCUMSTANCE REMAINED TOTALLY UNEXPLAINED. 6. THE A.O AFTER DELIBERATING ON THE AFORESAID FA CTS WAS NOT PERSUADED TO SUBSCRIBE TO THE EXPLANATION OF THE ASSESSEE AND HOLDING A CONVICTION THAT THE AMOUNT OF RS. 1,47,54,165/ - CREDITED BY THE ASSESSEE TO THE GENERAL RESERVE AC COUNT HAD REMAINED UNEXPLAINED, THEREFORE, ADDED THE SAID AMOUNT AS AN UNE XPLAINED CASH CREDIT U/S 68 IN THE HANDS OF THE ASSESSEE. 7. AGGRIEVED, THE ASSESSEE ASSAILED THE ORDER OF THE A.O BEFORE THE CIT(A). THE ASSESSEE SUBMITTED BEFORE THE CIT(A) THAT BY WAY OF A MISTAKE HIS ACCOUNTANT HAD ERRONEOUSLY TRANSFERRED THE AMOUNTS REFLECTED AGAINST THE AFORESAID PARTIES, VIZ. M/S ARODYNE CHEMICALS LTD. : RS. 1,08,59,288.50; AND M/S AVDHOOT FINANCE & INVESTMENTS LTD. : RS. 38,64,877/ - , AGGREGATING TO RS. 1,47,54,165.50 BY WRONGLY DEBITING THE ACCOUNTS OF THE SAID RESPECTIVE PARTIES A ND CREDITING THE P A G E | 6 ITA NO. 679 /MUM/201 6 AY: 20 12 - 1 3 DESAI INVESTMENTS PRIVATE LIMITED VS. ITO 2(1)(2) SAME TO THE GENERAL RESERVE. IT WAS SUBMITTED BY THE ASSESSEE THAT ON REALIZATION OF THE MISTAKE , THE SAME WAS RECTIFIED BY CREDITING THE AFORESAID AMOUNTS TO THE ACCOUNTS OF THE RESPECTIVE PARTIES AND DEBITING THE GENERAL RESERVE. THE ASS ESSEE FURTHER SUBMITTED BEFORE THE CIT(A) THAT THE VERACITY OF THE CLAIM OF THE ASSESSEE WAS VERIFIED BY THE A.O BY ISSUING SUMMONS U/S 133(6) OF THE ACT AND CARRYING OUT A DIRECT ENQUIRY WITH THE AFORESAID PARTIES. THE ASSESSEE ADVERTING TO THE OBSERVATIO N OF THE A.O THAT IT WAS BEYOND COMPREHENSION AS TO HOW THE ASSESSEE COULD CLAIM TO HAVE ADDED THE SUM TOTAL OF A LIABILITY FIGURE OF RS. 1,08,59,288.50 (CR) OF M/S ARODYNE CHEMICALS LTD. AND THE ASSET FIGURE OF RS. 38,94,877/ - (DR) OF M/S AVDHOOT FINANCE AND INVESTMENTS P. LTD. TO BRING THE TOTAL TO RS. 1,47,54,165/ - , AND CLAIM THAT THE SAID FIGURE WAS WRONGLY CREDITED TO GENERAL RESERVE, THEREIN SUBMITTED THAT AS FAR AS M/S ARODYNE CHEMICALS LTD. WAS CONCERN ED , THERE WAS A CREDIT BALANCE OF RS. 1,08,59,288.50 AS ON 31.03.2012 WHICH WAS TRANSFERRED BY DEBITING THE SAID PARTY AND CREDITING THE GENERAL RESERVE BY PASSING AN INCORRECT JOURNAL ENTRY, AS A RESULT WHEREOF THE BALANCE IN THE CASE OF M/S ARODYNE CHEMICAL S LTD. STOOD REDUCED TO RS. NIL. TH AT AS REGARDS M/S AVDHOOT INVESTMENTS P. LTD. WHERE THERE WAS ALREADY A DEBIT BALANCE OF RS. 8,13,146/ - IN THE LEDGER ACCOUNT ON 31.03.2012, THE ACCOUNTANT WRONGLY DEBITED AN AMOUNT OF RS. 38,94,877/ - TO THE PARTY ACCOUNT AND CREDITED THE SAME TO THE GENER AL RESERVE ACCOUNT, AS A RESULT WHEREOF THE CLOSING DEBIT BALANCE IN THE LEDGER ACCOUNT OF M/S AVDHOOT INVESTMENTS P. LTD. WAS RAISE D TO RS. 47,08,023/ - (I.E. RS. 8,13,146/ - (+) RS. 38,94,877/ - ). IT WAS SUBMITTED BY THE ASSESSEE THAT ON THE BASIS OF THE AF ORESAID TWO INCORRECT JOURNAL ENTRIES PASSED BY THE ACCOUNTANT THE GENERAL RESERVE ACCOUNT INCREASED BY AN AGGREGATE OF RS. 1,47,54,165.50 (I.E. RS. 1,08,59,288.50 AND RS. 38,94,877/ - ) , WHILE FOR THE CREDIT BALANCE OF RS. 1,08,59,288.50 IN THE ACCOUNT AROD YNE CHEMICALS LTD. WAS P A G E | 7 ITA NO. 679 /MUM/201 6 AY: 20 12 - 1 3 DESAI INVESTMENTS PRIVATE LIMITED VS. ITO 2(1)(2) REDUCED TO RS. NIL, WHEREAS THE DEBIT BALANCE OF M/S AVDHOOT FINANCE AND INVESTMENTS P. LTD. AFTER BEING INCREASED BY AN AMOUNT OF RS. 38,94,877/ - WAS RAISED TO RS. 47,08,023/ - (D R.) . THE ASSESSEE IN ORDER TO BUTTRESS THE VERACITY OF ITS AFORESAID CONTENTION SUBMITTED THAT THE A.O HAD ON THE BASIS OF INDEPENDENT ENQUIRIES OBTAINED THE NECESSARY CONFIRMATIONS FROM BOTH OF THE AFORESAID TWO CONCERNS, VIZ. M/S ARODYNE CHEMICALS LTD. AND M/S AVDHOOT FINANCE AND INVESTMENTS P. LTD., WHICH SUPPORTED THE CLAIM OF THE ASSESSEE. THUS, IN THE BACKDROP OF THE AFORESAID SUBMISSIONS IT WAS AVERRED BY THE ASSESSEE THAT AS THE ADDITION OF RS. 1,47,54,165/ - TO THE GENERAL RESERVE ACCOUNT HAD OCCASIONED ON THE BASIS OF WRONG JOURNAL ENTRIES, THEREFORE, NO ADDITION U/S 68 OF THE ACT WAS CALLED FOR IN THE HANDS OF THE ASSESSEE. 8. THE CIT(A) AFTER DELIBERATING O N THE AFORESAID CONTENTION S OF THE ASSESSEE IN THE BACKDROP OF THE MATERIAL MADE AVAILABLE O N RECORD, THOUGH FOUND FAVOUR WITH THE CLAIM OF THE A SSESSEE AS REGARDS THE INCREASE OF GENERAL RESERVE BY WRONGLY CREDITING THE LIABILITY OF RS. 1,08,59,288/ - OF M/S ARODYNE CHEMICALS LTD . TO THE GENERAL RESERVE ACCOUNT , HOLDING A CONVICTION THAT AS THE SAME WAS A CREDIT BALANCE/LIABILITY AS ON 31.03.2012, THEREFORE, IT WAS WELL WITHIN COMPREHENSION THAT ON THE BASIS OF AN INCORRECT JOURNAL ENTRY THE AMOUNT COULD HAVE BEEN TRANSFERRED TO THE GENERAL RESERVE ACCOUNT. HOWEVER, THE CIT(A) CONCLUDED THAT THE CONTENTION OF THE ASSESSEE THAT THE ACCOUNTANT HAD BY WAY OF AN INCORRECT JOURNAL ENTRY INCREASE D THE DEBIT BALANCE OF RS. 8,13,146/ - APPEARING IN THE ACCOUNT OF M/S AVDHOOT FINANCE AND INVESTMENTS P. LTD. BY FURTHER DEBITING AN AMOUNT OF RS. 38,94,877/ - TO THE SAID PARTY , WITH A CORRESPONDING CREDIT OF THE SAME TO THE GENERAL RESERVE ACCOUNT WAS BEYOND COMPREHENSION AND AS SUCH COULD NOT BE ACCEPTED. THE CIT(A) ON THE P A G E | 8 ITA NO. 679 /MUM/201 6 AY: 20 12 - 1 3 DESAI INVESTMENTS PRIVATE LIMITED VS. ITO 2(1)(2) BASIS OF HIS AFORESAID OBSERVATIONS THUS CONCLUDED THAT THE ASSESSEE BY INCREASING THE GENERAL RESERVE ACC OUNT BY AN AMOUNT OF RS. 38,94,877/ - HAD ATTEMPTED TO CREATE AN UNEXPLAINED LIABILITY IN ITS BALANCE SHEET, WHICH BY NO MEANS COULD BE CONSTRUED AS A MISTAKE ON THE PART OF ITS ACCOUNTANT. THE CIT(A) THOUGH DELETED THE ADDITION OF RS. 1,08,59,288/ - MADE BY THE A.O IN RESPECT OF THE ADDITION TO THE GENERAL RESERVE ACCOUNT WHICH WAS EXPLAINED BY THE ASSESSEE AS BEING THE LIABILITY OF M/S ARODYNE CHEMICALS LTD., WHICH AS CLAIMED BY THE ASSESSEE WAS ON THE BASIS OF A WRONG JOURNAL ENTRY ERRONEOUSLY CREDITED TO THE GENERAL RESERVE ACCOUNT, BUT HOWEVER , SUSTAINED THE ADDITION OF RS. 38,94,877/ - TO THE GENERAL RESERVE ACCOUNT. THE CIT(A) FORTIFYING HIS VIEW THAT THE ADDITION OF RS. 38,94,877/ - TO THE GENERAL RESERVE ACCOUNT MADE BY THE A.O U/S 68 AND UPHELD BY HIM WAS WELL IN ORDER, THEREIN OBSERVED THAT THE SAME FOUND SUPPORT FROM THE FACT THAT THE UNSE CURED LOANS OF RS. 86,07,129/ - APPEARING IN THE BALANCE SHEET OF THE ASSESSEE ON 31.03.2011 HAD INCREASED TO AN AMOUNT OF RS. 1,57,34,795/ - ON 31.03.2012, WHICH REVE ALED THAT THERE WAS AN INCREASE OF LOAN BY RS. 71,27,666/ - DURING THE YEAR UNDER CONSIDERATION . THE CIT(A) IN THE BACKDROP OF THE AFORESAID FACTS OBSERVED THAT FROM PERUSAL OF THE INCREASE OF THE LOAN S BY RS. 71,27,666/ - (C R) DURING THE YEAR UNDER CONSIDER ATION, IT COULD SAFELY BE CONCLUD ED THAT THE ASSESSEE HAD CREATED THE ASSETS TO THE SAID EXTENT FROM THE SOURCES WHICH HAD NOT BEEN EXPLAINED PROPERLY. THUS, THE CIT(A) ON THE BASIS OF HIS AFORESAID CONVICTION CONCLUDED THAT THE CREATION OF ASSET S TO THE EXTENT OF RS. 38,94,880/ - BY INCREASING THE AMOUNT RECEIVABLE FROM M/S AVDHOOT FINANCE AND INVESTMENTS P. LTD., WAS RIGHTLY ADDED BY THE A.O U/S 68 IN THE HANDS OF THE ASSESSEE. 9. THE ASSESSEE BEING AGGRIEVED WITH THE ORDER OF THE CIT(A) HAD THEREIN CARRIED THE MATTER IN APPEAL BEFORE US. THE LEARNED AUTHORIZED P A G E | 9 ITA NO. 679 /MUM/201 6 AY: 20 12 - 1 3 DESAI INVESTMENTS PRIVATE LIMITED VS. ITO 2(1)(2) REPRESENTATIVE (FOR SHORT A.R.) REITERATED THE SUBMISSIONS MADE BEFORE THE LOWER AUTHORITIES AS REGARDS THE ADDITION OF R S. 38,94,877/ - MADE TO THE GENERAL RESERVE ACCOUNT. THE LD. A.R. IN ORDER TO SUBSTANTIATE HIS CONTENTION THAT THE ADDITION OF RS. 38,94,877/ - WAS WRONGLY GENERATED BY ERRONEOUSLY DEBITING THE ACCOUNT OF M/S AVDHOOT FINANCE AND INVESTMENTS P. LTD. BY THE SA ID AMOUNT , WITH A CORRESPONDING CREDIT TO THE GENERAL RESERVE ACCOUNT, THEREIN PLACED ON RECORD THE COPY OF THE LEDGER ACCOUNT OF M/S AVDHOOT FINANCE AND INVESTMENTS P. LTD. APPEARING IN THE BOOKS OF ACCOUNT OF THE ASSESSEE ( PAGE 1 7 OF APB) FOR THE YEAR UNDER CONSIDER ATION, COPY OF THE JOURNAL VOUCHER DATED 31.03.2012 ON THE BASIS OF WHICH THE ACCOUNT OF THE AFORESAID PARTY WAS WRONGLY DEBITED BY AN AMOUNT OF RS. 38,94,877/ - , WITH A CORRESPONDING CREDIT TO THE GENERAL RESERVE ACCOUNT ( PAGE 15 OF APB), A S WELL AS THE COPY OF ACCOUNT OF THE AFORESAID CONCERN, VIZ. M/S AVDHOO T FINANCE & INVESTMENTS P. LTD. AFTER THE SAME WAS RECTIFIED ON 31.03.2012 ( PAGE 38 OF APB). THE LD. A.R. TAKING US THROUGH THE AFORESAID LEDGER ACCOUNTS/JOURNAL VOUCHERS, THEREIN SUB MITTED THAT IT COULD SAFELY BE GATHERED THAT THE ACCOUNT OF THE AFORESAID CONCERN, VIZ. M/S AVDHOOT FINANCE AND INVESTMENTS P. LTD. WAS ON THE BASIS OF A WRONG JOURNAL ENTRY DEBITED BY AN AMOUNT OF RS. 3 8 , 9 4,877/ - , AS A RESULT WHEREOF THE OPENING BALANCE OF RS. 8,13,149/ - (DR) APPEARING IN THE ACCOUNT OF THE SAID CONCERN WAS RAISED TO AN AMOUNT OF RS. 47,17,593/ - ON 31.03.2012. IT WAS FURTHER SUBMITTED BY THE LD. A.R. THAT THE AFORESAID WRONG JOURNAL ENTRY W AS RECTIFIED BY THE ASSESSEE BY CREDITING THE ACCOUNT OF THE AFORESAID CONCERN, VIZ. M/S AVDHOOT FINANCE AND INVESTMENTS P. LTD. BY AN AMOUNT OF RS. 38,94,877/ - WITH A CORRESPONDING DEBIT TO THE GENERAL RESERVE ACCOUNT. IT WAS THUS AVERRED BY LD. A.R. THAT A MERE INCREASE IN THE GENERAL RESERVE ACCOUNT BY WRONGLY DEBITING THE ACCOUNT OF THE AFORESAID CONCERN, VIZ. M/S AVDHOOT FINANCE AND INVESTMENTS P. LTD., WHICH THEREAFTER WAS P A G E | 10 ITA NO. 679 /MUM/201 6 AY: 20 12 - 1 3 DESAI INVESTMENTS PRIVATE LIMITED VS. ITO 2(1)(2) REVERSED AND RECTIFIED, COULD BY NO MEANS BE BROUGHT WITHIN THE SWEEP OF SEC. 6 8 OF THE ACT AND ASSESSED AS THE UNEXPLAINED CASH CREDIT IN THE HANDS OF THE ASSE SSEE. IT WAS SUBMITTED BY THE L D. A.R. THAT THE ADDITION TO THE EXTENT OF RS. 38,94,877/ - WAS WRONGLY SUSTAINED BY THE CIT(A), WHICH THUS WAS LIABLE TO BE VACATED. PER CONTRA , THE LEARNED DEPARTMENTAL REPRESENTATIVE (FOR SHORT D.R.) RELIED ON THE ORDER OF THE CIT(A) AND SUBMITTED THAT AS THE EXPLANATION OF THE ASSESSEE TO THE EXTENT RELATABLE TO THE ADDITION OF RS. 38,94,877/ - IN THE GENERAL RESERVE ACCOUNT WAS BEYOND COMPRE HENSION, THEREFORE, THE SAME HAD RIGHTLY BEEN SUSTAINED BY THE CIT(A). IT WAS THUS AVERRED BY THE LD. D.R THAT THE APPEAL OF THE ASSESSEE WAS DEVOID OF ANY MERIT AND WAS THUS LIABLE TO BE DISMISSED. 10. WE HAVE HEARD THE AUTHORIZED REPRESENTATIVES FOR BOT H THE PARTIES, PERUSED THE ORDERS OF THE LOWER AUTHORITIES AND THE MATERIAL AVAILABLE ON RECORD. WE HAVE GIVEN A THOUGHTFUL CONSIDERATION TO THE FACTS OF THE CASE IN THE BACKDROP OF THE MATERIAL MADE AVAILABLE ON RECORD. WE ARE OF THE CONSIDERED VIEW THAT THOUGH AT THE FIRST BLUSH THE EXPLANATION OF THE ASSESSEE APPEAR ED TO BE ABSOLUTELY ILLOGICAL AND NOTHING BETTER THAN A CONCOCTED STORY WHICH WAS BACKED BY AN AFTERTHOUGHT TO WRIGGLE OUT OF THE TAX RAMIFICATIONS EMERGING THERE FROM. HOWEVER, A CAREFUL PERU SAL OF THE FACTS IN THE BACKDROP OF THE COPIES OF THE LEDGER ACCOUNT S AND THE JOURNAL ENTRY PASSED BY THE ASSESSEE LEADING TO AN ADDITION OF RS. 38,94,877/ - TO THE GENERAL RESERVE ACCOUNT , AND THAT RECTIFYING THE SAME , HAD PERSUADED US TO TAKE A DEPARTURE FROM THE AFORESAID VIEW. WE MAY AT THIS STAGE OBSERVE THAT THOUGH THE EXPLANATION OF THE ASSESSEE AS REGARDS THE ADDITION OF RS. 38,94,877/ - TO THE GENERAL RESERVE ACCOUNT DOES NOT INSPIRE MUCH CONFIDENCE AS THE SAME IS NOT FREE FROM DOUBTS, BUT THEN WE CA NNOT ALSO REMAIN OBLIVIOUS OF THE FACT THAT WE HAVE TO RESTRICT OURSELVES TO P A G E | 11 ITA NO. 679 /MUM/201 6 AY: 20 12 - 1 3 DESAI INVESTMENTS PRIVATE LIMITED VS. ITO 2(1)(2) THE VETTING OF THE EXPLANATION OF THE ASSESSEE, IN ORDER TO VERIFY AS TO WHETHER THE SAME SATISFIES THE CONDITIONS CONTEMPLATED U/S 68, WHICH THEREIN WOULD JUSTIFY THE ADDITION OF THE SAID AMOUNT AS AN EXPLAINED CASH CREDIT IN THE HANDS OF THE ASSESSEE, OR NOT. WE FIND THAT THE ONLY REASONING ON THE PART OF THE CIT(A) TO CONCLUDE THAT THE AMOUNT OF RS. 38,94,877/ - WAS LIABLE TO BE ASSESSED AS AN UNEXPLAINED CASH CREDIT U/S 68 IN TH E HANDS OF THE ASSESSEE , WAS THE FACT THAT THE YEAR UNDER CONSIDERATION HAD WITNESSED AN INCREASE OF LOAN S RAISED BY THE ASSESSEE BY AN AMOUNT OF RS. 71,27,666/ - . THE CIT(A) ON THE BASIS OF HIS AFORESAID OBSERVATIONS HAD CONCLUDED THAT THE ASSESSEE BY RAIS ING LOAN S OF RS. 71,27,666/ - FROM OTHERS, WHICH HAD NOT BEEN PROPERLY EXPLAINED BY HIM, HAD THUS CREATED ASSETS TO THE SAID EXTENT. WE WOULD NOT HESITATE TO OBSERVE THAT EVEN IF THE UNSUBSTANTIATED REASONING OF THE CIT(A) WAS TO BE ACCEPTED, EVEN THEN, WIT HOUT POINTING OUT AS TO WHICH UNEXPLAINED CASH CREDIT OF RS. 38,94,877/ - BACKED/SOURCED THE ADDITION OF RS. 38,94,877/ - IN THE ACCOUNT OF M/S AVDHOOT FINANCE & INVESTMENTS P. LTD., NO ADDITION U/S 68 COULD VALIDLY BE MADE IN THE HANDS OF THE ASSESSEE . WE A RE AFRAID THAT THE REASONING ADOPTED BY THE CIT(A) TO CONCLUDE THAT THE ADDITION OF RS. 38,94,877/ - MADE BY THE A.O BY CHARACTERIZING THE SAME AS AN UNEXPLAINED CASH CREDIT IN THE HANDS OF THE ASSESSEE IS BEYOND COMPREHENSION AND CANNOT BE ACCEPTED. WE ARE OF THE CONSIDERED VIEW THAT AS THE PROVISIONS OF SEC. 68 OF THE ACT PRESUPPOSES AN UNEXPLAINED CASH CREDIT, FAILING WHICH NO ADDITION CAN VALIDLY BE MADE UNDER THE AFORESAID STATUTORY PROVISION, THEREFORE, NOW WHEN IT REMAINS AS A MATTER OF FACT THAT NOT ONLY THE ASSESSEE HAD DULY EXPLAINED THAT THE ADDITION OF RS. 38,94,877/ - HAD OCCASIONED ON ACCOUNT OF A WRONG JOURNAL ENTRY WHICH THEREAFTER HAD BEEN REVERSED, BUT RATHER, NO SUCH CASH CREDIT HAD BEEN BROUGHT TO OUR NOTICE WHICH COULD PERSUADE US TO CONCL UDE THAT THE ADDITION OF THE AFORESAID P A G E | 12 ITA NO. 679 /MUM/201 6 AY: 20 12 - 1 3 DESAI INVESTMENTS PRIVATE LIMITED VS. ITO 2(1)(2) AMOUNT OF RS. 38,94,877/ - MADE BY THE A.O WAS RIGHTLY UPHELD BY THE CIT(A). WE THUS IN THE BACKDROP OF OUR AFORESAID OBSERVATIONS NOT BEING PERSUADED TO SUBSCRIBE TO THE OBSERVATIONS OF THE LOWER AUTHORITIES, THEREFOR E, SET ASIDE THE ORDER OF THE CIT(A) AND DELETE THE ADDITION OF RS. 38,94,877/ - . 1 1 . THE APPEAL OF THE ASSESSEE IS ALLOWED IN TERMS OF OUR AFORESAID OBSERVATIONS . ORDER PRONOUNCED IN THE OPEN COURT ON 20. 1 2. 2017 SD/ - SD/ - ( P.K. BANSAL ) ( RAVISH SOOD ) VICE PRESIDENT JUDICIAL MEMBER MUMBAI ; 20 .1 2 .2017 PS. ROHIT KUMAR / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT(A) - 4. / CIT 5. , , / DR, ITAT, MUMBAI 6. / GUARD FILE . //TRUE COPY// / BY ORDER, / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI P A G E | 13 ITA NO. 679 /MUM/201 6 AY: 20 12 - 1 3 DESAI INVESTMENTS PRIVATE LIMITED VS. ITO 2(1)(2)