ITO WARD-49(1), NEW DELHI V. SAROJ MEHNDI, NEW DELHI

ITA 1552/DEL/2023

AI Insights

The case involves an appeal by the ITO, Ward-49(1), New Delhi against Saroj Mehndi concerning the assessment year 2013-14. The primary contention was the addition of Rs 1,60,57,794 to the capital account and Rs 2,03,10,067 to sundry creditors, which were treated as unexplained cash credits under Section 68 of the Income-tax Act, 1961. The CIT(A) had deleted these additions, accepting the assessee's explanation that the figures were reported erroneously due to the use of a draft personal statement of affairs instead of the audited balance sheet of the business. The Tribunal upheld the CIT(A)'s decision, dismissing the revenue's appeal.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 705920 (ITAT-DELHI)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-07-2025
• Appeal Filed By: Department
• Order Result: Dismissed
• Assessment Year: 2013-2014
• Laws Referred To: Income-tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MANISH GUPTA
• Assessee Lawyers: PRADEEP SINGH RAWAT
• Keywords: Additional evidence; Unexplained cash credit
• Section: 144; 68

Judgement Text

"INCOME TAX APPELLATE TRIBUNAL DELHI BENCH “G”: NEW DELHI BEFORE SHRI VIKAS AWASTHY, JUDICIAL MEMBER AND SHRI M. BALAGANESH, ACCOUNTANT MEMBER ITA No. 1552/Del/2023 (Assessment Year: 2013-14) ITO, Ward-49(1), New Delhi Vs. Saroj Mehndi, 38C, BB Block, Janakpuri, New Delhi (Appellant) (Respondent) PAN: AFIPM9811L Assessee by : Shri Pradeep Singh Rawat, Adv Shri Girish Upadhyay, Adv Shri Pankaj Pandey, Adv Revenue by: Shri Manish Gupta, Sr. DR Date of Hearing 20/05/2025 Date of pronouncement 04/07/2025 O R D E R PER M. BALAGANESH, A. M.: 1. The appeal in ITA No.1552/Del/2023 for AY 2013-14, arises out of the National Faceless Appeal Centre (NFAC), Delhi [hereinafter referred to as ‘ld. NFAC’, in short] in Appeal No. ITBA/NFAC/S/250/2022-23/1051066152(1) dated 21.03.2023 against the order of assessment passed u/s 144 of the Income-tax Act, 1961 (hereinafter referred to as ‘the Act’) dated 23.12.2015 by the Assessing Officer, ITO, Ward-49(1), New Delhi (hereinafter referred to as ‘ld. AO’). 2. The first issue to be decided in this appeal is as to whether the learned CIT(A) was justified in deleting the addition made in the sum of Rs 1,60,57,794/- on account of increase in capital in the facts and circumstances of the instant case. ITA No. 1552/Del/2023 Saroj Mehndi Page | 2 3. We have heard the rival submissions and perused the materials available on record. The return of income for the assessment year 2013-14 was filed by the Assessee on 7-11-2014 declaring total income of Rs 3,69,070/-. On perusal of the AIR information, it was seen that Assessee had shown an addition to the capital account of Rs 1,60,57,794/-. This was sought to be examined by the learned AO in the scrutiny assessment proceedings. It was submitted that Assessee is regularly assessed to income tax for the last 30 years and this balance represents the accumulated balance of capital since last 30 years. It was submitted that Assessee is engaged in the pharmaceutical business under the proprietary concern M/s Mehendi Medical Stores located at Morch, Manipur. The assessment was framed under section 144 of the Act without the presence of the Assessee wherein this addition to the capital account was sought to be added to the total income of the Assessee. 4. Before the learned CIT(A), the Assessee sought to explain that while filing the return of income for the year under consideration, the erstwhile tax advisor of the Assessee had inadvertently filled in particulars of draft personal statement of affairs of the Assessee as on 31-3-2013 instead of particulars of balance sheet as on 31-3-2013 of the business of the Assessee i.e M/s Mehendi Medical Stores in the ITR 4. This inadvertent error in the return had resulted in the disclosure of accumulated capital of the Assessee of Rs 1,60,57,794/- which ultimately culminated in the addition made to the total income by the learned AO as unexplained cash credit under section 68 of the Act. To buttress this argument, the Assessee also drew the attention of the learned CIT(A) by referring to the relevant columns and the figures filled in the ITR have been extracted in pages 18 and 19 of the order of the learned CIT(A). The Assessee in support of this ITA No. 1552/Del/2023 Saroj Mehndi Page | 3 argument also placed on record the entire audited balance sheet of the proprietary concern M/s Mehendi Medical Stores as on 31-3-2013 and 31-3-2012 together with the draft personal statement of affairs of the Assessee for the year ended 31- 3-2013 and the complete set of return of income. Accordingly the Assessee submitted that the addition of Rs 1,60,57,794/- made on account of accumulated balance of capital of the Assessee is merely due to inadvertent error in reporting the balance of capital account in the return of income and as such no addition is warranted in the assessment. The learned CIT(A) sought a remand report from the learned AO in this regard. The Assessee filed a rejoinder to the remand report before the learned CIT(A). The Assessee also placed on record an affidavit stating on oath that the details mentioned in the ITR filed for assessment year 13-14 are from the draft statement of affairs of the Assessee which were inadvertently filed by the Assessee in the ITR. 5. The learned CIT(A) appreciated the contentions of the assessee that there was no actual credit or addition to the capital account of the assessee during the year which would warrant addition to income of the assessee and deleted the addition made in the sum of Rs 1,69,57,794/-. 6. We find that this is a case of figures from the draft statement of affairs of the Assessee being reflected by the erstwhile tax advisor in the ITR 4 filed by the Assessee instead of picking up the actual capital account figure from the proprietary concern of the audited balance sheet of Mehendi Medical Stores as on 31-03-2013. It is not in dispute that Assessee is regularly assessed to income tax for the last 30 years and had accumulated balance of figures reflected in the capital account. M/s Mehendi Medical Stores is the proprietary concern of the Assessee, wherein only business transactions would be filled, whereas in the draft ITA No. 1552/Del/2023 Saroj Mehndi Page | 4 statement of affairs, the personal transactions as well as the business transactions would get clubbed and will get reflected in the capital account. But for an individual carrying on business, only the business transactions are to be reflected in the ITR. Hence, the explanation given by the Assessee that his erstwhile tax advisor had wrongly picked up the figure from the draft personal statement of affairs and reflected in the ITR needs to be accepted in the facts and circumstances of the incident case. There is absolutely no addition to the capital account actually made by the Assessee during the year under consideration. Since the Assessee is regularly assessed to tax for the last 30 years, even otherwise, this sum of Rs 1,69,57,794/- gets automatically explained by way of incomes offered by it in the past. Hence, there is absolutely no scope for making any addition on account of increase in capital by treating it as unexplained cash credit under Section 68 of the Act. We hold that the learned CIT(A) had rightly deleted the addition made to the capital account. Accordingly, the Ground Nos. 1 to 3 raised by the revenue are dismissed. 7. The next issue to be decided in this appeal is as to whether the Learned CITA was justified in deleting the addition made on account of sundry creditors in the sum of Rs 2,03.10,067/- in the facts and circumstances of the instant case. 8. We have heard the rival submissions and perused the materials available on record. The Learned AO observed that Assessee had shown certain sundry creditors of Rs 2,03,10,067/- in the ITR. Since no details were filed by the Assessee in the assessment proceedings in response to the show-cause notice issued by the Learned AO, the same was treated as unexplained cash credit under section 68 of the Act. Before the learned CIT(A), the Assessee submitted that these sundry creditors are only balances carried forward from earlier years and ITA No. 1552/Del/2023 Saroj Mehndi Page | 5 that there were no fresh credits during the year warranting any addition to be made under section 68 of the Act. Further, it was also pointed out that the erstwhile tax advisor had considered the figures reflected in the draft statement of affairs of the Assessee, wherein personal sundry creditors were reflected, which figure had been picked up and reflected in the ITR instead of the business sundry creditors to be picked up from the balance sheet of M/s Mehendi Medical Stores. This fact was sought to be examined by the Learned CITA. For this purpose, the Learned CIT(A) remanded the matter to the Learned AO and sought for a remand report. The Learned AO objected to the admission of the additional evidences and reiterated the findings made by him in the assessment order. The Assessee filed rejoinder to the remand report before the Learned CIT(A). The Learned CITA on consideration of all the explanations given by the Assessee and the remand report and the documentary evidences placed on record observed that the Assessee had bought one property bearing address No. B-1, 550, Janakpuri for Rs. 2,16,10,067 out of loan of Rs. 2 crores, which was disclosed as current liabilities in the draft personal statement of affairs for the year ended 31-03-2013. The Learned CITA observed that the Learned AO had added the said loan amount of Rs. 2 crores along with other miscellaneous sundry creditors of Rs. 3,10,067/- appearing in the draft personal statement of affairs as unexplained cash credit under Section 68 of the Act, which was inadvertently disclosed in the return of income by the erstwhile tax advisor. 9. This aspect of picking up the wrong figures from the draft personal statement of affairs had already been addressed by us in the earlier grounds. It is not the case of the revenue that this sum of Rs 2,03,10,067/- represent business sundry creditors of the Assessee for which explanation need to be given by the ITA No. 1552/Del/2023 Saroj Mehndi Page | 6 Assessee. The Learned CIT(A) had also appreciated the confirmation given by Mrs. Poonam Garg who had given a loan of Rs 2 crores to the Assessee which is reflected in the draft personal statement of affairs. Hence, there is no income element involved in the said transaction. It is also pertinent to note that Mrs. Poonam Garg is regularly assessed to income tax holding PAN AAGPC 2986F. The Assessee has also given the address of Mrs. Poonam Garg. The Learned AO had not sought to verify the credentials of the said party even to treat the loan amount as unexplained cash credit under Section 68 of the Act. Without making any such preliminary verification, simply disbelieving the contentions of the Assessee would not be accepted in the eyes of law. Hence, we hold that the Learned CIT(A) had rightly deleted the addition made in the sum of Rs 2,03,10,067/- on account of creditors in the facts and circumstances of the instant case. Accordingly, the Ground Nos. 4 and 5 raised by the revenue are dismissed. 10. In the result, the appeal of the revenue is dismissed. Order pronounced in the open court on 04/07/2025. -Sd/- -Sd/- (VIKAS AWASTHY) (M. BALAGANESH) JUDICIAL MEMBER ACCOUNTANT MEMBER Dated: 04/07/2025 A K Keot Copy forwarded to 1. Applicant 2. Respondent 3. CIT 4. CIT (A) 5. DR:ITAT ITA No. 1552/Del/2023 Saroj Mehndi Page | 7 ASSISTANT REGISTRAR ITAT, New Delhi "