The Bangalore Bench of the Income Tax Appellate Tribunal (ITAT) restores the matter to AO as the addition of unexplained investment deleted without verifying books of account.
The assessee,Shri H. Omkarappa is a HUF carrying on the business of arecanut as a proprietary concern under the name & style of N R Halagappa & Sons where the assessee is also a partner in the firm, N R Halagappa & Company in the status of HUF.
The assessee filed a return of income on 29.9.2016 declaring an income of Rs.10,30,740. A notice u/s. 143(2) of the Income Tax Act 1961 (the Act) was issued. The assessee submitted various details called for by the AO. The AO made additions to Income from unaccounted sales – Rs.1,89,12,954, Excess stock found during the search – Rs.63,90,490 and Unexplained capital account balance: Rs.1,02,18,644. The AO also initiated penalty proceedings u/s. 271(1)(c) of the Act. The CIT(Appeals), deleted the additions made by the AO.
It was contended by the assessee that there was no corroborative evidence support to state that the amount offered is not turnover but income and addition are made merely based on the statement recorded by ADIT u/s.131 of the Act which cannot be used for making addition.
A Coram of the Shri George George K, Judicial Member and Ms Padmavathy S, Accountant Member observed that the CIT(Appeals) has not verified whether the balance was correctly reflected in the assessee’s books of accounts. Further viewed that this issue needs to be examined based on facts and evidence to verify whether the amount offered income or turnover of the assessee.
It was viewed by the Tribunal that the AO has made the addition on the basis that the capital account of the assessee in the partnership firm is not reflected in the proprietorship balance sheetis not the correct basis as the balance sheet of the proprietorship would only reflect the transaction that is routed through the same and would not reflect the transactions if any done by the assessee directly from the HUF account.
The Tribunal remitted the issue to AO to verify the consolidated statement of accounts of the assessee and decide the issue afresh and the appeal by the revenue was allowed for statistical purposes.
The appellant was represented by Shri Dev Ratan Kumar, CIT(DR) and the respondent was represented by Shri Ramasubramaniyan, CA.
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