Discrepancy in Opening Balance of Furniture and Fittings: ITAT Remands Matter to AO for Verification [Read Order]

The Raipur Bench of Income Tax Appellate Tribunal (ITAT) remanded the matter to the Assessing Officer (AO) for verification after noting a discrepancy in the opening balance of furniture and fittings. 

Panchsheel Solvent Pvt. Ltd., appellant-assessee, was engaged in manufacturing and trading edible oil and rice bran oil. It filed its return for AY 2016-17 on March 27, 2018, declaring Nil income. The case was selected for limited scrutiny under Computer-Assisted Scrutiny Selection (CASS), and a notice under section 143(2) was issued on August 21, 2018. Subsequent notices under section 142(1) were issued, but there was no compliance.

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After a reminder, the assessee submitted an acknowledgment and computation of income on November 29, 2018. A final notice under section 144 was issued on December 4, 2018, but the explanations provided were not found satisfactory. As a result, additions were made, and the total income was enhanced to ₹1,14,90,060.

The assessee appealed the addition before the Commissioner of Income Tax (Appeals) [CIT(A)] but did not respond despite multiple opportunities, except on one occasion. The CIT(A) rejected the appeal, citing pending old cases and Central Board of Direct Taxes (CBDT) directions.

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The AO found a discrepancy in the opening balance of furniture and fittings between the ITRs for AY 2015-16 and 2016-17. As the assessee failed to provide a valid explanation or supporting evidence, the AO treated ₹1,45,472 as unexplained investment under Section 69 and disallowed ₹14,550 in depreciation.

Since no explanation or documents were submitted during the appeal, the CIT(A) upheld the addition and dismissed the appeal

Read More: Non-Reduction of Profit on Sale of Fixed Assets Adjustment: ITAT Upholds Remand for AO Verification

The key issue was the addition of ₹1,45,473 due to a change in the opening stock value of furniture and fittings as of March 31, 2015. The assessee explained that the difference resulted from a clerical error in depreciation adjustment, which was corrected during the year. It argued that the addition under Section 69 was unwarranted, but the Senior Department Representative supported the revenue's decision.

The two member bench comprising Ravish Sood (Judicial Member) and Arun Khodpia (Accountant Member) reviewed the submissions, records, and revenue authorities' orders. Since the issue involved a clerical error in depreciation and the assessee failed to provide supporting evidence, the ITAT sent the matter back to the AO for verification and fresh adjudication. It also directed the AO to give the assessee a fair chance to submit evidence and explanations.

In short,the appeal filed by the assessee was partly allowed for statistical purposes.

To Read the full text of the Order CLICK HERE

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