The Kolkata bench of the Income Tax Appellate Tribunal (ITAT) confirms the Income Tax addition under Section 68 of the Income Tax Act, 1961 in the absence of evidence proving the unsubstantial increase in the business capital.
The assessee is a proprietor of H.P. Institute of Insurance, engaged in the business of imparting vocational training. Assessee filed his return declaring a total income of Rs.20,17,360/-. The case of the assessee was selected for limited scrutiny.
The Assessing Officer noted the sharp rise amounting to Rs.23,26,96,302/- out of which the assessee has shown an amount of Rs.13,42,97,642/- as capital brought in. In this respect, the assessee has furnished a list of assets in the form of debtors/deposits/advances.
The Assessee had submitted that the books of account in his proprietary concern showed a negative opening capital balance of Rs.9,36,40,325/-. With a view to convert the negative capital balance into positive capital balance for banking purposes, the assessee had transferred the entries from the books of H. P. Institute of Insurance to his personal statement of affairs.
The Assessing Officer noted that the assessee did not consist of any conclusive proof as regards the time of acquisition of various items of transfer entries claimed to be introduced as capital from individual Balance Sheet into proprietorship Balance Sheet and the source of funds used for the same.
Thus, the Assessing Officer held that since the assessee has not been able to explain the credit in his books of accounts as regards this increase in capital brought in, added it to the total income as it remained unsubstantiated.
The Commissioner of Income Tax (Appeal) [CIT(A)] has not conducted any enquiry himself or caused to conduct an enquiry for examination of these transactions which have been claimed to be executed in the preceding years so as to ascertain whether these have been adequately subjected to taxation under the relevant provisions of the Income Tax Act.
The CIT(A) despite claiming that he has exercised his powers under Section 250(4) of the Income Tax Act, there is nothing on record which enables us to discern that he has made enquiries or directed the Assessing Officer to make further enquiry for the purpose of disposing of the appeal. He has simply taken on record, the material furnished by the assessee and after citing various judicial pronouncements, deleted the addition so made by the Assessing Officer.
The Two-member bench comprising of Sanjay Garg (Judicial member) and Girish Agrawal (Accountant member) held that there are discrepancies and contradictions in the submission made by the assessee which, more importantly, has been for the first time furnished before the CIT(A). And the findings arrived at by CIT(A) on submissions made by the assessee, in no way demonstrate, the conduct of any enquiry either by himself or through the Assessing Officer while disposing of the appeal, granting relief to the assessee.
Therefore, the order of the CIT(A) was set aside and remit the matter back to his file for de novo adjudication after taking into account the observations and by conducting necessary enquiries either himself or by the Assessing Officer. Thus, the ground taken by the revenue in this respect was allowed for statistical purposes.
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