Taxpayer Explains Source of Capital Enhancement in balance sheet: ITAT deletes addition of 89. 7 Lakhs u/s 68 of Income Tax Act [Read Order]

The assessee had duly shown from her cash book that the same was out of cash balance with her, which was also from personal books duly declared
Income Tax Act - ITAT Delhi - Section 68 of the Income Tax Act - Balance sheet - TAXSCAN

The Delhi bench of the Income Tax Appellate Tribunal (ITAT) deleted the addition of 89.7 Lakhs under Section 68 of the Income Tax Act, 1961 after the taxpayer provided an explanation for the source of capital enhancement in their balance sheet.

The respondent assessee daya rani was a proprietor in M/s Parasnath Iron Traders and deriving income from business or profession, house property and income from other sources. The learned Assessing Officer, on perusal of the balance sheet of M/s Parasnath Iron Traders noted that the assessee has made addition towards capital of Rs.89,70,600/-. In response to show-cause notice, the assessee stated out of Rs.89,70,600/- sum of Rs.74,70,600/- is a contra entry being balance of National Steel Suppliers appearing in the personal balance sheet of the assessee which was transferred through book entry and remaining has been paid in cash out of opening cash balance with her.  The assessee filed a ledger account of National Steel Suppliers in the books of the assessee.

However, the Assessing Officer rejected the assessee’s submission, stating that previous balance sheet of the assessee, no such balance of M/s National Steel Suppliers was appearing. Also, regarding the cash book, no source of cash balance has been furnished. Finally, learned Assessing Officer added the entire contribution/addition made in the capital of M/s Parasnath Iron Traders of Rs.89,70,600/-.

Before the Commissioner of Income Tax (Appeals), the assessee as an evidence to explain the source, furnished a copy of personal balance sheets of the assessee for Financial Years 2017-18 and 2018-19 and also balance sheet of M/s Parasnath Iron Traders for Assessment Years 2017-18 and 2018-19. The assessee also furnished the ledger account of her in the books of M/s National Steel Suppliers and a certificate of Chartered Accountant at amount of Rs.74, 70,600/- who has certified that the capital account of M/s Parasnath Iron Traders was by way of transfer entry in the books of M/s Parasnath Iron Traders, which was the amount receivables from M/s National Steel Suppliers from personal book of Smt. Daya Rani to the books of concern M/s Parasnath Iron Traders

Further, cash book and ledger account of the assessee in the books of M/s Parasnath Iron Traders and ledger account of proprietary concern was furnished to clarify that Rs.15, 00,000/- was transferred from a personal book of account of the proprietary concern. A certificate of Chartered Accountant and ledger account of the assessee in books of M/s Parasnath Iron Traders has been incorporated in the appellate order

 The bench  found that to explain the source of capital enhancement of Rs.89,70,600/- in the balance sheet of M/s Parasnath Iron Trader was stated to be through transfer entry on account of amount receivable from M/s National Steel Suppliers in the personal books of account of the Smt. Daya Rani of Rs.74,70,600/-.

Further the assessee had filed a certificate of Chartered Accountant, who has certified that as on 31.03.2019, an amount of Rs.74,70,600/- was credited to the capital account of M/s Parasnath Iron Traders, proprietor Smt. Daya Rani by transfer entry. Once, the assessee has produced the ledger account and books of M/s National Steel Suppliers and certificate of Chartered Accountant as transfer entry of the said amount receivable from them to the proprietary concern, ITAT does not find any reason as to why such amount remained unexplained. 

The Two member bench of the tribunal comprising M. Balaganesh ( Accountant member) and Amit Shukla ( Judicial member) concluded that the assessee had duly shown from her cash book that the same was out of cash balance with her, which is also from personal books duly declared. Thus, ITAT does not find any reason to deviate from the finding of the learned CIT (A) in deleting the addition. Thus, order of the CIT (A) is confirmed and the grounds raised by Revenue are dismissed. Accordingly, the appeal of the Revenue was dismissed.

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