2012 (9) TMI 965 - AT - Income Tax

Unexplained credits - Held that - Capital account shown in the statement of affairs was only a balancing figure. Even if the assessee s version that three bank accounts had to be excluded for reconciling his capital account, is accepted, there is still a difference of ₹ 6,68,954/-. As pointed out by the learned D.R., there is also an anomaly with regard to total of the balance in the bank account. We are, therefore, of the opinion that the matter requires a re-visit by the A.O. A.O. has to consider the statements of affairs as on 31.3.2006 and 31.3.2007 for arriving at any deficit or introduction in the capital account during the relevant previous year, taking into account the profit for the year. Assessee shall co-operate with the A.O. and file details of the work-out for arriving at the correct difference, if any, in capital account.

Summary

Issues:
- Addition of unexplained credits and difference in capital account.

Analysis:
1. The Revenue appealed against the deletion of an addition of Rs. 5,46,898 made for unexplained credits and another addition for a difference in the capital account by the CIT(Appeals).
2. The Assessing Officer found a difference in the capital account of the assessee based on the statement of affairs filed. The assessee explained that excluding balances from three bank accounts would reduce the difference to Rs. 6,68,954, which was voluntarily offered for taxation.
3. The CIT(Appeals held that if the bank accounts unrelated to money lending were ignored, the difference in the capital account was indeed Rs. 6,68,954, and deleted the balance addition. He also allowed the telescoping of unexplained credits with the reduced difference in the capital account.
4. The Revenue argued that the CIT(Appeals erred in deleting the addition of Rs. 5,46,898 as it was voluntarily agreed upon by the assessee during assessment proceedings. The Revenue contended that the exclusion of certain bank accounts by the CIT(Appeals was incorrect based on the accounts statement filed by the assessee.
5. The Appellate Tribunal observed discrepancies in the balance sheet and statements provided by the assessee. They concluded that a re-evaluation by the Assessing Officer was necessary to determine the correct difference in the capital account, considering the statements of affairs for the relevant years.
6. Regarding the telescoping of Rs. 5,46,898, the Tribunal noted that the assessee had already offered this amount as income during the assessment proceedings, as evidenced by a letter dated 15.12.2009.
7. The Tribunal set aside the decisions of the lower authorities and remitted the issues back to the Assessing Officer for a fresh consideration in accordance with the law. The appeal filed by the Revenue was allowed for statistical purposes.

This detailed analysis highlights the key arguments, findings, and conclusions of the ITAT Chennai judgment concerning the addition of unexplained credits and the difference in the capital account, providing a comprehensive overview of the case.