2020 (5) TMI 400 - AT - Income Tax

Reopening of assessment u/s 147 - creation of bogus capital - HELD THAT - We find that the AO has duly considered the addition to be made because of opening capital, but did not make separate addition of said amount, as he allowed set-off of the same against the investment holding that same is made out of bogus capital created by the assessee - contention of the assessee that no addition is made on account of opening capital is devoid of any merits and not correct on facts and in law. Hence, same is rejected. Accordingly, we hold that the reopening of the assessment done by the AO is perfectly in order and as per law. Addition on account of alleged unexplained cash u/s.69A - HELD THAT - There were two balance sheets prepared by the assessee, however, one was appeared to be authentic and has been prepared by Pankaj Danawala, and Chartered Accountant for bogus capital entry and assets, without any actual transaction has taken place. Therefore, the addition, if any, can be made any respective of one balance sheet for the same period, therefore, the addition of ₹ 64,806/- is confirmed and the other addition on amount of ₹ 67,535/- is deleted. This ground of appeal is partly allowed. Unexplained and undisclosed investment u/s.69B - assessee has invested in bank FD - HELD THAT - We find that the FDR of ₹ 13,482/- dated 29-02-2000 and the other FDR does not fall during the year under consideration. Hence, the addition of ₹ 13,482/- is confirmed and the balance addition therefore, is deleted. This ground of appeal is therefore, partly allowed. Unexplained investment in building u/s.69B - HELD THAT - Since the property in question was purchased in the year 1989 and same was registered in 1990. Therefore, the investment so made does not pertains to assessment year under consideration. The investment thereon is shown out of disowned balance sheet. Therefore, said addition is also not justified. In view of these facts and circumstances, the addition made by the AO is therefore, deleted. This ground of appeal is allowed. Unexplained investment on account of alleged unexplained expenditure and unaccounted investment made under section 69A - HELD THAT - We find that the addition made for the assessment year under consideration does not pertains to assessment year under consideration, hence, same is therefore, is deleted. This ground of appeal is allowed. Addition related to disowned balance sheet , which was prepared by Shri Danawala Chartered Accountant, for certain of bogus balance sheet and bogus assets without any actual investment made by the assessee. The assessee has disowned the said balance sheet. In number of case laws, it was found to be bogus and addition stand deleted. Therefore, considering these facts, these addition made by the AO are therefore, directed to be deleted. Enhancement of income - power to Assessing Officer in relation to items of assessment which were never framing part of appeal before appellate authority - power under Income Tax Act, to enhance the assessment in Appeal - HELD THAT - AO cannot enhanced the income originally assessed under section 143 (3) Is set-aside proceeding in consequence of direction of the tribunal. Since in original assessment, the addition were made in respect of unexplained investment in FDRs and addition made on account of unexplained investment which in fresh assessment has been made. Therefore, the original addition made by the AO in subsequent fresh assessment is only at ₹ 1,35,000/ i.e. ₹ 1,10,000 25,000 1,35,000 has been returned in set-aside assessment. Hence, only addition can be sustained up to ₹ 1,35,000 as per original assessment. Therefore, other additions so made are amounts to enhancement of income to that extent, which is not permissible in law. Hence, same is therefore, deleted. We are aware that original assessment was made at ₹ 4,64,870 whereas set-aside assessment has been made at ₹ 22,59,341 including returned income of ₹ 70,550. Therefore, we set-aside this issue for Limited verification by the AO whether there is other addition which has been made in original assessment and same is again retained set-aside assessment by the AO, if so he has liberty modify the figures of income to that extent. Ground No. 1 to 9 of appeals are partly allowed.

Summary

Issues Involved:
1. Reopening of assessment and issuing notice u/s.148.
2. Addition on account of alleged unexplained cash u/s.69A.
3. Addition on account of alleged unexplained and undisclosed investment u/s.69B.
4. Addition on account of alleged unexplained investment in building u/s.69B.
5. Addition on account of alleged unexplained expenditure and unaccounted investment u/s.69A.
6. Addition on account of alleged unexplained investment u/s.69.
7. Addition on account of alleged unexplained expenditure u/s.69C.
8. Addition on account of alleged unexplained expenses u/s.68.
9. Enhancement of income in fresh assessment after ITAT's set-aside order.

Issue-wise Detailed Analysis:

1. Reopening of Assessment and Issuing Notice u/s.148:
The assessee raised an additional ground challenging the reopening of assessment and issuing notice u/s.148. The Tribunal found that the additional ground was purely legal and admitted it. The assessee argued that the reopening was based on an alleged escapement of income due to an opening capital of ?16,97,252/-, which was not added in the assessment order. The Tribunal held that the reopening was valid as the AO considered the opening capital for addition but allowed a set-off against investments, thus rejecting the assessee's contention.

2. Addition on Account of Alleged Unexplained Cash u/s.69A:
The AO added ?1,32,341/- for unexplained cash, considering two balance sheets showing cash on hand of ?64,806/- and ?67,535/-. The Tribunal found that only one balance sheet was authentic and confirmed the addition of ?64,806/- while deleting the other addition of ?67,535/-.

3. Addition on Account of Alleged Unexplained and Undisclosed Investment u/s.69B:
The AO added ?1,20,944/- for unexplained investments in bank FDs. The Tribunal confirmed the addition of ?13,482/- for an FD dated 29-02-2000 but deleted the balance addition as the other FDs did not pertain to the assessment year under consideration.

4. Addition on Account of Alleged Unexplained Investment in Building u/s.69B:
The AO added ?5,35,776/- for unexplained investments in a building, factory shed, and flat. The Tribunal found that the property was purchased in 1989 and registered in 1990, thus not pertaining to the assessment year under consideration. The addition was deleted.

5. Addition on Account of Alleged Unexplained Expenditure and Unaccounted Investment u/s.69A:
The AO added ?4,80,992/- for unexplained investments in a factory shed and flat. The Tribunal found that these investments did not pertain to the assessment year under consideration and deleted the addition.

6. Addition on Account of Alleged Unexplained Investment u/s.69:
The AO made several additions for unexplained investments totaling ?12,29,400/- under section 69. The Tribunal found that these additions were based on a disowned balance sheet prepared for bogus entries and deleted them.

7. Addition on Account of Alleged Unexplained Expenditure u/s.69C:
The AO added ?2,24,800/- for unexplained expenditure. The Tribunal found that this was based on a disowned balance sheet and deleted the addition.

8. Addition on Account of Alleged Unexplained Expenses u/s.68:
The AO added ?2,35,000/- for unexplained expenses. The Tribunal found that this was based on a disowned balance sheet and deleted the addition.

9. Enhancement of Income in Fresh Assessment after ITAT's Set-Aside Order:
The AO made an addition of ?21,88,786/- in the fresh assessment after the ITAT's set-aside order. The Tribunal held that the AO could not enhance the income beyond the original assessment of ?4,64,870/-, citing jurisprudence that prohibits enhancement in set-aside proceedings. The Tribunal allowed only the original additions of ?1,35,000/- and set aside the issue for limited verification by the AO.

Conclusion:
The appeals for both the assessment years 2000-01 and 2004-05 were partly allowed. The Tribunal confirmed some additions while deleting others based on the assessment year relevance and the authenticity of the balance sheets. The Tribunal also restricted the AO from enhancing the income beyond the original assessment in the set-aside proceedings.