2021 (9) TMI 1088 - AT - Income Tax

Reopening of assessment u/s.148 - Reassessment on the basis of audit objection - unexplained addition to the capital account of the partners - CIT(A) has confirmed the addition - HELD THAT - Factual verification of the accounts is required to be done by the Ld. CIT(A) regarding the alleged unexplained addition to the books of the assessee's as claimed to be explained by the appellant that in case the inter branch balance is excluded from total capital of partners in the e-filed return the addition in the capital of partners will came to only ₹ 1450000 which is duly reflected in the capital accounts of the partners which is duly explained being withdrawals from the bank accounts and the other firms by the partners. In our view, this is a fit case, to be restored to the CIT(A) to pass a speaking order afresh, adjudicating all the grounds of appeal after granting adequate opportunity being heard to the assessee and considering the documentary evidences filed on record or to be filed in the course of proceedings before him. No doubt, the assessee shall cooperate in the proceedings before the CIT(A). Assessee appeal is allowed for statistical purpose.

Summary

Issues:
1. Reopening of assessment under section 148
2. Addition to capital account of partners in reassessment proceedings

Reopening of Assessment under Section 148:
The appeal challenged the reopening of assessment under section 148, contending that it was not justified. The CIT(A) upheld the reopening, citing the authority of the Hon'ble Supreme Court in the case of Income Tax vs. P.V.S. Beedies, which allows reopening based on any information. The appellant argued that the AO initiated proceedings under audit pressure, not independently. The Tribunal noted the AO's proper application of mind and dismissed the grounds challenging the reopening.

Addition to Capital Account of Partners in Reassessment Proceedings:
The primary issue in this appeal was the addition of ?1,41,17,217 to the capital account of partners during reassessment. The CIT(A) confirmed this addition summarily, stating that the assessee failed to provide evidence regarding the capital addition. The appellant explained that the actual addition was only ?14,50,000, with the remaining amount being a clerical error in the e-filed return. The Tribunal found the CIT(A)'s order lacking in detailed examination of the evidence provided by the assessee. It directed the CIT(A) to conduct a thorough verification of the accounts and pass a speaking order after considering all submissions and evidence, allowing the appeal for statistical purposes.

In conclusion, the Tribunal addressed the issues of reopening assessment under section 148 and the addition to the capital account of partners in reassessment proceedings, emphasizing the need for a detailed examination of evidence and a speaking order by the CIT(A) in the latter issue.