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2022 (3) TMI 463 - AT - Income TaxReopening of assessment u/s 147 - accretions to the capital account emanate from the returns filed by the partnership firms and the assessee in his individual capacity - HELD THAT - We are of the view that though the return of income for Assessment Year 2012-13 and 2013-14 of the assessee in his individual capacity and the two partnership firms in which the assessee was a partner, was filed on 22.01.2017 and that too in response to a notice under section 148 of the Act, the fact that the assessee has disclosed the source of accretions of the capital account in these returns has not been doubted or disputed or examined by the AO or the CIT(A). In our view, if the accretions to the capital account emanate from the returns filed by the partnership firms and the assessee in his individual capacity for Assessment Years 2012-13 and 2013-14 and if the said source is not disputed by the Revenue in a manner known to law, the accretions to the capital account and the corresponding opening balance in the capital account in Assessment Year 2014-15 cannot be doubted or disputed. Thus it would be just and appropriate to set aside the order of CIT(A) and remand the case to the AO for consideration denovo in the light of the returns filed for Assessment Years 2012-13 and 2013-14 and after verification, accept the claim of the assessee, so long as the source of the accretions as declared in the returns for Assessment Years 2012-13 and 2013-14 are not disputed in a manner known to law. Assessee appeal is treated as allowed for statistical purposes.
Issues:
Assessment of opening capital balance for the appellant for Assessment Year 2014-15 based on accretions to the capital account from partnership firms for previous years. Analysis: The appellant, an individual, declared an income of ?7,46,500 and showed an opening capital of ?3,25,03,430 for the financial year 2013-14. The Assessing Officer (AO) noted discrepancies in the accretions to the capital account for the years 2012-13 to 2013-14 as the appellant and the partnership firms did not file returns for those years. The AO disallowed ?17,78,447 from the opening capital balance, considering it unexplained income and initiated penalty proceedings under section 271(1)(c) of the Income Tax Act, 1961. The AO's order was passed on 30.11.2016. The appellant filed a section 154 application on 24.01.2017, stating that returns for the relevant years had been filed post the AO's order date. The AO rejected the application on 01.02.2017, citing no apparent mistake in the original order. The appellant appealed to the CIT(A), who upheld the AO's decision based on the timing of the partnership firms' return filings. The Tribunal, on appeal, acknowledged that returns for the appellant and the partnership firms were filed on 22.01.2017 in response to a notice under section 148. The Tribunal emphasized that the source of accretions to the capital account was disclosed in these returns and not disputed by the Revenue. Consequently, the Tribunal set aside the CIT(A)'s order and remanded the case to the AO for a fresh assessment based on the returns filed for the relevant years, as long as the source of accretions was not legally disputed. The appeal was allowed for statistical purposes. Therefore, the Tribunal's decision focused on the necessity of verifying the source of accretions to the capital account as declared in the returns filed by the appellant and the partnership firms for the preceding years before disallowing any part of the opening capital balance for Assessment Year 2014-15. The importance of following due process and legal examination of sources before making adjustments to the appellant's income was highlighted in the judgment.
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