2022 (4) TMI 498 - AT - Income Tax

Addition being the amount credited to the assessee s capital account in the firm SP - Addition u/s 68 - same in fact forms part of the credit to the assessee s account in the said firm, made, with a corresponding debit to his mother s capital account in the said firm - HELD THAT - We are wholly unable to fathom the basis of the said addition. The amount under reference stands credited, firstly, to the bank account of VR and, then, to the bank account of SP, i.e., on the transfer of funds by her thereto (SP). The transfer (credit) to the assessee s account in SP is through a corresponding debit to the account of VR on her death, to give effect to her Will dated 06/12/2014 - The impugned amount could therefore be added as unexplained bank deposit in the hands of VR (assessable through her legal representative), or of SP, i.e., u/s. 68 as unexplained credit, the nature and source of which is, rather, apparent. The transfer to the assessee s capital account in SP (which became proprietorship w.e.f. 15.12005) on her death, is only a transfer of an existing credit in the books of SP, i.e., from one account to another. The same could be regarded as unsatisfactory where the AO challenges or otherwise expresses dissatisfaction with the stated reason for this transfer. True, the AO has doubted the Will, claiming it to have been in fact not signed by the mother (VR). CIT(A) has glossed over this aspect, observing that the credit has been passed to the assessee only after her death. It needs to be appreciated that it is only by virtue of the Will that the sum stands credited to the assessee. The only issue that could therefore possibly arise is the claim on the said balance of the other claimants, inasmuch as the same may raise doubts as to its genuineness. Sh. Bardia would during hearing, with reference the Will, explain that VR had bequeathed her capital in each of the three different partnership firms being managed by her three sons, as SP by the assessee, thereto. Further, that the Will is undisputed by any of the Class-1 legal heirs. This, we observe, stands also explained before the AO. Under the circumstances, we find no reason to doubt the genuineness of the credit and, accordingly, confirm the deletion, save the separate addition for ₹ 11.80 lacs forming part of the impugned sum of ₹ 64.51 lacs (to the extent of ₹ 11.44 lacs), and which therefore stands agitated per the assessee s Ground 2. Difference between the opening balance of the assessee s capital account - What does the said difference signify, we fail to understand. None of the entries in the said two accounts, we observe, have been questioned by the AO. In fact, but for the fact at the same stands made explicit by the AO (refer para 10(ii)/page 6 of his order), making the snapshot of the two ledger accounts afore-noted, a part of his order, we would have been disinclined to believe Sh. Bardia that this difference, which carries no meaning, could be the subject matter of an addition, with we also confirming the balance (as on 14.01.2015) of the assessee s capital in the firm (SP) s audited accounts (PB pg. 81). We are completely at loss to understand the basis of the said addition, and neither was any explained to us during hearing. It is accordingly confirmed for deletion. We decide accordingly. Assessee s debit balance in SP as on 14.1.2015 and the credit balance of the said firm in the assessee s personal books of account at the same sum - This is again quizzical. Are not, one may ask, the two balances supposed to be in agreement, and opposite in character, i.e., representing an asset and a liability respectively? And, further, why should the two be added? The addition is meaningless, and rightly deleted, which we hereby confirm. We decide accordingly. Agricultural income - The same has been deleted by the ld. CIT(A) on the basis that the assessee owns 7.17 hectares of agricultural land and, further, had been returning such income in the past. The assessee s case is sans any evidence. No evidence, we find, has been produced at any stage in respect of sale of Masoor Daal , stated to be sold, much less carrying out of any agricultural activity. Two, how, one wonders, the sale of an agricultural commodity, even if shown, would, without anything more, show the same to be cultivated by the assessee? How, again, has the income component therein been determined? The declaration of such income, or even its acceptance, both not shown, for other year/s, would not explain the income for another year, particularly in the absence of any evidence. We, accordingly, find no basis for deletion and, accordingly, direct its restoration.

Summary

Issues:
Challenging part-allowance of Assessee's appeal for AY 2015-16 by CIT(A) regarding various additions made in assessment.

Analysis:
1. The Revenue contested the admission of additional evidence by CIT(A) in violation of Rule 46A of the Income Tax Rules. Assessee argued that all documents were submitted to the AO, and no fresh evidence was presented before CIT(A). The Tribunal found that the Revenue failed to identify any new documents presented before CIT(A) and rejected the contention. The Tribunal proceeded to address each ground raised by the Revenue individually.

2. The first ground involved an addition of ?64.51 lacs credited to the Assessee's capital account in a firm following his mother's death. The Tribunal observed that the amount was part of compensation received by the mother from NHAI and transferred to the Assessee as per her Will. The Tribunal found no basis for the addition and confirmed the deletion, except for a separate addition of ?11.80 lacs.

3. The next addition was for ?11.80 lacs, representing cash deposited by the mother in her bank account and transferred to the firm. The Tribunal confirmed the deletion of this addition, as the source of the amount was not linked to the disputed credits.

4. An addition of ?36.91 lacs was questioned, which was the difference in the Assessee's capital account balances. The Tribunal found no justification for this addition and confirmed its deletion.

5. Another addition of ?55.54 lacs was challenged, representing balances in the Assessee's personal and firm accounts. The Tribunal deemed this addition baseless and confirmed its deletion.

6. An addition of ?5.03 lacs was related to a credit balance from the mother's account, arising from loan adjustments. The Tribunal directed the matter back to the AO for verification, as supporting documents were not provided to the AO initially.

7. The final addition was regarding agricultural income of ?20,800, claimed by the Assessee. The Tribunal found no evidence to support this claim and directed its restoration.

8. The CO filed by the Assessee was supportive and did not require separate adjudication. Finally, the Tribunal partly allowed both the Revenue's appeal and the Assessee's CO for statistical purposes.