2022 (12) TMI 673 - AT - Income Tax

Assessment u/s 153A - unexplained opening capital and unexplained investment in shares - working of opening credit balance - AO did not consider the investment in shares in two companies in A.Ys. 1999-2000 and 2002- 03 - HELD THAT - There is no dispute with regard to investment and share in two companies during A.Ys. 1999-2000 and 2002-03 which is evident from the submissions of assessee before the CIT(A). Further, as noted that the assessee provided the details of such acquisition and which was examined by the Investigation Wing before the completion of proceedings u/s. 153A - also observed copy of share holding of both the companies is also enclosed for the consideration and examination of CIT(A). CIT(A) neither disputed the said evidences filed on behalf of the assessee in support of its claim nor a reference made in the impugned order. The said details of investments filed before me and on perusal of the same at page 5 of the paper book, discloses that the assessee has share holding to an extent of Rs.2,15,500/- in Gupta Leasing Finance Ltd. during A.Y. 1999-2000 and Rs.60,000/- in Gupta Coalfields and Washeries Ltd. for A.Y. 2002-03. Therefore, the details investments of shares in two companies in A.Ys. 1999-2000 and 2002-03 were before the CIT(A) and the opening capital by way of a income for A.Ys. 2003-04 and 2004-05 were available to the assessee which were, in my opinion, properly explained and no addition is warranted. There is no dispute with regard to credit opening balance to an extent of Rs.4,30,000/- which is supported through assessment order for A.Y. 2005-06 which is placed before me at page 7 of the paper book and also which is not disputed by the ld. DR. Since, the investments and availability of opening capital to the extent of Rs.3,41,577/- is properly explained vide evidences, thus, the addition is confirmed to an extent of Rs.88,423/- as admitted by the ld. AR on account of unexplained opening capital. Therefore, the order of CIT(A) is modified to that extent. Thus, the grounds raised by the assessee are partly allowed.

Summary

Issues:
1. Addition of Rs.2,66,586 in the assessment year 2005-06.
2. Justification of sustaining the addition by the Commissioner of Income Tax (Appeals).
3. Consideration of unexplained opening capital and investment in shares.
4. Assessment under section 153A of the Income Tax Act.
5. Dispute regarding the addition of unexplained opening capital.

Analysis:

1. The appeal before the Appellate Tribunal ITAT Nagpur involved the addition of Rs.2,66,586 in the assessment year 2005-06. The primary issue was whether the Commissioner of Income Tax (Appeals) was justified in sustaining this addition.

2. The assessee, an individual deriving income from service charges and miscellaneous sources, initially declared total income of Rs.92,600 under section 139 of the Income Tax Act. The Assessing Officer (AO) later determined the total income at Rs.4,59,186, including additions for unexplained opening capital and investment in shares. Subsequently, a search and seizure operation was conducted under section 132 of the Act, leading to a notice under section 153A being issued to the assessee.

3. The contention raised was that the AO determined the same total income under section 153A as in the original assessment under section 143(3), including the same additions. The assessee argued that the opening capital and investments in shares were not adequately considered. The Tribunal noted that the assessee provided details of investments in shares in two companies during certain assessment years, supported by evidence examined by the Investigation Wing.

4. The Tribunal observed that the details of investments in shares were properly explained, and the availability of opening capital was adequately supported. The order of the Commissioner of Income Tax (Appeals) was modified to confirm the addition to the extent of Rs.88,423 on account of unexplained opening capital. The Tribunal found no justification for further additions beyond this amount.

5. Ultimately, the Tribunal partly allowed the appeal of the assessee, modifying the order to confirm the addition only to the extent of Rs.88,423. The decision was pronounced in open court on 30th September 2022.

This detailed analysis highlights the key legal and factual aspects of the judgment, focusing on the issues raised by the parties and the Tribunal's reasoning in arriving at the final decision.