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TMI Blog2018 (1) TMI 446X X X X Extracts X X X X X X X X Extracts X X X X ..... y the assessee had duly explained that the addition of ₹ 38,94,877/- had occasioned on account of a wrong journal entry which thereafter had been reversed, but rather, no such cash credit had been brought to our notice which could persuade us to conclude that the addition of the aforesaid amount of ₹ 38,94,877/- made by the A.O was rightly upheld by the CIT(A). We thus in the backdrop of our aforesaid observations not being persuaded to subscribe to the observations of the lower authorities, therefore, set aside the order of the CIT(A) and delete the addition - Decided in favour of assessee - ITA No. 679/Mum/2016 - - - Dated:- 20-12-2017 - SHRI P . K . BANSAL, VICE PRESIDENT AND SHRI RAVISH SOOD, JM For The Appellant : Shri Vijay Mehta, A . R For The Respondent : Shri Saurabh Deshpande, D . R ORDER PER RAVISH SOOD, JUDICIAL MEMBER : The present appeal filed by the assessee company is directed against the order passed by the CIT(A)-4, Mumbai, dated 03.12.2015, which in itself arises from the order passed by the A.O under Sec. 143(3) of the Income Tax Act, 1961 (for short Act ), dated 25.02.2015. The assessee assailing the orde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ke on its part, submitted that at the time of passing the entries in the abovementioned two cases (viz. M/s Arodyne Chemicals Ltd. M/s Avdhoot Finance Investments Ltd.) the aforementioned amounts were directly credited to reserves and surplus account, instead of including the same under the head Short term borrowings , as a result whereof the closing balances against the said respective accounts were shown as Nil. It was further submitted by the assessee that the aforesaid mistake on its part was rectified in the books of account on 31.03.2012, and a revised audit report dated 30.06.2014 along with the balance sheet and profit and loss account for the year ended 31.03.2012, qualified as under : it has been subsequently notices that there were typographical errors while preparing and typing the schedules forming part to the accounts for the financial year ended 31st March 2012 . And, accordingly, the amounts from the following accounts : a ) Arodyne Chemicals Ltd . : Rs . 1,08,59,288 . 50 b ) Avdhoot Finance Investments Ltd . : Rs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 77; 1,47,54,165/-credited to the general reserve, had as a matter of fact in the backdrop of an afterthought projected a concocted story by characterizing the addition to the said account as a Typographical error . The A.O thus concluded that the assessee had failed to come forth with a plausible explanation as regards the addition made to the general reserve account. 5. The A.O further observed that the statement of account of M/s Avdhoot finance and investments private limited placed on record by the assessee revealed that the amount receivable by the assessee from the said concern was ₹ 8,13,146/-, while for the assessee had claimed the transaction amount at ₹ 38,94,877/-. The A.O observed that in the backdrop of the aforesaid variance a difference of ₹ 30,81,731/- [Rs. 38,94,877/- (minus) ₹ 8,13,146/-] in any circumstance remained totally unexplained. 6. The A.O after deliberating on the aforesaid facts was not persuaded to subscribe to the explanation of the assessee and holding a conviction that the amount of ₹ 1,47,54,165/- credited by the assessee to the general reserve account had remained unexplained, therefore, added the said amount a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the accountant the general reserve account increased by an aggregate of ₹ 1,47,54,165.50 (i.e. ₹ 1,08,59,288.50 and ₹ 38,94,877/-), while for the credit balance of ₹ 1,08,59,288.50 in the account Arodyne Chemicals Ltd. was reduced to Rs. Nil, whereas the debit balance of M/s Avdhoot finance and investments P. Ltd. after being increased by an amount of ₹ 38,94,877/- was raised to ₹ 47,08,023/- (dr.). The assessee in order to buttress the veracity of its aforesaid contention submitted that the A.O had on the basis of independent enquiries obtained the necessary confirmations from both of the aforesaid two concerns, viz. M/s Arodyne Chemicals Ltd. and M/s Avdhoot finance and investments P. Ltd., which supported the claim of the assessee. Thus, in the backdrop of the aforesaid submissions it was averred by the assessee that as the addition of ₹ 1,47,54,165/- to the general reserve account had occasioned on the basis of wrong journal entries, therefore, no addition u/s 68 of the Act was called for in the hands of the assessee. 8. The CIT(A) after deliberating on the aforesaid contentions of the assessee in the backdrop of the material made av ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oncluded that the assessee had created the assets to the said extent from the sources which had not been explained properly. Thus, the CIT(A) on the basis of his aforesaid conviction concluded that the creation of assets to the extent of ₹ 38,94,880/- by increasing the amount receivable from M/s Avdhoot finance and investments P. Ltd., was rightly added by the A.O u/s 68 in the hands of the assessee. 9. The assessee being aggrieved with the order of the CIT(A) had therein carried the matter in appeal before us. The Learned Authorized Representative (for short A.R. ) reiterated the submissions made before the lower authorities as regards the addition of ₹ 38,94,877/- made to the general reserve account. The Ld. A.R. in order to substantiate his contention that the addition of ₹ 38,94,877/- was wrongly generated by erroneously debiting the account of M/s Avdhoot finance and investments P. Ltd. by the said amount, with a corresponding credit to the general reserve account, therein placed on record the copy of the ledger account of M/s Avdhoot finance and investments P. Ltd. appearing in the books of account of the assessee (Page 17 of APB ) for the year under co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onsideration to the facts of the case in the backdrop of the material made available on record. We are of the considered view that though at the first blush the explanation of the assessee appeared to be absolutely illogical and nothing better than a concocted story which was backed by an afterthought to wriggle out of the tax ramifications emerging there from. However, a careful perusal of the facts in the backdrop of the copies of the ledger accounts and the journal entry passed by the assessee leading to an addition of ₹ 38,94,877/- to the general reserve account, and that rectifying the same, had persuaded us to take a departure from the aforesaid view. We may at this stage observe that though the explanation of the assessee as regards the addition of ₹ 38,94,877/- to the general reserve account does not inspire much confidence as the same is not free from doubts, but then we cannot also remain oblivious of the fact that we have to restrict ourselves to the vetting of the explanation of the assessee, in order to verify as to whether the same satisfies the conditions contemplated u/s 68, which therein would justify the addition of the said amount as an explained cash ..... X X X X Extracts X X X X X X X X Extracts X X X X
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