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TMI Blog2018 (11) TMI 1110X X X X Extracts X X X X X X X X Extracts X X X X ..... case, should have been made for ₹ 8,52,58,022/-, and not ₹ 1,85,65,955/- - as is the situation in the present case. What is before us is the addition of ₹ 1,85,65,955/- and that credit is reasonably explained and even admitted to be so by the AO. CIT(A) has mentioned about the need of verification about the creditors of ₹ 8,52,58,022/- but made no additions in respect of the same. It cannot be open to us to enlarge the scope of proceedings at this stage, or deal with an aspect in respect of which no additions are made. So far as the addition impugned in this appeal is concerned, and that is what we are concerned with, it is explained and we delete the related additions of ₹ 1,85,65,955/-. - Decided in favour of assessee. - ITA No.1329/Ahd/2014 - - - Dated:- 28-9-2018 - Pramod Kumar AM and Mahavir Prasad JM For the Appellant : Aseem L Thakkar For the Respondent : Mudit Nagpal ORDER PER PRAMOD KUMAR, AM: 1. By way of this appeal, the assessee-appellant has challenged correctness of the order dated 28th February 2014 passed by the CIT(A) in the matter of assessment under section 143(3) of the Income-tax Act, 1961, for the ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... other observations with respect to inadequacy of capital, which are not really relevant for the present purposes, as follows:- The assessees balance sheet as on 31.03.2009 shown a total of ₹ 8,95,74,579/-.The balance in capital account shows is ₹ 43,16.656/- whereas unsecured loans constitute ₹ 8,52,58,022/- which obviously the balance sheet and liabilities side with the properties, Fixed Assets, Investments, Advance, deposits of the assessee has mentioned in the balance sheet. Thus, ₹ 2,33,87,955/- was treated as an advance which was invested out of the unsecured loans and incidentally the balance of capital account shown at ₹ 43,16,557/- which includes the receipts occurred during the F.Y. like direct remuneration of ₹ 1,95,000/- and profit from proprietary concern of ₹ 36,74,590/-. It is dear that the assessee conveniently diverted all the loans towards the advances deposits, investments diversion of funds has occurred for accumulating the assets. So in view of the above facts the appeal may be decided on the merits based on the facts stated above. 5. It was in this backdrop that the CIT(A) confirmed the addition of ₹ 1,8 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ally acting as a conduit for somebody, is further evident from the fact that even though the appellant has taken unsecured loans of ₹ 8,52,58,022/- there are no major interest outgoings on such huge loans taken by the appellant in its personal books. Thus, loans received by Ajay S Mehta (Indl capacity) were partly diverted to be shown as capital in the hands of Jay Jewellers. 4.4 The appellant has argued that there is no justification for making the addition since the capital introduction in the case of Jay Jewellers was fully explained. The question which however remains is that does it than absolve the appellant of any onus u/s. 68 or not. It is an admitted fact of this case that Jay Jewellers and Ajay J Mehta are not two separate entities but are one and same. Hypothetically conceding, for the sake of argument only, on present facts capital introduction in the case of Jay Jewellers, could have been accepted as genuine if, Ajay S Mehta was a separate taxable entity. Section 68 of the Act provides that a credit appearing in the books of accounts of an assessee for which no explanation about the nature, source thereof is offered would be treated as income of the ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 8. Let us first understand the case of the Assessing Officer. His short point was that since capital shown to have been introduced in the capital account of Jay Jewellers does not find corresponding entries in the capital account of the assessee and are in fact much more than capital account credit in the hands of the assessee, and, therefore, the introduction of capital in the accounts of Jay Jewellers stands unexplained. This point, as noted in the remand report, is fallacious. The assessee has one set of accounts for himself, as an individual, and the other set of accounts for his sole proprietorship concern, Jay Jewellers. It is indeed true that the assessee and his sole proprietorship concern are one unit so far as taxability under the Income Tax Act 1961 is concerned, but, viewed from the accounting perspective, the maintenance of such separate books of accounts are perfectly in order. In such a situation, the capital account of the assessee in his accounts, and capital account of Jay Jewellers, in the name of assessee, cannot be mirror image of each other as the Assessing Officer erroneously expected these accounts to be. This comparison was incorrect. In a situation in ..... X X X X Extracts X X X X X X X X Extracts X X X X
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