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TMI Blog2010 (6) TMI 892X X X X Extracts X X X X X X X X Extracts X X X X ..... n 148 and in response to the said notice, the assessee filed the return of income on 29.10.2007 declaring income of Rs. 90,060/-. The Assessing Officer on verifying the return filed on 29.03.2004 and its supporting capital a/c. and balance-sheet discovered that capital account reflected the jump of capital to the extent of Rs. 15,00,000/-. The Assessing Officer accordingly made the assessment under section 143(3) read with section 147 on 31.10.2007 at total income of Rs. 15,90,000/-, wherein he made the addition of Rs. 15,00,000/- on protective basis under section 68 of the Income Tax Act, 1961. In this assessment order, the Assessing Officer also observed in para 3.6 on page-4 that "taking into considering the admission made by the Mohanbhai Dhanjibhai Patel Group, this is required to be taxed in the hands of Mohanbhai Dhanjibhai Patel substantively alongwith the enhanced capital of Rs. 15,00,000/- altogether which works out to Rs. 15,00,000/- an on protective basis in the case of the assessee". 3. On appeal before the Learned Commissioner of Income Tax(Appeals), the assessee filed the written submissions, which reads as under :- "An addition of Rs. I5,00,000/- has been made ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that on 22.10.2007 bears the same signature. The appellant do not deny that he has not signed the return filed on 29.3.2004, but he disowns the capital account and Balance Sheet attached to it. Infect, the Karta of the HUF Shri Kantilal R Nakrani used to get his returns in his individual capacity prepared by Shri Pankaj Danawala and signed papers considering the same being signed against his individual income. The appellant totally disowns the status of HUF. And your honour will appreciate that the annexures to the return do not bear appellant's signature and are the creation of Mr. Pankaj Danawala behind the appellant's back. It Is only that when the appellant received the copies of the impounded material he came to know about the fact that such mischief has been played by their CA, so question of denial of such return prior to reopening of case does not arise. The copies of annexure for the assessment year 2002- 2003 and 2003-2004 attached by Shri Pankaj Danawala are being enclosed herewith as Annexure-B. The A.O. has in para 3.3 and para 3.4 of the assessment order has not accepted the income as declared by the appellant vide return filed u/s. 148 treating the same as a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nce- It has been also ascertained that no monies out of such opening balance were wholly or partially advanced as interest bearing loans to any one. Nor has any party utilized such funds for any business or personal purposes. So the appellant has not derived any financial benefit from manipulation of opening balance. In this case only the CA of the appellant has unilaterally fabricated figures of opening balance on an unsigned alleged balance sheet perhaps to be ready to give entries as and when the opportunity arises in the market. But in reality it could only be a preparatory step without any actual entry given or income derived there from, Shri Pankaj Danawala vide his statement dated 11/3/05 as reproduced on page 8 to 11 of the assessment order has given a detailed modus operandi wherein the actual utilization of capital build up has been confessed in certain cases. In the appellant's case it is not so. The circumstances and facts, in appellant's case render the differential amount only a fictional character and lying in fictitious names. There is no real fund which is available with the appellant either in his books or bank account or stood expended; invested or loaned ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is case. But even if some one has claimed any loans, expenditure or acquisition of any asset, whose source is this fictitious; enhanced and bogus capital formation In the appellant's hands, the same can not be allowed to go explained or accounted for and will have to be taxed in such beneficiary hands. Most importantly, the appellant has filed return showing income of Rs. 90,060/- and which has no linkages with the capital introduced as opening balance for the assessment year under consideration. It has made no claim, sought relief or any deduction before the IT. Department. Therefore rejection of any claim or holding the differential amount vis-a-vis preceding year's closing balance being taxable income of the year under consideration incase of the appellant is futile. Hence having applied my mind to the issue, it is held that, the AO was not justified in relying upon the fictitious entries in loose sheets of paper found from the premises of the C.A. Shri Pankaj Danawala, who had admitted to have created such accounts himself. Further, these entries were neither supported by any independent corroborative evidence so as to establish their genuineness nor was such capital ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bstantively alongwith the enhanced capital of Rs. 15,00,000/- altogether which works out to Rs. 15,00,000/- an on protective basis in the case of the assessee". This clearly indicates that the Assessing Officer himself was not sure whether this income of Rs. 15,00,000/- is earned and actually belonged to the assessee. The assessee has filed an affidavit before the Assessing Officer. From the perusal of the same and after considering the totality of the facts and reasoning given by the Learned Commissioner of Income Tax(Appeals), we are convinced that the Assessing Officer made the addition of Rs. 15,00,000/- on the basis of fictitious entries in loose sheets of paper found from the premises of the C.A. Shri Pankaj Danawala, who had admitted to have created such amounts himself. Therefore, the Learned Commissioner of Income Tax(Appeals) is legally and factually correct in deleting the addition of Rs. 15,00,000/-, which was made by the Assessing Officer in the hands of assessee on protective basis. Resultantly, the ground of appeal raised by the Revenue is rejected. 9. Now we take up the Cross Objection being CO No. 202/AHD/2008 filed by the assessee, in which the assessee has rais ..... X X X X Extracts X X X X X X X X Extracts X X X X
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