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TMI Blog2022 (8) TMI 1011X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee without verification of facts or records. Further it is the submission of the AR that the assessee was not provided with sufficient opportunity to confront the statement recorded from Mr.Arvind as the copy of the same was not provided. In view of the above discussion, we remit the issue back to the AO, for verification of the issue afresh after giving a reasonable opportunity of being heard to the assessee. Addition towards capital account balance in M/s. N R Halagappa Company - CIT(Appeals) has verified and given a clear finding of each of the line items pertaining to the movement of the balance during the year under consideration and has decided on the taxability. However the CIT(Appeals) has not verified whether the balance is correctly reflected in the assessee s books of accounts. Tribunal in the individual case for AY 2012-13 has remitted that issue back to the AO to verify the whether the investments are recorded in the books including the opening balance. Further in the present case, the AO has made the addition on the basis that the capital account of the assessee in the partnership firm is not reflecting in the proprietorship balance sheet. This, in our con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... TA No. 31/Bang/2018 dated 25.01.2019 has set aside the order of the CIT(A) to the file of the A.O for fresh consideration. 5. For these and such other grounds that may be urged at the time of hearing the order of Ld. CIT(A) may be set aside and that of Assessing Officer may be restored. 3. The brief facts of the case are that assessee is a HUF carrying on business of arecanut as a proprietary concern under the name style of N R Halagappa Sons. The assessee is also a partner in the firm, N R Halagappa Company in the status of HUF. For the year under consideration, the assessee filed return of income on 29.9.2016 declaring an income of Rs.10,30,740. A notice u/s. 143(2) of the Income Tax Act 1961 (the Act) was issued. The assessee submitted various details called for by the AO. The AO concluded the assessment by making the following additions:- (i) Income from unaccounted sales Rs.1,89,12,954. (ii) Excess stock found during the search Rs.63,90,490. (iii) Unexplained capital account balance : Rs.1,02,18,644. 4. The AO also initiated penalty proceedings u/s. 271(1)(c) of the Act. The assessee preferred appeal before the CIT(Appeals), who deleted the addition ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... all the expenditure has already been claimed by me in my regular books of accounts. I have to state that the total quantity of arecanut that has been traded in NRHS and NRH Co. has drastically come down during the current Financial Year. As per the data available in my books, the quantity of arecanut sold in the books of NRHS during the period April to November 2013 is 14,76,000Kgs. The quantity of arecanut sold during the period April to November 2014 is 6, 33,226 Kgs. The quantity of arecanut sold during the period April to November 2015 is 2,40,100Kgs. These figures can be verified from my audited books of accounts for FY 2013-14 and FY 2014-15 and the seized books of accounts for FY 2015-16. Consequently, I state that I shall offer a minimum regular income of Rs. 15,00,000/ - and I shall increase this figure in case my business improves in. the next three months. However, I also wish to state that the same modus operandi followed by me in the earlier FYs was followed in the current Financial Year as well. To cover for these discrepancies, over and above the regular income of Rs. 15,00,000/-, I shall offer an amount of Rs. 1,85,04,420/ as undisclosed Income for AY 2016-17 i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... disclosed turnover declared by the assessee and applied Gross Profit ratio based on earlier years profit ratio and applied it on the said amount to arrive at the addition of Rs.3,69,875. Aggrieved, the revenue is in appeal before us. 10. The ld. DR submitted that the entire decision of the CIT(Appeals) is on a wrong premise of income declared by the assessee as undisclosed turnover declared by the assessee. He drew our attention to the relevant para of the statement recorded which is extracted hereinabove, where the assessee had given a clear statement stating that he shall offer Rs. Rs.1,85,04,420/- as undisclosed income for A.Y.2016-17. The ld. DR further submitted that the CIT(Appeals) has not understood the statement recorder and has proceeded to delete the addition on a wrong understanding. The ld DR further submitted that when the assessee in the statement recorded has very clearly agreed to offer additional income and not additional turnover the CIT(Appeals) is not justified in deleting the said addition by applying the profit ratio on the additions made by the AO treating it as turnover. 11. The ld. AR submitted that the assessee has declared additional turnover only ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the assessee. 14. We have considered the rival submissions and perused the material on record. The assessee during the search proceedings has declared both the unaccounted turnover and the profit thereon. The average profit offered to tax is worked out by the CIT(Appeals) at 2%. The addition made by the AO is based on the statement of the assessee where he has offered an amount of Rs.1,85,04,420 as undisclosed income and that the assessee was not under any undue pressure while making the said declaration. We notice that the assessee while answering the Q.No.9, has provided details of the sales that are recorded in the books of accounts and agreed to offer a minimum income of Rs.15,00,000 against what is recorded in the books of accounts. We also notice that the assessee has declared that he has used the same modus operandi for the year under consideration also and in the same context have used the words to say I shall offer an amount of Rs.1,85,04,420 as undisclosed income for AY 2016-17 . It is the contention of the ld AR that there is no corroborative evidence support to state that the amount offered is not turnover but income and addition is made merely based on the st ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of section 132 of the I.T.Act. The relevant finding of the Hon ble Gujarat High Court, reads as follows:- We have considered the rival submissions made by the learned advocates. We have also perused Circular No. 551, dated January 23, 1990,* referred to by the learned advocate, Shri Puj. Upon considering the rival submissions, we are of the view that the notices under section 131(1A) can also be issued after completion of the search undertaken under the provisions of section 132 of the Act. In our opinion, it would be absolutely logical to call for information so as to have better particulars or to have a complete idea about the material seized during the search. If some material is seized at the time of the search and the authorised officer wants to have some details so as to understand the nature of the documents, he may issue notice under section 131(1A) of the Act. In our opinion, in a given case such a notice cannot only help the Department but can also help the assessee. If the assessee is in a position to give more explanation so as to satisfy the authorised officer that the documents seized by him do not reveal any undisclosed income, but the income or transactions refe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... odown at Abbalgere where the agricultural land of above persons is situated and this fact was also brought to the notice of the officials during the course of search. The stocks were subsequently sold and disclosed before the tax authorities in the return of income for the AY 2016-17, the details of which are as follows:- H. Omkarappa, HUF - Rs.62,00,032 H.O. Aravind - Rs.32,92,225 19. Based on the above, the assessee contended that the stock is not unaccounted stock and therefore no addition is warranted. The AO rejected these submission of the assessee and proceeded to make the addition towards unaccounted closing stock for an amount of Rs.63,90,490 on the ground that during the course of search, it was stated by Shri Aravind in the statement u/s. 132(4) dated 24.11.2005 and for the following reasons as stated in the assessment order:- During the course of search and survey physical inventory of stock was taken separately at the office and the godown at Abbalgere. The copy of the working of the stock position as on the date of search has been given to t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bstantiated by any evidence and the CIT(Appeals) without going into these facts, has accepted the submissions of the assessee. The subsequent sale of stock and declaration of the agricultural income by these persons was not properly verified by the CIT(Appeals). 22. The ld. AR submitted that the AO in the order has mentioned that a statement was recorded from Shri Aravind u/s. 132(4) wherein it was stated that the stock found belonged to both N R Halagappa Sons and N R Halagappa Company. However, the assessee was not provided with copy of the statement so recorded from Mr. Aravind and therefore the assessee was not given a property opportunity to explain the discrepancy in the stock. The ld. AR further submitted that the department has not brought anything contrary to show that the stock does not belong to H.O. Omkarappa, HUF and H O Aravind, HUF. He also reiterated that the stock belonging to these two HUFs were subsequently sold and the income was declared in their returns. The ld. AR therefore submitted that the CIT(Appeals) has rightly allowed the claim of the assessee after proper verification of these facts. 23. We have considered the rival submissions and perused t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is to tax the Taxable income. From the balance sheet of the firm, it can be seen that the following are the credits to the capital account IT refund 20,739 Profit for the year 16,799 Addition to capital 39,00,000 Sale of Agricultural produce 86,99,110 Interest 4,10,391 7.2 There is a credit of Rs.20,739/- in the capital account which is Income Tax refund. This is not a taxable income. 7.3 A sum of Rs.16,799/- represents share of profit of the year for the Appellant. As per section 10(2A), profits from partnership firm is exempt as profit for the year is arrived at after paying the applicable taxes in hands of the firm. Therefore, it is not taxable in the hands of the appellant. 7.4 The appellant introduced additional capital of Rs.39,00,000/- which was transferred from his business balance sheet. Therefore, it is not a taxable credit. 7.5 It is submitted by the Appellant that the sale of agricultural produce from the lands owned by the appellant in its HUF capacity is rou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n case. 27. The ld. AR strongly objected to the issue being remitted back to the AO and submitted that in the aforesaid the decision of the Tribunal, the issue was remitted to the AO since the details of the movement of capital during the year was not examined, whereas in the present case, however, the CIT(Appeals) has verified each of the line items in the capital account and has given a clear finding as to why each of the line items are not be treated as taxable credit. In the light of the above, the ld. AR submitted that the decision of the CIT(Appeals) should be upheld. 28. We have considered the rival submissions and perused the material on record. The coordinate bench of the Tribunal is assessee s individual case for AY 2012-13 in ITA No.31/Bang/2018 by order dated 25.01.2019 has considered a similar issue and has remitted the issue back to the AO after admitting the additional evidence submitted by the assessee in that case. The Tribunal has held that In our view, the ends of justice require that the documents now furnished by the assessee should be scrutinized by the AO and thereafter a categorical finding should be recorded by the AO under the four corners of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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