2021 (10) TMI 498 - AT - Income Tax

Tribunal directs deletion of additions under Income Tax Act Sections 68 and 69, accepting legitimate sources.

Sh. Mukesh Kumar Versus The ITO, Ward-2, Yamunanagar

Sh. Mukesh Kumar Versus The ITO, Ward-2, Yamunanagar - TMI Issues Involved:1. Addition of opening capital balance as unexplained income under Section 68 of the Income Tax Act, 1961.2. Addition of repayment of principal and interest on housing loan as unexplained investment under Section 69 of the Income Tax Act, 1961.Detailed Analysis:Issue 1: Addition of Opening Capital Balance as Unexplained Income under Section 68The assessee filed an appeal against the order of the Commissioner of Income Tax (Appeals) [CIT(A)], who confirmed the addition of Rs. 80,55,462/- as unexplained income under Section 68 of the Income Tax Act. The Assessing Officer (AO) initially selected the case for scrutiny for the limited purpose of verifying the substantial increase in the capital account during the financial year 2013-14, which was later converted into complete scrutiny. The AO determined the total income of the assessee at Rs. 1,02,50,570/- and made an addition of Rs. 80,55,462/- as unexplained income under Section 68 and Rs. 6,94,290/- as unexplained investment under Section 69.The assessee contended that the opening capital balance as on 01.04.2013 was Rs. 1,23,12,128/- and the closing capital was Rs. 1,14,86,802/-. The AO accepted the opening balance of Rs. 42,56,666/- but added Rs. 80,55,462/- as unexplained income on a protective basis, stating that substantive additions would be made after reopening assessments for earlier years under Section 147. The AO subsequently reassessed the income for the assessment years 2010-11 to 2013-14, making various additions.The assessee argued that the total addition of Rs. 1,42,92,186/- had already been made for earlier years, and the opening balance could not be considered as credit during the current year. The legal precedents cited included CIT vs. Usha Stud Agricultural Farms Ltd., CIT vs. J.J. Development (P) Ltd., and CIT vs. Parmeshwar Bohra, which supported the view that the opening balance carried forward from earlier years could not be treated as fresh credit in the current year.The Tribunal found merit in the assessee's contention, noting that the AO had already made additions for earlier years. The Tribunal held that the opening balance could not be treated as fresh credit in the relevant previous year and directed the AO to delete the addition.Issue 2: Addition of Repayment of Principal and Interest on Housing Loan as Unexplained Investment under Section 69The assessee challenged the addition of Rs. 4,20,519/- out of a total addition of Rs. 6,94,290/- made by the AO as unexplained investment under Section 69. The assessee explained that the payments were made from an account maintained with HDFC and provided documentary evidence, including bank statements and ledger accounts, to substantiate the source of payments.The CIT(A) sustained the addition on the ground that the payments towards tanker rent were made in cash, and the assessee had not filed a cash account to show the availability of funds. However, the Tribunal found that the assessee had provided a detailed breakup of payments, including cheque numbers and bank statements showing deposits from M/s Prem Oil Store, which were used to pay the EMI.The Tribunal noted that the CIT(A) had sustained the addition without considering the documentary evidence provided by the assessee. The Tribunal set aside the findings of the CIT(A) and directed the AO to delete the addition after verifying the entries in the bank statement.Conclusion:The appeal of the assessee was partly allowed for statistical purposes. The Tribunal directed the AO to delete the addition of Rs. 80,55,462/- under Section 68 and to verify and delete the addition of Rs. 4,20,519/- under Section 69 after examining the bank statements.