TaxTMI 
TaxTMI 
2017 (11) TMI 68
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....n of the ld. DR, we hereby condone the delay as the assessee was prevented by reasonable cause in not filing the appeal within the stipulated time. ITA Nos. 657 & 507/H/16 by the assessee and revenue for AY 2005- 06 4. Briefly the facts of the case are that the assessee is a partnership firm carrying on business in chits. For the Assessment Year 2005-06, it filed its Return of Income on 28-10-2005 admitting an income of Rs. 1,16,380/-* The said return of income was processed u/s 143(1) of the Act. The Assessing Officer, later, conducted survey u/s 133A on 13-09-2007 and initiated proceedings u/s 148 on 05-02- 2008. The assessee filed a letter on 31-03-2008 requesting the Assessing Officer to treat the return of income already filed as the return filed in response to notice u/s 148 of the Act. The Assessing Officer issued notices u/s 143(2) and 142(1), against which, the assessee filed detailed explanations. The Assessing Officer completed the assessment u/s 143(3) r.w.s. 147 of the Act on 29-12- 2008 determining total income at Rs. 51,89,090/-. While doing so, the Assessing Officer made the following additions: 1) Unexplained credit in opening balances Rs.33,38,971/-....
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....per books was Rs. 1,55,32,977/- and, therefore, there was an excess of assets in books by Rs. 25,54,000/-. Thus, the AO made the addition of Rs. 33,38,971/- ( the summation of deficit liability Rs. 7,84,971/- and excess of assets Rs. 25,54,000/-). 7.2 The CIT(A) after considering the submissions of the assessee observed that the contention of the assessee was that the closing balance of cash-in-hand as on 31/03/2004 was shown at Rs. 46,39,109/- in the return. He opined that it was erroneously taken by the AO at Rs. 16,25,487/-, hence, there will be assets as per books of Rs. 1,59,92,599/- and deficit of asset in books will be of Rs. 4,59,622/-, as under: Closing balance as on 31/03/04 return of income for AY 04-05 Opening balance as on 01/04/04 (as per books) Difference 198150 198150 0 7709953 7709953 0 2972500 2972500 0 46000 0 -46000 0 2600000 2600000 8000 8000 0 182216 182216 0 4639109 1625487 -3013622 15992599 15532977 -459622 With respect to the differences in liabilities, CIT(A) observed that the opening balance as on 1st April, 2005 as per impounded books of accounts which is less....
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.... final accounts and the entries in the books of account do not support the final accounts. The CIT(A) after considering the submissions of the assessee, restricted the addition to Rs. 3,25,349/- instead of Rs. 33,38,971/-. We find that similar issue came up for consideration before the coordinate bench in assessee's own case for AY 2004-05 (supra) wherein the coordinate bench held as under: "11.1 After considering the rival contentions, considering that books of account are not complete even though they are impounded after three years of closure of the accounting year, the reconciliation given by assessee was not correctly appreciated by the AO or CIT(A). Since the final accounts are tallying, the so called discrepancies on the basis of incomplete books cannot lead to an addition that too, when assessee was explaining that both the assets and liabilities are to be reconciled. Considering the reconciliation filed by assessee before the CIT(A), we are of the opinion that there is no need for any addition on this account. Accordingly, the order of CIT(A), deleting the amount of Rs. 20,28,000/- was confirmed and the balance confirmed amount of Rs. 4,83,297/- is also directed t....
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.... Mohan Reddy was disallowed on the basis of so called statement. We do not agree with the observation of the AO as the disallowance has no basis. AO is directed to allow the amount as claimed. Ground is allowed." Since issue is identical in the AY under consideration, following the conclusions drawn therein, we direct the AO to delete the addition made on this count. Accordingly, this ground is allowed. 9. As regards the addition of Rs. 5,18,009/- as unexplained credit towards excess liabilities in the books, AO observed that there was excess liabilities in the books of account of Rs. 67,18,914/-, while, in books, there was record of excess assets of Rs. 62,00,904/-. Therefore, the difference between the said two figures were taken by the AO as unexplained credit and made the addition. 9.1 After considering the submissions of the assessee, the CIT(A) observed that after taking into adjustments of 'liability on own chits' by reducing 'investment in own chits' and making adjustment of 'cheques under clearance' and the 'bank balance' there was a difference of the amount of Rs. 5,18,009/-, which remain unexplained. Accordingly, he confirmed the addition. 9.2 Ld. AR submitte....
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....capital accounts, wherein each of the partners have contributed Rs. one Lakh each totalling to Rs. 5 Lakhs during that year and those amounts have not been carried over as opening balance in the Books of Account for this year. Since the entries are shown in the final accounts filed for the earlier year, the discrepancy of Rs. 5 Lakhs in cash receipt has come in the opening cash balance of this year. Further, an amount of Rs. 79,312/- was collected from the subscriptions on the chits, which was shown as a difference in the statements, whereas this amount collected was adjusted in the final accounts. Thus, the total amount of Rs. 5,79,312/- has affected not only the cash difference but also various other accounts. Since the partners have contributed the amount in the earlier year which was already accepted, an amount of Rs. 5 Lakhs cannot be considered as 'discrepancy' in this year. With reference to the amount of Rs. 79,312/- collected from various subscribers, this has come in for adjustment in various chit subscriptions account, therefore, as per the Books, the chits subscription amount was at Rs. 25,93,234/-. But in the final statements it was Rs. 25,93,234/-. Since these....
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....itted that the issue is similar in current AY, the addition may be deleted. 11.2 Ld. DR relied on the orders of revenue authorities. 11.3 Considered the rival submissions and perused the material facts on record. The AO made the addition of Rs. 3,72,300/- towards inflation of expenditure by observing that some of the expenditures such as donation were inadmissible and some of the expenditures were also inflated, which was demonstrated by the AO in his order by way of tabular form at pages 7 & 8 of his order. The contention of the assessee is that proper adjustments were made while finalizing the account. Since no other explanation or reconciliation statements were provided during the appellate proceedings, the CIT(A) confirmed the addition made by the AO. 11.4 In AY 2004-05 (supra), the coordinate bench while deleting the addition made on similar issue, held as under: "13.1. After considering the rival contentions, we are surprised that AO even after reconciling the amount as noted down the last column of the table thought it fit to disallow the amount. Considering the very same explanation, we are of the opinion that no disallowance is called for as the so called....