TaxTMI 
TaxTMI 
2026 (8) TMI 363
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....ee's personal balance sheet (Rs.27,05,32,933/-) with assessee's capital in the firm M/s. Srusti Diam (Rs. 16,42,29,296/-) in A.Y. 2022-23 and treated the difference as unexplained u/s. 68 of the I.T. Act, 1961, without giving due consideration to assessee's own claim during the assessment proceedings that all his capital of Rs. 27,05,32,933/-came to him from the firm M/s. Srusti Diam in the form of accumulated profit and partner's remuneration, particularly in the light of comparative analysis of assessee's own declaration in his ITRs for A.Y. 2021-22 and A.Y. 2022-23 leading to the fact that the entire capital of Rs. 27,05,32,933/-pertains to A.Y. 2022-23 only. 2. Whether on the facts and in the circumstances of the case and in law the Ld.CIT(A) is justified in relying upon submission and unaudited books of accounts of the assessee that closing capital of A.Y. 2021-22 and opening capital of A.Y.2022-23 is Rs. 25,10,07,964.35 and not Nil, who himself declared in his return of income for the preceding A.Y. 2021-22 capital of Rs. Nil, which he never revised, and declared capital of Rs. 27,05,32,933/- in the return for A.Y. 2022-23, leading to the undisput....
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....al account balance for the Assessment Year was not 'Nil. On account of clerical error, the capital account balance figure could not be mentioned. The Assessing Officer had ignored the Income Tax Return for Assessment Year 2020-2021 wherein capital account balance of INR. 24,45,45,460.25/- was disclosed by the Assessee. The increase in capital during the previous year relevant to the Assessment Year 2022-2023 was only INR. 1,95,24,969/- and not INR. 10,63,03,637/- as computed by the Assessing Officer. The Learned CIT(A) accepted the explanation offered by the Assessee and deleted the additions made by the Assessing Officer vide Order, dated 11/09/2025, concluding as under: "5.1 Ground No 1 to 3 are all directed against the Assessing Officer (hereinafter referred to as 'the AO') assessing the income at Rs. 10,73,14,217 as against the returned income of Rs. 10,10,580, on account of addition of Rs 10,63,03,637 u/s. 68 of the Act. The brief facts of the case is that the appellant filed the original ITR for A.Y. 2022-23 u/s. 139(1) of the Act on 28.10.2022 by declaring total income of Rs. 10,10,580. The case was selected for Complete Scrutiny assessment through CASS as there was....
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....come Tax Department under the ITR form for A.Y. 2020-21. A snapshot of the said balance sheet is attached herewith for your reference." 5.2 In support of his claim, the appellant furnished before the AO the scanned copy of Balance sheet portion of his ITR filed during AY 2020-21 wherein capital amount was mentioned of Rs. 24.50 crores but the AO held that books of accounts of the appellant was not audited and ITR for AY 2020-21 of the appellant was also not assessed, so the appellant's claim made in ITR was not acceptable specially. The AO found that vide para 7 of letter dated 09.09.2023, the appellant has submitted the following points: "8) Capital shown of Rs. 27,05,32,933/- in my ITR of A.Y. 2022-23 is my own individual capital there has not been any share holders share in my capital. All this capital has generated by accumulated profit from SRUSTI DIAM, and Remuneration from SRUSTI DIAM Since 2003, therefore the detail of share holders is not available. So that most off capital generated by this share of profit from firm and only last 3 years income from firm is Rs. 3,73,45,493 which exempt in hands of partner and 30,00,000/- remuneration from firm."....
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....CIT v. Suresh Kumar Kothari (2008) 303 ITR 130 (MP), the Hon'ble Madhya Pradesh High Court has held that capital accumulated over earlier years cannot be added under Section 68 merely because it appears in a capital account in a later year. 5.8 I find that in response to the Show Cause Notice, the appellant had explained to the AO vide reply dated 29.02.2024 that in the Income Tax Return (ITR) for A.Y. 2021-22, the balance sheet figures were inadvertently not entered. However, to establish the continuity and genuineness of capital, the appellant submitted the ITR for A.Y. 2020-21, which reflected a capital balance of Rs 24,45,45,460.25 as on 31.03.2020. Additionally, the appellant submitted financial statements for A.Y. 2020-21, A.Y. 2021-22, and A.Y. 2022-23. Therefore, it is seen that the capital increase across the said years was primarily on account of profit share and remuneration received from the partnership firm M/s. Srusti Diam, in which the appellant is a partner. The appellant submits the below mentioned working for the purpose of ease wherein the change in Capital during A.Y.2022-23 can be easily understood. S. No. PARTICULARS AMOUNT (Rs.) 1. Ope....
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....led to furnish the relevant financial statements before the Assessing Officer and the Learned CIT(A) erred in considering the same without calling for a remand report from the Assessing Officer. 7. Per contra, the Learned Authorized Representative for the Assessee supported the order passed by the Learned CIT(A) and submitted that the Learned CIT(A) had correctly appreciated the relevant facts after taking into consideration the documents and details furnished by the Assessee deleted the incorrect addition made by the Assessing Officer. It was submitted that the capital account balance was being carried forward from the preceding assessment years and therefore, no addition could be made in the hands of the Assessee. He also place reliance upon the written note submitted during the course of hearing. Reiterating the stand taken before the authorities below, the Learned Authorized Representative submitted the Assessing Officer had incorrectly compared the total capital balance of INR. 27,05,32,933/-reflected in the individual/personal balance sheet of the Assessee for the relevant previous year with the capital account balance of INR. 16,42,29,296/- of the Assessee in the partners....