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TMI Blog2025 (5) TMI 98X X X X Extracts X X X X X X X X Extracts X X X X ..... hare Capital / Other Capital iv. Other Income reported in Schedule A-OI not credited to P&L Account 3. Accordingly, statutory notices u/s 143(2) and 142(1) of the Act were issued and served on the assessee, in response to which the assessee filed the requisite details from time to time as asked by the Assessing Officer. 4. During the course of assessment proceedings the Assessing Officer noted that there is a difference between the capital account as per the business balance sheet and the capital account reported in the ITR. He further noted that the capital as on 31.03.2017 was Rs. 5,72,65,831/- whereas the capital as on 31.03.2018 was Rs. 45,94,20,606/- as per the I.T. Return. Thus, there is a huge difference of Rs. 40,21,54,775/-, He, therefore, asked the assessee to reconcile the difference. It was explained by the assessee that the capital account as per the business balance sheet represented only the business capital whereas the capital account reported in ITR included the personal capital account balance as well. However, the Assessing Officer did not agree with the submissions made by the assessee. He accordingly made addition of Rs. 40,21,54,775/- on the ground that th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed to file his balance sheet with his entire business transactions including his capital account, Profit and Loss Account from proprietorship concern, income from partners and other income. Rejecting the various explanations given by the assessee, the Ld. CIT(A) / NFAC sustained the addition of Rs. 40,21,54,775/- by observing as under: "6.1.3 From the above submissions of appellant and the documents attached thereto, it is abundantly clear that the appellant is a prudent businessman, running business for the last three decades. However, when filing the ITR for the year under consideration as well as for the earlier Assessment years, he has got the accounts audited related to his proprietorship business only and not of his entire assets including the capital. In fact, the appellant has bifurcated his capital into two parts i.e. introduced in his proprietorship business and personal. It is quite amazing that the appellant who, is running his business for the last three decades, and also hires professional for auditing his accounts has drawn such bifurcation with respect to his capital. Further, while the actual capital has been detected during the scrutiny assessment, the appellant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dry creditor is concerned, the Ld. CIT(A) / NFAC sustained the same by observing as under: "7.1 With respect to the above addition the appellant vide his submission dated 04.02.2024 has stated that the amount shown as Sundry Creditor has been mentioned mistakenly as the same is 'unsecured loan. However, the appellant in support of his submission has not attached any documentary evidence along with copy of bank account statement. The appellant should have submitted the copy of confirmation letter of the concerned party, copy of respective ledger and the bank account entries, so as to prove the genuineness of the transactions. In absence of these documents the submission of the appellant is not acceptable. Therefore, the addition made by the AO with respect to the sundry creditor amounting Rs. 13,60,27,619/- is also sustainable and the same is upheld. Accordingly, the Ground No. 2 is dismissed." 9. Aggrieved with such order of Ld. CIT(A) / NFAC, the assessee is in appeal before the Tribunal by raising the following grounds: 1] The learned CIT(A) erred in confirming an addition of Rs. 40,21,54,775/-on account of alleged difference in proprietor's capital account without a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... edger of the concerned party to prove the genuineness of the transaction and therefore, the addition made was justified. 10) The learned CIT(A) erred in not appreciating that the addition made of Rs. 13,60,27,619/- was not justified at all and the reduction in the sundry creditors was on account of change in classification of certain amounts from sundry creditors to unsecured loans (same side of Balance sheet) and therefore, the addition made is not justified and the same may kindly be deleted. 11] The appellant craves leave to add, alter, amend or delete any of the above grounds of appeal. 10. Grounds of appeal Nos. 1 to 7 relates to the addition of Rs. 40,21,54,775/ -. 11. The Ld. Counsel for the assessee submitted that the assessee had prepared his balance sheet which includes the assets relating to solar business, money lending activities and construction activities. In the ITR form, the assessee has given the details of his assets on a consolidated basis by including business and personal assets. Referring to page 151 of the paper book, he drew the attention of the Bench to the submissions made before the Assessing Officer vide letter dated 22.03.2021 and submitted that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2018-19 Sr. No. ROI Year TAXABLE INCOME EXEMPT INCOME INCOME TOTAL TAX PAID A B C D E F 1 AY 2006-07 13,83,091 2,48,22,365 2,62,05,456 6,26,068 2 AY 2007-08 13,40,027 1,89,76,425 2,03,16,452 5,66,231 3 AY 2008-09 24,76,768 1,48,00,872 1,72,77,640 8,88,456 4 AY 2009-10 37,06,012 92,49,631 1,29,55,643 11,19,654 5 AY 2010-11 47,71,943 91,22,833 1,38,94,776 13,43,223 6 AY 2011-12 80,59,005 70,71,999 1,51,31,004 23,09,378 7 AY 2012-13 83,26,262 1,93,52,083 2,76,78,345 25,09,073 8 AY 2013-14 1,13,88,252 3,37,01,224 4,50,89,476 32,84,776 9 AY 2014-15 1,11,41,324 2,81,47,923 3,92,89,247 35,49,107 10 AY 2015-16 3,16,16,789 1,93,67,881 5,09,84,670 1,02,57,649 11 AY 2016-17 17,30,250 69,10,219 86,40,469 3,12,619 1,27,61,048 1,27,61,048 12 AY 2017-18 3,93,22,743 1,91,79,754 5,85,02,497 1,41,60,021 47,59,110 47,59,110 13 AY 2018-19 6,40,25,041 2,48,82,542 8,89,07,583 1,76,69,832 TOTAL 18,92,87,507 25,31,05,909 44,23,93,416 5,85,96,087 14. Further, the assessment for assessment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the preceding paragraphs. It is the submission of the Ld. Counsel for the assessee that the assessee in the ITR form has reported the closing capital balance as on 31.03.2018 at Rs. 45,94,20,606/- which includes his business and personal capital account whereas the capital account as per the business balance sheet was Rs. 11,21,81,842/ -. It is also his submission that in the ITR form filed for assessment year 2017-18 the assessee had reported the details only relating to the business assets and accordingly had reported closing capital account balance of Rs. 5,72,65,831/ -. It is his submission that the difference between the two capital account balances is on account of reporting of all the personal liabilities and assets in the balance sheet in the ITR form where the assessee is required to give the details of his assets and liabilities. It is his submission that if the personal balance sheet and the business assets are compared for this year and the subsequent years along with year-wise analysis of income and tax paid, then there is absolutely no difference and the addition made by the Assessing Officer and sustained by the Ld. CIT(A) / NFAC was not justified. 18. We find som ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er Businesses Balance sheet (Revised), and Profit and loss account, as attached with Tax audit report in Form no 3CD/3CB for AY 2018- 19.(Page No ) c. Solar and Other Businesses Balance sheet(original), and Profit and loss account, as attached with Tax audit report in Form no 3CD/3CB for AY 2018-19. (Page No d. Statement of affairs (Combine Balance Sheet) as on 31/03/2017. (Page Nos ) e. Solar and Other Businesses Balance Sheet and Profit and Loss account, as attached with Tax Audit report in Form No. 3CB/3CD for AY 2017-18 (Page Nos ) Perusal of these documents will reveal the fact that, all the figures are correctly reported, however there appears apparent confusion and we wish to explain the same in following paras; " With this background I will answer the respective issues in following manner: .................................." 19. We find business balance sheet of the assessee as on 31.03.2018 is as under: SANJAY M. BAFNA A 33, SAGAR BUNGALOW, VIDYASAGA COLONY, MARKET YARD, PUNE 411037 BALANCE SHEET AS ON 31.03.2018 LIABILITIES Rs Rs ASSETS Rs Rs CAPITAL ACCOUNT LAND - SOLAR PROEJCT - TELANGANA 3181350 OP. BALANCE 572 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 12.2018 for assessment year 2016-17 accepting the said balance sheet. Similarly, for assessment year 2022-23 also the assessee had submitted the capital account as per business balance sheet and the personal balance sheet as on 31.03.2016 and the Assessing Officer, after verifying the same, has accepted the claim of the assessee without making any addition in the order passed u/s 143(3) dated 18.03.2024, copy of which is placed at pages 167 to 177 of the paper book. It is pertinent to mention here that for assessment year 2022-23 the case of the assessee was selected for scrutiny through CASS for the following reason: Reason Code Reason Description Issue BL01.02 Substantial increase in capital in a year Share Capital / Other Capital 23. From the various details furnished by the assessee we find the confusion arose in the minds of the Assessing Officer as well as the Ld. CIT(A) / NFAC regarding the two capital account balances which is mainly due to the capital account as per the business balance sheet and the capital account as per the personal balance sheet. In the personal balance sheet, the assessee has disclosed his entire assets and liabilities whereas in the business b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and the Ld. CIT(A) / NFAC. 28. We have heard the rival arguments made by both the sides, perused the order of the Ld. CIT(A) / NFAC and the paper book filed on behalf of the assessee. We find from the balance sheet of Sanjay M Bafna as on 31.03.2017, copy of which is placed at page 162 of the paper book, that the assessee under the head 'sundry creditor' has shown an amount of Rs. 12,48,01,000/- in the name of Sanjay M. Bafna, HUF. A perusal of the Ledger account of Sanjay M Bafna, which has already been reproduced in the preceding paragraphs, shows the same account as the opening balance as on 01.04.2017 and after making certain payments, the closing balance of Rs. 12,11,10,914/- has been arrived at which has been shown in the balance sheet as on 31.03.2018 under the head "loans - SANAJY M. BAFNA". Thus, this is only a mere change in the nomenclature without any difference in the figures as per the Ledger account. Under these circumstances, we are satisfied that there is absolutely no error except the name change i.e. from sundry creditor to unsecured loans. Thus, the Assessing Officer, in our opinion was not justified in making the addition and the Ld. CIT(A)/ NFAC was n ..... X X X X Extracts X X X X X X X X Extracts X X X X
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