M/S. Laxmi Narayan Agarwal, Hyderabad vs Assessee

This is an appeal filed by the assessee against the order of the Commissioner of Income Tax (Appeals)-IV, Hyderabad, vide Appeal No. 387/ACIT 6(1)/CIT(A) IV/09-10 dated 30-09-2010 for the Assessment Year (AY) 2001-02 raising the following grounds of appeal:

"1. The Hon'ble CIT Appeals - IV Hyderabad, erred while confirming the order passed by the Assessing Officer by making addition of Rs. 19,61,766/- relating to the difference between opening capitals as per the original return and revised return without considering the explanation give by the assessee which is not correct, not justified and bad in law.

2. The assessee had income from lorry hire, scrap business and rental income for the past several years. Further he stated that he had invested an amount of Rs. 1,00,000/- on 15-05-1995 and another amount of Rs.

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1,00,000/- on 18-05-1995 in Kisan Vikas Patras with SR Nagar Post Office, SR Nagar, Hyderabad on the same matured on 15-11-2000 and 19-01-2000 respectively for Rs. 2,00,000/- each. Thus, he admitted of having received Rs. 4,00,000/- out of the two deposits stated to have been made with the post office, S.R.Nagar, Hyderabad.

3. The CIT(A)-IV has erred while confirming the Order of the Assessing Officer wherein the AO has failed to appreciate that the amount received as commission on sale transaction but considered the same as sale transaction of assessee which is not correct and not justified. We, hereby, submit you to kindly consider the commission income only and calculate tax on such income.

4. The assessee had deposited certain cash amounts totaling to Rs. 9,95,000/- into the bank accounts of his proprietary concern. These amounts were given as advances for purchase of scrap and chemicals through demand drafts to various persons bu the transactions have not taken place and the said money was received back in cash during February and March 2000. Therefore, the assessee requested to accept the explanation offered for the sources.

5. In proof of the claim made the assessee furnished the copies of bank accounts of M/s. Mittal Minerals & Chemicals as per which the cash deposits and the demand drafts obtained were submitted.

6. The assessee has claimed the deduction under section 80U of Rs. 40,000/- for physical disability and submitted a certificate ;issued by the civil surgeon, Gandhi Hospital in support of the claim. The CIT(A) erred by making the disallowance of said amount without considering the explanation offered by the assessee which is not correct, not justified and bad in law.

7. The assessee is praying to give a fresh opportunity to produce the certificate regarding the disability and to take the same in to account while assessing the total income of the assessee and to decide the matter in favour of the assessee.

8. The order of the CIT Appeals may be set aside and sent back to Assessing Officer for redoing the same.

9. The CIT Appeals - IV, Hyderabad erred while confirming the order passed by Assessing Officer while not considering the explanation given by the Assessee Company and initiated penalty proceedings under section 271(1)(c) which is not correct, not justified and bad in law.

10. We would like to submit that the Assessee has not concealed any income or not furnished inaccurate particulars to the A.O. Hence, the penalty proceedings u/s. 271(1)(c) may not be initiated.

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11. The Assessee may add, alter or substitute any other points to the grounds of appeal before or at the time of hearing of the case/appeal."

Precise and additional grounds of appeal:

"1. The learned CIT (A) erred in sustaining the additions made by the assessing officer for the assessment year under consideration.

2. The learned CIT (A) erred in upholding the additions made to the income of the assessee based on the loose sheets and dumb materials which has no evidential value.

3. The learned CIT (A) ought to have applied the principle of Telescoping of the income determined in the earlier years against the expenditure of subsequent years.

4. The learned CIT (A) ought to have applied the principle of Telescoping of unexplained expenditure against the income of the appellant.

5. The CIT (A) ought to have appreciated the fact that the assessing officer has erred in passing the assessment order u/s. 143(3) r.w.s. 147 of the Act.

6. The ld. CIT (A) ought to have appreciated the fact that there is no nexus between reasons recorded and the income finally assessed in the assessment order passed u/s. 143(3) r.w.s. 147 of the Act.

7. The ld. CIT (A) ought to have appreciated the fact that the Assessing Officer could not have assessed other income independently dehors the income escapement of which, formed the basis of reopening the assessment as per the reasons recorded.

8. Without prejudice to the above grounds, the CIT(A) has erred in sustaining the additions made in respect of difference in opening capital of Rs. 19,61,766/-.

9. The CIT (A) ought to have appreciated the fact that the assessee has explained all the details regarding opening balance for the AY. 2001-02.

10. The CIT (A) erred confirming the disallowance of claim of deduction u/s. 80U of the Act of Rs. 40,000/-.

11. The CIT (A) ought to have appreciated the fact that no additions can be made to the income of the assessee without there being any incriminating material in search assessment.

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12. The assessee may add, alter or modify any of the points to the grounds of appeal at any time before or at the time of hearing of the appeal".

2. Briefly, the facts of the case are that, the assessee is an individual engaged in the business of trading in scrap. For the assessment year under consideration, the appellant filed original return of income on 04- 12-2001 admitting total income of Rs. 82,200/-. The said return of income was processed u/s. 143(1) of the Income Tax Act, 1961 [Act]. Search and seizure operations were conducted in the appellant's premises on 07-11-2007. Subsequently, notice u/s. 148 was issued on 27-03-2008 in response to which the appellant filed return of income on 01-09-2009 admitting income of Rs. 91,720/-. As against the said return of income, the assessment was completed by the ACIT, Circle- 6(1), Hyderabad vide order dt. 30-11-2009 u/s. 143(3) r.w.s. 147 of the Act at a total income of Rs. 20,93,486/-. The disparity between the returned and assessed income is on account of addition of the opening balance of capital account filed during the course of assessment proceedings.

3. Being aggrieved by this addition, the appellant filed an appeal before the CIT(A), who vide order dt. 30-09-2010, dismissed the appeal on the ground that the appellant failed to substantiate the opening balance of the capital for the year under consideration. Aggrieved, the appellant come up with the present appeal before us.

4. It was contended by the Ld. AR on behalf of the appellant that, no addition in respect of opening balance can be made in the year under consideration. If at all an addition is warranted, it can be made only in the preceding year. In this connection, the Ld. AR relied upon the following decisions of the co-ordinate benches of the Tribunal:

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i. Smt. Surapu Indira Devi Vs. ACIT (ITA No. 96/Hyd/2012) dt. 08-08-2013; and ii. Sri Grosu Murali Krishna Vs. DCIT (ITA No. 178/Hyd/2011) dt. 05-03-2014.

5. On the other hand, Ld. CIT-DR had placed reliance on the orders of the lower authorities and submitted that no interference is called for by the Hon'ble Tribunal.

6. We heard the rival parties. We are of the considered opinion that the issue in appeal is covered by the decision of the co-ordinate bench of this Tribunal in the case of Smt. Surapu Indira Devi Vs. ACIT (Supra), vide para 15, wherein it was held that:

"15. We have heard both the parties. We are of the opinion that even though there may be difference of opinion as to the amount of agricultural income which could be obtained from the land and the lack of evidence produced with respect to the same, the issue of Assessing Officer not accepting the opening balance and treating the same as NIL is incorrect. The CIT(A) has also confirmed the order of the Assessing Officer and hence, the lower authorities have erred as they have overlooked the principle that the opening balance cannot be disturbed this year. The authorities can only reopen for the earlier year. We rely on the decision of ACIT Vs. Smt. N. Sasikala (2005) 92 TTJ (Chennai) 119 wherein it has been held as follow:

5. ........................... The learned counsel for the assessee submitted that the assessee has filed the return of income for the assessment year 1991-92 along with cash flow statement and the statement of affairs. Cumulative cash balance was saved by the assessee over a period of time. The assessee explained the total assets and liabilities position and he further submitted that the assessee has also filed return of income for the assessment year 1990-

91. If the Department doubted the availability of cash balance, it can go to the concerned assessment year 1990-91, and treat it as unexplained income, but it cannot treat the opening balance in the assessment year 1991-92 as unexplained. The learned counsel for the assessee strongly supported the order of the CIT(A).

6. ................. The Tribunal held that the A.O. has failed to take cognizance of the return for 1990-91, while deciding the issue of 1991- 92 as the return was before him. The opening balance of cash cannot be treated as unexplained in the assessment year 1991-92.

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In view of this position, we have no hesitation in confirming the order of the CIT(A) and reject the ground taken by the Revenue".

This above decision was again followed by this Hon'ble Tribunal in the case of Sri Grosu Murali Krishna Vs. DCIT (Supra). We also find that from the material on record, as a result of search and seizure operations, there is no material indicating that the opening cash balance was not available. Hence, it is settled principle of law that in the case of assessments made u/s. 153A, the additions can be made only based on the material seized in the absence of any such material, the addition cannot be made. We are in agreement with the reason given by the Hon'ble Tribunal in the above cases. Respectfully following the decision, we allow the grounds of appeal filed by the appellant.

7. On the issue of claim of deduction u/s. 80U of the Act, we find that the claim was withdrawn before the AO and therefore, the CIT(A) is perfectly justified in rejecting the claim of the appellant. Hence, this ground of appeal is dismissed.

8. Accordingly, this appeal is partly allowed.

Order pronounced in the open Court on 17th June, 2015

Sd/- Sd/-

(ASHA VIJAYARAGHAVAN) (INTURI RAMA RAO) JUDICIAL MEMBER ACCOUNTANT MEMBER

Hyderabad, Dated 17th June, 2015

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Copy to :

1. Sri Laxmi Narayan Agarwal, C/o. P. Murali & Co., Chartered Accountants, 6-3-655/2/3, 1st Floor, Somajiguda, Hyderabad.

2. The Asst. Commissioner of Income Tax, Circle-6(1), Hyderabad.

3. CIT(Appeals)-IV, Hyderabad.

4. CIT-III, Hyderabad.

5. D.R. ITAT, Hyderabad.

6. Guard File.