Naveen Bolia vs ITO – Income Tax Officer: [I.T.A. No. 176/Jodh/2023]
The matter of Naveen Bolia versus the Income Tax Officer (ITO), as reviewed by the Income Tax Appellate Tribunal (ITAT) in Jodhpur, pertains to the validity of the assessment and the justification for specific additions imposed by the Assessing Officer (AO). The appellant, Naveen Bolia, contested the assessment order on two main bases: the legality of the assessment procedure and the justification for the additions made by the AO. The AO contended that the appellant did not submit the Return of Income (ROI) for several assessment years, resulting in the inclusion of Rs. 16,98,502/- as undisclosed income for the assessment year 2010-11.
The Tribunal heard the rival contentions and perused the material placed on record and had also gone through the various judicial precedent cited to drive home to the respective contentions raised by both the parties.
The bench noted that in this case, there were two type of grounds: one challenging the legality of the assessment and other on the merits of the case. On merits of the case the addition the bench noted that the ld. AO has repeatedly recorded findings that the assessee did not filed any Return of Income (ROI) for A.Y. 2008-09 and again alleged that the assessee had not filed ROI for preceding years.
Against this set of facts it was evident that the ROI for AY 2007-08 was filed on 31.07.2007 along with the copy of balance sheet and P&L A/c followed by the ROI for AY 2008-09 filed on 31.07.2008 along with the copy of balance sheet and P&L A/c. Thereafter, ROI for AY 2009-10 was filed on 31.07.2009 declaring total income 1,47,932/- and notably (and admittedly), the balance sheet for AY 2009-10 was also filed along with the ROI wherein the closing balance of cash in hand of Rs. 16,98,502/- was disclosed, which became the opening balance of cash in hand of the subjected year i.e. A.Y. 2010-11. This contention raised before the Hon’ble Tribunal and before the lower authority were never challenged.
Even the ld. AO himself, to this opening cash in hand, added the income of the current year i.e. A.Y. 2009-10 of Rs.2,37,993/-. Accordingly, the closing balance of cash in hand of Rs.16,98,502/- became the opening balance of the cash in hand as on 01.04.2009. Thus, addition made of the entire cash in hand of Rs.16,98,502/-, admittedly was of the closing balance of cash in hand supported by the Balance Sheet and ROI filed for AY 2009-10. The ROI for AY 2009-10 was processed u/s 143(1) and the said assessment (or the earlier even) was not stated to have been disturbed by taking any action u/s 147 or u/s 263 of the Act.
Thus, the closing balance of cash in hand for AY 2009-10 stood established or not disputed. Thus, once the Balance Sheet of the current year and the preceding years were accepted by the Department, the repeated contention of the assessee that the very source of the availability of the cash in hand of Rs.16,98,502/- was in the Balance Sheet further explained the source. Notably the ld. AO himself had taken note of the Balance Sheet, Capital Account and P & L Account of A.Y. 2009-10 and A.Y. 2010-11 and also discussed the investments, debtors, creditors, loan taken etc. but had not appreciated the opening cash in hand. He even admitted that the closing balance of cash in hand of Rs. 7,42,864/- in this year and even admitted the availability of closing cash in hand of Rs.16,98,502/- in A.Y. 2009-10.
It was beyond one`s comprehension that when each and every entry of the Balance Sheet for the preceding year i.e. A.Y. 2009-10 and current year i.e. A.Y. 2010-11 had been accepted (and no dispute was raised w.r.t. the correctness of these figures and the facts), there was no reason as to why the ld. AO not accepted the closing cash in hand as having been available with the assessee in A.Y. 2009- 10.
Also consequently, again when he had admitted rather not disputed any of the entries of the Balance Sheet for the current year, opening cash in hand of the subjected amount of Rs.16,98,502/- should have been accepted as available balance with the assessee. Thus, once the assessee based on the all the evidence which are not under dispute submitted that the same was out of the opening cash in hand no addition can be made in the year under consideration.
The ld. AO assumed opening cash balance as `Nil` on the suspicion that whatever the assessee had earned in the preceding years stood utilized towards expenses or in making the investments and also alleged that the assessee failed to prove the existence of cash in hand and accordingly he considered Rs.16,98,502/- as undisclosed income of the current year. Thus, what the ld. AO added was the opening balance of cash in hand in this year which was legally impermissible.
Although the ld. AO had not invoked any particular provision of law yet however, assuming that it was a case of section 68 (or even u/s 69A), the provision speaks of the credit found during the previous year in the books of account maintained by the assessee. Therefore, the law was well settled that credit found on the first day or carried forward from the preceding year cannot be added in this year.
The ld. AR of the assessee on this aspect of the matter had relied upon the decision in Parmeshwar Bohra v/s ITO 27 TW 55(JD). Therefore, the Hon’ble Tribunal held that the opening capital cannot be added as unexplained investment u/s 69 of the Act for the AY 1993-94.”
This decision was affirmed in CIT v/s Parmeshwar Bohra (2007) holding that clear finding recorded by the Tribunal that the impugned amount was credited in the books of account of the assessee in the earlier previous year and was shown as closing capital of that year – carried forward amount of the previous year does not become an investment or cash credit of the relevant year. Respectfully following the finding of the co-ordinate bench and affirmed by the jurisdictional high court, the Tribunal directed to delete the addition of Rs. 16,98,502/-.
In terms of these observation, the appeal of the assessee was allowed.
Naveen Bolia vs ITO – Income Tax Officer
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