Commissioner of Income Tax-III vs Suryadeep Salt Refinery and Chemical Works Ltd.

M.S. Sonia Gokani, JJ.—Challenging the order of Income Tax Appellate Tribunal dated 24.8.2012, this Tax Appeal has been preferred by the Revenue u/s 260A of the income tax Act, 1961 (to be referred to hereinafter as "the Act"). The question in the present Tax Appeal is of addition of undisclosed investment to the tune of Rs. 3,95,41,997/- made by the Assessing Officer. For the Assessment Year 2005-06 return of income was filed by the assessee. Such return was taken in scrutiny assessment. The assessee chose not to attend the hearing. On the basis of two balance sheets made available before the Assessing Officer, he added such amount to the income of the assessee.

Aggrieved by such addition, the same was challenged before CIT (Appeals). CIT (Appeals) was of the opinion that if in two balance sheets different figures are emerging that ipso facto cannot be held to be an unexplained investment by the Assessing Officer. For enabling any amount to be termed as unexplained investment, the investment need not be on record. On giving detailed reasonings, such addition was deleted by CIT (Appeals). The Revenue challenged the same before the Tribunal and the Tribunal extensively quoted the order of CIT (Appeals) and concurred with the findings of CIT (Appeals) by giving independent elaborate findings.

Aggrieved by such order of the Tribunal, present appeal is preferred proposing the following substantial question of law for our consideration:-

Whether the ITAT was justified in law in upholding the perverse order of the ld. CIT(A), who deleted the addition on account of undisclosed investment of Rs. 3,95,41,907/- by not appreciating the fact that the auditor of the assessee had submitted three different balance sheets of the same year before the Income tax authorities and the assessee was not able to justify the figures of groupings before the Ld. CIT(A)?

We have heard learned counsel Mr. Ketan Parikh for the Revenue who has taken us through the orders of all the three authorities. For the reasons to follow hereinafter, we are not inclined to interfere in this Tax Appeal.

4.1 Additions it appears have been made by the Assessing Officer basing on incorrect balance-sheet produced by the assessee respondent during the course of the assessment proceedings.

CIT (Appeals) noted that the investment of Rs. 3.95 crores (rounded off) treated by the Assessing Officer as unexplained is incorrect in as much as the increase in capital work-in-progress was only Rs. 41,907/- as the entire amount was found accounted in the books of account and was duly represented by increase in assets in the balance sheet, such amount was held not as unexplained amount.

The real controversy arose as in the balance sheet, the figure of capital work-in-progress was mentioned at Rs. 4,80,83,633/- as against the sum of Rs. 85,83,633/- and, therefore, investment Rs. 3,95,41,907/- was treated by the Assessing Officer as unexplained.

In our opinion, both CIT (Appeals) and the Tribunal have rightly approached the issue. The assessee respondent, at the time of filing of the return of income, had depicted incorrect figures. Various figures of assets such as capital work-in-progress, investment etc. were wrongly shown. However, during the course of proceedings by way of corrigendum, the discrepancy in the balance sheet and the schedules had been duly explained. Not only such defect was aptly explained and rectified but the capital work-in-progress was also accounted in the books of account and was represented by increase in assets in the balance-sheet and, therefore, also the same has rightly not been treated as unexplained investment.

Section 69 of the Act would require that any investment made by the assessee immediately preceding the assessment year in question, if is not recorded in the books of account and no explanation comes forth from the assessee about the nature and source of the investment or any explanation given, if is not found satisfactory by the Assessing Officer, the value of such investment can be deemed to be the income of the assessee of such financial year. As far as Section 69C of the Act is concerned, if any expenditure has been made by the assessee in the financial year in question and no explanation he offers about the source of such expenditure or if the explanation given is not found satisfactory by the Assessing Officer, such expenditure can be deemed to be income of the assessee. Therefore, both the provisions, require explanation from the assessee with regard to the investment and expenditure respectively. In the event of not being satisfied with the explanation also the same can be added to the income of the assessee considering such investment or expenditure as deemed income. As rightly held by both the authorities even if these mistakes in the figures were not corrected by the corrigendum, then also as such amount had already been recorded in the books of account of the assessee, the same cannot be said to be falling either u/s 69 or Section 69C of the Act. In absence of any mistake in interpretation of law, no interference is necessary. Both the authorities have concurrently held in favour of the assessee and have given cogent reasons while dealing with the issue in question as also applied correct law to the said issue. This merits no consideration and Tax Appeal is dismissed.