Subramanian Shanmuganathan Vs ACIT (ITAT Chennai)
Summary: The ITAT Chennai allowed the assessee’s appeal for A.Y. 2012-13 and directed deletion of four additions aggregating to ₹9,66,42,740 comprising ₹78,19,519 towards alleged variation in the proprietor’s capital account, ₹4.40 crore under section 69A towards alleged cash on-money for purchase of immovable property, ₹1,82,11,522 under section 68 towards sundry creditors and ₹2,66,11,699 towards sundry debtors. The assessment arose after an earlier reassessment accepting the returned income was set aside under section 263, followed by proceedings under section 144 read with section 263. An earlier assessment pursuant to the revision had also been set aside by the Madras High Court and remitted for fresh consideration. In the fresh assessment, the AO determined total income at ₹9,91,17,260 against returned income of ₹24,74,520, and the CIT(A) subsequently confirmed all four additions.
On the capital-account addition, the Tribunal found that the correct opening capital as on 01.04.2011 was ₹1,69,39,675, directly traceable to the identical closing capital as on 31.03.2011 disclosed for the immediately preceding A.Y. 2011-12. After rental income of ₹6,18,000 and drawings of ₹20,02,721, the intermediate balance was ₹1,55,54,954, and after adding current-year business profit of ₹31,32,175, closing capital became ₹1,86,87,129. The AO had compared the erroneous original capital figure of ₹77,35,435 with the intermediate reconciled figure of ₹1,55,54,954 and treated the mathematical difference of ₹78,19,519 as unexplained. The Tribunal held that the comparison was fundamentally misconceived because the figures represented different stages of the capital account. No fresh capital introduction, cash credit, investment, unexplained money, asset or expenditure corresponding to ₹78,19,519 had been identified. The addition was therefore deleted.
