Addition made for difference due to wrong journal entry. Assessee directed to file reconciliation to explain the difference-ITAT
ABCAUS Case Law Citation
ABCAUS 3477 (2021) (04) ITAT
In the instant case, the assessee had challenged the order passed by the CIT(A) in confirming the addition made by the Assessing Officer (AO) on account of unexplained cash credit u/s 68 of the Act.
The return of the assessee was selected for income tax scrutiny and during the course of assessment proceedings the AO noticed a difference in the capital account balance, when compared to the closing balance for the immediately preceding assessment year.
The assessee was called upon to file necessary details including reconciliation to explain the difference in the capital account.
The assessee explained that by an inadvertent error provision for depreciation account has been wrongly credited to capital account instead of fixed asset account, due to this, there was a difference in capital account, when compared to closing balance for the immediately preceding assessment year.
The assessee further submitted that said anomaly had been rectified by passing necessary journal entries in the next assessment year.
In this regard, the assessee filed necessary ledger account copies of capital account, provision for depreciation and fixed asset account.
The AO, however was not convinced with the explanation and according to him, the assessee could not explain the difference.
Therefore, the difference in the capital account was treated by the AO as unexplained cash credit u/s 68 of the Act and added to total income.
The CIT(A) confirmed the addition.
The Tribunal observed that reasons given by the authorities below indicated that assessee was unable to reconcile the difference with necessary evidences. Even before the Tribunal, the assessee was unable to explain as to how difference in capital account was reconciled with reference to amount outstanding in provision for depreciation account.
The Tribunal stated that if the assessee had explained difference and filed necessary journal entries to explain the fact that wrong journal entries had been passed to capital account, then there was no reason for authorities below to observe that no evidence had been filed to explain the difference.
On the request of the assessee, the Tribunal set aside the issue back to the file of the Assessing Officer with direction to the assessee to file evidence to reconcile the difference in capital account.
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