DCIT3(1), INDORE vs. SHRI MANOJ DAGA, INDORE

आयकर अपील�य अ�धकरण, इ�दौर �यायपीठ, इ�दौर

IN THE INCOME TAX APPELLATE TRIBUNAL INDORE BENCH, INDORE

BEFORE SHRI KUL BHARAT, JUDICIAL MEMBER AND SHRI MANISH BORAD, ACCOUNTANT MEMBER

ITA No.931/Ind/2019 Assessment Year:2010-11

DCIT-3(1) Shri Manoj Daga, Indore Indore बनाम/ (Revenue) (Respondent ) Vs. P.A. No.ABZPD1724G Revenue by Shri Ashish Porwal, Sr. DR Respondent by Shri S.N. Agrawal, CA Date of Hearing: 09.11.2020 Date of Pronouncement: 08.01.2021 आदेश / O R D E R PER KUL BHARAT, J.M: This appeal by the Revenue is directed against the order of ld. Commissioner of Income Tax (Appeals)(in short ‘Ld. CIT(A)-II, Indore dated 21.08.2019 pertaining to assessment year 2010-11. The assessee has raised following grounds of appeal: “1. Whether on the facts and in the circumstances of the case, the Ld. CIT(A) was justified in deleting the addition of

Manoj Daga /ITANo.931/Ind/2019

Rs.90,00,000/- on account of bogus incurred loan u/s 68 and Rs.1,18,330/- on account of interest paid thereon as bogus loan are received from M/s. Purvi finvest Ltd., M/s. East West Finvest Ltd. and M/s. Trimurti Finvest Ltd, who have procured bogus share application money/premium from the paper companies of Kolkata and thereafter advances loan to the assessee and also many persons/entry/companies as per enquiries carried out through investigation Wing Kolkata. 2. Whether on the facts and in the circumstances of the case, The Ld. CIT(A) was justified in deleting the additions of Rs.90,00,000/- + interest of Rs.1,18,330/- inspite of specific findings of the Assessing Officer in the assessment order. 3. The appellant craves leave to add to or deduct from or otherwise amend the above grounds of appeal.”

assessee was reopened for assessment, on the ground that the

assessee had obtained bogus share application money of premium.

Therefore, the assessment was reopened, the assessing officer was

farmed the assessment u/s 147 r.w.s 143(3) of the Income Tax Act

1961 (hereinafter referred as the Act) while framing the assessment,

assessing officer noticed that perusing the details of “Loan and

Advances” it was found that the assessee company had taken ‘Loan

and Advances’ from three companies namely M/s. Purvi finvest

Ltd., M/s. East West Finvest Ltd. and M/s. Trimurti Finvest Ltd

and has charged interest thereon. The assessing officer did not

Manoj Daga /ITANo.931/Ind/2019

accept the explanation of the assessee and made addition of

Rs.90,00,000/- in respect of the loan received from the said

companies and also made addition of the interest paid to such

companies of Rs. 1,18,330/-.

CIT(A) who after considering the submissions deleted the addition.

present appeal is not maintainable in the light of the Circular of the

CBDT. Ld. Counsel for the assessee reiterated the submissions as

made in the written submissions. The submissions of the assessee

are under ;

SYNOPSIS IN THE CASE OF DEPARTMENTAL APPEAL: A.1] The present appeal is filed by the Department against the order of the Ld CIT (A)-2, Indore. A.2] The grounds of appeal taken by the Department in the present appeal are summarized hereunder for your ready reference: 1.Whether on the facts and in the circumstances of the case, the CIT(A) was justified in deleting the addition of Rs. 90,00,000/- on account of bogus unsecured loan u/s 68 and Rs. 1,18,330/- on account of interest paid thereon as bogus loan are received from M/ s Purvi Finvest Ltd., M/ s East West Finvest Ltd. and M/ s Trimurti Finvest Ltd., who have procured bogus share application money/ premium from the paper companies of Kolkata and thereafter advanced loan to the assessee and also many persons/ entity/

Manoj Daga /ITANo.931/Ind/2019

companies as per enquiries carried out through Investigation Wing Kolkata. 2.Whether on the facts and in the circumstances of the case, the CIT(A) was justified in deleting the additions of Rs. 90,00,000/- + interest of Rs. 1,18,330/- in spite of specific findings of the Assessing Officer in the assessment order. 3.The appellant craves leave to add to or deduct from or otherwise amend the above grounds of appeal. GROUND NO. 1 & 2 OF THE DEPARTMENTAL APPEAL: 1.1] The Department in these grounds of appeal has challenged the deletion of additions made by the assessing officer of Rs. 90,00,000/- and Rs. 1,18,330/- to the total income on account of unsecured loans received and interest paid thereon respectively thereby aggregating to Rs.91,18,330/-. 1.2.1] At the outset, it is pertinent to mention that the present appeal as filed by the Department is not maintainable before the Hon'ble ITAT, Indore Bench in light of the Circular No. 17/2019 dated 8th August, 2019 as issued by the Hon'ble CBDT wherein monetary limit of tax effect for filing of appeals by the Department before the Hon 'ble Income Tax Appellate Tribunal was enhanced to Rs. 50,00,000/- from the erstwhile monetary limit of Rs. 20,00,000/- 1.2.2] The Hon'ble CBDT in Para 4 of the Circular No. 3/2018 dated 11th July, 2018 defined the term 'tax effect' as the difference between the tax on the total income assessed and the tax that would have been chargeable had such total income been reduced by the amount of income in respect of the issues against which appeal is intended to be filed. The Circular also specifically mentioned that 'tax effect' shall be tax including applicable surcharge and cess but will not include any interest thereon. 1.2.3] The 'tax effect' involved in the present appeal as filed by the Department is computed hereunder for your ready reference:

Amount [in S.No Particulars Rs.]

Manoj Daga /ITANo.931/Ind/2019

1.1 Amou of assess in th assessm order passed 1,14,65,710 nt income ed e ent under section 147 r.w.s. 143(3) of the Act Tax on the amount of income assessed inclusive of 1.2 34,44,024 surcharge and cess Amount of income as per the income-tax return filed 2.1 23,47,380 in response to the notice issued under section 148 of the Act/ Amount of income assessed in the assessment order passed under section 143(3) of the Act Tax on the amount of income returned inclusive of 2.2 6,26,460 surcharge and cess Tax Effect - Difference in the amount of tax on 3 28,17,564 income assessed and income returned inclusive of surcharge and cess [1.2 (-) 2.2]

1.2.4] On perusal of the above table, it is quite clear that 'tax effect' involved in the present appeal was of Rs. 28,17,564/- which was less t an Rs. 50,00,000/- and therefore, the present appeal as filed by the Department is not maintainable before the Hon'ble !TAT, Indore Bench. 1.3.1] However, the Hon'ble CBDT in Para 3 of its Circular No. 23 of 2019 dated 6th September, 2019 stated that appeal may be filed on merits as an exception to the Circular issued by the Hon'ble CBDT specifying monetary limits for filing of departmental appeals in cases where Board, hy way of special order, directs filing of appeal on merit in cases involved in organized tax evasion activity. 1.3.2] The Hon'hle CBDT vide its Notification F. No. 279/Misc./M-93/2018-ITJ (Pt.) dated 16th September, 2019 issued a Special Order exempting cases involving bogus Long Term Capital Gains (LTCG)/ Short Term Capital Loss (STCL) through penny stocks from monetary limits specified in any Circular issued under section 268A of the Income-Tax Act, 1961. 1.3.3] In the facts of the present case, the respondent assessee

Manoj Daga /ITANo.931/Ind/2019

received unsecured loan of Rs. 90,00,000/- and paid interest thereon of Rs. 1,18,330/- which was duly substantiated with ample supporting documentary evidences. The case of the respondent assessee was not a case involving bogus Long Term Capital Gains (LTCG)/ Short Term Capital Loss (STCL) through penny stocks. 1.4] In view of the above, the present appeal as filed by the Department is not maintainable due to low tax effect.

and submitted that the issue fall in the exception clause of the

circular issued by CBDT.

us and gone through the orders of lower authorities. The

contentions of the assessee are that case does not fall in the

exception clause. He brought to our notice, Circular No.23 of 2019

dated 06.09.2019 and Office Memorandum dated 16.09.2019, for

the sake of clarity both the Circular and Office Memorandum are

reproduced as under;

Circular No. 23 of 2019 F, No . 279/Misc./M-93/2018-ITJ (Pt.) Government of India Ministry of Finance Department of Revenue Central Board Direct Taxes Judicial Section

New Delhi, 6th September 2019

Manoj Daga /ITANo.931/Ind/2019

Subject: -Exception to monetary limits for filing appeals specified in any Circular issued under Section 268A of the Income-tax Act, 1961-reg

Reference is invited to the Circulars issued from time to time by Central Board of Direct Taxes (the Board) under section 268A of the Income-tax Act,1961 (the Act), for laying down monetary limits and other conditions for filing of departmental appeals before Income Tax Appellate Tribunal (ITAT), High Courts and SLPs/appeals before Supreme Court.

Copy to:

Manoj Daga /ITANo.931/Ind/2019

F. No. 279/Misc./M-93/2018-ITJ(Pt.) Government of India Ministry of Finance Department of Revenue Central Board of Direct Taxes New Delhi, Dated: 16th September, 2019 OFFICE MEMORANDUM Subject: -Special Order of Board exempting cases involving bogus Long Term Capital Gains(LTCG)/Short Term Capital Loss (STCL) through penny stocks from monetary limits specified in any Circular issued under Section 268A of the Income-tax Act, 1961-reg The undersigned is directed to refer to Circular No. 23 of 2019 dated 6th September, 2019 and to say that by virtue of powers of the Central Board of Direct Taxes u/s 268A of Income-tax Act,1961, the monetary limits fixed for filing appeals before ITAT/HC and SLPs /appeals before 8

Manoj Daga /ITANo.931/Ind/2019

Supreme Court shall not apply in case of assesses claiming bogus LTCG/STCL through penny stocks and appeals/SLPs in such cases shall be filed on merits. Sd/- (Abh hek Gautam) DCIT(OSD)(ITJ-1), CBDT, New Delhi. Copy to: 1. The Chairman, Members and all other officers in CBDT of the rank of Under Secretary and above. 2. All Principal Chief Commissioners of Income-tax and Director Generals of Income-tax. 3. ADG (PR, PP& OL), Mayur Bhawan, New Delhi for printing in the quarterly Tax Bulletin and for circulation as per usual mailing list. 4. The Comptroller and Auditor General of India. 5. ADG (Vigilance), Mayur Bhawan, New Delhi. 6. The Joint Secretary & Legal Advisor, Ministry of Law & Justice, New Delhi. 7. All Directorates of Income-tax, New Delhi and DGIT (NADT), Nagpur. 8. ITCC (3 copies). 9. The ADG (System)-4, for uploading on the Department’s website. 10. Data Base Cell for uploading on irsofficersonline.gov.in. 11. njrs_support@nsdl.co.in for uploading on NJRS. 12. Guard file. DCIT(OSD)(ITJ-1),

advances and interest thereon by observing as under;

5.1 The authorized representative of the assessee has appeared and submitted the explanation and submission vide letter dated 22.12.2017 and 27.12.2017. The details and the explanations submitted by the assessee are given due consideration and they are found to be not 9

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acceptable. The assessee has taken 'Loan and Advances' from three companies namely M/s Purvi Finvest Limited, East West Finvest Limited and Trimurti Finvest Limited of Rs. 25,00,000/- , Rs. 25,00,000/- and Rs. 40,00,000/- respectively during the year 2009-10. The information has been received from DCIT1(1) Bilaspur stating that the companies M/s East West Finvest India Ltd, M/s Purvi Finvest Limited & M/s Trimurthi Finvest Limited that During the assessment proceedings for the A.Y. 2014-15 in the case of above mentioned companies it has come to notice that the company namely M/s Purvi Finvest Limited, East West Finvest Limited and Trimurti Finvest Limited has procured bogus share application money/premium from paper companies of Kolkata and thereafter advance loan to various persons/entity/companies. The directors of these concerns were found to be dummy directors to the entry operators. The lender company has given merely an entry as unsecured loan to assessee and assessee has used its unaccounted money is shadow of these companies as creditors. The assessee Shri Manoj Daga is also one of the beneficiary who has obtained entry as unsecured loan from M/s Purvi Finvest Limited, East West Finvest Limited and Trimurti Finvest Limited of Rs. 25,00,000/-, Rs. 25,00,000/- and Rs. 40,00,000/- respectively and the assessee has introduced his unaccounted money in shadow of these companies. Hence, the amount of Rs. 90,00,000/- is added as unexplained credits u/s 68 of the LT. Act. Hence the amount of interest paid by the assessee for those loans taken by above mention companies of Rs. 34,521/-, Rs.34,521/- and Rs.49,288/respectively is disallowed and added back to the total income of the assessee for the A.Y. under reference. Penalty is initiated u/s 271 (1)(c) for concealment of income and furnishing inaccurate particulars of income.

case where claim of bogus long term capital gain or short term

capital gain is made. It could be a case of suspicious loan

transaction. Since the suspicious loan transaction is not covered in

the exceptions clause of CBDT circular. We find merit in the

contention of the Ld. counsel for the assessee. Hence, we hold that

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the present appeal is not maintainable in view of the monetary limit prescribed by CBDT Circular No.17 of 2019 dated 8th August 2019. The appeal in ITANo.931/Ind/2019 is dismissed as not maintainable. 10. In result, appeal filed by the assessee is dismissed as not maintainable. Order was pronounced in the open court on 08 .01.2021.

Sd/- Sd/- (MANISH BORAD) (KUL BHARAT) ACCOUNTANT MEMBER JUDICIAL MEMBER Indore; �दनांक Dated : 08/01/2021 Patel/PS Copy to: Assessee/AO/Pr. CIT/ CIT (A)/ITAT (DR)/Guard file. By order

Assistant Registrar, Indore