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

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.”

2. The facts giving rise to the present appeal are that the case of the 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/-.

3. Aggrieved against this assessee preferred an appeal before Ld. CIT(A) who after considering the submissions deleted the addition.

4. Now the Revenue is in appeal before this Tribunal.

5. At the outset Ld. Counsel for the assessee submitted that the 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.

6. Ld. Departmental Representative opposed the submissions and submitted that the issue fall in the exception clause of the circular issued by CBDT.

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.

4. Hindi version follows. Sd/- (Neetika Bansal) Director (ITJ) CBDT, New Delhi Copy to:

2. All Chief Commissioners of Income tax and all Directors General of Income Tax.

Manoj Daga /ITANo.931/Ind/2019

3. ADG (PR, P&P), Mayur Bhawan, New Delhi for printing in the quarterly Tax Bulletin and for circulation as per usual mailing list.

7. All Directorates of Income-tax, New Delhi and Pr. DGIT(NADT), Nagpur