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आदेश/Order
Per Sanjay Garg, Judicial Member:
The present appeal has been preferred by the assessee against the order dated 18.09.2017 of the Commissioner of Income Tax (Appeals)-1, Ludhiana [hereinafter referred to as ‘CIT(A)’]
The assessee in this appeal has taken following grounds of appeal:- -Chd-2019 Sh. Mahesh Kumar Goel, Ludhiana 2 1. That the order of Ld. CIT(A) is against the law and facts of the case.
2. That the Ld. CIT(A) has grossly erred in upholding the addition of Rs. 50,00,000/- u/s 68 on account of share application money ignoring the well settled law and brushing aside the submissions & evidences of the assessee.
3. That the Ld. CIT(A) is not justified while upholding the addition of Rs. 11,50,000/- under section 68 totally ignoring the factual matrix and without considering or commenting upon confirmation filed by the assessee and payment of interest after TDS compliance.
4. That the Ld. CIT(A) has grossly erred in upholding the addition of Rs. 1,59,500/- paid as interest on the unsecured loans and ignoring the fact that TDS on the interest paid was deducted and the creditors had disclosed it as their income in ITRs, meaning thereby that it would amount to double taxation in the hands of receiver as well as in the hands of payee.
5. That the appellant craves leave to add or amend the grounds of appeal before the appeal is finally heard and disposed off.
3. The brief facts of the case are that while completing the assessment in the case of assessee, the Assessing officer inter alia made the impugned additions by observing as under:-
“Unexplained Share Capital and Share Premikum of Rs. 50 lakhs:- From the Balance Sheet of the assessee it is observed that share capital of the company has been increased from 344.53 Lacs to Rs.406.35 Lacs. This gives additional capital at Rs.61.82 Lacs. The share premium has also increased by Rs. 247.28 Lacs. This shows that the assessee has issued 6,18,200/- new shares of Rs.10 each at a -Chd-2019 Sh. Mahesh Kumar Goel, Ludhiana 3 premium of Rs.40 each. The assessee was asked to intimate the details of the persons who had contributed to the issue of fresh share capital and share premium account and to furnish the details and evidences of their sources. The details of old and new shares were furnished. However, the further details regarding identity, capacity, creditworthiness and sources of some of these persons have been furnished. However, these details in respect of M/s Balwindera Paper Mills and Shri Teja Singh have not been furnished. M/s Balwindera Paper Mills have invested Rs.30,00,000/- and Shri Teja Singh Rs.20,00,000/- total of Rs.50,00,000/-Only the cheque numbers through which these have been claimed to have been paid and copy of bank account of the assessee company in which these have been deposited have been furnished. These documents and information do not explain the investment claimed to have been made by these persons. In this way the amount of Rs.50,00,000/- has remained unexplained. Since the assessee has not furnished any information regarding the source of this credit to share capital, it is liable to be deemed to be the income of the assessee u/s 68 of the Income-tax Act, 1961. Accordingly the amount of Rs.50,00,000/- is deemed to be the income of the assessee and added to its income."
2. Unexplained Unsecured Loans of Rs.11.50,000/-:- "As per information furnished, during the A.Y. the assessee has raised unsecured loans from the following persons during the year. Sr. Name Amount No. 1. Stuti Gupta 10,00,000/- 2. Kusum Devi 1,50,000/- Vaid Total 11,50,000/-
The assessee was asked to intimate the details of the above persons and to furnish the details and evidences of their sources. Only the copies of accounts have been furnished all of which are not even confirmed. No further details have been given. Accordingly there is no information regarding the identity, capacity, creditworthiness and sources of these persons. In this way the above amount of Rs.11,50,000/- has remained unexplained. Since the assessee has not furnished any information regarding the source of these credits, it is liable to be deemed to be the income of the assessee u/s 68 of the -Chd-2019 Sh. Mahesh Kumar Goel, Ludhiana 4 Income-tax Act, Accordingly the amount of Rs.11,50,000/- is deemed to be the income of the assessee and added to its income."
Interest on unexplained unsecured loans amounting to Rs.1,59,500/-:-
"The assessee has paid interest of Rs.1,55,000/- to Stuti Gupta and Rs 4500/- to Kusum Devi Vaid. Since the source of these loans itself has not been explained and these have been deemed to be income of the assessee, there is no question of allowance of interest on the same. Accordingly the amount of interest of Rs.1,59,500/- is disallowed and added back to the income of the assessee."
Being aggrieved by the above additions made by the Assessing officer, the assessee preferred appeal before the Ld. CIT(A). Since the assessee did not furnish the required evidences to prove the genuineness of the transactions relating to the share capital, share premium as well as relating to the unsecured loans and interest paid thereupon, therefore, the Ld. CIT(A) dismissed the appeal of the assessee.
Being aggrieved by the above said order of the CIT(A) the assessee has come in appeal before us.
The Ld. Counsel for the assessee, at the outset, has submitted that assessee had received Rs.30 lakhs from M/s Balvindera Paper Mills and Rs.20 lakhs from Shri Teja Singh through cheques as share application money. The bank statements of the assessee company were placed on the assessment records depicting the credit entries. Confirmation of Shri Teja Singh could not be filed at the assessment stage, as Shri Teja Singh -Chd-2019 Sh. Mahesh Kumar Goel, Ludhiana 5 had expired in the year 2012. Further, that M/s Balvindera Paper Mills was having business dealing with the assessee company; however, due to litigation with M/s Balvindera Paper Mills, conformation of loan could not be filed, at the assessment stage.
It was also submitted that late Shri Teja Singh was Addl. Director of the aforesaid company as well as father of the Managing Director of M/s Balvindera Paper Mills Private Ltd. i.e. Shri Sukhwinder Singh Birdi. That the amount of Rs.20,00,000/- was given through banking channel vide cheque No.00095168, which was cleared from SB Account No. DFSB000007858 jointly held by Ms. Teja Singh & Sukhwinder Singh maintained with Canara Bank, Bharat Nagar Chowk, Ludhiana.
The Ld. counsel has further submitted that the assessee company had received loans of Rs. 10 lakhs and Rs. 1,50,000/- from M/s Stuti Gupta and Kusum Devi Vaid through Financial brokers, through banking channels, in the course of their day to day business. Interest amount of Rs.1,59,500/- was paid on regular basis through banking channels, after making TDS. The amounts of loans were raised from Smt. Stuti Gupta and Kusum Devi Vaid for a short period, and were duly returned to the concerned parties, during the year ending 31-03-2011. On interest paid to Smt. Shruti Gupta, TDS was deducted, as per the law. That in the case of Smt. Kusum Devi Vaid, on payment of interest TDS was not applicable. -Chd-2019 Sh. Mahesh Kumar Goel, Ludhiana 6 The Ld. Counsel has further submitted that during the period, when the assessment proceedings were pending in the case, the Directors of the Company were under depression due to recovery proceedings initiated by their Bankers viz. Bank of India. The said company had raised loan of Rs.30 Crores from Bank of India as Cash Credit Limit and equal amount of Rs.30 Crs., was being availed as Cash Credit against book debts, against stocks, book debts and immovable properties of the directors of the company. The Bank account of the Company was declared NPA as on 27-01-2014; and as on 1-06-2014 liability of the Company towards loan amount and unpaid interest was computed at Rs.39.44 Crs. Proceedings were initiated against them under Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002. These unprecedented proceedings against the Company and its Directors had burdened the Directors of the Company in their individual capacity and goodwill of the company earned over the years was badly damaged. During the course of the assessment proceedings, the MD of the assessee-company viz., Shri Ashwani Arora was in depression and was undergoing treatmen, so he could not provide the confirmed copies of accounts and other information.
The Ld. Counsel has further submitted that the assessee even could not produce the relevant evidences and details in the appellate -Chd-2019 Sh. Mahesh Kumar Goel, Ludhiana 7 proceedings in quantum appeal resulting into passing of the impugned order.
The Ld. counsel of the assessee has further submitted that in the meantime the penalty proceedings were initiated u/s 271(1)( c) against the assessee. The assessee during the penalty proceedings the assessee was able to procure the Bank account statement of Shri Teja Singh, copy of the return of income as well as his death certificate.
The assessee had also been able to provide the copies of the return of M/s Balvindera Paper Mills Private Ltd with computation of income, Audited Balance Sheet, Profit & Loss Account of M/s Balvindera Paper Mills Private Ltd., copy of account of the assessee with regard to Share Investment, in the books of M/s Balvindera Paper Mills Pvt. Ltd., duly confirmed, their PAN, Certificate of M/s Balvindera Paper Mills Pvt. Ltd. relating to investment of Rs.30,00,000/- for purchase of shares of the assessee company.
The Ld. counsel has further submitted that the assessee also had provided details of Bank Accounts, PANs, addresses of the aforesaid parties during penalty proceedings. In this regard notices for recovery of outstanding dues, issued by the Bank were also brought to the notice of the Ld. AO. However, the Ld. Assessing officer during penalty proceedings had ignored all these evidence furnished by the assessee. -Chd-2019 Sh. Mahesh Kumar Goel, Ludhiana 8 The assessee being aggrieved has filed an appeal against the penalty levied by the Assessing officer before the Ld. CIT(A).
The Ld. counsel for the assessee has relied upon the order of the Ld. CIT(A) in Penalty Appeal No. 38/IT/CIT(A) -1/Ldh./2019-20 dated 3.7.2020 and further submitted that considering the evidences furnished by the assessee, the Ld. CIT(A) deleted the penalty levied in respect of the impugned additions. The relevant para of the order of the Ld. CIT(A) in penalty appeal is reproduced as under:-
“On an appreciation of the entire factual matrix of the case, it is evident that the claim of receipt of share application money alongwith premium of Rs.50 lakhs and unsecured loans of Rs.11,50,000/- was not found to be admissible because the appellant could not produce the necessary documentation for the said claim at the appellate stage. In the assessment proceedings, there was no compliance before the AO and hence the order of assessment was framed ex parte under the provisions of section 144. However, during the penalty proceedings, all the necessary documentation was adduced before the AO, who simply refused to acknowledge them and reiterated the findings of the assessment qua the additions confirmed by the First Appellate Authority. Besides, the AO, while considering imposition of penalty, should have noted that it was primarily because of non-furnishing of the relevant documentation that the claim of the appellant was not accepted and appellant was found to have failed in discharging its onus in justifying the claim of receipt of money as share capital and premium and unsecured loan. Such situation did not obtain during the penalty proceedings. The appellant company may not have been able to discharge its onus in substantiating its claim in the assessment and the subsequent appellate proceedings but that per se would not mean that the appellant was proved to have acted -Chd-2019 Sh. Mahesh Kumar Goel, Ludhiana 9 contumaciously in making a claim which was non-genuine or bogus or fake………” 10. The Ld. counsel, therefore, has submitted that the assessee was prevented because of the aforesaid reasons in producing the relevant evidence to prove the genuineness of the transactions relating to the share capital, share premium as well as unexplained loans. However, the assessee has been able to produce the relevant evidences which have been duly considered in the appellate proceedings relating to the levy of penalty u/s 271(1) (c) of the Act. The Ld. Counsel has submitted that the assessee may be allowed to produce the aforesaid documents for consideration of the Assessing officer in the quantum proceedings.
The Ld. DR, on the other hand, has submitted that since the assessee has not been able to substantiate the transactions with evidences, therefore, the impugned additions have been rightly made by the lower authorities.
We have considered the rival contentions of the parties and gone through the record. In this case, the impugned additions have been made because of the reason that the assessee was not able to produce the necessary evidences to prove the genuineness of the transactions relating to the share capital, share premium and unexplained loans. The assessee had duly explained the reasons for his inability to produce the relevant documents during the assessment proceedings as well as in the quantum appeal proceedings before the Ld. CIT(A). However, the -Chd-2019 Sh. Mahesh Kumar Goel, Ludhiana 10 assessee has been able to procure the evidences from the concerned parties including the confirmations and details of bank account etc. to prove the creditworthiness of the investor and genuineness of the transactions, which evidences have been duly considered by the Ld. CIT(A) in penalty appeal and he has deleted the penalty so levied by the Assessing officer in respect of the impugned additions made by the Assessing officer. Under the circumstances, it seems that the assessee has a fair case on merits. In our view, interest of justice will be well served, if the assessee is given an opportunity to produce the relevant evidences before the Assessing officer.
In view of this, the impugned order of the CIT(A) is set aside and the matter is restored to the file of the Assessing officer for decision afresh. Needless to say that the Assessing officer will provide proper opportunity to the assessee to produce necessary evidences, and thereafter decide the case in accordance with law by way of a speaking order.
The appeal of the assessee is treated as allowed for statistical purposes.
Order pronounced on 07.12.2021