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Income Tax Appellate Tribunal, MUMBAI BENCH “C” MUMBAI
Before: SHRI OM PRAKASH KANT & SHRI RAHUL CHAUDHARY
This appeal by the Revenue is directed against order dated 28.03.2023 passed by the Ld. Commissioner of Income-tax (Appeals) – National Faceless Appeal Centre, Delhi [in short ‘the Ld. CIT(A)’] for assessment year 2013-14, raising following grounds:
1. "Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) was justified in deleting the addition of Rs.540,00,000/-- without appreciating the fact that the onus is on the assessee to prove the genuineness of transaction of the share premium and creditworthiness of the Investors subscribing to the share capital?"
Cheryl Advisory Pvt. Ltd. 2 ITA No. 1975/Mum/2023
"Whether on the facts of case and in the circumstances of the case 2. "Whether on the facts of case and in the circumstances of the case 2. "Whether on the facts of case and in the circumstances of the case and in law the Ld. CIT(A) was justified in allowing the expenses of Rs. law the Ld. CIT(A) was justified in allowing the expenses of Rs. law the Ld. CIT(A) was justified in allowing the expenses of Rs. 38,24,085/- without appreciating the complete facts of the case that no without appreciating the complete facts of the case that no without appreciating the complete facts of the case that no business activities was carried out by the assessee". business activities was carried out by the assessee". 2. Briefly stated, facts of the case are that Briefly stated, facts of the case are that during the year un during the year under consideration, the assessee company was engaged in providing the assessee company was engaged in providing the assessee company was engaged in providing services of consultancy and advisory commercial, legal etc. The services of consultancy and advisory commercial, legal etc. The services of consultancy and advisory commercial, legal etc. The assessee filed return of income assessee filed return of income electronically on 24.09.2013 electronically on 24.09.2013 declaring total income at Rs. Nil. The return of income filed by the declaring total income at Rs. Nil. The return of income filed by t declaring total income at Rs. Nil. The return of income filed by t assessee was selected for scrutiny assessment and statutory notices assessee was selected for scrutiny assessment and statutory notices assessee was selected for scrutiny assessment and statutory notices under the Income-tax Act, 1961 (in short ‘the Act’) were issued and tax Act, 1961 (in short ‘the Act’) were issued and tax Act, 1961 (in short ‘the Act’) were issued and complied with. In the assessment completed u/s 143(3) of the Act complied with. In the assessment completed u/s 143( complied with. In the assessment completed u/s 143( dated 01.03.2016, the Assessing Officer made additio he Assessing Officer made additio he Assessing Officer made addition for the share capital/share premium capital/share premium of Rs.5,49,30,000/- received against received against allotment of shares holding the same as unexplained cash credit allotment of shares holding the same as unexplained cash credit allotment of shares holding the same as unexplained cash credit u/s 68 of the Act and disallowance for business expenses of u/s 68 of the Act and disallowance for business expenses of u/s 68 of the Act and disallowance for business expenses of Rs.38,24,085/-. On further appeal, the Ld. CIT(A) called . On further appeal, the Ld. CIT(A) called for the . On further appeal, the Ld. CIT(A) called remand report for the Assessing Officer and deleted both the remand report for the Assessing Officer and deleted both the remand report for the Assessing Officer and deleted both the additions made by the Assessing Officer. Aggrieved additions made by the Assessing Officer. Aggrieved, the , the Revenue is in appeal before the Tribunal by way of raising grounds as appeal before the Tribunal by way of raising grounds as appeal before the Tribunal by way of raising grounds as reproduced above.
Before us, the Ld. Counsel Before us, the Ld. Counsel for the assessee filed a Paper book see filed a Paper book containing pages 1 to 897. containing pages 1 to 897.
4. The ground No. 1 of the appeal relates to addition of The ground No. 1 of the appeal relates to addition of The ground No. 1 of the appeal relates to addition of Rs.5,40,30,000/- made u/s 68 of the Act which has been deleted by made u/s 68 of the Act which has been deleted by made u/s 68 of the Act which has been deleted by Cheryl Advisory Pvt. Ltd. 3 ITA No. 1975/Mum/2023 the Ld. CIT(A). The facts in brief qua the issue in dispute are that the Ld. CIT(A). The facts in brief qua the issue in dispute are that the Ld. CIT(A). The facts in brief qua the issue in dispute are that the Assessing Officer observed shares issued at premium by the Officer observed shares issued at premium by the Officer observed shares issued at premium by the assessee which has been tabulated by him in para 5.1 of the assessee which has been tabulated by him in para 5.1 of the assessee which has been tabulated by him in para 5.1 of the assessment order. For ready reference said table is reproduced as assessment order. For ready reference said table is reproduced as assessment order. For ready reference said table is reproduced as under:
As at 5th October, 2012: October, 2012:
Sr. No. Name of Applicant Name of Applicant No of shares Face value Amount Amount including including Premium (in Rs.) Premium (in Rs.) 1. Ms. Anju Batra Ms. Anju Batra 805000 805000 16100000 16100000 2. Plus Plus Corporate Corporate 1880000 1880000 37600000 37600000 Ventures Pvt. Ltd. Ventures Pvt. Ltd. Total 2685000 2685000 53700000 53700000 As at 31st March, 201 2013:
Sr. No. Name of Applicant Name of Applicant No of shares Face value Amount Amount including including Premium (in Rs.) Premium (in Rs.) 1. Ms. Anju Batra Ms. Anju Batra 815000 8150000 16200000 16200000 2. Religare Finvest Ltd. Religare Finvest Ltd. 1903000 19030000 37830000 37830000 Total 2718000 27180000 54030000 54030000 4.1 The Assessing Officer asked the assessee to justify the amount The Assessing Officer asked the assessee to justify the amount The Assessing Officer asked the assessee to justify the amount of share capital/share premium received in terms of section 68 of of share capital/share premium received in terms of section 68 of of share capital/share premium received in terms of section 68 of the Act. However, the Ld. Counsel the Act. However, the Ld. Counsel for the assessee submitted that the assessee submitted that the shareholders of the assessee company the shareholders of the assessee company as on 5th th October, 2012 i.e. Ms. Anju Batra and Plus Corporate Ventures Pvt. Ltd. were not i.e. Ms. Anju Batra and Plus Corporate Ventures Pvt. Ltd. were not i.e. Ms. Anju Batra and Plus Corporate Ventures Pvt. Ltd. were not traceable by the assessee and hence assessee traceable by the assessee and hence assessee was unable to provide unable to provide details of their income tax return, balance sheet and confirmation of income tax return, balance sheet and confirmation of income tax return, balance sheet and confirmation of shareholders. Consequently, the Assess shareholders. Consequently, the Assessing Officer issued notice u/s ing Officer issued notice u/s 133(6) of the Act to the shareholder parties calling for the relevant 133(6) of the Act to the shareholder parties calling for the relevant 133(6) of the Act to the shareholder parties calling for the relevant information. However, only M/s Plus Corporate Ventures Pvt. Ltd. information. However, only M/s Plus Corporate Ventures Pvt. Ltd. information. However, only M/s Plus Corporate Ventures Pvt. Ltd. replied but in respect o in respect of other two parties no reply had f other two parties no reply had been Cheryl Advisory Pvt. Ltd. 4 ITA No. 1975/Mum/2023 received. The assessee was fu he assessee was further asked to file necessary rther asked to file necessary documentary evidence in support of identity, creditworthiness and documentary evidence in support of identity, creditworthiness and documentary evidence in support of identity, creditworthiness and genuineness of the transaction genuineness of the transaction in respect of share subscribers in respect of share subscribers. However, no reply was filed on the part of the assessee and However, no reply was filed on the part of the assessee and However, no reply was filed on the part of the assessee and therefore, the Assessing Officer mad therefore, the Assessing Officer made addition for the amount of the the amount of the share capital/share premium received during the year under share capital/share premium received during the year under share capital/share premium received during the year under consideration amounting to Rs.5,40,30,000/ consideration amounting to Rs.5,40,30,000/-. During appellate . During appellate proceedings before the Ld. CIT(A), the assessee filed further proceedings before the Ld. CIT(A), the assessee filed further proceedings before the Ld. CIT(A), the assessee filed further documentary evidence documentary evidences in support of identity, creditworthiness and tity, creditworthiness and genuineness of the transaction in respect of three parties. The Ld. genuineness of the transaction in respect of three parties. The Ld. genuineness of the transaction in respect of three parties. The Ld. CIT(A) called for the remand report from the Assessing Officer and CIT(A) called for the remand report from the Assessing Officer CIT(A) called for the remand report from the Assessing Officer after considering the remand report, the Ld. CIT(A) deleted the considering the remand report, the Ld. CIT(A) deleted the considering the remand report, the Ld. CIT(A) deleted the addition observing as under: addition observing as under:
6.1 I have carefully considered the findings of the AO, the submissions of .1 I have carefully considered the findings of the AO, the submissions of .1 I have carefully considered the findings of the AO, the submissions of the appellant and the facts of the case as placed before me. I have also the appellant and the facts of the case as placed before me. I have also the appellant and the facts of the case as placed before me. I have also gone through the remand report submitted by the present AOan this case. gone through the remand report submitted by the present AOan this case. gone through the remand report submitted by the present AOan this case. In the remand report dated 24/03/2023 In the remand report dated 24/03/2023, the AO admits that the , the AO admits that the appellant had furnished the following documents before him during the appellant had furnished the following documents before him during the appellant had furnished the following documents before him during the remand report proceedings, which is reproduced as under: remand report proceedings, which is reproduced as under: A. With respect to Ms. Anju Batra A. With respect to Ms. Anju Batra 1. Copy of bank statement 1. Copy of bank statement 2. Copy of PAN Card (PAN No. AJPS8459E) 2. Copy of PAN Card (PAN No. AJPS8459E) 3. Documents available from the records of the Registrar of Companies ocuments available from the records of the Registrar of Companies ocuments available from the records of the Registrar of Companies ("ROC")I, Ministry of Corporate Affairs "MCA")n relation to a Liability ("ROC")I, Ministry of Corporate Affairs "MCA")n relation to a Liability ("ROC")I, Ministry of Corporate Affairs "MCA")n relation to a Liability Partnership ("LLP"), namely, Cheryl Investment Advisors LLPin which Ms. Partnership ("LLP"), namely, Cheryl Investment Advisors LLPin which Ms. Partnership ("LLP"), namely, Cheryl Investment Advisors LLPin which Ms. Anju Batra is a designated Partner under the D Anju Batra is a designated Partner under the DPIN 01319276, viz: PIN 01319276, viz: 1. Form-9 (Consent to act as Designated Partner) dated 31.03.2017 9 (Consent to act as Designated Partner) dated 31.03.2017 9 (Consent to act as Designated Partner) dated 31.03.2017 2. LLP Form-2 filing dated 03.04.2017 2 filing dated 03.04.2017
Cheryl Advisory Pvt. Ltd. 5 ITA No. 1975/Mum/2023
3. "List of subscribers of Cheryl Investment Advisors LLP" dated 3. "List of subscribers of Cheryl Investment Advisors LLP" dated 3. "List of subscribers of Cheryl Investment Advisors LLP" dated 31.03.2017 4."No Objection Certificate" dated 31.03.2017 confirming 4."No Objection Certificate" dated 31.03.2017 confirming 4."No Objection Certificate" dated 31.03.2017 confirming that she is owner of the property situated at "42, Juhu Ashish CHS Ltd., NS Road owner of the property situated at "42, Juhu Ashish CHS Ltd., NS Road owner of the property situated at "42, Juhu Ashish CHS Ltd., NS Road No. 10, JVPD Scheme, Near HSBS Bank, Vile Parle (W) Mumbai, 400049" No. 10, JVPD Scheme, Near HSBS Bank, Vile Parle (W) Mumbai, 400049" No. 10, JVPD Scheme, Near HSBS Bank, Vile Parle (W) Mumbai, 400049"
Copy of the List of Allottees for allotment dated 05.10.2012 of the 4. Copy of the List of Allottees for allotment dated 05.10.2012 of the 4. Copy of the List of Allottees for allotment dated 05.10.2012 of the Assessees available on the ROC, MCA Assessees available on the ROC, MCA 5. List of directorships of Ms. Anju Batra as per the DPIN data available 5. List of directorships of Ms. Anju Batra as per the DPIN data available 5. List of directorships of Ms. Anju Batra as per the DPIN data available on ROC, MCA : on ROC, MCA :
1. 1. 1.
1. Smana Smana Smana Hospitality Hospitality Hospitality And And And Management Management Management Private Private Private Limited Limited Limited (U63090H2010PTC204869) (U63090H2010PTC204869) 2. 2.
2. EPSCO EPSCO EPSCO Facility Facility Facility Management Management Management Private Private Private Limited Limited Limited (U93000MH2010PTC203940) (U93000MH2010PTC203940) 3. Trevin Investment Ad 3. Trevin Investment Advisors LLP (AAJ-1589) 4. TB Investment Advisors LLP (AAJ 4. TB Investment Advisors LLP (AAJ-2150) Copy of Assessee's letter dated 16.03.2023 enclosing the PAN Card of Copy of Assessee's letter dated 16.03.2023 enclosing the PAN Card of Copy of Assessee's letter dated 16.03.2023 enclosing the PAN Card of Ms. Anju Batra and stating its inability to provide Ms. Anju Batra's Ms. Anju Batra and stating its inability to provide Ms. Anju Batra's Ms. Anju Batra and stating its inability to provide Ms. Anju Batra's Income Tax Returns, requesting that the same may be ver Income Tax Returns, requesting that the same may be ver Income Tax Returns, requesting that the same may be verified by the Department itself. Department itself. Similarly in the case of Religare Finvest Ltd, the appellant had produced Similarly in the case of Religare Finvest Ltd, the appellant had produced Similarly in the case of Religare Finvest Ltd, the appellant had produced the following documents before the AO in the remand report process. the following documents before the AO in the remand report process. the following documents before the AO in the remand report process.
1. Confirmation Letter dated 21.03.2616 r 1. Confirmation Letter dated 21.03.2616 rồm Religare about share m Religare about share acquisition of Cheryl Transaction. Cheryl Transaction.
2. Copy of Annual Report of ReligareFinvest Ltd. for Fy 2012 2. Copy of Annual Report of ReligareFinvest Ltd. for Fy 2012 2. Copy of Annual Report of ReligareFinvest Ltd. for Fy 2012-2013, as available from the records of ROC, MCA, reflecting acquisition of stake in available from the records of ROC, MCA, reflecting acquisition of stake in available from the records of ROC, MCA, reflecting acquisition of stake in Assessee in satisfaction of debts. Assessee in satisfaction of debts.
3. Copy of Religare's parent 3. Copy of Religare's parent concern Religare Enterprise Religare Enterprises Limited's a listed company Annual Report for EX 2012 company Annual Report for EX 2012-2013, as available from the as available from the records of ROC, records of ROC, MCA, reflecting the Assessee as Religare'S subsidiary. MCA, reflecting the Assessee as Religare'S subsidiary.
4. Copy of Religare Enterprises Limited's Annual Report for the FY 2013 4. Copy of Religare Enterprises Limited's Annual Report for the FY 2013 4. Copy of Religare Enterprises Limited's Annual Report for the FY 2013 - 2014, as available from the 2014, as available from the records of ROC, MCA reflecting the sale of records of ROC, MCA reflecting the sale of Religare's stake in the Assessee. Religare's stake in the Assessee. 6.2 In the case of Ms.Anju Batra, the AO observes in the remand report 6.2 In the case of Ms.Anju Batra, the AO observes in the remand report 6.2 In the case of Ms.Anju Batra, the AO observes in the remand report that on perusal of HDFC bank statement which is provided for the period that on perusal of HDFC bank statement which is provided for the period that on perusal of HDFC bank statement which is provided for the period from 01.08.2012 to 19.12.2012, it is from 01.08.2012 to 19.12.2012, it is seen that Rs.75,00,000/ seen that Rs.75,00,000/- debited on 22.09.2012 &Rs.75,00,000/ debited on 24.09.2012 in favor of Cheryl 22.09.2012 &Rs.75,00,000/ debited on 24.09.2012 in favor of Cheryl 22.09.2012 &Rs.75,00,000/ debited on 24.09.2012 in favor of Cheryl Advisory and amount of Rs.41,00,000 Advisory and amount of Rs.41,00,000- is credited on 28.09.2012 from is credited on 28.09.2012 from Cheryl Advisory towards Share Capital & Premium. Cheryl Advisory towards Share Capital & Premium.
Cheryl Advisory Pvt. Ltd. 6 ITA No. 1975/Mum/2023 6.3 Further the AO observes that "t Further the AO observes that "the Assessee Company was asked to he Assessee Company was asked to provide confirmation to which, being old matter, they referred PAN, bank provide confirmation to which, being old matter, they referred PAN, bank provide confirmation to which, being old matter, they referred PAN, bank statement, Annual ROC Returns, her filings with MCA and details of statement, Annual ROC Returns, her filings with MCA and details of statement, Annual ROC Returns, her filings with MCA and details of other directorships held by her as per ROC data about Anju Batra. other directorships held by her as per ROC data about Anju Batra. other directorships held by her as per ROC data about Anju Batra. However no direct However no direct evidence of the worthiness of the Ms. Anju Batra is evidence of the worthiness of the Ms. Anju Batra is available." 6.4 In the case of MIs Religare Finvest Ltd, he AO observes that " the 6.4 In the case of MIs Religare Finvest Ltd, he AO observes that " the 6.4 In the case of MIs Religare Finvest Ltd, he AO observes that " the Religare Finvest Limited is a NBFC registered with the RBI and is a Religare Finvest Limited is a NBFC registered with the RBI and is a Religare Finvest Limited is a NBFC registered with the RBI and is a subsidiary of a listed company i.e. Religare Enterpr subsidiary of a listed company i.e. Religare Enterprises Limited, with the ises Limited, with the disclosures made with ROC, statutory bodies and provided ROC annual disclosures made with ROC, statutory bodies and provided ROC annual disclosures made with ROC, statutory bodies and provided ROC annual returns. However the AO further submits that though the amounts totaled returns. However the AO further submits that though the amounts totaled returns. However the AO further submits that though the amounts totaled with the annual report, certificates and confirmation, specific bank with the annual report, certificates and confirmation, specific bank with the annual report, certificates and confirmation, specific bank statement of the shareho statement of the shareholder and the copy of ITR is not provided by the lder and the copy of ITR is not provided by the appellant. 6.5 With all these evidences filed before the AO, I am inclined to the view 6.5 With all these evidences filed before the AO, I am inclined to the view 6.5 With all these evidences filed before the AO, I am inclined to the view that the appellant has discharged the onus and the AO's observations that the appellant has discharged the onus and the AO's observations that the appellant has discharged the onus and the AO's observations that no details of transactions of bank details in t that no details of transactions of bank details in the case of Religare and he case of Religare and that "no direct evidence of the worthiness of the Ms. Anju Batra is that "no direct evidence of the worthiness of the Ms. Anju Batra is that "no direct evidence of the worthiness of the Ms. Anju Batra is available" cannot be accepted. Once the assessee produced evidences available" cannot be accepted. Once the assessee produced evidences available" cannot be accepted. Once the assessee produced evidences about identity, genuiness and credit worthiness of the share holders, the about identity, genuiness and credit worthiness of the share holders, the about identity, genuiness and credit worthiness of the share holders, the onus of proof shifted onus of proof shifted to the revenue. The opinion of the AO is not formed to the revenue. The opinion of the AO is not formed objectively with reference to the material available on record as objectively with reference to the material available on record as objectively with reference to the material available on record as application of mind is the sine qua non for forming the opinion. application of mind is the sine qua non for forming the opinion. application of mind is the sine qua non for forming the opinion. 6.6 In the case of M/s Religare Fininvest Ltd., the AO observes in the In the case of M/s Religare Fininvest Ltd., the AO observes in the In the case of M/s Religare Fininvest Ltd., the AO observes in the remand report that the assessee did not provide the IT copy. It is mand report that the assessee did not provide the IT copy. It is mand report that the assessee did not provide the IT copy. It is pertinent to note that the Income tax returns are filed with thesincome tax pertinent to note that the Income tax returns are filed with thesincome tax pertinent to note that the Income tax returns are filed with thesincome tax department in the fiduciary capacity. department in the fiduciary capacity. The appellant is not expected to The appellant is not expected to collect the IT copies of a third party on th collect the IT copies of a third party on the behalf of AO who is much e behalf of AO who is much empowered to acquire it. empowered to acquire it. 6.7 It is well-settled principle that an obligation gets discharged due to settled principle that an obligation gets discharged due to settled principle that an obligation gets discharged due to impossibility of performance. The law of impossibility of performance impossibility of performance. The law of impossibility of performance impossibility of performance. The law of impossibility of performance does not necessarily require absolute impossibility, but al does not necessarily require absolute impossibility, but also encompass so encompass the concept of severe impracticability. the concept of severe impracticability. The doctrine of impossibility of The doctrine of impossibility of performance applies in the instant case. Due to uncontrollable performance applies in the instant case. Due to uncontrollable performance applies in the instant case. Due to uncontrollable circumstances, the performance of the obligation as specified under circumstances, the performance of the obligation as specified under circumstances, the performance of the obligation as specified under section 68 of the Act became impossible section 68 of the Act became impossible to perform for the assessee. The to perform for the assessee. The impossibility of performance releases the assessee from its obligation for impossibility of performance releases the assessee from its obligation for impossibility of performance releases the assessee from its obligation for the noncompliance of the condition imposed under section 68 of the Act. A the noncompliance of the condition imposed under section 68 of the Act. A the noncompliance of the condition imposed under section 68 of the Act. A default occurs only when an obligation is not performed. When the default occurs only when an obligation is not performed. When the default occurs only when an obligation is not performed. When the assessee is released from the obligation, it cannot be said that it is in e is released from the obligation, it cannot be said that it is in e is released from the obligation, it cannot be said that it is in default. This finds support from the legal maxim "Lex non cogit ad default. This finds support from the legal maxim "Lex non cogit ad default. This finds support from the legal maxim "Lex non cogit ad impossibilia" meaning thereby that the law does not compel a man to do impossibilia" meaning thereby that the law does not compel a man to do impossibilia" meaning thereby that the law does not compel a man to do what he cannot possible perform. In the matters rel what he cannot possible perform. In the matters related to section 68, ated to section 68, burden of proof cannot be discharged to the hilt burden of proof cannot be discharged to the hilt-such matters are decided such matters are decided on the particular facts of the case as well as on the basis of on the particular facts of the case as well as on the basis of on the particular facts of the case as well as on the basis of preponderance of probabilities. preponderance of probabilities.
Cheryl Advisory Pvt. Ltd. 7 ITA No. 1975/Mum/2023 6.8 In the case of ITO v. Anant Shelters (P.) Ltd. [2012] 20 taxma In the case of ITO v. Anant Shelters (P.) Ltd. [2012] 20 taxma In the case of ITO v. Anant Shelters (P.) Ltd. [2012] 20 taxmann.com 153/51 SOT 234, the honorable Mumbai tribunal held that "Phrase SOT 234, the honorable Mumbai tribunal held that "Phrase SOT 234, the honorable Mumbai tribunal held that "Phrase appearing in the section " nature and sources of such credits" should be appearing in the section " nature and sources of such credits" should be appearing in the section " nature and sources of such credits" should be understood in right perspective, so that genuiness of the transaction can understood in right perspective, so that genuiness of the transaction can understood in right perspective, so that genuiness of the transaction can be decided on merits and not on prejud be decided on merits and not on prejudices. Courts are of the firm view ices. Courts are of the firm view that the evidence produced by the assessee cannot be brushed aside in a that the evidence produced by the assessee cannot be brushed aside in a that the evidence produced by the assessee cannot be brushed aside in a casual manner. casual manner. 6.9 This observation of the honorable tribunal is squarely applying to the This observation of the honorable tribunal is squarely applying to the This observation of the honorable tribunal is squarely applying to the instant case. The appellant has produced various evidences w instant case. The appellant has produced various evidences w instant case. The appellant has produced various evidences which one can possibly collect to prove the identity, genuiness and credit worthiness can possibly collect to prove the identity, genuiness and credit worthiness can possibly collect to prove the identity, genuiness and credit worthiness of the share holders. Providing ITR copies and bank statements of third of the share holders. Providing ITR copies and bank statements of third of the share holders. Providing ITR copies and bank statements of third party is beyond the reasonable capacity of the appellant which finds party is beyond the reasonable capacity of the appellant which finds party is beyond the reasonable capacity of the appellant which finds support from the legal maxim " support from the legal maxim "lex non cogit ad impossiblia" The AO even during the remand report proceedings had not made any attempt to during the remand report proceedings had not made any attempt to during the remand report proceedings had not made any attempt to either do further enquiries or gather additional data using the PAN; which either do further enquiries or gather additional data using the PAN; which either do further enquiries or gather additional data using the PAN; which is in his capacity as the Jurisdictional AO in the income tax department. is in his capacity as the Jurisdictional AO in the income tax department. is in his capacity as the Jurisdictional AO in the income tax department. In view of the above, it is hereby held that addition u/s 68 to the tune of In view of the above, it is hereby held that addition u/s 68 to the tune of In view of the above, it is hereby held that addition u/s 68 to the tune of Rs 5,40,30,000/ Rs 5,40,30,000/- is unwarranted and hence deleted. Thus Thus the grounds relating alleged alleged unconfirmed/unsubstantiated securities premium under unconfirmed/unsubstantiated securities premium under section 68 is hereby allowed. section 68 is hereby allowed.” 4.2 We have considered the rival submission of the parties on the e considered the rival submission of the parties on the e considered the rival submission of the parties on the issue in dispute and perused the relevant material on record. Before issue in dispute and perused the relevant material on record. Before issue in dispute and perused the relevant material on record. Before us, the Ld. Counsel us, the Ld. Counsel for the assessee referred to Paper Book page Paper Book page 177, which is a copy of the PAN card of Ms. Anju Batra copy of the PAN card of Ms. Anju Batra copy of the PAN card of Ms. Anju Batra. He also referred to pages 161 and 162 161 and 162 of paper book, which is a copy of of paper book, which is a copy of bank statement of the assessee company. The Ld. Counsel bank statement of the assessee company. The Ld. Counsel bank statement of the assessee company. The Ld. Counsel submitted that relevant share capital/share premium received has submitted that relevant share capital/share premium received has submitted that relevant share capital/share premium received has been reflected in the been reflected in the said bank statement. The Ld. Counsel also bank statement. The Ld. Counsel also referred to Paper Book page 179 which is bank statement of Ms. ed to Paper Book page 179 which is bank statement of Ms. ed to Paper Book page 179 which is bank statement of Ms. Anju Batra.
4.3 The Ld. Departmental Representative (DR) submitted that The Ld. Departmental Representative (DR) submitted that The Ld. Departmental Representative (DR) submitted that during the assessment proceedings, notice during the assessment proceedings, notice issued u/s 133(6) to Ms. issued u/s 133(6) to Ms. Anju Batra was not complied with and same was not traceable by atra was not complied with and same was not traceable by atra was not complied with and same was not traceable by the assessee also ,therefore, during the remand proceeding the Ld. therefore, during the remand proceeding the Ld. therefore, during the remand proceeding the Ld.
Cheryl Advisory Pvt. Ltd. 8 ITA No. 1975/Mum/2023 CIT(A) was required to direct the assessee for carry out the process CIT(A) was required to direct the assessee for carry out the process CIT(A) was required to direct the assessee for carry out the process u/s 133(6) of the Act for identification of the share subscriber but u/s 133(6) of the Act for identification of the share subscribe u/s 133(6) of the Act for identification of the share subscribe no such inquiry has been carried out. Further, no evidences in no such inquiry has been carried out. Further, no evidence no such inquiry has been carried out. Further, no evidence support of creditworthiness of the share support of creditworthiness of the share subscriber subscriber had been filed. He further submitted that no finding has been given by the Ld. He further submitted that no finding has been given by the Ld. He further submitted that no finding has been given by the Ld. CIT(A) in respect of share subscriber M/s Plus Corporate Ventures CIT(A) in respect of share subscriber M/s Plus Corporate CIT(A) in respect of share subscriber M/s Plus Corporate Pvt. Ltd. Similarly, addition addition in respect of Religare Finvest Ltd. has in respect of Religare Finvest Ltd. has been deleted without verifying creditworthiness and genuineness of been deleted without verifying creditworthiness and genuineness of been deleted without verifying creditworthiness and genuineness of the transaction.
4.4 We have heard rival submission of the parties We have heard rival submission of the parties and perused the and perused the relevant material on rec relevant material on record. We find that in the beginning of the ord. We find that in the beginning of the year shares have been issued by the assessee company to two year shares have been issued by the assessee company year shares have been issued by the assessee company parties namely Ms. Anju Bhatra parties namely Ms. Anju Bhatra (8,05,000 shares 8,05,000 shares) and Plus Corporate Venture Pvt. Ltd. Corporate Venture Pvt. Ltd. (18,80,000 shares) whereas upto the whereas upto the end of the year i.e. 31.03.2013, nd of the year i.e. 31.03.2013, the shares issued to Ms. Anju he shares issued to Ms. Anju Bhatra stood at 81,5000 shares and Religare Finvest Ltd. 19,03,000 at 81,5000 shares and Religare Finvest Ltd. 19,03,000 at 81,5000 shares and Religare Finvest Ltd. 19,03,000 shares. It is stated before the Ld. CIT(A) that shares of Pluc shares. It is stated before the Ld. CIT(A) that shares of Pluc shares. It is stated before the Ld. CIT(A) that shares of Pluc Corporate Ventures Pvt. Ltd. have been acquired by Religare Finvest Corporate Ventures Pvt. Ltd. have been acquired by Religare Finvest Corporate Ventures Pvt. Ltd. have been acquired by Religare Finvest Ltd. during the year under Ltd. during the year under consideration before the end of consideration before the end of 31.03.2013. but on perusal of the table of the shares issued n perusal of the table of the shares issued, which n perusal of the table of the shares issued has been reproduced has been reproduced above, we find that even no of no of shares held by Religare Finvest Ltd is more than the shares which stood in the Religare Finvest Ltd is more than the shares which stood Religare Finvest Ltd is more than the shares which stood name of Plus Corporate Ven Corporate Ventures Pvt. Ltd. This fact suggests that . This fact suggests that Religare Finvest Ltd must have been allotted additional shares by Religare Finvest Ltd must have been allotted additional shares by Religare Finvest Ltd must have been allotted additional shares by Cheryl Advisory Pvt. Ltd. 9 ITA No. 1975/Mum/2023 the assessee company. We the assessee company. We notice that during the appellate that during the appellate proceedings before the Ld. CIT(A) proceedings before the Ld. CIT(A), no notice u/s 133(6) of the Act no notice u/s 133(6) of the Act has been issued for verif has been issued for verification of the identity of Ms. Anju Bhatra. ication of the identity of Ms. Anju Bhatra. We find that the Hon’ble Delhi High Court in We find that the Hon’ble Delhi High Court in judgment dated 11 judgment dated 11th in the case of Jansampark advertising and advertising and March, 2015 in Marketing p Ltd Pvt. Ltd. Pvt. Ltd. in ITA 525/214 held that held that the appellate authorities including the authorities including the Ld. CIT(A) and the ITAT should carry out Ld. CIT(A) and the ITAT should carry out inquiries for determination of true facts if the Assessing Officer failed inquiries for determination of true facts if the Assessing Officer failed inquiries for determination of true facts if the Assessing Officer failed in doing so. The relevant finding of Hon’ble Delhi High Court(supra) The relevant finding of Hon’ble Delhi High Court(supra) The relevant finding of Hon’ble Delhi High Court(supra) is reproduced as under: is reproduced as under:
The provision of appeal, before the CIT (A 38. The provision of appeal, before the CIT (Appeals) and then before the ppeals) and then before the ITAT, is made more as a check on the abuse of power and authority by the ITAT, is made more as a check on the abuse of power and authority by the ITAT, is made more as a check on the abuse of power and authority by the AO. Whilst it is true that it is the obligation of the AO to conduct proper AO. Whilst it is true that it is the obligation of the AO to conduct proper AO. Whilst it is true that it is the obligation of the AO to conduct proper scrutiny of the material, given the fact that the two appellate authorities scrutiny of the material, given the fact that the two appellate authorities scrutiny of the material, given the fact that the two appellate authorities above are also forums for fact ve are also forums for fact-finding, in the event of AO failing to discharge finding, in the event of AO failing to discharge his functions properly, the obligation to conduct proper inquiry on his functions properly, the obligation to conduct proper inquiry on his functions properly, the obligation to conduct proper inquiry on facts would naturally shift to the door of the said appellate authority. For such would naturally shift to the door of the said appellate authority. For such would naturally shift to the door of the said appellate authority. For such purposes, we only need to poi purposes, we only need to point out one step in the procedure in appeal as nt out one step in the procedure in appeal as prescribed in Section 250 Section 250 of the Income Tax Act wherein, besides it being of the Income Tax Act wherein, besides it being obligatory for the right of hearing to be afforded not only to the assessee but obligatory for the right of hearing to be afforded not only to the assessee but obligatory for the right of hearing to be afforded not only to the assessee but also the AO, the first appellate authority is given the liberty to make, or the AO, the first appellate authority is given the liberty to make, or the AO, the first appellate authority is given the liberty to make, or cause to be made, "further inquiry", in terms of sub cause to be made, "further inquiry", in terms of sub-section (4) which reads section (4) which reads as under:- ―The Commissioner (Appeals) may, before disposing of any appeal, make The Commissioner (Appeals) may, before disposing of any appeal, make The Commissioner (Appeals) may, before disposing of any appeal, make such further inquiry as he such further inquiry as he thinks fit, or may direct the Assessing Officer to thinks fit, or may direct the Assessing Officer to make further inquiry and report the result of the same to the Commissioner make further inquiry and report the result of the same to the Commissioner make further inquiry and report the result of the same to the Commissioner (Appeals).‖ 39. The further inquiry envisaged under 39. The further inquiry envisaged under Section 250(4) quoted above is generally by calling what is known as "remand report". The purpose of this generally by calling what is known as "remand report". The purpose of this generally by calling what is known as "remand report". The purpose of this enabling clause is essentially to ensure that the matter of assessment enabling clause is essentially to ensure that the matter of assessment enabling clause is essentially to ensure that the matter of assessment reaches finality with all the requisite facts found. The assessment reaches finality with all the requisite facts found. The assessment reaches finality with all the requisite facts found. The assessment proceedings re proceedings re- opened on the basis of preliminary satisfaction that some is of preliminary satisfaction that some part of the income has escaped assessment, particularly when some part of the income has escaped assessment, particularly when some part of the income has escaped assessment, particularly when some unexplained credit entries have come to the notice (as in unexplained credit entries have come to the notice (as in Section 68 Section 68), cannot conclude, save and e conclude, save and except by reaching satisfaction on the touchstone of the xcept by reaching satisfaction on the touchstone of the three tests mentioned earlier; viz. the identity of the third party making the three tests mentioned earlier; viz. the identity of the third party making the three tests mentioned earlier; viz. the identity of the third party making the payment, its creditworthiness and genuineness of the transaction. Whilst it payment, its creditworthiness and genuineness of the transaction. Whilst it payment, its creditworthiness and genuineness of the transaction. Whilst it
Cheryl Advisory Pvt. Ltd. 10 ITA No. 1975/Mum/2023 is true that the assessee cannot be called up is true that the assessee cannot be called upon to adduce conclusive proof on to adduce conclusive proof on all these three questions, it is nonetheless legitimate expectation of the on all these three questions, it is nonetheless legitimate expectation of the on all these three questions, it is nonetheless legitimate expectation of the process that he would bring in some proof so as to discharge the initial process that he would bring in some proof so as to discharge the initial process that he would bring in some proof so as to discharge the initial burden placed on him. Since burden placed on him. Since Section 68 itself declares that the credited itself declares that the credited sum would have to be included in the income of the assessee in the absence sum would have to be included in the income of the assessee in the absence sum would have to be included in the income of the assessee in the absence of explanation, or in of explanation, or in the event of explanation being not satisfactory, it the event of explanation being not satisfactory, it naturally follows that the material submitted by the asses naturally follows that the material submitted by the asses naturally follows that the material submitted by the assessee with his explanation must itself be wholesome or not untrue. It is only when the explanation must itself be wholesome or not untrue. It is only when the explanation must itself be wholesome or not untrue. It is only when the explanation and the material offered by the assessee at this stage passes explanation and the material offered by the assessee at this stage passes explanation and the material offered by the assessee at this stage passes this muster that the initial onus placed on him would shift leaving it to the this muster that the initial onus placed on him would shift leaving it to the this muster that the initial onus placed on him would shift leaving it to the AO to start inquiri AO to start inquiring into the affairs of the third party.
The CIT (Appeals), as also the ITAT, in the case at hand, in our view, 40. The CIT (Appeals), as also the ITAT, in the case at hand, in our view, 40. The CIT (Appeals), as also the ITAT, in the case at hand, in our view, unjustifiably criticized the AO for not having confronted the assessee with unjustifiably criticized the AO for not having confronted the assessee with unjustifiably criticized the AO for not having confronted the assessee with the facts regarding return of some of the summons under the facts regarding return of some of the summons under the facts regarding return of some of the summons under Section 131 or not having given opportunity for the identity of all the share applicants to be not having given opportunity for the identity of all the share applicants to be not having given opportunity for the identity of all the share applicants to be properly established. The order sheet entries taken note of in the order of properly established. The order sheet entries taken note of in the order of properly established. The order sheet entries taken note of in the order of CIT (Appeals) seem to indicate otherwise. T CIT (Appeals) seem to indicate otherwise. The order of CIT (Appeals), which he order of CIT (Appeals), which was confirmed by ITAT in the second appeal, does not demonstrate as to on was confirmed by ITAT in the second appeal, does not demonstrate as to on was confirmed by ITAT in the second appeal, does not demonstrate as to on the basis of which material it had been concluded that the genuineness of the basis of which material it had been concluded that the genuineness of the basis of which material it had been concluded that the genuineness of the transactions had been duly established. There is virtually no discussio the transactions had been duly established. There is virtually no discussio the transactions had been duly established. There is virtually no discussion in the said orders on such score, except for vague description of the material in the said orders on such score, except for vague description of the material in the said orders on such score, except for vague description of the material submitted by the assessee at the appellate stage. Whilst it does appear that submitted by the assessee at the appellate stage. Whilst it does appear that submitted by the assessee at the appellate stage. Whilst it does appear that the time given to the assessee for proving the identity of the third party was the time given to the assessee for proving the identity of the third party was the time given to the assessee for proving the identity of the third party was too short, and furt too short, and further that it is probably not always possible for the her that it is probably not always possible for the assessee placed in such situation to be able to enforce the physical assessee placed in such situation to be able to enforce the physical assessee placed in such situation to be able to enforce the physical attendance of such third party (who, in the case of share applicants vis attendance of such third party (who, in the case of share applicants vis attendance of such third party (who, in the case of share applicants vis-à-vis a company, would be individuals at large and may not be a company, would be individuals at large and may not be a company, would be individuals at large and may not be even in direct or personal contact), the curtains on such exercise at verification may not be personal contact), the curtains on such exercise at verification may not be personal contact), the curtains on such exercise at verification may not be drawn and adverse inferences reached only on the basis of returning drawn and adverse inferences reached only on the basis of returning drawn and adverse inferences reached only on the basis of returning undelivered of the summonses under undelivered of the summonses under Section 131. Conversely, with doubts . Conversely, with doubts as to the genuineness of some of the parties persisting on account of non as to the genuineness of some of the parties persisting on account of non as to the genuineness of some of the parties persisting on account of non- delivery of the processes, the initial burden on the assessee to adduce proof delivery of the processes, the initial burden on the assessee to adduce proof delivery of the processes, the initial burden on the assessee to adduce proof of identity cannot be treated as discharged. of identity cannot be treated as discharged.
We are inclined to agree 41. We are inclined to agree with the CIT (Appeals), and consequently with with the CIT (Appeals), and consequently with ITAT, to the extent of their conclusion that the assessee herein had come up ITAT, to the extent of their conclusion that the assessee herein had come up ITAT, to the extent of their conclusion that the assessee herein had come up with some proof of identity of some of the entries in question. But, from this with some proof of identity of some of the entries in question. But, from this with some proof of identity of some of the entries in question. But, from this inference, or from the fact that the transactions were inference, or from the fact that the transactions were through banking through banking channels, it does not necessarily follow that satisfaction as to the channels, it does not necessarily follow that satisfaction as to the channels, it does not necessarily follow that satisfaction as to the creditworthiness of the parties or the genuineness of the transactions in creditworthiness of the parties or the genuineness of the transactions in creditworthiness of the parties or the genuineness of the transactions in question would also have been established. question would also have been established.
The AO here may have failed to discharge his obli 42. The AO here may have failed to discharge his obligation to conduct a gation to conduct a proper inquiry to take the matter to logical conclusion. But CIT (Appeals), proper inquiry to take the matter to logical conclusion. But CIT (Appeals), proper inquiry to take the matter to logical conclusion. But CIT (Appeals), having noticed want of proper inquiry, could not have closed the chapter having noticed want of proper inquiry, could not have closed the chapter having noticed want of proper inquiry, could not have closed the chapter simply by allowing the appeal and deleting the additions made. It was also simply by allowing the appeal and deleting the additions made. It was also simply by allowing the appeal and deleting the additions made. It was also the obligation of the first appellate authority, as indeed of ITAT, to have on of the first appellate authority, as indeed of ITAT, to have on of the first appellate authority, as indeed of ITAT, to have ensured that effective inquiry was carried out, particularly in the face of the ensured that effective inquiry was carried out, particularly in the face of the ensured that effective inquiry was carried out, particularly in the face of the allegations of the Revenue that the account statements reveal a uniform allegations of the Revenue that the account statements reveal a uniform allegations of the Revenue that the account statements reveal a uniform
Cheryl Advisory Pvt. Ltd. 11 ITA No. 1975/Mum/2023 pattern of cash deposits of equal amount pattern of cash deposits of equal amounts in the respective accounts s in the respective accounts preceding the transactions in question. This necessitated a detailed scrutiny preceding the transactions in question. This necessitated a detailed scrutiny preceding the transactions in question. This necessitated a detailed scrutiny of the material submitted by the assessee in response to the notice of the material submitted by the assessee in response to the notice of the material submitted by the assessee in response to the notice under Section 148 Section 148 issued by the AO, as also the material submitted at the he AO, as also the material submitted at the stage of appeals, if deemed proper by way of making or causing to be made stage of appeals, if deemed proper by way of making or causing to be made stage of appeals, if deemed proper by way of making or causing to be made a "further inquiry" in exercise of the power under a "further inquiry" in exercise of the power under Section 250(4) Section 250(4). This approach not approach not having been adopted, the impugned order of ITAT, and having been adopted, the impugned order of ITAT, and consequently that of CIT (Appeals), cannot be approved or upheld. consequently that of CIT (Appeals), cannot be approved or upheld. consequently that of CIT (Appeals), cannot be approved or upheld. 4.5 In the case, the Ld. CIT(A) has simply admitted the submission In the case, the Ld. CIT(A) has simply admitted the submission In the case, the Ld. CIT(A) has simply admitted the submission of the assessee without independent verification of the identity and of the assessee without independent verification of the identity and of the assessee without independent verification of the identity and creditworthiness of Ms. Anju Bhatra reditworthiness of Ms. Anju Bhatra. Further the Ld. CIT(A) has . Further the Ld. CIT(A) has recorded documentary evidence d documentary evidences in support of Religare Finvest Ltd. in support of Religare Finvest Ltd. who claimed to have who claimed to have purchased shares from Plus Corporate from Plus Corporate Ventures Pvt. Ltd. and no credit from Religare Finvest Ltd. was Ventures Pvt. Ltd. and no credit from Religare Finvest Ltd. Ventures Pvt. Ltd. and no credit from Religare Finvest Ltd. appearing in the books of the assessee. Though this fact is not appearing in the books of the assessee. Though this fact is not appearing in the books of the assessee. Though this fact is not getting reconciled with the fact of share holding of Religare Finvest with the fact of share holding of Religare Finvest with the fact of share holding of Religare Finvest Ltd. shown by the Assessing Officer Ltd. shown by the Assessing Officer, but if the Religare Finvest Ltd. but if the Religare Finvest Ltd. had not made any payment to the assessee not made any payment to the assessee, then provi then provision of section 68 of the Act section 68 of the Act would not be applicable in case of share applicable in case of share subscribed to Religare Finvest Ltd. But the Ld. CIT(A) has not taken subscribed to Religare Finvest Ltd. But the Ld. CIT(A) has not taken subscribed to Religare Finvest Ltd. But the Ld. CIT(A) has not taken into consideration facts recorded himself in the impugned order facts recorded himself in the impugned order facts recorded himself in the impugned order ,while deleting the addition in respect of share cap while deleting the addition in respect of share cap while deleting the addition in respect of share capital /share premium from Religare Finvest Ltd. Further the share capital/share premium from Religare Finvest Ltd. Further the share capital/share premium from Religare Finvest Ltd. Further the share capital/share premium received from Plus Corporate Venture Pvt. Ltd. has not from Plus Corporate Venture Pvt. Ltd. has not from Plus Corporate Venture Pvt. Ltd. has not been examined by the Ld. CIT(A) in the impugned order. In view of been examined by the Ld. CIT(A) in the impugned order. In view of been examined by the Ld. CIT(A) in the impugned order. In view of the aforesaid discussion, we feel it appropriate the aforesaid discussion, we feel it appropriate to restore the issue to restore the issue of addition of share capital/share premium amounting to of addition of share capital/share premium amounting to of addition of share capital/share premium amounting to Rs.5,40,30,000/- back to the file of the Assessing Officer for back to the file of the Assessing Officer for back to the file of the Assessing Officer for Cheryl Advisory Pvt. Ltd. 12 ITA No. 1975/Mum/2023 deciding afresh after providing due opportunity to the assessee for deciding afresh after providing due opportunity to the assessee for deciding afresh after providing due opportunity to the assessee for discharging its onus onus u/s 68 of the Act. The ground No. 1 of the und No. 1 of the appeal of the Revenue is accordingly allowed for statistical purpose. appeal of the Revenue is accordingly allowed for statistical purpose. appeal of the Revenue is accordingly allowed for statistical purpose.
The ground No. 2 of the appeal of the Revenue relates to The ground No. 2 of the appeal of the Revenue relates to The ground No. 2 of the appeal of the Revenue relates to disallowance of miscellaneous expenses disallowance of miscellaneous expenses of Rs.38,24,085/ Rs.38,24,085/-, which has been deleted by the Ld. CIT(A). The deta has been deleted by the Ld. CIT(A). The details of the expenses ils of the expenses disallowed are reproduced as under: disallowed are reproduced as under:
Sr. No. Particulars Particulars Amount in Rs. Amount in Rs.
Employee benefit expenses Employee benefit expenses 1047000 1047000 2. Finance Costs Finance Costs 263309 263309 3. Depreciation and amortization expense Depreciation and amortization expense 2200334 2200334 4. Other Expenses Other Expenses 313442 313442 Total 3824085 3824085 5.1 The Assessing Officer has disallowed the expenses mainly for The Assessing Officer has disallowed the expenses mainly for The Assessing Officer has disallowed the expenses mainly for the reason that there is no business activity carried out by the the reason that there is no business activity carried out by the the reason that there is no business activity carried out by the assessee in the year under consideration in the year under consideration as well as in the preceding as well as in the preceding assessment years. T s. The Ld. CIT(A) deleted the addition observ he Ld. CIT(A) deleted the addition observing as under:
“7.1 I have gone through the facts of the case and the material on 7.1 I have gone through the facts of the case and the material on 7.1 I have gone through the facts of the case and the material on record. The questiant is a registered company under the companies record. The questiant is a registered company under the companies record. The questiant is a registered company under the companies act and the said Tiat in question is held as an asset which served act and the said Tiat in question is held as an asset which served act and the said Tiat in question is held as an asset which served as a registered office of the said as a registered office of the said company. Though there is no company. Though there is no income from the business activity for the relevant assessment year, income from the business activity for the relevant assessment year, income from the business activity for the relevant assessment year, the appellant had to still under go fixed expenses such as the appellant had to still under go fixed expenses such as the appellant had to still under go fixed expenses such as depreciation and other finance cost. As a going concern, one cannot depreciation and other finance cost. As a going concern, one cannot depreciation and other finance cost. As a going concern, one cannot deny there is overhead expenses w deny there is overhead expenses which are wholly and exclusively hich are wholly and exclusively for the purpose of business. The AOs observation that the for the purpose of business. The AOs observation that the for the purpose of business. The AOs observation that the assessee's intention is to book only losses in the return of income is assessee's intention is to book only losses in the return of income is assessee's intention is to book only losses in the return of income is baseless and arbitrary. The AO had not investigated or established baseless and arbitrary. The AO had not investigated or established baseless and arbitrary. The AO had not investigated or established the fact that the expenditur the fact that the expenditure claimed are of bogus in nature. e claimed are of bogus in nature. 7.2 It is pertinent to note that the finance act 2001 amended section 7.2 It is pertinent to note that the finance act 2001 amended section 7.2 It is pertinent to note that the finance act 2001 amended section 32, which clarified that in computing the profits and gains of 32, which clarified that in computing the profits and gains of 32, which clarified that in computing the profits and gains of business or profession for any previous year, deduction of business or profession for any previous year, deduction of business or profession for any previous year, deduction of Cheryl Advisory Pvt. Ltd. 13 ITA No. 1975/Mum/2023 depreciation under section 32 depreciation under section 32 shall be mandatory.(clause 21 of the shall be mandatory.(clause 21 of the finance bill of 2001). In this connection the CBDT in the circular no. finance bill of 2001). In this connection the CBDT in the circular no. finance bill of 2001). In this connection the CBDT in the circular no. 14/2001 in para 30.2 clearly mentions that depreciation shall be 14/2001 in para 30.2 clearly mentions that depreciation shall be 14/2001 in para 30.2 clearly mentions that depreciation shall be mandatory. Even if the assessee had not claimed depreciation in mandatory. Even if the assessee had not claimed depreciation in mandatory. Even if the assessee had not claimed depreciation in the books of accoun the books of account, the assessing officer is duty bound to grant t, the assessing officer is duty bound to grant deprecation allowance by virtue of explanation 5 to section 32(1) of deprecation allowance by virtue of explanation 5 to section 32(1) of deprecation allowance by virtue of explanation 5 to section 32(1) of the act. In the instant case the other expenses such as employee the act. In the instant case the other expenses such as employee the act. In the instant case the other expenses such as employee benefit expenses, finance cost and other expenses are allowable benefit expenses, finance cost and other expenses are allowable benefit expenses, finance cost and other expenses are allowable unless the AO proves beyond doubt that there are bogus AO proves beyond doubt that there are bogus AO proves beyond doubt that there are bogus expenditure. In view of the above, it is hereby held that the expenditure. In view of the above, it is hereby held that the expenditure. In view of the above, it is hereby held that the disallowance to the tune of 38,24,085 does not hold water and disallowance to the tune of 38,24,085 does not hold water and disallowance to the tune of 38,24,085 does not hold water and hence deleted. Accordingly these grounds are allowed. hence deleted. Accordingly these grounds are allowed.” 5.2 Before us, the Ld. DR submit Before us, the Ld. DR submitted that the assessee has failed to ted that the assessee has failed to substantiate carrying out any business activity in the year under substantiate carrying out any business activity in the year under substantiate carrying out any business activity in the year under consideration as well as in consideration as well as in the preceding assessment year, s the preceding assessment year, since inception of the assessee company. H eption of the assessee company. He submitted that since no e submitted that since no business has been commenced business has been commenced and therefore, the expenses claimed and therefore, the expenses claimed prior to commencing/setting prior to commencing/setting up of the business, cannot be allowed cannot be allowed as revenue expenditure. as revenue expenditure.
5.3 On the contrary, the Ld. On the contrary, the Ld. Counsel for the assessee submitted the assessee submitted that it was not possible for the it was not possible for the assessee to substantiate whethe substantiate whether business of the assessee was commenced in earlier assessment business of the assessee was commenced in earlier assessment business of the assessee was commenced in earlier assessment year(s) or not. On being specifically asked by the Bench to file a or not. On being specifically asked by the Bench to file a or not. On being specifically asked by the Bench to file a copy of profit and loss account of the profit and loss account of the preceding assessment preceding assessment year(s), the Ld. Counsel express his inability in producing financial the Ld. Counsel express his inability in producing the Ld. Counsel express his inability in producing statement including Profit and loss account including Profit and loss account of the assessee for the of the assessee for the preceding assessment years preceding assessment years , since inception of the company. In the of the company. In the facts and circumstances and in the interest of substantial justice, facts and circumstances and in the interest of substantial justice facts and circumstances and in the interest of substantial justice we feel it appropriate to restore we feel it appropriate to restore this matter also back to the file of back to the file of the Assessing Officer with the direction to the assessee to file all the Assessing Officer with the direction to the assessee to file all the Assessing Officer with the direction to the assessee to file all
Cheryl Advisory Pvt. Ltd. 14 ITA No. 1975/Mum/2023 necessary evidence to necessary evidence to demonstrate that business of the assessee that business of the assessee was commenced in earlier assessment years. The Assessing Officer was commenced in earlier assessment years. The Assessing Officer was commenced in earlier assessment years. The Assessing Officer accordingly may decide the issue accordingly may decide the issue in accordance with law in accordance with law. The ground No. 2 of the appeal of the Revenue is allowed for statistical ground No. 2 of the appeal of the Revenue is allowed for statistical ground No. 2 of the appeal of the Revenue is allowed for statistical purposes.
In the result, the appeal filed by the Revenue is allowed for In the result, the appeal filed by the Revenue is allowed for In the result, the appeal filed by the Revenue is allowed for statistical purposes.