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Income Tax Appellate Tribunal, “F” BENCH, MUMBAI
O R D E R Per B.M. Biyani, A.M.: These are two appeals filed by the assessee for Assessment-Year [“AY”] 2007-08. is a quantum-appeal filed against appeal-order dated 27.10.2011 passed by learned Commissioner of Income Tax (Appeals)-40, Mumbai [“Ld. CIT(A)”], which in turn arises out of assessment-order dated 28.12.2010 passed by learned DCIT(OSD)-II, CR-7, Mumbai [“Ld. AO"] u/s 153C/143(3) of the Income Tax Act, 1961 [“the Act”]. ITA No. 5640/Mum/2015 is a penalty-appeal against the appeal-order dated 22.09.2015 passed by learned Commissioner of Income Tax (Appeals)-52, Mumbai, which in Page 1 of 7 Dilip B. Patel arises out of penalty-order dated 28.03.2013 passed by Ld. AO u/s 271(1)(c) of the Act.
Heard the learned Representatives of both sides at length and case record perused.
Briefly stated facts are such that a search u/s 132 was conducted upon “Vinod Faria/Milind Dalal Group” on 30.05.2008, wherein a “Loose Paper Number 60 of Annexure A-1” was seized, which revealed that the assessee taken certain loans from 19 parties amounting to Rs. 55,00,000/- at interest-rate of 12.2%, the interest amount being Rs. 6,71,000/-. Ld. AO, being of the view that the said loans had been taken through accommodation entries, confronted the assessee with regard to the identity and creditworthiness of the lenders as also the genuineness of transactions, to which the assesee made submissions. However, the Ld. AO was not convinced with the submissions of assessee. Ld. AO also examined the return filed by assessee wherein the assessee had declared loans of Rs. 75,00,000/-. The Ld. AO, therefore, treated the loans of Rs. 75,00,000/- plus interest of Rs. 11,25,000/- thereon, aggregating to Rs. 86,25,000/-, as bogus and made addition of Rs. 86,25,000/-. Subsequently, vide order dated 28.03.2013, the Ld. AO also imposed penalty of Rs. 29,18,818/- u/s 27(1)(c) qua the addition so made. Being aggrieved by addition as well as penalty, the assessee filed appeals to the first appellate authority but could not succeed. Now, the assessee has come in these appeals before us assailing the orders of lower authorities.
4. We first take up this appeal. The grounds raised in this appeal (including additional grounds) are as under:
ITA No. 5640/Mum/2015 Dilip B. Patel “ORIGINAL GROUNDS OF APPEAL:
The Learned Commissioner of Income Tax (Appeals)-40 (CIT) erred in confirming addition of Rs. 55,00,000/- on account of loans accepted by accommodation entries.
2. The Learned Commissioner of Income Tax (Appeals)-40 (CIT) erred in confirming addition of Rs. 20,00,000/- on account of loans taken from M/S Genelac Ltd.
3. The Learned Commissioner of Income Tax (Appeals)-40 (CIT) erred in confirming addition of Rs. 11,25,000/- on account of interest payment @15% p.a. on the unsecured loans of Rs. 75 Lacs.”
ADDITIONAL GROUNDS RAISED EARLIER: “1. The Learned AO has erred in issuing notice u/s 153C and subsequently completing the assessment u/s 153C r.w.s. 143(3) of the Income Tax Act. 1961.
Your appellant respectfully submits that on the facts and circumstances of the case and in law the issue of notice u/s 153C in the present case in contrary to the provisions of that section and hence invalid. The assessment u/s 153C r.w.s. 143 (3) competed on the basis of the invalid notice may please be annulled.”
ADDITIONAL GROUND RAISED on 21st JANUARY, 2015:
1. The assessment proceedings are null and void ab initio because the AO had, it seems from assessment order, not recorded satisfaction for issuing notice u/s 153C. (Copy of satisfaction note recorded was not made available by the AO despite request).
2. The assessing officer had no satisfactory material and had no satisfactory reasons for issuing notice u/s 153C.
3. The material relied on by the AO for the proceedings u/s 153C did not belong to the assessee. Hence whole proceedings are null and void.
Interest u/s 234B is not chargeable. (Not pressed now)
Interest on loans is alternatively allowable under the head income from House Property/adventure in the nature of trade.
ITA No. 5640/Mum/2015 Dilip B. Patel
6. The appellant craves, leave to add, to amend, and/or to alter all or any of the above grounds.”
FRESH ADDITIONAL GROUNDS RAISED AS PER THIS REVISED GROUNDS OF APPEAL DATED 06-01-2016:
“1. The assessment made is null and void because notice u/s 143(2) was not issued at all and there was no other action for assessment during the period such notice could be issued as per provisions of law.
2. As per copy of note sheet supplied by the LAO on 26-10-15, this fact stands proved. Copy of records supplied by Ld. AO is being submitted in the form of paper book.
3. The JCIT either did not approve the assessment order; or approved without looking into the file. Entire records of Ld. AO are silent on this point. Hence assessment order is null and void on this ground also.” 5. At the start of hearing, the Ld. AR submitted that the assessee has filed additional grounds from time to time and lastly the latest grounds incorporating original as well as additional grounds were filed on 06.01.2016. We have re-produced such latest grounds in foregoing paragraph. Ld. AR submitted that the additional grounds are in the nature of legal grounds; go to the root of the matter and can be decided on the basis of facts available on record; hence they may be allowed in view of National Thermal Power Company Ltd. Vs. CIT 229 ITR 383 (SC). We confronted the Ld. DR who fairly agreed to the submissions of Ld. AR and did not show any objection. Therefore, the additional grounds are admitted and shall be taken up for adjudication.
Ld. AR representing the assessee submitted that the ground No. 2 under the caption “ADDITIONAL GROUND RAISED
on 21st JANUARY, 2015” is a legal ground on the maintainability of the impugned addition made by Ld. AO, hence the same should be adjudicated first. This ground reads as under: Dilip B. Patel “2. The assessing officer had no satisfactory material and had no satisfactory reasons for issuing notice u/s 153C.”
7. Apropos to this ground, the Ld. AR straightaway drew our attention to Para No. 7 of the assessment-order and demonstrated that the only seized material for making impugned addition was “Loose Paper Page No. 16 of Annexure A-1”, copy of which is placed at Page No. 20 of the appeal-documents filed by assessee. Then, Ld. AR carried us to the same and pointed out that the said document clearly mentions “Loan’s interest from 1-4-2007 to 31-03-2008”; on right side of document “A/c year 2007-08” is mentioned and Column No. 4 of the Table appearing in the document also mentions “01-04-2007 to 31-03-2008”. Thus, Ld. AR successfully demonstrated that the seized documents pertains to the period 01-04-2007 to 31-03-2008 relevant to AY 2008-09 and not to the AY 2007-08 with which we are concerned. Therefore, Ld. AR strongly contended, the said document is nothing to do with AY 2007-08 and addition made by Ld. AO, based on such irrelevant document, is patently wrong as well as illegal. With such precise and clear-cut submission, Ld. AR prayed to delete the addition made by Ld. AO.
Ld. DR representing the revenue fairly admitted the twin- aspects, viz. (i) the only seized material possessed by revenue- authorities is “Loose Paper Page No. 16 of Annexure A-1”, there is no other material; and (ii) the seized document relates to AY 2008-09 and not to AY 2007-08.
In that view of matter, we have no hesitation in accepting the submission of Ld. AR to the effect that the addition made by revenue- authorities in AY 2007-08 is illegal and therefore unsustainable. Faced Dilip B. Patel with such a situation, we delete the impugned addition. The assessee succeeds.
Since we have deleted addition on legal basis as discussed above, other grounds are left open and do not require adjudication at this stage. (Penalty-appeal): 11. Now we take up penalty-appeal. The grounds raised
in this appeal are as under: “1. The Learned CIT(A) has erred in law and on facts in upholding the penalty u/s 271(1)(c) read with section 153C of Rs. 29,18,818/- as levied by Learned Assessing Officer as per order dated 28th March, 2013. 2.When proceedings u/s 153C itself were not sustainable, the learned CIT(A) should not have upheld the penalty.
3. The appellant craves, leave to add, to amend and/or to alter or delete all or any of the above grounds.”
12. Since we have already deleted the quantum addition of Rs. 86,25,000/-, the penalty imposed by Ld. AO u/s 271(1)(c) qua the said addition does not survive. Therefore, we delete the penalty. The assessee succeeds.
13. Resultantly, both of these appeals of assessee are allowed.
Order pronounced in the open court on 17/02/2023.