Loading judgment…
No AI summary yet for this case.
Income Tax Appellate Tribunal, KOLKATA ‘B’ BENCH, KOLKATA
Before: SRI SANJAY GARG & DR. MANISH BORAD
order
: December 14th, 2023 ORDER
Per Manish Borad, Accountant Member:
This appeal filed by the assessee pertaining to the Assessment Year (in short ‘AY’) 2013-14 is directed against the order passed u/s 250 of the Income Tax Act, 1961 (in short the ‘Act’) by ld. Commissioner of Income Tax (Appeals)- NFAC, Delhi [in short ‘ld. CIT(A)’] dated 08.06.2023 arising out of the assessment I.T.A. No.: 728/KOL/2023 Assessment Year: 2013-14 Improve Financial Consultants Private Limited. order framed by the Assessing Officer (in short ld. ‘AO’) u/s 144 of the Act dated 21.03.2016.
2. The assessee is in appeal before the Tribunal raising the following grounds:
“1. The order passed by Id Commissioner of Income-tax (Appeals), NFAC, Delhi is unjust, unwarranted and bad in law.
The Id Commissioner of Income-tax (Appeals) failed to appreciate and/or overlooked and/or did not consider the submissions made by the appellant as also other facts of the case and erred to pass an ex- parte order without affording any opportunity to the appellant to file submissions as also other facts of the case.
3. On the facts and in the circumstances of the case, the Id Commissioner of Income-tax (Appeals) erred in confirming the action of Id AO in treating the investment of Rs 5,60,77,100/- in unlisted securities made by the appellant as unexplained investments.
On the facts and in the circumstances of the case, the Id Commissioner of Income-tax (Appeals) erred in confirming the enhancement of income of the appellant by Rs 5,60,77,100/- by observing that the appellant had no source of income for making such investment.
On the facts and in the circumstances of the case, the Id Commissioner of Income-tax (Appeals) erred in confirming the action of Id AO in treating the loans and advances of Rs 5,76,01,200/- to related parties as unexplained advances.
On the facts and in the circumstances of the case, the Id Commissioner of Income-tax (Appeals) erred in confirming the enhancement of income of the appellant by Rs 5,76,01,200/- by observing that the appellant had no source of income for making such investment.
7. On the facts and in the circumstances of the case, the Id Commissioner of Income-tax (Appeals) erred in confirming the action of Id AO in disallowing the expenses of Rs 16,384/- u/s 14A of the act.
I.T.A. No.: 728/KOL/2023 Assessment Year: 2013-14 Improve Financial Consultants Private Limited. 8. On the facts and in the circumstances of the case, the Id Commissioner of Income-tax (Appeals) erred in confirming the action of Id AO in enhancing the income off the appellant by Rs 16,384/-. 9. The appellant craves leave to add, amend, rectify, modify or otherwise alter any ground of appeal
.”
3. The facts in brief are that the assessee is a private limited company and it filed its return of income for AY 2013-14 declaring loss of Rs. 16,384/-. Case selected for scrutiny through CASS followed by serving of notices u/s 143(2) & 142(1) of the Act. The reasons for selection of scrutiny under CASS are as follows: “a) Low income in comparison to high loans/advances/investment in shares. b) Investment in unlisted equities during the year. c) Low income in comparison to very high investments.”
4. Since the assessee failed to appear on the given dates of hearing after being provided sufficient opportunity, ld. AO based on the income tax return made addition for unexplained investment in unlisted securities at Rs. 5,60,77,100/-, unexplained loans and advances to related parties at Rs. 5,76,01,200/- and disallowance u/s 14A of the Act at Rs. 16,384/- . Income assessed at 11,36,78,300/-.
5. Aggrieved, the assessee preferred appeal before ld. CIT(A) challenging various additions made by the AO. On one occasion the assessee submitted that it has not made any new investment during the year under consideration but again failed to file the copy of ledger accounts of underlined investments, annual report, other documents etc. to substantiate its claim. As a result, the assessee failed to succeed before ld. CIT(A). Page 3 of 10 I.T.A. No.: 728/KOL/2023 Assessment Year: 2013-14 Improve Financial Consultants Private Limited.
6. Aggrieved, the assessee is now in appeal before this Tribunal. Ld. Counsel for the assessee placed the copy of audited financial statement along with the written submission and vehemently argued supporting the same. For the sake convenience written submission filed by the assessee is reproduced below: “1. As Regards Disallowance of Rs. 5,60,77,100/-, on account of Investment in Unlisted securities, we submit as below: - a. The learned AO has erred in passing the assessment order and not allowed the assessee sufficient time and made the assessment u/s 144 of The Income Tax Act 1961, which is against the principal of natural justice and totally bad in law. b. The learned AO has made assessment u/s 144 of The Income Tax Act and stated that Best Judgment order u/s 144 of the Act has been passed, however the AO has not even considered the materials available on record and just for the sake of completion of assessment passed the ex-parte order without considering the materials available on record. c. The assessee has Made Investment in Equity Shares of Unlisted Companies, however no Fresh Investment has been made by the assessee during the year under consideration, which can be clearly verified from the Audited Financial Statement of the Assessee and List of Companies in which investments have been made, enclosed herewith. d. For the sake of Clarity, we further state that the Balance under Investment in Unlisted Securities as on 31.03.2012 was Rs. 7,98,77,100/- and Balance under Investment in Unlisted Securities as on 31.03.2013 was Rs. 5,60,77,100/-, which can be verified from Note No. 5 (B) of the audited financial statement, which clearly depicts that no Fresh Investment has been made during the year by the assessee. e. Further a list of investment in unlisted securities as on 31.03.2012 & 31.03.2013 is enclosed, where it can be seen that No Fresh Investment in Unlisted Securities have been made by the assessee during the year under consideration.
I.T.A. No.: 728/KOL/2023 Assessment Year: 2013-14 Improve Financial Consultants Private Limited. f. Therefore, Addition made on this count is totally illegal and against the Law and accordingly requested to be deleted.
2. As Regards addition of Rs. 5,76,01,200/- on account of Loan & Advances, we submit as below: - a. The learned AO has erred in passing the assessment order and not allowed the assessee sufficient time and made the assessment u/s 144 of The Income Tax Act 1961, which is against the principal of natural justice and totally bad in law. b. The learned AO has made assessment u/s 144 of The Income Tax Act and stated that Best Judgment order u/s 144 of the Act has been passed, however the AO has not even considered the materials available on record and just for the sake of completion of assessment passed the ex-parte order without considering the materials available on record. c. The assessee has given Loan & Advances to Companies and other entities, the details of which are as under: - Loan & Advances as on 31.03.2012 Rs. 2,35,01,200/- Loan & Advances as on 31.03.2013 Rs. 5,76,01,200/- Loan Given during the Year 2012-13 Rs. 3,41,00,000/- A detailed List of Persons to whom such Loan has been given is enclosed herewith. d. As regards Source, the assessee has given Loan of Rs. 3,41,00,000/- during the year, Source of which are as under: - Realization of Fund from Sale of Rs. 2,38,00,000/- Unlisted Equity Shares Realization of Fund from Unsecured Rs. 1,03,25,000/- Loan Total Fund Received Rs. 3,41,25,000/- The above figures can be verified from the audited financial statement of the assessee. e. The Genuineness of the above Transactions can be further verified from the Bank statement of the assessee enclosed herewith. f. Therefore, addition of Rs. 5,76,01,200/- made on this count is totally unjustified and requested to be deleted.
I.T.A. No.: 728/KOL/2023 Assessment Year: 2013-14 Improve Financial Consultants Private Limited.
As Regards Disallowance of Rs. 16,384/- u/s 14A, we submit as below: - Expenses Debited by the assessee in profit & Loss account of the company is operational expenditure, details of which has been given at Note No. 10 of the Audited Financial statement and the expenses so debited to profit & loss account are not related to any income directly and is a pure company operational expenditure and accordingly requested to be deleted. Accordingly, the assessment so made by the learned AO is totally bad in law and therefore requested to be quashed. Further if the contention of the assessee is not accepted by the department, we would like to be heard in person through Video Conferencing.”
Ld. Counsel for the assessee also took us through the details of loans and advances and investment movements during the year and with the help of the bank statement submitted that consideration from sale of investment was utilized to give fresh loan during the year and also stated that the assessee received unsecured loan of Rs. 1,03,25,000/- during the year.
On the other hand, ld. D/R submitted that the assessee failed to file any details before the lower authorities and the issues may be restored to the file of the AO or ld. CIT(A), as the Hon'ble Tribunal deems fit.
We have heard rival contentions and perused the records placed before us. Though the assessee has raised various grounds of appeal
but the issues relate to addition for unexplained investment & loans and advances given and disallowance u/s 14A of the Act.
10. We observe that the assessee did not file necessary details before the AO but made certain submissions before ld. CIT(A) and I.T.A. No.: 728/KOL/2023 Assessment Year: 2013-14 Improve Financial Consultants Private Limited. has now filed various details before us. Ld. AO made the alleged additions/disallowances for lack of evidences and information filed by the assessee.
11. The first issue is regarding addition for unexplained investment in unlisted securities at Rs. 5,60,77,100/-. We have perused the audited financial statement for current financial year i.e. 2012-13 and also for immediately preceding financial year i.e. 2011-12. The details of investments for FY 2011-12 & 2012-13 are available at page 6 of the paperbook. Perusal of the same indicates that during the year no fresh investment has been made. As against the total investment as on 31.03.2012 at Rs. 7,98,77,100/- the investment in equity shares as on 31.03.2013 has reduced to Rs. 5,60,77,100/-. We observe that during the year assessee has sold equity shares for a consideration of Rs. 2.38 Crore. Therefore, there remains no question of unexplained investment during the year. Even the relevant schedule of the balance sheet prima facie indicates that ld. AO has made the addition for the total investment in equity shares appearing as on 31.03.2013 but has totally ignored the investments as on the last day of the preceding financial year. Further, one of the reasons for such action of the AO may be that the audited financial statements were not placed before him. However, since the said financial statements have been placed before us and they are also available on public domain on the portal of Ministry of Corporate Affairs, we are inclined to take note of the audited financial statement. As discussed above, since there is no fresh investment during the year and only certain investments which were available with the I.T.A. No.: 728/KOL/2023 Assessment Year: 2013-14 Improve Financial Consultants Private Limited. assessee at the opening of the financial year has been sold, no addition is called for the unexplained investment at Rs. 5,60,77,100/-. Thus, the alleged addition for unexplained investment in unlisted securities at Rs. 5,60,77,100/- is deleted. Accordingly, the finding of ld. CIT(A) is set aside and ground nos. 3 & 4 raised by the assessee are allowed.
12. The next issue for our consideration is unexplained loans and advances at Rs. 5,76,02,100/- for which the assessee has raised ground nos. 5 & 6. The details of loans and advances as on the close of the FY 2011-12 & 2012-13 have been submitted by the assessee. Perusal of the same in consonance with the audited financial statement, we notice that loans and advances as on 31.03.2012 stood at Rs. 2,35,01,200/- and the same increased to Rs. 5,76,01,200/- as on 31.03.2012. The net increase is Rs. 3.41 Crore. In the said increase of Rs. 3.41 Crore, one of the outstanding loan and advances from preceding year at Rs. 18 Lakh given to Ganga Carriers Pvt. Ltd. was received back during the year. Fresh loans have been given to Rani Sati Enterprises Pvt. Ltd. at Rs. 10 Lakh, Amar Kumar Agarwal at Rs. 15 Lakh, Gangotri Electrocasting Ltd. at Rs. 6 Lakh, additional loan to Gangotri Iron & Steel Co. Ltd. at Rs. 3.26 Crore and Rs. 2 Lakh to Sanjeev Kumar Choudhary. The question arises that what is the source of the said fresh loans of Rs. 3.41 Crore during the year. As submitted by ld. Counsel for the assessee, the source of the alleged loan is partly from the funds realised from the sale of equity shares at Rs. 2.38 Crore and a fresh unsecured loan of Rs. 1,03,25,000/- which has been received from A.V. Ispat Pvt. Ltd. at Rs. 1 Crore and Ganga