KAVIAR HOSPITALITY PVT. LTD.,MUZAFFARNAGAR vs. ACIT, CIRCLE- 1, MUZAFFARNAGAR

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ITA 3281/DEL/2018Status: DisposedITAT Delhi26 May 2022AY 2012-134 pages
AI SummaryRemanded

What did the Tribunal hold?

The Tribunal held that the assessee had provided sufficient documentation, including a signed audit report, financial statements, VAT/Service Tax returns, and bank statements, during remand proceedings. The additions on account of share capital were also contested due to the close-knit nature of the company and the introduction of funds through banking channels from respectable individuals.

What were the facts?

The assessee's appeal concerns the disallowance of a business loss of Rs. 1,21,32,366.00 and additions of Rs. 2,70,49,000 on account of share capital, application money, and premium. The Assessing Officer (AO) disallowed the loss citing lack of commencement date, unsigned audit report, and no stock register.

What were the issues?

Whether the disallowance of business loss was justified despite the assessee providing subsequent documentation, and whether additions on account of share capital were valid given the nature of the transactions and the identity of the subscribers.

Which sections of the Income-tax Act were involved?

Section 68

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, DELHI BENCH, ‘C’: NEW DELHI

Before: SHRI SHAMIM YAHYA & Ms. ASTHA CHANDRA

For Respondent: Ms. Anupama Singla Sr.DR
Hearing: 23.05.2022Pronounced: 26.05.2022

Date of Hearing 23.05.2022 Date of Pronouncement 26.05.2022 ORDER PER SHAMIM YAHYA, AM,

This appeal by the assessee is against the order of the Ld. CIT(A), Muzaffarnagar, dated 27.02.2018, pertaining to Assessment Year 2012- 13.

2.

Grounds of appeal reads as under:-

“1. Because considering the facts and the circumstances of the case the learned Commissioner of Income Tax (Appeals) was not justified in confirming the disallowance of loss of Rs. 1,21,32,366.00. While making the disallowance the AO has observed that date of commencement of business was not made available, audit report was unsigned and the stock register was not maintained. The learned CIT has failed to appreciate that during the course of remand proceedings the assesse has furnished Signed Audit Report, Balance Sheet

M/s Kaviar Hospitality Private Ltd. and Statement of Profit & Loss from 01.01.2012-31.03.2012. The assesse had also furnished complete details as asked for vide questionnaire issued by the ACIT. The assesse has also furnished the VAT and Service Tax Returns and Bank Statements. In the above background disallowance of loss of Rs.1,21,32,366.00 made by the AO and confirmed by the learned CIT (A) may kindly be directed to be deleted.

2. Because considering the facts and the circumstances of the case the learned ACIT was not justified in making additions of Rs. 2,70,49,000 u/s 68 of the Income Tax Act on account of increase in Share Capital, Share Application Money and Share Premium. The learned assessing officer has failed to understand that it is a private limited closely held company in which Directors and shareholders are either family members or close relatives. The AO has added the entire amount of capital introduced by directors, shareholders and their relatives. These people belong to respectable family and have long business experience and also the amount has been received through banking channels and partly in cash duly confirmed by these parties. They are also regular assesse of income tax and filing their returns showing good amount of income and paying taxes on that. The learned commissioner of Income Tax (Appeals) has not accepted the documents submitted for establishing the credit worthiness of these persons. He also failed to accept the copies of Form No. 2 being return of allotment of equity shares filed with the Registrar of Companies. Under the circumstances the addition of Rs. 2,70,49,000.00 can not be sustained and may kindly be deleted.”

3.

The assessee has also filed additional ground which reads as under:-

Ground No.1

“On the facts and in the circumstances of the case as well as in law, the impugned Assessment order is without jurisdiction, ab intio void and not sustainable in law due to non-issue and service of valid jurisdictional notice u/s 143(2) of the Income Tax Act, 1961.”

M/s Kaviar Hospitality Private Ltd.

4.

The assessee has pleaded that the since the additional ground goes to the root of the matter and which is a legal issue, the same may be admitted in terms of decision of the Hon’ble Supreme Court in the case of NTPC Ltd. vs CIT (229 ITR 383)(SC).

5.

Upon careful consideration, as regards the additional ground, we note that it is relating to the absence of valid notice. The same is a legal ground and goes to the root of the matter. Hence, we admit the same.

6.

As regards the additional ground, the Ld. DR submitted that she will need a report from the Assessing Officer on the factual aspects in this regard.

7.

We note that this ground was not raised before the Ld. CIT(A). For proper adjudication of the grounds, due reference to the assessment records will be required. Hence, in our considered opinion, the ld. CIT(A) should have an opportunity to examine this issue at his level. The ld. counsel for the assessee and the ld. DR fairly agreed to the above proposition. The ld. counsel for the assessee only submitted that the direction should be given to the Ld. CIT(A) to decide the issue in short period of time.

8.

Upon careful consideration, we are of the opinion that on the facts and circumstances of the case, it will be apposite to remit the issue to the file of the Ld. CIT(A). The ld. CIT(A) is directed to consider the additional grounds admitted by us hereinabove and decide the same

M/s Kaviar Hospitality Private Ltd. after giving proper opportunity to the assessee. We are not expressing any opinion on the merits of the case in appeal before us. We make it clear that after the proper adjudication by the Ld. CIT(A) on the additional ground, both the parties are at liberty to canvass the appeal on the issue of jurisdiction as well as on the merits, as deemed fit.

9.

In the result, this appeal by the assessee stands allowed for statistical purpose.

Order pronounced in the open court on 26.05.2022.

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