LAKHOTIA DIAGNOSTIC SERVICE PRIVATE LIMITED. ,HOWRAH vs. ACIT,CC-3(2), KOLKATA. , KOLKATA

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ITSSA 164/KOL/2023Status: DisposedITAT Kolkata31 July 2024AY 2017-183 pages

In favour of the assessee: the assessee's appeal was allowed. From the AI summary of this appeal.

AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that the additions made by the Assessing Officer on account of alleged unaccounted interest and brokerage expenses paid on cash loans were not sustainable. The reasoning was based on the fact that penalty proceedings under Section 269SS, initiated for the alleged receipt of cash loans in violation of the Act, were dropped against the assessee. The assessee had successfully demonstrated in those proceedings that no such cash loans were received. Since the very foundation of the cash loans was eliminated and accepted by the department, the subsequent claim of interest and brokerage payments on these non-existent loans could not stand. The Tribunal applied the legal maxim 'sublato fundamento cadit opus'. Accordingly, the impugned additions were ordered to be deleted. The appeals were allowed.

What were the facts?

The assessee, Lakhotia Diagnostic Service Pvt. Ltd., filed two appeals before the Income Tax Appellate Tribunal (ITAT), Kolkata Bench 'C', for Assessment Years 2017-18 and 2018-19. These appeals challenged separate orders dated August 8, 2023, and August 9, 2023, passed by the Commissioner of Income Tax (Appeals)-21, Kolkata, under Section 250 of the Income Tax Act. The core dispute revolves around additions made by the Assessing Officer (AO) for alleged unaccounted interest and brokerage expenses paid on non-existent cash loans. The assessee contended that the cash loans themselves were imaginary, a fact supported by the dropping of penalty proceedings under Section 269SS initiated on that basis.

What were the issues?

1. Whether the addition of Rs. 9,70,000/- (for AY 2017-18) and Rs. 9,90,000/- (for AY 2018-19) on account of interest and brokerage paid on alleged cash loans is sustainable in law, when the foundation of such cash loans, as alleged by the Assessing Officer, has been eliminated? Assessee's Contention: The assessee argued that the CIT(A) erred in upholding the additions as the alleged cash loans were imaginary and not based on credible evidence. The assessee pointed out that penalty proceedings under Section 269SS, initiated for the alleged violation of accepting cash loans, were dropped by the JCIT, Central Circle. Therefore, the legal maxim 'sublato fundamento cadit opus' (when the foundation is removed, the superstructure falls) applies, rendering the additions unsustainable. Revenue's Contention: The judgment records no specific arguments from the Revenue's side regarding this issue.

Which sections of the Income-tax Act were involved?

Section 250,Section 269SS,Section 271D

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, “C” BENCH KOLKATA

Before: Shri Sanjay Garg & Shri Rakesh Mishra

आयकर अपील�य अ�धकरण, कोलकाता पीठ ‘सी’, कोलकाता IN THE INCOME TAX APPELLATE TRIBUNAL “C” BENCH KOLKATA Before Shri Sanjay Garg, Judicial Member and Shri Rakesh Mishra, Accountant Member I.T.(SS)A. Nos.164&165/Kol/2023 Assessment Years: 2017-18 & 2018-19 Lakhotia Diagnostic Service Pvt. Ltd.....................…...……………....Appellant 93/C/A Block-E Vivek Bihar, G T Road (South), Shibpur, Howrah, W.B – 711102. [PAN: AAACO6522G] vs. ACIT, Central Circle-3(2), Kolkata.………............................…..…..... Respondent Appearances by: Shri Miraj D. Shah, AR, appeared on behalf of the assessee. Shri Rakesh Kr. Das, CIT- DR, appeared on behalf of the Revenue. Date of concluding the hearing : June 05, 2024 Date of pronouncing the order : July 31, 2024 आदेश / ORDER संजय गग�, �या�यक सद�य �वारा / Per Sanjay Garg, Judicial Member: The captioned two appeals have been preferred by the assessee for different assessment years against the separate orders dated 08.08.2023 & 09.08.2023 of the Commissioner of Income Tax (Appeals)- 21, Kolkata [hereinafter referred to as ‘CIT(A)’] passed u/s 250 of the Income Tax Act (hereinafter referred to as the ‘Act’) respectively. Since common issues are involved in both the appeals, therefore, both the appeals have been heard together and are being disposed of by this common order. Assessee’s appeal in IT(SS)A No.164/Kol/2023 is taken as lead case for narration of facts. IT(SS)A No.164/Kol/2023 – The assessee in this appeal has 2. taken the following ground of appeal:

I.T.(SS)A. Nos.164&165/Kol/2023 Assessment Years: 2017-18 & 2018-19 Lakhotia Diagnostic Service Pvt. Ltd

“1. FOR THAT the CIT(A) erred in law in upholding in imaginary addition being Interest & Brokerage paid on alleged Cash Loan to the tune of Rs.9,70,000/- without considering the fact that the Cash Loan, as alleged, in the Order of Assessment was imaginary and not based upon any credible evidence and therefore. the penalty proceedings u/s 269SS initiated on that score was dropped by the Ld. Jurisdictional JCIT, Central Circle and accordingly, and when the foundation of Cash Loan is eliminated, the edifice build upon such foundation in form of imaginary interest and brokerage paid of Rs.9,70,000/- on alleged cash loan cannot stand in the eyes of law and the addition sustained by the Ld. CIT(A) on that score is liable to be deleted at this forum. 2. FOR THAT the Ld. Authority below erred in law in upholding the imaginary addition to the tune of Rs. 9,90,000/- on account of Commission and Brokerage paid on non-existent of "cash loan", taken by the Company. 3. FOR THAT the legal maxim "sublato fundamento cadit opus" is directly applicable in this case, and accordingly the addition sustained by the CIT(A)-21 is liable to be deleted. Your appellant craves leave to add supplement or amend further ground or grounds at the time of hearing.” 3. The issue raised by the assessee in this appeal is relating to the confirmation of addition of Rs.9,90,000/- made by the Assessing Officer on account of alleged unaccounted interest and brokerage expenses paid by the assessee on cash loans of Rs.75,00,000/-.

4.

The ld. counsel for the assessee has invited our attention to the relevant part of the assessment order to submit that the allegation of the Assessing Officer was that the assessee had received cash loans in violation of provisions of section 269SS of the Act, for which the proceedings u/s 271D were initiated against the assessee. However, the assessee has demonstrated in the said proceedings that the assessee did not receive any such cash loans as alleged in the assessment order. Thereafter, the proceedings carried out u/s 271D were dropped against the assessee. Since the assessee did not receive any cash loans and the said fact stands accepted by the department and therefore, the alleged

I.T.(SS)A. Nos.164&165/Kol/2023 Assessment Years: 2017-18 & 2018-19 Lakhotia Diagnostic Service Pvt. Ltd

payment of interest & brokerage on such non-existed cash loans, does not arise at all. 5. In view of the above, the impugned additions in respect of alleged unaccounted interest and brokerage are not sustainable and the same are accordingly ordered to be deleted. IT(SS)A No.164/Kol/2023 – The issue involved in this appeal is 6. identical to that has been discussed in IT(SS)A No.164/Kol/2023 and our findings given above will mutatis mutandis apply to this appeal also and the impugned additions in this appeal are ordered to be deleted. 7. In the result, both the appeals of the assessee stand allowed. Kolkata, the 31st July, 2024. Sd/- Sd/- [Rakesh Mishra] [Sanjay Garg] लेखा सद�य/Accountant Member �या�यक सद�य/Judicial Member Dated: 31.07.2024. RS Copy of the order forwarded to: 1. Assessee - 2. Respondent - 3.CIT (A)- 4. CIT- , 5. CIT(DR),

//True copy// By order Assistant Registrar, Kolkata Benches

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