LADHOTIA DIAGNOSTIC SERVICE PVT. LTD.,HOWRAH vs. ACIT, CIR. 3(2), KOLKATA

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ITSSA 15/KOL/2024Status: DisposedITAT Kolkata14 June 20244 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 addition of Rs. 21,81,600/- on account of interest and brokerage paid on the alleged cash loan was unsustainable. The reasoning was based on two key observations. Firstly, the Assessing Officer (AO) had not mentioned any specific documents seized during the search that supported these transactions, and it is settled law that no addition can be made under Section 153A in the absence of incriminating material. Secondly, and crucially, the Additional Commissioner (Addl. CIT) had dropped the penalty proceedings initiated under Section 271D (which deals with cash deposits) in relation to the alleged cash loan. This dropping of penalty implicitly suggested that the loan was not received in cash. The Tribunal also noted the assessee's argument that the assessment should have been under Section 153C if no incriminating documents were found. Since the foundation of a cash loan was found to be questionable, and penalty proceedings for cash receipt were dropped, the Tribunal found no justification for the addition of commission and interest. Therefore, the Tribunal allowed the appeal and deleted both additions totaling Rs. 21,81,600/-.

What were the facts?

The assessee, Lakhotia Diagnostic Service Private Limited, is appealing an order from the Commissioner of Income Tax (Appeal) for Assessment Year 2019-20. The appeal stems from an addition of Rs. 21,81,600/- made by the Assessing Officer (AO) on account of interest and brokerage paid on an alleged cash loan of Rs. 1,80,00,000/-. The AO had issued a show cause notice for applicability of Section 269SS and addition under Section 69C. The Ld. CIT(A) confirmed the AO's action, stating the assessee failed to discharge its onus. However, the AO had initially initiated penalty proceedings under Section 271AAC, and the Ld. CIT(A) had deleted an addition of Rs. 1,91,475/- related to interest on two loans not supported by incriminating documents. The assessee's grounds of appeal argue that the cash loan was imaginary, and therefore, the consequential additions for interest and brokerage should be deleted, citing the legal maxim 'sublato fundamento cadit opus'.

What were the issues?

1. Whether the addition of Rs. 21,81,600/- on account of interest and brokerage paid on an alleged cash loan is sustainable in law, considering the assessee's contention that the cash loan itself was imaginary and not based on credible evidence, thereby rendering the foundation for the addition invalid (turning on Section 69C and the principle of 'sublato fundamento cadit opus'). 2. Whether the assessment proceedings under Section 153A were validly initiated, or if they should have been under Section 153C, given the assessee's claim that no incriminating documents relevant to AY 2019-20 were seized during the search operation. Assessee's Arguments: The assessee argued that the cash loan was imaginary and not supported by credible evidence. Consequently, the addition of interest and brokerage on this non-existent loan is unsustainable, invoking the legal maxim 'sublato fundamento cadit opus'. The assessee also contended that the assessment should have been under Section 153C, not 153A, as no relevant incriminating documents were seized. Revenue's Arguments: The revenue, through the Ld. CIT(A), upheld the addition, stating that the assessee failed to discharge its onus to prove the AO's action was incorrect and did not produce any affidavit denying the acceptance of cash loans.

Which sections of the Income-tax Act were involved?

Section 250,Section 132,Section 153A,Section 69C,Section 269SS,Section 271AAC,Section 271D,Section 153C

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, “A” BENCH KOLKATA

Before: SHRI RAJPAL YADAV & SHRI RAKESH MISHRA

For Appellant: Shri Miraj D. Shah, AR
For Respondent: Shri Subhendu Datta, CIT, DR
Hearing: 12.06.2024Pronounced: 14.06.2024

IN THE INCOME TAX APPELLATE TRIBUNAL “A” BENCH KOLKATA BEFORE SHRI RAJPAL YADAV, VICE PRESIDENT AND SHRI RAKESH MISHRA, ACCOUNTANT MEMBER IT(SS)A Nos.15/KOL/2024 Assessment Year: 2019-20

Lakhotia Diagnostic Service ACIT, Central Circle-3(2), Private. Limited. Kolkata. 93/C/A, Block-E, Vivek Bihar, G. T. Road (South), Shibpur, Vs Howrah-711102, West Bengal- 711102. (PAN: AAACO6522G) (Appellant) (Respondent)

Present for: Appellant by : Shri Miraj D. Shah, AR Respondent by : Shri Subhendu Datta, CIT, DR Date of Hearing : 12.06.2024 Date of Pronouncement : 14.06.2024 O R D E R PER RAKESH MISHRA, ACCOUNTANT MEMBER: This appeal filed by the assessee is against the order of the Ld. Commissioner of Income Tax (Appeal), Kolkata-21(hereinafter referred to as “the Ld. CIT(A)”passed u/s. 250 of the Income Tax Act, 1961 (hereinafter referred to as “the Act”) for AY 2019-20vide Order No. ITBA/APL/S/250/2023-24/1059118387(1) dated 27.12.2023.

2.

Grounds of appeal raised by the assessee are reproduced as under:

“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.21,81,600/- 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

2 IT(SS)A No. 15/Kol/2024 Lakhotia Diagnostic Service Pvt. Ltd. AY: 2019-20 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. 21,81,600/ - 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. 21,81,600/ - 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. Briefly stated facts as culled out from records are that the assessee belongs to “Health Care Group”. A search and seizure operation u/s. 132 of the Act was conducted in various office premises cum residence of Lakhotia Group on 05.02.2021. The said Group is engaged in real estate, manufacturing and export-import business, healthcare diagnostic including laboratory, radiology, cardiology and neurology services, industrial fabrication, industrial automation, woven and non-woven fabric business, education and services, hotel industry. The assessee filed its return of income in response to the notice u/s. 153A on 27.12.2021 declaring total income of Rs.40,22,720/-. The AO observed during the course of assessment proceeding that in the year under consideration, the assessee had received cash loan of Rs.1,80,00,000/- and paid interest @ 12% at Rs.21,60,000/- and brokerage at Rs.21,600/-. In view of the above, the assessee was issued a show cause notice as to why section 269SS should not be applied on the above cash loan of Rs.21,60,000/- (correct figure being Rs. 1,80,00,000/-) in the hands of the assessee and also why the interest and brokerage paid should not be added u/s. 69C of the Act to the income of the assessee. However, the response of the assessee was not found to be satisfactory by the AO and the AO added the interest and

3 IT(SS)A No. 15/Kol/2024 Lakhotia Diagnostic Service Pvt. Ltd. AY: 2019-20 brokerage expenses of Rs.21,81,600/- u/s. 69C of the Act to the total income of the assessee. Penalty notice u/s. 271AAC was also issued separately. Aggrieved, the assessee preferred an appeal before the Ld. CIT(A), who confirmed the action of the AO by observing that the addition made by the AO is on account of interest as well as brokerage paid on cash loan. Ld. CIT(A) also stated that the assessee produced nothing to demonstrate that cash loans were not accepted by the assessee and in support of this assessee had not produced any affidavit denying the acceptance of such cash loans. Hence, the Ld. CIT(A) held that the onus is completely upon the assessee to prove that the action of the AO was legally or factually incorrect. Since the assessee failed to discharge its onus and there is no material before him to show that the action of the AO is incorrect, the addition was confirmed. Aggrieved, the assessee is in appeal before the Tribunal. Ld. CIT(A) however deleted the addition of Rs. 1,91,475/- made on account of interest on 2 loans which was not supported by any incriminating documents found and seized in the course of the search and seizure action.

4.

We have heard both the Ld. AR and the Ld. DR and perused the material available on record. The AO has not mentioned whether these transactions were mentioned in any document seized from the premises of the assessee and it is a settled law that no addition can be made in an order under section 153A in the absence of any incriminating material found during the course of the search. It is observed that the AO added the commission and interest on the alleged cash amount received but the Addl. CIT in the course of penalty u/s. 271D dropped the penalty thereby implying that the loan was not received in cash. Further, this is a matter of search and seizure and the AO has not even erely mentioned the Sl. No. of the annexure, the assessment has been made u/s. 153A of the Act whereas as per the assessee, no incriminating document relevant for AY 2019-20 was seized from the

4 IT(SS)A No. 15/Kol/2024 Lakhotia Diagnostic Service Pvt. Ltd. AY: 2019-20 premises of the assessee and, therefore, the assessment ought to have been made u/s. 153C of the Act and not under section 153A of the Act. Since the cash loan was found to be not cash loan and the proceeding initiated for penalty u/s. 271D was dropped, therefore, there appears no justification for the addition made on account of commission and interest which has been estimated by the AO. Hence, the appeal of the assessee is allowed and both the additions totalling to Rs.21,81,600/- are hereby deleted.

5.

In the result, the appeal of the assessee is allowed.

Order pronounced in the open court on 14th June, 2024. Sd/- Sd/- (Rajpal Yadav) (Rakesh Mishra) Vice President Accountant Member Dated: 14th June, 2024 JD, Sr. P.S. Copy to: 1. The Appellant: 2. The Respondent. 3. CIT(A), Kolkata-21, Kolkata 4. Pr. CIT, 5. DR, ITAT, Kolkata Bench, Kolkata //True Copy// By Order

Assistant Registrar ITAT, Kolkata Benches, Kolkata

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