Loading judgment…
Facts
The assessee filed an appeal against the order of the CIT(A). The appeal was filed in February 2025 and had been adjourned multiple times. The Tribunal decided to proceed with the matter based on available records.
Held
The Tribunal dismissed Ground No.1 challenging the assumption of jurisdiction by the Ld.PCIT u/s 263. Grounds No. 2 & 3 were dismissed finding that the assessee was provided reasonable opportunity by the AO. Ground No.4 was set aside to the file of the Ld.CIT(A) for re-examination. Ground No.5 was set aside to the file of the Ld.CIT(A) for necessary verification. Ground No.6 was remitted to the Ld.CIT(A) for verification.
Key Issues
Whether the assumption of jurisdiction by the Ld.PCIT u/s 263 was valid? Whether the AO provided reasonable opportunity of being heard? Whether additions on account of interest income and unsecured loans were justified? Whether disallowance of depreciation was correct?
Sections Cited
263, 250, 143(3), 144B, 142(1), 133(6)
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, MUMBAI “G” BENCH : MUMBAI
Before: SHRI VIKRAM SINGH YADAV & SHRI SANDEEP GOSAIN
O R D E R PER VIKRAM SINGH YADAV, A.M : This is an appeal filed by the assessee against the order of the Learned Commissioner of Income Tax (Appeals)-National Faceless Appeal Centre (NFAC), Delhi [„Ld.CIT(A)‟], dated 10-01-2025, pertaining to Assessment Year (AY) 2016-17.
None appeared on behalf of the assessee nor was any adjournment application filed. Considering the fact that the appeal was filed way back in February, 2025 and the matter has been adjourned from time to time, it is decided to proceed with the matter based on the material available on record and after hearing the Ld.DR.
In Ground No.1, the assessee has challenged the assumption of jurisdiction by the Ld.PCIT u/s. 263 of the Income Tax Act, 1961 („the Act‟).
In this regard, on perusal of the impugned order, we find that the said order has been passed u/s. 250 of the Act against the order passed by the AO u/s. 143(3) r.w.s. 263 r.w.s. 144B of the Act, dt. 31-03-2022. We, therefore, do not find any basis for challenging the jurisdiction exercised by the Ld.PCIT u/s. 263 of the Act as the impugned order has been passed u/s. 250 of the Act and not the order passed by the Ld.PCIT u/s. 263 of the Act, which has since attained finality and consequent to the said order, the AO has since passed the order u/s. 143(3) r.w.s. 263 r.w.s. 144B of the Act. Accordingly, the ground of appeal so raised by the assessee is hereby dismissed.
5. In Ground No.2, the assessee has challenged the action of the Ld.CIT(A) in failing to consider that the AO has passed the assessment order without providing reasonable opportunity of being heard. Similarly, in Ground No. 3, the assessee has challenged the action of the Ld.CIT(A) in confirming the action of the AO in absence of any show cause issued to the assessee.
6. In this regard, we find that consequent to the order of the Ld.PCIT passed u/s. 263 of the Act, dt. 17-03-2021, the AO has issued a notice u/s. 142(1) of the Act on 29-09-2021, wherein the assessee was allowed time to furnish his response on or before the 13-10-2021. However, there was no response from/compliance on part of the assessee. Thereafter, another notice was issued u/s. 142(1) of the Act on 22-03-2022 fixing the case on 23-03-2023 and wherein the information as sought earlier vide notice dt. 29-09-2021 was asked and again, there was no compliance on the part of the assessee and thereafter, basis material available on record, the AO has proceeded and passed the consequential assessment order dt. 31-03-2022. We, therefore, find that the assessee has been provided reasonable opportunity by issuance of notice firstly on 22-09-2021, wherein adequate time was provided to the assessee to furnish response by 13th of October and given the fact that the assessee has not responded to the said notice, again fresh notice was issued seeking information as sought earlier. We, therefore, find that sufficient opportunity has been provided to the assessee by the AO and in light of the same, Grounds No. 2 & 3 taken by the assessee are hereby dismissed.
7. In Ground No.4, the assessee has challenged the sustenance of addition of Rs. 12,80,697/- for the proportionate interest estimated on loan given and interest debited to the Profit & Loss Account.
8. In this regard, briefly, the facts of the case are that the Ld.PCIT in his order passed u/s. 263 of the Act observed that on perusal of the assessment records, it is seen that the assessee vide letter dt. 23-11-2018, furnished details of loan taken for Rs. 3,52,49,087/- and interest amounting to Rs.31,10,833/- has been charged to Profit & Loss Account. Further, on perusal of the Balance Sheet, it was noticed that the assessee has given unsecured loan of Rs. 4,97,60,762/- on which interest of Rs. 10,87,227/- was charged by the assessee. It was further stated that the rate of interest charged on loan taken by the assessee was 12% p.a. as per Tata Capital loan sanction letter placed on record. Therefore, interest to be charged on loan of Rs. 4,97,60,162/- should have been charged by the assessee at a rate not less than 12% and since the AO has failed to verify the same, the matter was set aside to the file of the AO. Following the said directions of the Ld. PCIT, the AO in set aside proceedings has worked out an amount of Rs. 12,80,697/- being the proportionate interest which the assessee should have charged and the same was brought to tax.
During the appellate proceedings before the Ld.CIT(A), the assessee as part of his grounds of appeal has stated that the AO has made an addition of Rs. 12,80,697/- on account of interest income. However, the fact of the matter is that no interest income has been received by the assessee as certain loans and advances are given to friends and relatives on which no interest has been charged. It was also submitted that the assessee has also taken loan from them from time to time on which they did not charge any interest. It was also submitted that he had taken loan from Tata Capital on certain property which was used for his business purposes, hence, the interest on the said loan was claimed as an allowable expenditure. It was submitted that as far as the other loan transactions are concerned, in terms of loan taken and given, the same was for personal use and neither there was interest collected nor interest given.
We, however, find that there is no finding recorded by the Ld.CIT(A) in this regard and the appeal so filed by the assessee has been dismissed as the assessee has failed to file any documents/information to substantiate his claim. We therefore set-aside the matter to the file of ld CIT(A) to examine the contentions so raised by the assessee and decide the matter afresh after providing reasonable opportunity to the assessee. The assessee is also directed to furnish necessary supporting documentation as so advised. In the result, the ground of appeal is allowed for statistical purposes.
11. In Ground No.5, the assessee has challenged the sustenance of addition of Rs. 10,09,800/- being unsecured loan taken from Shri Mansukh Gala without considering the facts of the case.
12. In this regard, we again refer to the order of the Ld.PCIT u/s. 263 of the Act, wherein the Ld.PCIT has stated that the assessee has secured un-secured loan of Rs. 10,09,800/- from Shri Mansukh Gala. However, the assessee has not submitted ledger confirmation for these transactions and as one of the reasons for selection of scrutiny was large un-secured loan and the AO should have sent a notice u/s. 133(6) of the Act from Shri Mansukh Gala and independently verified genuineness of the loan transaction and since the AO has failed to verify the genuineness of the transaction, the order so passed by the AO was set aside to carry out the necessary verification regarding the genuineness of the loan transaction.
In the set aside proceedings, from the perusal of the assessment order, we do not find any material which suggest that the AO has issued any notice u/s. 133(6) of the Act or called for any information from Shri Mansukh Gala and the only reason stated by the AO was that in the absence of any evidence furnished by the assessee, the amount of loan taken from Shri Mansukh Gala was treated as un-explained credit and the same was brought to tax. Further, we note that during the appellate proceedings, the assessee has submitted before the Ld.CIT(A) as a part of his grounds of appeal that he has taken unsecured loan of Rs. 10,09,800/- and has deducted TDS of Rs. 10,980/- and a copy of TDS certificates were attached along with the appeal documentation so submitted before the Ld.CIT(A). However, in the findings of the Ld.CIT(A), he has stated that the assessee has not furnished any documentary evidence to substantiate the grounds of appeal.
We, therefore, have a situation where the Ld.PCIT has directed the AO to seek necessary confirmation from Shri Mansukh Gala by issuing notice u/s. 133(6) of the Act. However, there is nothing on record that whether the said exercise has been undertaken by the AO and the loan transaction has been verified. At the same time, as far as the assessee is concerned, he has claimed that he has taken unsecured loan and has given interest and has carried out TDS on the said transaction and claim to have submitted necessary documentation before the ld CIT(A), however, the latter has disputed and has held that assessee has not filed any documents in support of his contentions and ground of appeal. We therefore set-aside the matter to the file of ld CIT(A) to call for necessary information from the AO in terms of issuance of notice u/s 133(6) and to examine the contentions so raised by the assessee and decide the matter afresh after providing reasonable opportunity to the assessee. The assessee is also directed to furnish necessary supporting documentation as so advised. In the result, the ground of appeal is allowed for statistical purposes.
15. In Ground No.6, the assessee has challenged the action of the Ld.CIT(A) in sustaining the disallowance of depreciation claim of Rs. 33,039/- being difference between WDV claimed in the return of income. In this regard it was submitted that the said disallowance was already made by the AO while passing the original assessment order u/s. 143(3) of the Act on 27-12-2018. There is however, no finding recorded by the Ld. CIT(A) in this regard nor the original assessment order is on record, we therefore, deem it appropriate to remit the matter to the file of the Ld. CIT(A) to verify the same and whether the same is found to be correct, necessary relief be provided to the assessee.
In the result, the appeal of the assessee is partly allowed for statistical purposes.