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Facts
The Revenue is in appeal against the CIT(A)'s order deleting additions made by the Assessing Officer on account of unexplained investment in fixed deposits and advance for property purchase. The assessee had declared Nil income after claiming carry forward of losses and the AO had made significant additions.
Held
The Tribunal restored the issue of Rs. 26,500/- related to stamp duty payment to the Assessing Officer for fresh examination, allowing an opportunity to the assessee. For the Rs. 30,95,00,000/- fixed deposit issue, the matter was also restored to the AO for examining the genuineness of loans taken from Nisiddh Vision Pvt. Ltd.
Key Issues
Whether the CIT(A) erred in deleting additions related to unexplained investments and advances without proper evidence, and whether opportunity should be granted to the assessee to substantiate claims.
Sections Cited
69, 68
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Income Tax Appellate Tribunal, MUMBAI BENCH “A” MUMBAI
Before: SHRI OM PRAKASH KANT & SHRI RAHUL CHAUDHARY
This appeal by the Revenue is directed against order dated 26.04.2023 passed by the Ld. Commissioner of Income-tax (Appeals) – National Faceless Appeal Centre, Delhi [in short ‘the Ld. CIT(A)’] for assessment year 2018-19, raising following grounds:
M/s Aspect Enterprises Pvt. Ltd. 2 ITA No. 2299/MUM/2023
"On the facts and in the circumstances of the case and in law, the Ld.CIT(A) Ao-pam-3 erred in deleting the addition amounting to Rs. 26,000/- as the assessee has failed to provide explanation/documentary evidence with regard to this amount?"
On the facts and in the circumstances of the case and in law, the Ld.CIT(A) erred in deleting the addition amounting to Rs. 30,95,00,000/- as the assessee Ad- pose- Y has failed to provide explanation/documentary evidence with regard to this amount at the time of assessment proceedings?"
3. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in deleting the addition amounting to Rs. 30,95,00,000/- without calling for remand report from the AO as the assessee has submitted additional evidences during the course of the appellate proceeding with regard to the investment of Rs. 30,95,00,000?" 4. On the facts and in the circumstances of the case and in law, the La.CIT(A) erred in deleting the addition amounting to Rs. 10,00,00,000/-, on account of unexplained investment, as source of funds of Rs. 10,00,00,000/-, given as advance for property remains unexplained? 5. "The appellant prays that the order of the CIT(A) on the above ground be set aside and that of the AO be restored.» 2. Briefly stated, facts of the case are that the assessee filed return of income on 04.10.2018 declaring total income at Rs. Nil, after claiming carry forward of current year losses of Rs.19,50,635/-. The return of income filed by the assessee was selected for scrutiny assessment and statutory notices under the Income-tax Act, 1961 (in short ‘the Act’) were issued and complied. The Assessing Officer made additions totaling to Rs.41,09,30,000/- to the loss returned by the assessee. On further appeal, the Ld. CIT(A) has deleted the additions. Aggrieved, the Revenue is in appeal before the Tribunal by way of raising grounds as reproduced above.
M/s Aspect Enterprises Pvt. Ltd. 3 ITA No. 2299/MUM/2023
Before us, the Ld. counsel for the assessee has filed a Paper Book in three volumes 1 to 28, 1 to 26 and 1 to 13 respectively.
The ground No. 1 of the appeal relate to addition of Rs.26,000/- in relation to registration of property, which has been deleted by the Ld. CIT(A).
4.1 The facts in brief qua the issue in dispute are that the assessee had purchased a property and shown stamp duty charges of Rs.2,21,000/- and registration charges of Rs.30,000/-. The assessee explained source of the payment of the above expenses as under:
Sr. No. Particulars Amount Date of payment as Source of fund per bank record 1. Stamp Duty Rs.1,95,000/- 3rd Aug 2017 Owned fund 2. Registration fees Rs.30,000/- 3rd Aug 2017 Owned Fund 3. Stamp Duty Rs.26,500/- Paid through broker Owned fund bank 4.2 Although, the assessee failed to explain source of the payment of Rs.26,500/- for stamp duty through broker, but the Ld. CIT(A) referred to the copy of the bank statement of the assessee/broker and deleted the addition.
4.3 We have heard the rival submissions advanced by the learned counsel for the parties and perused the material available on record. The issue arising for consideration in the present ground pertains to the payment of registration fee amounting to ₹26,500/-, which is stated to have been paid through the broker’s bank
M/s Aspect Enterprises Pvt. Ltd. 4 account. However, the record does not indicate with clarity as to how the assessee reimbursed or paid the said amount to the broker. In the factual matrix of the case, the question of whether the broker effected payment through his bank account is of limited relevance. The onus squarely lay upon the assessee to demonstrate the mode and manner of reimbursement—whether in cash, by cheque, bank transfer, or any other acceptable mode. No explanation or supporting evidence in this regard appears to have been furnished before the lower authorities. Before us, learned counsel for the assessee has pleaded that one final opportunity may be granted to explain the source of the expenditure incurred towards the said registration charges. Having regard to the totality of the facts and circumstances of the case, and in the interest of substantial justice, we deem it appropriate to restore the matter to the file of the Assessing Officer. The Assessing Officer shall re-examine the issue afresh and afford the assessee an adequate opportunity to furnish documentary evidence substantiating the source of the payment of ₹26,500/- claimed to have been reimbursed to the broker towards registration charges. The ground no. 1 of the appeal of the Revenue is accordingly allowed for statistical purposes.
The ground Nos. 2 and 3 of the appeal of the Revenue relate to addition of Rs.30,95,00,000/- which has been deleted by the Ld. CIT(A).
M/s Aspect Enterprises Pvt. Ltd. 5 5.1 During the course of assessment proceedings, the assessee furnished details pertaining to fixed deposits amounting to ₹81,26,50,000/- maintained with ‘Kotak Mahindra Bank’ during the relevant previous year. The assessee also disclosed interest income of ₹58,04,665/-, which was reflected in the profit and loss account. However, it is an admitted position that the said fixed deposits were not disclosed under the head 'Investments' in the balance sheet. Consequently, the Assessing Officer called upon the assessee to explain the source of investment in the fixed deposits. Upon examination, the Assessing Officer found that two fixed deposit receipts—one amounting to ₹5,95,00,000/- dated 10.06.2017 and another of ₹25,00,00,000/- dated 18.10.2017—were made afresh, whereas the balance fixed deposits were mere renewals or rollovers of earlier deposits. Accordingly, the Assessing Officer required the assessee to explain the source of investment in the aggregate amount of ₹30,95,00,000/- representing the fresh fixed deposits. The assessee, however, failed to satisfactorily substantiate the source of the aforesaid investment. In the absence of a cogent explanation, the Assessing Officer proceeded to treat the said amount as unexplained investment under Section 69 of the Income Tax Act, 1961. In appeal, the assessee contended before the learned Commissioner of Income Tax (Appeals) that the said two fixed deposits had been made out of loans obtained from Nisiddh Vision Pvt. Ltd. Relevant part of decision of Ld CIT(A) is extracted as under:
M/s Aspect Enterprises Pvt. Ltd. 6 ITA No. 2299/MUM/2023
6.4.5 On being asked to link the source of funds, FD wise with the cash flow, the appellant has produced a statement which is reproduced below:
ASPECT ENTERPRISES PVT LTD (EARLIER KNOWN AS IRON MAN REAL ESTATE PRIVATE LIMITED) DETAILS OF LOAN TAKEN, FIXED DEPOSIT MADE AND REPAYMENT OF LOAN FOR A. Y 2018-19 Sr. Details of loan taken Details of FD OPEN Details of FD Closed Details of loan repaid No. Name of Amount of Date of the Name of Amount of Date of Name of Amount of Name of the Amount of Date of loan the loan loan taken the bank FD opening the bank FD party loan repaid repaid party
1. Nishiddh 5,96,00,000 05.06.2017 Kotak 5,95,00,000 06.06.2017 Kotak 5,95,00,000 13.06.2017 Nisiddh 4,95,00,000 13.06.20 Vision Mahindra Mahindra Vision Pvt. Pvt Ltd Bank Bank Ltd. Nisiddh 1,00,000 28.07.20 Vision Pvt. Ltd. Total 5,96,00,000 Total 5,95,00,000 Total 5,95,00,000 Total 5,95,00,000 Amount amount amount amount of of loan of FD of FD loan taken open closed repayment 2. Nisiddh 25,00,00,000 18.10.2017 Kotak 25,00,00,000 18.10.2017 Kotak 25,51,23,543 14.03.2018 Nisiddh 2,46,66,575 04.12.20 Vision Mahindra Mahindra Vision Pvt. Pvt. Ltd. Bank Bank Ltd. Nisiddh 3,30,00,000 05.12.20 Vision Pvt. Ltd. Nisiddh 20.64,44,000 16.03.20 Vision Pvt. Ltd. Total 25,00,00,000 Total 25,00,00,000 Total 25,51,23,543 Total 26,43,10,575 Amount amount amount amount of of loan of FD of FD loan taken open Closed repayment 5.2 The Ld. CIT(A) in para 6.4.6 of the impugned order recorded that loans taken by the assessee for investment in fixed deposits were accepted by the Assessing Officer as genuine and the addition was dropped after the show cause statement. But the Ld. Departmental Representative (DR) submitted that the above finding of the Ld. CIT(A) is factually incorrect and no such details of the loans were submitted before the Assessing Officer and even the Ld. CIT(A) has not called for remand report from the Assessing Officer
M/s Aspect Enterprises Pvt. Ltd. 7 for admitting the additional evidence. Therefore, the relief allowed by the Ld. CIT(A) is in violation of the principle of natural justice. 5.3 We have heard rival submissions of the parties and perused the relevant materials on record. The issue in dispute is source of investment in fixed deposits of Rs.30,95,00,000/-. The Assessing Officer in para 4 of the impugned order has recorded that no source of the investment in fixed deposits of Rs.30,95,00,000/- was explained by the assessee during the assessment proceedings, whereas the Ld. CIT(A) has recorded a contradictory finding that source of the fixed deposits was explained by way of loans which were accepted by the Assessing Officer. Before us, the assessee has failed to substantiate the finding which has been recorded by the Ld. CIT(A). Thus, in view of incorrect factual observation without any supporting evidences, the finding of the Ld. CIT(A) cannot be sustained. Before us, the Ld. counsel for the assessee however submitted that if an opportunity is allowed, the assessee is willing to file all the documents in support of genuineness of the loans and discharge its onus u/s 68 of the Act by way of filing necessary evidence in support of identity, creditworthiness of the loan donor and genuineness of the transaction. In view of above facts and circumstance and in the interest of justice, one more opportunity is provided to the assessee and the matter is restored back to the Assessing Officer for examining unsecured loan taken from Nisiddh Vision Pvt. Ltd. in terms of section 68 of the Act. It is the M/s Aspect Enterprises Pvt. Ltd. 8 ITA No. 2299/MUM/2023 responsibility to the assessee to file all the necessary documents in support of its claim that loans obtained from Nisiddh Vision Pvt. Ltd. are genuine. Accordingly, the ground No. 2 and 3 of the appeal of the Revenue are allowed for statistical purposes.
The ground No. 4 of the appeal relates to the addition of Rs.10,00,00,000/- in relation to advance to Mohit Bharatiya for purchase of a property, which has been deleted by the Ld. CIT(A). The Assessing Officer has recorded that assessee had filed confirmation of the ledger account from Mr. Mohit Bharatiya however, the assessee failed to explain source of such advance given for purchase of property through Mr. Mohit Bharatiya. Before the Ld. CIT(A) also the assessee filed confirmation of the ledger account from Mr. Mohit Bharatiya and copy of the contract/agreement of land regarding source of advance. The assessee submitted before the Ld. CIT(A) that investment is either from own fund or borrowed fund and coy of the bank statement was enclosed. During the course of the hearing, the Ld. counsel indentified the source of the said advance of Rs.10 crores to Mr. Mohit Bharatiya appearing in bank statement. The credit of Rs. 10.00 lakhs is appearing in the bank account of Mohit Bhartiya on 19th Mrch, 2018 (PB-IV/2). The contra entry of debit of Rs. 10.00 lakhs is appearing in bank statement of the assessee on 19/03/2018 ( PB-IV/3) and source of which by way of money received on 17/03/2028 form KBJ venture private limited. The DR
M/s Aspect Enterprises Pvt. Ltd. 9 also could not controvert that advance to Mr Bharatiya has been made though bank account and source of the same was appearing as certain credit into bank account. Thus, the source of advance payment stands duly explained. We don’t find any infirmity in finding of ld CIT(A) on this issue. The ground No. 4 of the appeal of the Revenue is accordingly dismissed.
6.1 The ground Nos. 5 and 6 of the appeal are general in nature and therefore, same are dismissed as infructuous.
In the result, the appeal of the Revenue is allowed partly for statistical purposes.