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Income Tax Appellate Tribunal, [ DELHI BENCH “C”: NEW DELHI ]
Before: MS. SUCHITRA KAMBLE & SHRI PRASHANT MAHARISHI
This Appeal is filed by Himalayan Dairies Pvt. Ltd. – the assessee against the order passed by the Commissioner of Income Tax (Appeals)–XV, New Delhi, { the Ld CIT (A) ] dated 28.02.2013 wherein the appeal filed by the assessee against the assessment order passed under Section 143(3) of the Income Tax Act, 1961 (the Act), dated 30.11.2011 by Income Tax Officer, Ward 12 (4) , New Delhi { the Ld AO ] for assessment year 2009-10 was dismissed. Therefore, assessee is in appeal before us on three issues: No. 1 – Disallowance under Section 14A read with Rule 8D of Rs.5,27,095/- and also [2] the addition of Rs.1,21,59,988/- on account of addition of unexplained investment, [ 3] applicability o explanation to section 73 of the Act.
The brief facts of the case shows that assessee is stated to be engaged in making finance, advances, investment and trading. It is also stated that Page | 1 company purchased and sold shares from the market and through direct investment in the companies. It is also making finance and advance to various persons. It has filed its return of income declaring a loss of Rs.7,749/- on 29.09.2009. The return of the assessee was picked up for scrutiny. Assessing Officer noted that assessee has declared profit of Rs.5,86,262/- as per profit and loss account. However, return of income has been filed at a loss of Rs.7,749/- and in computation loss of Rs.60,637/- has been claimed. Consequent to scrutiny assessment the order under Section 143(3) of the Act was passed by the ld. Assessing Officer on 30.11.2011 wherein total income of the assessee was determined at Rs.1,77,54,763/- and further a speculative loss to be carried forward was determined at Rs.75,429/-. Against this assessment order assessee preferred appeal before the ld. CIT (Appeals) un-successfully and, therefore, this appeal.
As per the grounds of appeal
filed before us, the assessee is contesting the above three isues.
4. We have heard the rival contentions and perused the orders of the lower authorities.
5. Ground No. 1 is general in nature. No arguments were advanced and, therefore, the same is dismissed.
6. Ground No. 2 is with respect to the disallowance under Section 14A of the Act of Rs.5,27,095/-. During the course of assessment proceedings assessee has not made any disallowance under Section 14A of the Act, therefore, the Assessing Officer raised an issue. By letter dated 14.11.2012 assessee offered disallowance of Rs.15,450/-. Assessing Officer noted that no proper disallowance is made. Therefore, he applied the provisions of Rule 8D of the IT Rules for making disallowance u/s 14A of The Act. Assessing Officer noted that assessee has investment as well as the stocks and is earning exempt income from both these portfolios. Therefore, Section 14A of the Act applies on it. He worked out 0.5% of the average value of investment for the purpose of disallowance of administrative expenditure at Rs.5,27,095/- and disallowed the same. Assessee carried the matter before the ld. CIT (Appeals), who confirmed the disallowance. We find that assessee has shown dividend income in its profit and loss account of Rs.5,94,012/- and also has debited the expenditure of Rs.48,280/-. On page No. 13 of the Paper book it clearly shows that assessee has only claimed expenditure of Rs.48,280/-. Therefore, naturally the disallowance cannot exceed the expenditure incurred and claimed by the assessee as deductible expenditure. No other arguments are advanced and, therefore, we direct the ld. Assessing Officer to restrict the disallowance made by the ld. Assessing Officer and confirmed by the ld. CIT (Appeals) of Rs.5,27,095/- to only Rs.48,280/-. Accordingly, ground No. 2 of the appeal is partly allowed.
7. The second issue involved is an addition of Rs. 1,21,59,988/- as unexplained investment under Section 69 of the Act. Vide order-sheet entry dated 04/10/2011 the assessee was asked to file justification and confirmation with respect to shares received and claimed on securities lending. The assessee did not file any explanation. The fact shows that as per letter dated 4.08.2011 assessee submitted details of shares obtained on loan as well as held as inventories as investment. During the year it was found that there are 18 different scripts credited in the demat account of the assessee starting from 12.11.2008 to 15.11.2008. The above demat entries which are stated to be shares received on loan are not recorded in the books of accounts and source thereof has not been explained, therefore, the ld. Assessing Officer adopted the lowest market rate of shares on the date of credit in demat account of assessee and made an addition of Rs.1,21,59,988/-. The ld. CIT (Appeals) confirmed the addition holding that the appellant did not furnish any explanation. On appeal before us the claim of the assessee is that the order-sheet entry dated 4.10.2011 is incorrect and no such details were asked. The assessee claims that the addition has been made without any notice to the assessee. On the merits of the case he referred to the transaction statement of the demat account of the assessee with National Security Depository Ltd. of the depository Alankrit Assignments Ltd. He submitted that the shares are received in this demat account through another DPID and further he referred to page No. 62 of the Paper book stating that all these shares have been received from Shri Balaji Traders, A–231,Derawal Nagar, New Delhi, Permanent Account Number ABAFS3304A. He also submitted the statement of loan of shares wherein it is claimed that the shares have been received and returned during the same year. He further referred to the fact that the assessee has already returned the above investment and, therefore, no addition can be made. The ld. AR also submitted the copy of the order-sheet obtained by the assessee under the Right to Information Act and stated that the ld. Assessing Officer has not asked any details about receipt of shares in the demat account, but has interpolated the entries in the order-sheet.
The ld. DR submitted that the ld. Assessing Officer has specifically asked the details of shares received in the demat account which assessee has failed to show and, therefore, the addition has been made. He further referred to the order of the ld. CIT (Appeals) and specifically referred to para No. 3 of that order stating that even if it is to be agreed that assessee was not given proper opportunity before the ld. Assessing Officer, then the conduct of the assessee before the ld. CIT (Appeals) where despite giving almost 10 opportunities assessee did not appear before him. It was further stated that the order passed by the ld. CIT (Appeals) in absence of any argument or submission made before him. He, therefore, submitted that assessee does not have anything to say on this issue. Even otherwise on merits, he submitted that when a loan has been taken of shares by the assessee, the assessee needs to show the identity from whom these shares have been received and whether such person was capable of holding such shares or not. He further submitted that it is highly unusual that why somebody will lend the shares to the assessee without any benefit. He further submitted that even before the co-ordinate bench assessee has submitted only the transaction statement of his demat account. He submitted that the complete demat account is not available in the Paper book, no confirmation of Shri Balaji Traders is available. No demat account of Shri Balaji Traders is furnished. In view of this, the lower authorities have correctly confirmed the addition.
We have carefully considered the argument of the assessee as well as the ld. DR and orders of the lower authorities. Apparently, it is seen that on 4.08.2011 the assessee has filed details of shares obtained on loan. However, assessee did not file any confirmation of the party from whom the shares were received, what is the object of obtaining loan from a party, what is the relationship of the security lender with the assessee, when those shares were sold and at what price, whether the assessee has earned profit and whether anything has been transferred to the security lender over and above the securities. All these details are required to be verified. Even if it is accepted that assessee was not granted proper opportunity of hearing before the lower authorities i.e. before the Assessing Officer in absence of any show-cause notice, as alleged, it cannot be said that assessee was devoid of opportunity before the ld. First appellate authority as more than 10 notices of hearing were issued and assessee kept on seeking adjournments. Therefore matter is not at all examined by the lower authorities, before us only assertions are made, evidences were not produced. Therefore, as the full facts have not been examined by the lower authorities, and assessee also might not have proper opportunity before ld Ao, order of ld CIT (A) is exparte, we set aside the whole issue back to the file of the ld. CIT (Appeals)with the following direction to the assessee to submit necessary details :-
i. The name, address, Permanent Account Number, confirmation, demat account of the securities lender along with the Income Tax Returns as how the lender has dealt with the lending of stock; ii. To show how stock lending has been accounted for in the books of accounts of the assessee and whether any profit or loss incurred on the sale or purchase of shares taken on loan; iii. The nature and genuineness of the transaction as to why anybody will give a loan of more than 18 scrips to an assessee between a span of only three days i.e. 12.11.2008 to 15.11.2008. iv. Relationship of the assessee with the stock lender; v. The details of re-payment /return of the stocks by the assessee; vi. Whether loan borrowing and lending of such stock is permitted in case of listed securities by Securities & Exchange Board of India; & vii. The assessee may also produce any further evidences to justify the above transaction.
The ld. CIT (Appeals) may consider the above details or any other explanation furnished by the assessee and then decide the issue on the merits of the case. We also make it absolutely clear that assessee should be given no more than 2 opportunities of hearing looking at the past record of appearance before the ld. CIT (Appeals). The assessee is directed to furnish all the information within 60 days from the date of this order before the ld. CIT (Appeals). Needless to say that the ld. CIT (Appeals) then decide the issue on the merits of the case. Ground Nos. 4–8 of the appeal are decided accordingly.
The remaining ground No. 3 is with respect to whether Explanation to Section 73 is applicable in the case of the assessee company or not. The Assessing Officer has held that the assessee company is engaged in speculative activities and, therefore, the speculative loss cannot be allowed to be set off against any other income and, therefore, Rs.75,429/- was determined by him as speculative loss to be carried forward and to be set off only against the speculative income.
On appeal before the ld. CIT (Appeals) same was decided as per ground No. 4 at para No. 4.3 of the order. Naturally, the assessee did not appear before the ld. CIT (Appeals) and hence the issue was decided against assessee. For the reason given by us while deciding other grounds of appeal
, we also set aside this ground of appeal back to the file of the ld. CIT (Appeals) with direction to the assessee to show that the assessee is not engaged in speculative activities or the Explanation to Section 73 do not apply. Thus, this ground of appeal is decided accordingly.
13. The order in this appeal was placed for pronouncement on 7 October 2021. However on that date, we received a detailed compilation by the assessee. Therefore, in the interest of justice , on the appointed date of pronouncement, we deferred it further to consider the arguments of the assessee.
14. In the written submission mostly the assessee has objected to the assessment proceedings before the learned assessing officer stating that there are some irregularities in the order sheet. The assessee has also submitted the affidavit of the chartered accountant who appeared before the learned assessing officer in assessment proceedings. We have considered the arguments of the assessee and find that even otherwise, the assessee did not raise such issue before the learned CIT – A and further before the learned CIT – A assessee sought adjournments instead of making this points before him. Therefore, it is not relevant so as to decide the issue. Even otherwise assessee stating that assessee did not get proper opportunity of hearing before the assessing officer. This grievance is as such interest by the us in our order.
15. The next grievance of the assessee is about the addition of shares taken on loan by the assessee from another person. In the present submission at page number 6 assessee has submitted the confirmation of Shri Balaji traders from womb assessee has received shares on loan. Assessee has also got submitted the transaction statement of one Shri Praveen Kumar and Rukmini Devi who are stated to be the partners of Balaji traders same is placed at page number 8 – 26. Further the assessee submitted once again the transaction statement of the assessee placed at page number 27 – 30 of the paper book. Assessee also submitted the assessment order passed u/s 143 (3) of the act for assessment year 2009 – 10 in case of Shri Balaji traders passed on 30/12/2011. Thus the assessee has submitted all-new documents which have never been submitted before the lower authorities. Even before us no application for admission of additional evidences were made. Even otherwise on the merits we have set aside this issue back to the file of the learned CIT – A. The assessee will have the full opportunity there to explain his case. Thus the additional submission made by the assessee does not have any impact on our decision rendered earlier in this order.
In the result appeal of the assessee is partly allowed for statistical purposes. Order pronounced in the open court on : 13/10/2021.