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Facts
The Assessing Officer (AO) made additions of Rs. 19,06,266/- on account of share sale and Rs. 1,63,50,000/- for alleged unexplained investments. The CIT(A) upheld both additions. The assessee argued that the first addition was already offered as capital gains and constituted double taxation, and for the second addition, the amount was disclosed as investments in the balance sheet.
Held
The Tribunal found that the AO's order lacked substantial assistance from the assessee and the CIT(A) relied heavily on the AO's findings without a thorough examination. The Tribunal remanded the matter back to the CIT(A) for fresh adjudication, directing to consider the explanation regarding capital gains and verify the balance sheet entries for the investment addition.
Key Issues
Whether the additions made by the AO for sale of shares and unexplained investments were justified, and if the CIT(A) properly adjudicated the appeal, especially concerning alleged double taxation and proper disclosure in the balance sheet.
Sections Cited
143(3), 263, 144B, 250, 68, 46A, 11UA
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, “A” BENCH KOLKATA
S.R.P. Infocom Private Limited, KB-21, 3rd Floor, Vostok House, Sector – III, Salt Lake, Kolkata - 700098 [PAN: AABCD6707F] .....................…...…………….... Appellant vs. Income Tax Officer, Ward 4(4), Kolkata, Aayakar Bhawan, P-7, Chowringhee Square, Kolkata - 700069 ...............…..….................... Respondent Appearances by: Assessee represented by : S. Bhattacharya, AR Department represented by : Subhendu Datta, CIT-DR Banik Deb Barman, Sr. DR Date of concluding the hearing : 21.01.2025 Date of pronouncing the order : 04.02.2025 O R D E R
PER SANJAY AWASTHI, ACCOUNTANT MEMBER:
This appeal arises from the order of the Ld. Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi [hereinafter referred to as “the Ld. CIT(A)”] passed u/s 250 of the Income Tax Act, 1961 (hereinafter referred to as “the Act”), dated 03.05.2024.
1.1. In this case, it is seen that that the Ld. Assessing Officer (in short ‘the AO’) has passed an order u/s 143(3) r.w.s. 263 of the Act which is read with section 144B of the Act dated 27.03.2022. Through this order, the following additions were made:
(a) Rs. 19,06,266/- added on account of sale of shares of M/s Paulmech Hospitality Pvt. Ltd.
It has also been recorded by the Ld. AO that a draft assessment order was sent to the assessee on 24.03.2022, but there was no response from the assessee’s side and hence he made the impugned additions.
1.2. Aggrieved with the action of the Ld. AO, the assessee approached the CIT(A), who has confirmed the two additions with the following findings:
“5.2.2 It is seen that the appellant had sold 9,50,000 shares of M/s. Paulmech Hospitality P Ltd. On a sale consideration of Rs. 3,45,85,662/- @ Rs. 36.41 per share. On verification of the computation of income filed along with the return of income that the appellant had shown long term capital gain at Rs. 2,38,79,877/-. On going through the working furnished the full value of consideration was taken at Rs. 3,45,85,662/ out of which brokerage @ 1% Rs. 3,45,856/- was reduced. The assessee has purchased the shares on 22.4.2013 for Rs. 94,99,974/- and indexed cost of acquisition was Rs. 1,03,39,806/- which was reduced and balance amount of Rs. 2,38,79,877/- was offered to tax. Without considering this fact, the AO has made an addition of Rs. 1,90,62,662/- to the income returned on the ground that the appellant had failed to furnish the valuation report under rule 11UA of the Act. It is contended by the appellant that it was a sale of equity shares held as investments in Paulmech Hospitality P. Ltd. to another company Mis Barque Hotels P Ltd vide agreement dated 14.5.2014 The entire sale proceeds of 5,75,756 equity shares @ 60.07 amounting to Rs. 3,45,85,662/- were offered to revenue for taxation. It is pertinent to mention that in the submissions made by the appellant it has been stated that the appellant sold 5,75,756/- equity shares @60.07 amounting to Rs. 3,45,85,662/-. However, the appellant failed to submit valuation report under rule 11UA to adopt the sale value of each share @60.07. In the absence submission of valuation report as per Rule 11UA of the Income Tax Rules, 1962, the contention of the appellant that the value of each share sold was @60.07 is not considered to be correct. Therefore, the addition of Rs. 1,90,62,662/- is Upheld. 5.2.3 With regard to the addition of Rs 1,63,50,000/-, it is seen from the assessment order that the assessee has not submitted complete details of investment of Rs. 8,65,89,190/- as appears in the balance sheet. The appellant had submitted details to the extent of Rs. 7,02,39,190/- only. Therefore, the difference amount of Rs. 1,63,50,000/- is brought to tax as unexplained investment. It is submitted by the appellant that as per Note No. 8- Noncurrent investments in the audited balance sheet for the year under consideration of the had disclosed Rs. 1,63,50,000/- as investments in assets held for resale / capital appreciation. Though the assessing officer has asked for details of investment to the tune of Rs. 8,65,89,190/- the appellant had submitted to the tune of Rs. 7,02,39,190/- only. In the absence of the details of Rs. 1,63,50,000/- is added to the total income. Now the appellant had submitted the details of the investment. If the details are available with the appellant, why the same should not be submitted before the AO is best known to it only. Further, the appellant had not furnished the supporting documents for these investments. Therefore, in the absence of the verifiable evidences in support of its claim of investment, I find no reason to hold that the AO was wrong S.R.P. Infocom Pvt. Ltd. in making the addition, and accordingly, the addition of Rs. 1,63,50,000/- is upheld.” 1.3 Further aggrieved, the assessee has approached the ITAT with the following grounds:
“1. That the Ld. Commissioner of Income-tax (Appeals), NFAC was wrong in upholding the addition of Rs.1,90,62,662 made by the Assessing Officer u/s 68 as alleged unexplained Cash Credit.
That without prejudice to the contention raised in Ground No., 1 above, the Ld. Commissioner of Income-tax (Appeals), NFAC failed to appreciate that the appellant had offered the entire Sale Proceeds of Rs.3,45,85,662 under the head Capital Gains' and thus there occurred double taxation of the added sum of Rs.1,90,62,662.
That the Ld. Commissioner of Income-tax (Appeals), NFAC was wrong in upholding the addition of Rs.1,63,50,000 made by the Assessing Officer as alleged unexplained Investments.
4. That without prejudice to the contention raised in Ground No. 3 above, the Ld. Commissioner of Income-tax (Appeals), NFAC failed to appreciate that during the Assessment proceeding the appellant had explained before the Assessing Officer that the sum of Rs.1,63,50,000 had been the Investments in Assets held on resale/capital appreciation which had duly been disclosed in the Balance Sheet and thus it had been wrong in treating the said sum of Rs.1,63,50,000 as alleged unexplained Investments.
That the Appellant craves leave to add, modify or withdraw any Ground or Grounds of Appeal
before or at the time of Hearing of the Appeal.”
2. Before us, the Ld. AR has filed a detailed paper book running into 99 pages. However, the Ld. AR has clearly stated that the payment confirmation received from one Barque Hospitality Pvt. Ltd. was obtained only in July 2024 and hence could not be placed before either of the lower authorities (pages 63 and 64 of paper book). The Ld. AR also averred that the assessee has suffered a double taxation since, the entire sales profit of Rs. 3,45,85,662/- was offered as capital gains and out of this amount Rs. 1,90,62,662/- has again been added u/s 68 of the Act by the Ld. AO. Regarding the second addition of Rs. 1,63,50,000/- it was averred that the Ld. AO failed to appreciate that there was no accounting entry in the balance sheet as far as the impugned addition was concerned.
2.1 The Ld. AR relied on the orders of authorities below.
3. We have carefully considered the rival submissions and also gone through the orders of authorities below and the paper book filed by the assessee. A perusal of the Ld. AO’s order reveals that the same was passed without substantial help from the assessee since it is recorded on page 3 (para 2.5) of Ld. AO’s order that out of five opportunities provided to the assessee only one was availed. It is further seen that the Ld. CIT(A) has been content to rely on the Ld. AO’s findings and has not really gone into the issue of alleged double taxation and the fact that the entries in the balance sheet could have been appraised at his level. In light of this fact, we remand this matter back to the file of Ld. CIT(A) for fresh adjudication with the direction that their certainly cannot be any double taxation of one amount, under different provisions of the Act. The new evidence filed before us deserves to be filed before the Ld. CIT(A) with a proper application under Rule 46A so that remand report can be called from the Ld. AO. Accordingly, it is reiterated that while adjudicating this matter, the Ld. CIT(A) would consider the explanation of the assessee regarding the capital gains issue and thereafter, take a decision as per law. Regarding the addition of Rs. 1,63,50,000/-. The Ld. CIT(A) would verify the entries in the balance sheet, if needed with the help of Ld. AO, and thereafter, take an appropriate decision as per law.
In the result, the appeal filed by the assessee is allowed for statistical purposes.
Order pronounced in the court on 04.02.2025