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Facts
The assessee's appeal was filed with a delay of 69 days due to a partner's medical issues and father's death. The assessee sought condonation of delay, citing these reasons. The delay was reportedly due to a partner's prolonged illness and subsequent family bereavement, preventing timely filing.
Held
The Tribunal condoned the delay of 69 days, finding sufficient cause due to the partner's medical condition and bereavement. The Tribunal then adjudicated the grounds of appeal, dealing with additions made by the Assessing Officer regarding unexplained capital, unsecured loans, and interest income.
Key Issues
The primary issues were whether the delay in filing the appeal should be condoned and the merits of the additions made by the Assessing Officer on account of unexplained capital, unsecured loans, and interest income.
Sections Cited
250, 147, 139(1), 148, 68, 194A
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Income Tax Appellate Tribunal, AHMEDABAD “C” BENCH
Before: Shri Sanjay Garg & Ms. Annapurna Gupta
Per Annapurna Gupta, Accountant Member:
This is assessee’s appeal against the order passed by National Faceless Appeal Centre (NFAC), dated 09-09-2024 u/s. 250 of the Act.
The registry has noted the appeal to be filed by delay of 69 days. The assessee has filed an application seeking condonation of delay stating that there were sufficient reasons for the same. The application mentions the fact that the delay was on account of reason that the email id of one of the partners of the assessee firm was given to the Department for the purpose of e- communication and this particular partner had developed serious medical issues around the time the appellate order was passed by the CIT(A) and the said partner subsequently had Ispatam Metals, A.Y. 2018-19 passed away also. He pointed out that while CIT(A) order was passed on 09-09-2024 immediately thereafter around the second week of October the partner whose email id was available with the Department i.e. Shri Kapilkumar Kansal developed Lumbo- Sacral Spine and had to go for MRI on 17-10-2024 which reported mild-moderate compression of left exiting nerve roots. His father passed away immediately thereafter 15-11-2024 and the said partner under continuous treatment was discharged only on 25-12-2024. That when he resumed business on discharge in Jan, 2025, he became aware of the passing of CIT(A) order and took pro active steps to file the appeal to the ITAT. It was accordingly filed on 7th Feb, 2025 with a delay of 69 days. It was pleaded that the delay was neither intentional nor warranted and if the delay is not condoned, the assessee would suffer irreparable loss and injury while the Department would not suffer in any way. In the interest of justice, the delay was therefore pleaded to be condoned. The aforestated facts leading to the delay were stated on a sworn affidavit by the partner who was cause for the delay i.e. Shri Kapilkumar Kansal. The ld. D.R. opposed the condonation of delay.
Having considered the cause adduced by the assessee for the delay stated on a sworn affidavit by the partner of the assessee firm whose medical condition was stated to have caused the delay, we are inclined to concur with the counsel for the assessee that there was sufficient cause of the delay of 69 days in filing of the present appeal before us by the assessee. The fact of the email id of the partner of the assessee firm Shri Kapilkumar Kansal being given to the Department for the purpose of e-communication has been controverted by the ld. D.R. No infirmity or incorrectness has been pointed by the ld. D.R. in the factual submission that the said partner was 2 Ispatam Metals, A.Y. 2018-19 medically unwell and undergoing treatment during the period when he was required to file the appeal to the ITAT. That the said partner was discharged on 25-12-2024 and on resumption of work in Jan, 2025, therefore he became aware of the first appellate order and took pro-active steps to file present appeal before us. We are convinced that there was sufficient cause for the delay of 69 days in filing of the present appeal before us and noting the settled position of law with regard to the condonation of delay as held by the Apex Court in cases of N. Balkrishnan V. M. Krishnamurty, (1998) (7 SCC 123) and B. Madhuri Goud V.B. Damodar Reddy, (2012) 12 SC 693,since sufficient cause has been adduced by the assessee for the delay, the same needs to be condoned to meet the ends of justice. Accordingly, the delay in filing of present appeal of 69 days is condoned.
4. Taking up the appeal for adjudication the grounds raised read as under:- “1.1 The order passed by U/s. 250 passed on 09.09.2024 for AY 2018-19 by NFAC, [CIT(A)], Delhi (for short CIT(A)" upholding the additions aggregating to Rs. 4,78,45,243/- made by A.O is wholly illegal, unlawful and against the principles of natural justice.
2.1 The ld. CIT(A), has grievously erred in law and or on facts in not appreciating that there could not be compliance to the notices claimed to be issued solely on account of failure of the managing partner Shri kapilkumar kansal to check his mail id from time to time which has resulted on account of the mental tension and worry due to huge losses in the business and pressure from dues of the creditors and it had also affected his health. Thus, there was a sufficient cause for failure to comply with the notices claimed to be issued by NFAC.
3.1 The ld CIT has grievously erred in law and or on facts in upholding that the additions as under: Sl. No. Particulars of addition Amount (Rs.) 1. Capital introduced in partner 2,92,98,928/- account 2. Unsecured loans 1,85,79,000/- 3. Interest income from Liamani 67,315/-
3.2 That the in the facts and circumstances of the ld CIT(A), ought not to have upheld the additions aggregating to Rs 4,78,45,243/- as above. It is, therefore, prayed that the additions aggregating to Rs.4,78,45,243/- upheld by the CIT(A) may kindly be deleted.”
3. As is evident from perusal of the grounds as above, the assessee has agitated the confirmation by the CIT(A) of the addition made by the Assessing Officer on account of capital introduced in assessee firm, the source of which remained unexplained, amounting to Rs. 2,92,98,928/-; unsecured loans taken by the assessee source of which remained unexplained amounting to Rs.1,85,79,000/- and interest earned by the assessee not returned to tax amounting to Rs.67,350/-. The CIT(A) has passed an ex-parte order in the absence of non- compliance by the assessee to various notices issued to it during appellate proceedings. The Assessing Officer however has made the additions considering the reply filed by the assessee during the assessment proceedings and after appreciating all evidences/documents/explanations furnished before it during assessment proceedings.
Arguments were made by the ld. counsel for the assessee challenging the impugned addition based on documents furnished during assessment proceedings itself. After hearing both the parties, we shall adjudicate the challenges raised by the assessee to the various additions made by the Assessing Officer as noted above by us. Before proceeding to adjudicate the issues, it is pertinent to point that assessment order in the present case was passed on account of assessment framed in re- assessment proceedings u/s. 147 of the Act. The reasons for Ispatam Metals, A.Y. 2018-19 reopening the case of the assessee was that the assessee was noted to have not filed any return of the impugned year, but at the same time, it was found that the assessee made huge cash deposits of Rs. 17,60,550/- with the ICICI Bank Ltd., made huge cash withdrawals of Rs. 2,15,52,500/- and 56,87,800/- from M/s. ICICI Bank Ltd. and M/s. Yes Bank Ltd. respectively and also earned interest of Rs. 63,315/- from M/s. Leelamani Infra. During assessment proceedings, the assessee was asked to justify the cash deposits and huge cash withdrawals as also interest earned by the assessee and to justify the same, the assessee filed its profit and loss account, bank statement and such other documents. On perusing the same, the Assessing Officer noted that the assessee had not filed any return of income for the assessment year prior to 2018-19 i.e. the impugned assessment year and therefore he asked the assessee to justify the capital introduced in the partnership firm which on 31-01-2018, i.e at the close of the impugned A.Y, amounted to Rs. 2,92,88,929/-. The assessee was asked to furnish all details amount wise and year wise of the capital contributed justifying the genuineness of the same with necessary evidences. Similarly, the assessee was noted to have reported unsecured loans as addition under impugned year i.e. 2017-18 amounting to Rs. 1,85,79,000/-. The assessee was asked to justify genuineness of the unsecured loans also. The assessee contended the entire capital and major portion of the unsecured loans to have been come in the partnership firm in the preceding year. But in the absence of evidence filed by the assessee justifying its explanation, the Assessing Officer treated the entire amount of partners capital and of unsecured loans as unexplained credits of the impugned year and added the same to the income of the assessee. In relation to the interest receipts, Ispatam Metals, A.Y. 2018-19 the Assessing Officer found the Form 26AS of the assessee for the impugned year to reveal the assessee to have received interest of Rs. 67,315/- from M/s. Leelamani Infra which he found was not disclosed in the return filed in response to the notice u/s. 147 of the Act. The assessee contended that he had not received the said interest but surrendered the same for addition to its income which the Assessing Officer accordingly added to the income of the assessee.
In this backdrop, we shall proceed to adjudicate the addition made in the hands of the assessee on account of partner’s capital and unsecured loans added u/s. 68 of the Act as unexplained credits and interest income, after dealing with contention raised by the assessee and considering the findings of the Assessing Officer and the documentary evidences available on record.
First taking up the issue of partner’s capital, it is pertinent to reiterate the facts noted by the Assessing Officer which have remained uncontroverted before us. (i) The assessee was partnership firm admittedly formed in F.Y. 2014-15 and had never filed return of income for any of the years right from the beginning upto the immediately preceding assessment year i.e. assessment year 2017-18 (ii) That even for assessment year 2018-19, no regular return of income in terms of section 139(1) of the Act was filed by the assessee. The return of income filed by the assessee was only in response to the notice issued for reopening the case of the assessee u/s. 148 of the Act. Thus, it is a fact on record which is not disputed that the assessee had never in the past filed any return of income and even in the impugned year, the regular return of 6 Ispatam Metals, A.Y. 2018-19 income which it was required by law to file in terms of section 139(1) of the Act was not filed by the assessee. The return filed in response to notice issued u/s. 148 of the Act disclosed nil income of the assessee for the impugned year, assessment year 2018-19. During re-assessment proceedings, the assessee submitted its profit and loss account, balance sheet, bank statement, trial balance and some ledgers in respect of purchase and sale.
(iii) Balance sheet of the impugned year revealed capital outstanding of partners as at the close of the year i.e. 31- 03-2018 of Rs. 2,92,88,929/-. The Assessing Officer asked the assessee to submit details of introduction of capital with regards to date of introduction of capital and their concerned bank statement for introduction of capital, PANs of the partners, the ITR copies of the partners.
(iv) The assessee furnished balance sheet of earlier years which were unaudited and stated that the capital was introduced by the partners in the preceding year and the amount reflected in the balance sheet of the impugned year was the balances carried forward from earlier years.
Except this, unaudited balance sheet of earlier years no other evidence was filed by the assessee proving the introduction of capital by partners in the preceding year. The copy of bank statement was not filed by the assessee of the preceding years pleading that since its bank account become inoperative, the bank was not co-operating furnishing bank statement of the assessee firm of the preceding year. The Assessing Officer has noted that the assessee failed to provide the mode, date, year wise bank Ispatam Metals, A.Y. 2018-19 statement statements, confirmation letters and documentary evidences in support of introduction of capital .That the assessee had not furnished the audited profit and loss account, audit report for earlier years. These facts noted by the Assessing Officer have not been controverted in any way by the ld. ld. counsel for the assessee. Further, the Assessing Officer extracted the details of the partners from the departmental data base and found the partners to have filed return of income for some of the preceding year but noted that they declared very meager income and had not shown any details of investment. He found the income declared by the partners to be not even sufficient to meet their day to day expenses. The detail relating to the partners examined by the Assessing Officer is tabulated at page no. 5 to 9 of the year as under:
The facts noted in the tabulated form have also remained uncontroverted by the ld. counsel for the assessee.
Briefly put the uncontroverted facts relating to the issue of capital of partners in the books of the assessee firm amounting to Rs. 2.92 crores is that the assessee failed to file any documentary evidence proving that the impugned amount was introduced in the firm in the preceding years. It is an uncontroverted fact that the assessee failed to provide its bank statement of preceding years showing receipt of capital in the said preceding years. The only evidence which has been relied upon by the assessee for demonstrating that the capital was introduced in the preceding years is the balance sheet of the assessee firm of the preceding years. Again it’s a fact on record that the assessee had not filed its return of income for the preceding years and so there was no occasion to furnish any balance sheet or profit and loss account to the Department in the preceding years. The balance sheet and profit and loss account of the preceding years now furnished to the Assessing Officer undisputedly are unaudited. Therefore we concur with Ispatam Metals, A.Y. 2018-19 the Revenue that the documents now furnished have no veracity and are only afterthought, they are only self-serving documents furnished by the assessee which do not have the seal and approval of any auditor, have not been furnished earlier to any third party, therefore the Assessing Officer is right in holding that these documents cannot be taken cognizance of for explaining capital introduced in the assessee firm in the preceding years. Surely, the assessee has failed miserably to demonstrate that capital was introduced in the assessee firm in the preceding years. For the genuineness of the capital reflected in the impugned year the assessee has again failed to discharge its onus to prove the genuineness of the same. He did not file the ITRs or the confirmations of any of the partners who had introduced capital in the assessee firm. It was only by virtue of the effort of the Assessing Officer who extracted the data pertaining to the partners from the departmental record that the ITR of the partners came to be accessed by the Assessing Officer and the said ITRs revealed the fact of the partners having returned meager income which fact has not been disputed by the ld. counsel for the assessee. either before the Assessing Officer or even before us. Therefore there is no doubt that the partners having returned very meager income, their creditworthiness for having contributed capital in the assessee firm to the tune Rs. 2.92 crores was not established. In view of the above, we concur with the Assessing Officer with respect to capital introduced by partners shown as outstanding as addition under impugned year, the assessee failed (i) to demonstrate that the capital was introduced in the preceding years (ii) that the partners were creditworthy of contributing the capital in the assessee firm.
Ispatam Metals, A.Y. 2018-19 Therefore, the findings of the Assessing Officer based on the above, we hold is correct that the entire capital was introduced in the assessee firm in the impugned year and the source of the same remained unexplained which therefore were rightly taxed by the Assessing Officer, we hold, u/s. 68 of the Act.
Taking the next issue of unsecured loan, the facts relating to the same are identical to that in the case of partners capital. The assessee had reflected outstanding unsecured loans as at the end of the year amounting to Rs.1,85,79,000/- and identically had failed to establish with evidence when the unsecured loans were taken and whether the said transactions were genuine or not. The assessee was asked to furnish the name of the party, pan of the party, date of receipt from bank statement showing the receipt of loan, confirmation letters from the creditors, ITR, copy of the creditor and bank statement of the loan creditor for the year when the loan was introduced. The Assessing Officer noted the assessee to have only given 19 creditors with outstanding balances and to have submitted that due to old transactions and old parties, it was unable to take ITR confirmation and bank statements. The fact that the assessee failed to furnish the above has remained un-controverted before us by the ld. counsel for the assessee. Therefore, it is evidently clear that the assessee has not established with evidences the year in which the loans were received as also the genuineness of the said transaction, bank statement and ITR of the concerned unsecured loan parties. We do not find any infirmity in the order of the Assessing Officer treating the entire unsecured loans as unexplained credit of the assessee for the impugned year and adding the same to the income of the assessee in terms of section 68 of the Act. We agree with the ld. Assessing Officer that 14 Ispatam Metals, A.Y. 2018-19 the assessee has miserably failed to discharge its onus not only of proving the genuineness of the transaction but also establishing the fact that when the unsecured loans were received. In the light of the same, the addition made on unsecured loans u/s. 68 of the Act is also confirmed.
With respect to the interest amount of Rs. 67,315/- it is an admitted fact that the said amount was reported in the 26AS by the assessee in the impugned year for TDS deducted u/s. 194A of the Act. The amount was received from M/s. Leelamani Infra. The assessee had not offered the same in the return of income in the impugned year. It is also a fact on record that the assessee submitted the same to taxation for the impugned year to the Assessing Officer stating that though it had not received the same amount of interest from M/s. Leelamani Infra and therefore had not reflected the same in its profit and loss account, however, it offered the same to taxation before the Assessing Officer. In view of the admitted position of the assessee that the assessee did earn the impugned income by way of interest from M/s. Leelamani Infra amounting to Rs. 67,315/- and had also surrendered the same to the Assessing Officer we see no reason to interfere with the order of the Assessing Officer and confirm the addition of the same to the income of the assessee.