INCOME TAX OFFICER-6(1)(2), MUMBAI vs M/S.AROMA TELECOM PRIVATE LIMITED, MUMBAI

Income Tax Appellate Tribunal, “A” BENCH, MUMBAI

Before: SHRI SHAMIM YAHYA & SHRI PAVAN KUMAR GADALE

Hearing: 11/03/2021

आदेश / O R D E R

PER PAVAN KUMAR GADALE:

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The revenue has filed the appeal against the order of the Commissioner of Income Tax (Appeals) - 12, Mumbai, passed u/s. 143 (3) and 250 of the Income Tax Act, 1961.

The revenue has raised the following grounds of appeal:-

1. "On the facts and in the circumstances of the case and in law, the Ld. CITA) cried in deleting the addition of Rs.8,00,00,000/- made u/s 68 of the Act in respect of unexplained Cash credit, without appreciating the fact that the sources of funds in the hands of the creditors were not proven. "

2. On the facts and circumstances of case and in law, the Ld. CIT(A) has erred in deleting the addition of Rs. 800,00,000/- made u/s. 68 of the Act in respect Of unexplained Loan credit, without appreciating the fact that the genuineness of the Cash Credit is not proved as no break up of the entries in WIP of M/s. Hotel Horizon Pvt. Ltd were provided to the AO as noted on page no.3 of the assessment order." 3. The Appellant prays that the order of the Ld. CIT(A) on the above grounds be set aside to the file of the AO or confirm the order of the AO " 4. The appellant craves leave to amend or alter any ground or add a new ground which may be necessary."

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At the time of hearing, none appeared on behalf of the assessee. On perusal of the record, the case was first posted for hearing on 05.03.2019 and none appeared on behalf of the assessee. Similarly, when the case was posted on24.04.2019,18.6.2019,4.09.2019,20.01.2020,04.11.2020 and 17.12.2020 also none appeared on behalf of the assessee. We considering the action of the assessee for non prosecuting the appeal, in spite of providing adequate opportunities, we heard the Ld.DR and perused the material on record.

The Brief facts of the case are that the assessee company is engaged in the business of dealing in mobile and mobile accessories and filed the return of income on 30.09.2013 declaring the total loss at Rs. 3,79,813/-.Subsequently, the case was selected for scrutiny and notice u/s 143 (2) and 142 (1) of the Act along with questionnaire were issued. In compliance, the Ld.AR for the assessee attended from time to time and filed the explanations. The A.O. on perusal of financial statements found that the assessee has obtained unsecured loan aggregating to Rs 8 crores from M/s Hotel Horizon Pvt. Ltd. The A.O. to examine the correctness of M/s Aroma Telecom Pvt. Ltd. - 4 - the loan, has issued notice u/s 133 (6) of the Act on the loan creditor. Whereas M/s Hotel Horizon Pvt Ltd(Loan Creditor) vide letter dated 03.03.2016 submitted various statements including bank statements, ledger and the financial statements. The A.O. on verification of financial statements found that the details of unsecured loan provided to the assessee company is not reflected in the balance sheet of M/s Hotel Horizon Pvt. Ltd. The AO observed that the transaction of Rs. 8 crores in the bank account of M/s Hotel Horizon Pvt. Ltd. is also not reflected in the Balance sheet. Therefore, the A.O. issued show cause notice. In response, the assessee company filed explanations, mentioning that that M/S Hotel Horizon Pvt. Ltd. has disclosed Rs. 8 crores under the capital work in progress (WIP) as it is running the business of the Hotel as per the accounting system adopted. The AO observed that the assessee company has failed to provide break up of work in progress (WIP) in the books of accounts of M/s Hotel Horizon Pvt. Ltd. Further there is no business connection between the assessee and the loan creditor which is entirely into Hotel business. The AO also observed that loans and advances being long term or short term has to be disclosed in the Balance sheet. Whereas the M/s Aroma Telecom Pvt. Ltd. - 5 - adjustment of loans and advances by M/s Hotel Horizon Pvt. Ltd under the work in progress is against the principles of accountancy. Since the assessee failed to submit the details of work in progress (WIP) and evidences to prove the genuineness of transaction, in spite of providing several opportunities, the A.O. treated the unsecured loan as un explained cash credit u/s 68 of the Act and assessed the total income of Rs.7,96,20,190/-and passed the order u/sec143(3) of the Act dated 22-03-2016.

Aggrieved by the order, the assessee has filed the appeal with the Ld.CIT (A).In the appellate proceedings the Ld.CIT (A) considered the grounds of appeal, findings of the A.O. and written submissions referred at page 4 para 12 of the order. The CIT(A) on the disputed issue, found that loan/advances provided to the assessee company has been capitalized and reflected in the capital work in progress(WIP) in the financial statements of the lender company. Further, the Ld. CIT (A) observed that the above loan was repaid in the subsequent financial years which is evident from the copy of the bank statements and accounts filed. Further, in the assessment proceedings, notice 133 (6) of the Act was issued by A.O. on the loan creditor. The M/s Aroma Telecom Pvt. Ltd. - 6 - lender company submitted the ledger account copy of loan transactions and details. But the A.O. has doubted the genuineness of the loan transaction as it was not reflected in the balance sheet of the lender company. Further, the assessee company has submitted details and the loan has been disclosed by the lender in the books of accounts under the head work in progress (WIP). The Ld.CIT (A) also observed that, the loan was repaid in the financial year 2013-14 to the extent of Rs 6.36 crores and is evident from financial statements and the ledger account of the assessee company. Further, the assessee company has satisfied the genuineness of transaction and the creditworthiness has been established. Hence, the Ld.CIT(A) has deleted the addition and partly allowed the appeal of the assessee. Aggrieved by the CIT(A)order, the Revenue has filed the appeal before the Hon’ble Tribunal and none appeared on behalf of the assessee.

We have heard the Ld. DR submissions and perused the material on record. The Ld.DR emphasized that the Ld. CIT(A) erred in deleting the unexplained cash credit without considering the factual aspects that the assessee has failed

M/s Aroma Telecom Pvt. Ltd. - 7 - to substantiate sources of funds of lender company. As per the observations of Ld. CIT (A), the assessee has provided a certificate of the auditor of Lender Company that the loans and advances made to the assessee company are disclosed in work-in-progress. But on perusal of assessment order, the A.O mentioned that the assessee has not proved or provided break up of work in progress (WIP). Since the observations of both the revenue authorities are contradictory, and such information plays a vital role in decision making of authorities. We are of the view that the LdCIT(A) considering the material filed in the appellate proceedings by the assessee company should have called for comments of the assessing officer or remand report . Accordingly, we set aside the CIT(A)order and restore the entire dispute to the file of Ld. CIT (A) to adjudicate afresh and provide adequate opportunity of hearing to the assessee and the assessee should cooperate in submitting the information for early disposal of the Appeal. And we allow the grounds of appeal of the revenue for statistical purposes.

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In the result, the appeal filed by the revenue is treated as allowed for statistical purposes.

Order pronounced in the open court on 11.03.2021.

INCOME TAX OFFICER-6(1)(2), MUMBAI vs. M/S.AROMA TELECOM PRIVATE LIMITED, MUMBAI