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Income Tax Appellate Tribunal, LUCKNOW BENCH “A”, LUCKNOW
Before: SHRI SUDHANSHU SRIVASTAVA & SHRI, NIKHIL CHOUDHARY
PER NIKHIL CHOUDHARY, ACCOUNTANT MEMBER.:
This is an appeal filed by the assessee against the order of the learned Commissioner Income Tax (Appeals)/NFAC, Delhi u/s 250 of the Income Tax Act, 1961 (“Act”, for short) dated 17.01.2025 wherein the Ld. CIT(A) has dismissed the appeal of the assessee that was filed against the order of the Assessing Officer u/s 143(3) of the Act on 28.12.2019. The grounds of appeal are as under: - “1.1. BECAUSE the ld. “CIT(A)” was not justified in dismissing the appeal, by passing the impugned order on ex-parte basis in a non-speaking manner, without dealing with the issues raised in appeal by taking into consideration the material and information on record as per provisions contained in Section 250(6) of the “Act”. 1.2 BECAUSE the Id. “CIT(A) has passed the impugned order without affording due and effective opportunity of being heard to the “appellant” and consequently the impugned order passed by the ld. “CIT(A)” deserves to be set aside and matter restored to his file for passing the order a-fresh after affording reasonable opportunity of being heard to the appellant.
2. BECAUSE notice under section 143(2) dated 09.08.2018 issued for selection of this case for scrutiny assessment through CASS is not valid as necessary conditions specified in sub-section (2) of section 143 of the Act for selection of case for scrutiny were not satisfied and consequently the Id. “CIT(A)” ought to have quashed the assessment order dated 28.12.2019 passed u/s 143(3) by holding the same as illegal and bad in law. WITHOUT PREJUDICE TO AFORESAID 3.1 BECAUSE the Id. “CIT(A)” has erred in law and on facts in upholding the addition of Rs. 1,67,50,000/- made by the Assessing Officer by treating unsecured loans received from various parties as unexplained cash credit under section 68 of the Act. 3.2. BECAUSE the Id. “CIT(A)” has erred in law and on facts in upholding the addition of Rs. 1,67,50,000/- made by the Assessing Officer merely on account of hon-response to notice u/s 133(6) by lenders of the unsecured loans even though appellant had duly explained nature and source thereof by furnishing name, PAN, address, bank account statement and confirmation of the lenders of unsecured loan before the authorities below. 3.3 BECAUSE the ld. “CIT(A)", while upholding the addition of Rs. 1,67,50,000/-, failed to appreciate that the loan amounts were received through banking channel from old parties and interest due thereon was paid after deducting TDS. 4.1 BECAUSE the Id. “CIT(A)” has erred in law and on facts in upholding the addition of Rs. 56,25,000/made by the Assessing Officer by disallowing interest paid on unsecured loan received from the parties from whom loan amounts received were treated as unexplained cash credit. 4.2. BECAUSE the Id. “CIT(A)”, while upholding the entire addition of Rs. 56,25,000/-, failed to appreciate that the interest was also paid on the balance amount of unsecured loans brought forward from previous financial year/(s). 5.1 BECAUSE the Id. “CIT(A)” has erred in law and on facts in upholding the addition of Rs. 39,39,205/made by the Assessing Officer by making ad-hoc disallowance of 10 percent of ‘Other Expenses’ amounting to Rs. 3,93,92,056/debited to profit & loss account of the “appellant”. 5.2 BECAUSE the ld. “CIT(A)”, while upholding the addition of Rs. 39,39,205/-, failed to appreciate that the ad-hoc disallowance of expense was made without rejecting the books of accounts and without pointing out any specific defect or discrepancy in the books of accounts furnished by the “appellant” during assessment. 5.3. BECAUSE the Id. “CIT(A)”, while upholding the addition of Rs. 39,39,205/-, failed to appreciate that the books of accounts were audited and the Assessing Officer had made ad-hoc disallowance of expense without considering ledger accounts furnished by “appellant” in support of the expense.
BECAUSE the additions made by the Assessing Officer in the assessment Order upheld by Id. “CIT(A)” were purely based on surmises and conjectures.
7. BECAUSE the case laws relied upon by the authorities below are distinguishable from the facts of the present case.
BECAUSE on a due consideration of facts and circumstances of the case, the Id. “CIT(A)” ought to have directed the Assessing Officer to drop the penalty proceedings initiated under section 272A(1)(d) of the Act.
BECAUSE on a due consideration of facts and circumstances of the case, the ld. “CIT(A)” ought to have directed the Assessing Officer to drop the penalty Page 3 of 7 proceedings initiated under section 270A of the Act without recording proper satisfaction.
10. BECAUSE on a due consideration of facts and circumstances of the case, the ld. “CIT(A)” ought to have directed the Assessing Officer to drop the penalty proceedings initiated under section 271AAC(1) of the Act.
11. BEAUSE on a due consideration of the facts and circumstances of the case of “appellant” the ld. “CIT(A)” ought to have held that the provisions of sections 115BBE were not attracted in the present case.
12. BECAUSE on the facts and circumstances, the “appellant” is not liable for interest under section 234B of the Act and consequently the ld. “CIT (A)” ought to have directed the Assessing Officer to delete the interest charged under this section.
BECAUSE the order appealed against is contrary to facts, law and principles of Natural justice.
BECAUSE each ground taken in appeal is mutually exclusive and without Prejudice to each other.
The “appellant” craves leave, to add, delete or modify any of the grounds before or at the time of arguing the appeal.”
The facts of the case are that the case of the assessee was selected for scrutiny. During the course of scrutiny, the Assessing Officer observed that the assessee had taken large amount of unsecured loans from various parties as under: - (i) Smt Aditi Bhardwaj (ii) Shri Dujender Bhardwaj (iii) M/s. CEA Consultants P. Ltd (iv) M/s. Lenient Consultants P. Ltd (v) M/s. SW Consultants P. Ltd (vi) Shri Amit Choudhary 3. The assessee was asked to furnish a copies of ledger account of the parties from whom the unsecured loans had been taken. The Assessing Officer records that the assessee company had shown unsecured loans from the above parties, who could not explain the nature and source of such credit entries and that he was not satisfied with the genuineness of the credit entries in the books of accounts of the assessee company. The Ld. AO did Page 4 of 7 not state during the course of his order as to why he had come to such a conclusion. He, therefore, made an addition of Rs.1,67,50,000/- on account of unexplained cash credit on this account u/s 68 of the Act. The Ld. AO also observed that the assessee had shown interest expenses on borrowings of Rs.2,54,97,008/- under the head Finance Cost. However, as he had already disallowed the sum of Rs.1,67,50,000/- on account of unsecured loans, he added back the interest paid on the same of Rs.56,25,000/-. He also noticed that the assessee company had debited of Rs.3,93,92,056/- under the head, “Other Expenses” and since the assessee company had not produced its books of account and relevant bills and vouchers during the course of assessment, he disallowed 10% of this amount and made an addition of Rs.39,39,205/-.
Aggrieved by this addition, the assessee went in appeal to the Ld. CIT(A). The Ld. CIT(A) records that during the course of appellate proceedings, the assessee was afforded many opportunities for hearing but no compliance was made, therefore he proceeded to dispose of the appeal, after considering the facts on record. The Ld. CIT(A) quoted from the judgment of the Hon’ble Supreme Court in the case of B. N Bhattacharjee and Another (118 ITR 461), Estate of late Tukojirao Holkar vs CWT (223 ITR 480) (MP), M/s. Chemipol vs Union of India in Excise Appeal No.62 of 2009 and CIT vs Multiplan India (P) Ltd (38 ITD 320) (Del), to hold that the assessee could not ask for relief merely by filing of the appeal. He had to persue and furnish the necessary evidences to secure the relief which the assessee had not done. On merits, he observed that the assessee had been given numerous opportunities by the Ld. AO, but had failed to Page 5 of 7 file any satisfactory response to the queries raised by the AO and it was for this reason that the additions aggregating to Rs.2,63,14,205/- were made. Since the assessee had not furnished any supporting documents or any evidence in support of the grounds of appeal. The Ld. CIT(A) did not find any reason to interfere with the orders of the AO and he confirmed the disallowances made.
5. The assessee is aggrieved with this summary manner of the disposal and has accordingly come in appeal before us. Shri P. K. Kapoor, CA (hereinafter none as the Ld. AR) submitted that the AO had passed the order u/s 143(3) of the Act and in his assessment order, he had himself reproduced part of the reply filed by the assessee, which showed that the assessee had submitted responses before the Ld. AO. However, only because the books of accounts, bills and vouchers could not be produced due to certain difficulties being faced by the assessee at the time, the Ld. AO had come to the conclusion that the persons who had given the loans could not explain the nature and sources of such credit entries. It was submitted that there was no basis for the Ld. AO to come to such a conclusion, as no examination had been done of the creditworthiness of the creditors. In the circumstances, the addition made was pre-mature and unwarranted. It is also submitted that the disallowance of interest that had been paid was also unwarranted. With regard to the disallowance of 10% of other expenses, it was submitted that the same was highly excessive and deserved to be re-considered. Ground no. 2, regarding the validity of notice u/s 143(2) of the Act was not pressed in that no arguments were offered on that issue. On other hand, Shri Amit Kumar, Sr DR pointed out, that Page 6 of 7 the assessee had not submitted any explanation either before the Assessing Officer or before the Ld. CIT(A) to explain the credit entries and absence of explanation was a sufficient ground to make the addition u/s 68 of the Act. He submitted that since the assessee had not responded to various notices for hearing by the Ld. CIT(A), the Ld. CIT(A) was justified in refusing to consider the appeal on account that it was not substantiated by evidence or documents. Accordingly, he prayed that additions may kindly be confirmed.
6. We have duly considered the facts and circumstances of the case. It is very clear that the facts in the case have not been brought out, primarily due to the failure of the assessee to make compliance before the Assessing Officer and the Ld. CIT(A). However, we also note that the Assessing Officer has not assigned any reasons for coming to the conclusion that the creditors lacked creditworthiness or that the transactions were ingenuine. The Ld. CIT(A) has refused to the consider the appeal on merits on account of the fact that the compliance has not been made to the notices. We observe that the assessee claims that M/s. Lenient Consultants and Shri Amit Choudhary were old depositors and therefore the additions made on their accounts, were unwarranted. We also observe that the additions have been made on account of three cases, because the creditors did not make compliance to the notice u/s 133(6) of the Act. It has further been alleged that the Assessing Officer ignored the fact that the TDS has been deducted on the interest that has been paid to these depositors and the disallowance of 10% of other expenses had been made without appreciating that the relevant details had been filed through e-filing. Therefore, in Page 7 of 7 consideration of the above, we deem it appropriate to restore this matter back to the file of the AO, so that the assessee may present proper explanations to the queries raised by the Assessing Officer and so that the Assessing Officer may have the benefit of these replies, before proceeding to take a decision with regard to the genuineness or otherwise of these credits. Further, the assesse is also directed to produce its books of account before the Ld. AO and the AO is directed to re-consider the disallowances made out of other expenses and thereafter take such action as appropriate, after examining the books of account.
In the result, the appeal of the assessee is allowed for statistical purposes.
Order pronounced in the open Court on 31/07/2025.