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INCOME TAX OFFICER, KOLKATA vs MILESTONE FINSTOCK PVT. LTD., KOLKATA | BharatTax

INCOME TAX OFFICER, KOLKATA vs. MILESTONE FINSTOCK PVT. LTD., KOLKATA

ITA 1180/KOL/2023Status: DisposedITAT Kolkata24 February 2026AY 2012-13Bench: Shri Rajesh Kumar (Accountant Member), Shri Pradip Kumar Choubey (Judicial Member)1 pages

AI SummaryDismissed

Facts

The revenue filed an appeal against the order of the CIT(A) for AY 2012-13. The appeal was filed with a significant delay of 1075 days, for which the revenue submitted an affidavit citing reasons such as departmental restructuring and the COVID-19 pandemic.

Held

The Tribunal condoned the delay in filing the appeal after considering the reasons provided in the affidavit. The appeal was then decided on merits.

Key Issues

Whether the delay in filing the appeal should be condoned and whether the CIT(A)'s order deleting additions related to interest disallowed, loss on share trading, indexation benefit, and share application money was justified.

Sections Cited

250 of the Income-tax Act, 1961, 143(2) of the Income-tax Act, 1961, 143(3) of the Income-tax Act, 1961, Section 73 of the Income-tax Act, 1961

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, “B” BENCH KOLKATA

Before: Shri Rajesh Kumar & Shri Pradip Kumar Choubey

order

: February 24, 2026 ORDER

Per Pradip Kumar Choubey, Judicial Member:

1.

This appeal filed by the revenue is directed against the order dated 24.09.2020 of the CIT(Appeals)-4, Kolkata (hereinafter referred to as the “CIT(A)”) passed u/s 250 of the Income-tax Act, 1961 (hereinafter referred to as “the Act”) for the assessment year 2012–13.

2.

The appeal has been filed by the revenue with a delay of 1075 days and the revenue has filed an affidavit for condonation of the delay. The contents of the said affidavit are as under:

Milestone Finstock Pvt. Ltd 2.1 After going over the said affidavit, we find sufficient reasons behind the delay and consequently, the delay in filing the appeal is hereby condoned and we proceed to dispose of the appeal on merits.

3.

Brief facts of the case are that the assessee filed its return of income for assessment year 2012-13 by declaring an income at Nil. The case of the assessee selected for scrutiny and accordingly notice u/s 143(2) was issued and duly served upon the assessee. The assessment in the case of the assessee was completed u/s 143(3) assessing total income of the assessee as under:

3. Aggrieved by the above order, the assessee filed appeal before the ld. CIT(A) wherein the ld. CIT(A) allowed the appeal of the assessee.

4.

Aggrieved and dissatisfied, the revenue is in appeal before us raising the following grounds of appeal:

5. Contrary to that, the ld. AR supports the impugned order by submitting that the ld. CIT(A) while allowing the appeal of the assessee has not only discussed the facts rather discussed the case laws. The ld. AR submits that the assessee is a NBFC and is engaged in the business of advancing of loans and investment in shares and securities. The ld.

Milestone Finstock Pvt. Ltd AR submits that the the Assessing Officer has wrongly disallowed the difference between the interest paid and interest received of Rs.4,32,018/- (Rs.9,01,729 – Rs.4,69,711) and added to the income of the assessee company by observing that the assessee company had paid interest of Rs.9,01,729/- and received interest of Rs.4,69,711/- on loans taken and given during the year. The ld. AR further submits that the Ld. CIT(A) has rightly observed that on perusal of the Balance Sheet of the assessee company for the year under consideration that the assessee had interest-free shareholders’ funds of Rs.14,34,86,481/- as of 01.04.2011 and interest-free loan advanced was Rs.2,95,61,480/- and loan liability was Rs.54,32,391/- and further as on 31.03.2012, the assessee had an amount of Rs.11,03,57,989/- as interest-free funds in the form of share capital and reserves and surplus, therefore, the interest-free funds available with the assessee company are much more in comparison to the advances made. The ld. AR further submits that Ld. CIT (A) rightly allowed the loss on share trading of Rs.4,29,05,496/- by treating it as trading loss ignoring the provisions of Sec. 73 of the Act and the Ld. CIT (A) observed that as per the financials for 4 years the deployment of funds by the assessee company is mainly in loans and advances and hence the invocation of Explanation to Sec. 73 was bad in law. The ld. AR further submits that the Ld. CIT(A) also allowed the ground of the assessee in the context of indexation benefit to the assessee for a capital gain of Rs.93,50,000/- even though the same was not claimed in the return of income. His submission is that the assessee company had acquired the shares of listed company Mechnally Sayaji Engineering Ltd on 12.03.2010 through preferential allotment and sold the same on 24.06.2011 and the said shares were listed on the stock exchange and also the assessee offered the capital gain on the sale of these shares of Rs.93,50,000/- without claiming indexation benefit which was denied by the Assessing Officer for the reasons that the same was not claimed in the return of income and the assessee had not filed a revised return of income. The ld. also submits that the Ld. CIT(A) allowed the claim relying on the CBDT Milestone Finstock Pvt. Ltd Circular No. 14(XL-35) of 1955, dated 11.4.1955 wherein the CBDT directed the officer to guide the taxpayer where proceedings or other particulars before them indicate that sum refund or relief is due to him and the Ld. CIT (A) relied on the decision of the Hon'ble Supreme Court in CIT Vs. Shelly Products reported in 261 ITR 367 (SC) wherein the Hon’ble Apex Court held that in terms of Article 265 of the Constitution, tax can be levied only if it is authorized by law. The taxing authority cannot collect or retain tax that is not authorized. Any retention of tax collected, which is not otherwise payable, would be illegal and unconstitutional. The ld. AR states that the CIT(A) has deleted the addition of Rs.6.45 crores which was made by the Assessing Officer treating Rs.6,45,00,000/- by allowing the benefit of peak credit as undisclosed income and added the same to the income of the assessee. His submission is that the assessee company during the year received share application money of Rs.6,72,00,000/- from M/s. Sahal Business Pvt. Ltd. and the Ld. CIT(A) deleted the addition observing that Sahal Business Pvt. Ltd is a group concern of the assessee company which provided an amount of Rs.6.72 crore as share application money which was repaid during the financial year itself. In the appellate proceedings, the assessee company submitted complete details of transactions undertaken with M/s. Sahal Business Pvt. Ltd along with a bank statement showing the transaction and the ld. CIT(A) was not in any doubt regarding the three ingredients namely identity, creditworthiness and genuineness of the transactions in this case and rightly deleted the addition made by the Assessing Officer.

6.

Upon hearing the submissions of the counsels of the respective parties and on perusal of the impugned order, we find that the first issue is regarding the allowability of interest expenses of Rs.4,32,018/-. We find that the ld. CIT(A) noted from the Balance Sheet that the assessee company for the year under consideration had interest-free shareholders’ funds of Rs.14,34,86,481/- as of 01.04.2011 and interest-free loan advanced was Milestone Finstock Pvt. Ltd Rs.2,95,61,480/- and loan liability was Rs.54,32,391/- and further as on 31.03.2012, the assessee had an amount of Rs.11,03,57,989/- as interest-free funds in the form of share capital and reserves and surplus. Therefore, the interest-free funds available with the assessee company are much more in comparison to the advances made. We find that in this context, the Ld. CIT (A) relied on the decision of the Bombay High Court in the case of Reliance Utilities & Powers Ltd reported in 313 ITR 340 whereas, in the similar facts of the case, the Court relied on the Supreme Court decision in the case of East India Pharmaceutical Works reported in 224 ITR 627 where the Court had held if interest-free fund available with the assessee was sufficient to meet its investments and at the same time the assessee had raised a loan it can be presumed that the investments where from interest-free funds available allowed the appeal of the assessee. The Ld. CIT (A) further observed that the decision of the Hon'ble Bombay High Court was considered by the Hon'ble Supreme Court in the case of CIT Vs. Reliance Industries Ltd reported in 410 ITR 466 (SC) where the Court held that the presumption that investment is made out of interest-free funds is possible when interest-free funds are available with the assessee. We note that the Ld. CIT(A) has rightly deleted the addition of Rs.4,32,018/- under the head interest disallowed. On the next issue of loss on share trading of Rs.4,29,05,496/- by treating it as trading loss ignoring the provisions of Sec. 73 of the Act, we find that the assessee is a NBFC Company engaged in the business of providing loans and advances and thus provisions of section 73 are not applicable to it. It is pertinent to mention the Explanation to Section 73 reads as follows:

Milestone Finstock Pvt. Ltd 6.1 We also find that on perusal of the above extract of explanation, it emerges that if a company’s principal business is of granting loans and advance, Section 73 is not applicable. In this respect, the assessee has also submitted a chart of assessee’s financials for four years showing the deployment of funds of assessee company is mainly in loans and advances and the invocation of Explanation to Section 73 is bad in law and the chart is as under: 31.3.2010 31.3.2011 31.3.2012 31.3.2013 Total funds 1432 lac 1517.61 lac. 1418.16 lac 1377.98 lac Inventory (stock-in- 3.30 lac 38.58 lac 591.69 lac - trade) Loans & Advances 632 lac 658.25 lac 517.68 lac 574.65 lac Loans & Advances as 44.13% 43.37% 36.50% 41.70% percentage of total fund Inventory as 0.23% 2.5% 41.72% - percentage of total fund 31.3.2010 31.3.2011 31.3.2012 31.3.2013 Total Revenue 1,93,15,841 22,53,658 1,80,16,346 44,40,454 Sales 78,00,579 - 68,64,635 - Interest 1,15,15,262 14,03,658 4,69,711 23,79,938 Dividend - 8,50,000 13,32,000 6,09,482 Profit from sale of - - 93,50,000 14,51,034 investment Sales as % of total 40.38% - 38.10% - revenue Interest and other 59.62% 100% 61.90% 100% income as % of total revenue 6.2 We note that the Ld. CIT(A) rightly observed that as per the financials for 4 years the deployment of funds by the assessee company is mainly in loans and advances and hence the invocation of Explanation to Sec. 73 was bad in law and the Ld. CIT(A) has relied on the decision of the Hon'ble Calcutta High Court in the case of CIT Vs. Savi Commercial Pvt. Ltd reported in 373 ITR 243 (Cal) wherein the Court dismissed the appeal of the Department and agreed with the decision of the Tribunal that in the Explanation to Sec. 73, two Milestone Finstock Pvt. Ltd exceptions can be made which are based on two distinguishing factors. One fact was based on income and the other was based on activity. In the decided case the assessee suffered a loss of Rs.32.21 Lacs from trading in shares and had earned income of Rs.13.48 Lacs from interest on loan. The Court observed that profit alone cannot be a distinguishing factor and that business activity is also a distinguishing factor. Since the granting of loans and advances was on a larger scale evident from financials of several years than the business of buying and selling shares, the principal business of the assessee was of granting loans and advances and Sec. 73 was not applicable. This decision was followed by the Hon'ble Calcutta High Court in the case of Crochet Trade & Investment Pvt. Ltd Vs. Commissioner of Income Tax on 26.07.2018 in of 2009. The decision of the Hon'ble Calcutta High Court in the case of Savi Commercial Pvt. Ltd (supra) was followed by the Kolkata Bench of the ITAT in the case of ITO, Wartd-12(3) Vs. Amrabathi Investra Pvt. Ltd reported in 2017(4) TMI 447 – ITAT Kolkata and the appeal of revenue was dismissed. On the next issue of allowability of indexation benefit by the ld. CIT(A) to the assessee for a capital gain of Rs.93,50,000/- even though the same was not claimed in the return of income, we note that the assessee company had acquired the shares of listed company Mechnally Sayaji Engineering Ltd on 12.03.2010 through preferential allotment and sold the same on 24.06.2011 and the shares were listed on the stock exchange and also the assessee offered the capital gain on the sale of these shares of Rs.93,50,000/- without claiming indexation benefit which was denied by the Assessing Officer for the reasons that the same was not claimed in the return of income and the assessee had not filed a revised return of income. The ld. also submits that the Ld. CIT(A) allowed the claim relying on the CBDT Circular No. 14(XL-35) of 1955, dated 11.4.1955 wherein the CBDT directed the officer to guide the taxpayer where proceedings or other particulars before them indicate that sum refund or relief is due to him and the Ld. CIT (A) relied on the decision of the Hon'ble Supreme Court in CIT Vs. Shelly Products reported in 261 ITR 367 (SC) wherein the Milestone Finstock Pvt. Ltd Hon’ble Apex Court held that in terms of Article 265 of the Constitution, tax can be levied only if it is authorized by law. The taxing authority cannot collect or retain tax that is not authorized. Any retention of tax collected, which is not otherwise payable, would be illegal and unconstitutional. The ld. CIT(A) also placed reliance on the decision of the Hon'ble Bombay High Court in Bal Mukund Acharya Vs. DCIT reported in 310 ITR 310 where the Court held that if an assessee, under a mistake, misconception or on not being properly instructed is over assessed, the authorities under the Act are required to assist him and ensure that only legitimate taxes due are collected and Calcutta High Court in the case of Maynak Poddar HUF Vs. Wealth Tax Officer reported in 262 ITR 633 (Calcutta) and also on the decision of the Hon'ble Supreme Court in the case of Jute Corporation of India Ltd Vs. CIT reported in 187 ITR 688 (SC) where the Court held that the appellate authorities are competent enough to consider the same and take the decision for claims even raised for the first time before them. We find that the ld. CIT(A) while allowing the relief has rightly observed that in this case, there is no doubt Mcnnally Sayaji Engineering Ltd is a listed entity and this fact is in the public domain which even Assessing Officer could have found out very easily during the assessment proceedings and the Assessing Officer has not doubted the genuineness of sales and purchase of shares of Mcnally Sayaji Engineering Ltd. and sale as well as purchase of shares were duly accounted for in the books of account. On the next issue of deletion of the addition of Rs.6.45 crores, we note that the assessee company during the year received share application money of Rs.6,72,00,000/- from M/s. Sahal Business Pvt. Ltd. and which was repaid during the financial year and during the appellate proceedings, the assessee company submitted complete details of transactions undertaken with M/s. Sahal Business Pvt. Ltd along with a bank statement showing the transaction. We further note that the ld. CIT(A) has discussed the facts and the assessee discharged its primary onus by submitting relevant documents before the ld. CIT(A) to prove the identity, creditworthiness and genuineness of the Milestone Finstock Pvt. Ltd transactions. We further find that while deleting the addition, the ld. CIT(A) has also discussed the case laws i.e (i) The Hon’ble Supreme Court in the case of Commissioner of Income-tax v. Kanpur Coal Syndicate reported in [1964] 53 ITR 225 (SC) wherein the court held that AAC has, plenary powers in disposing of an appeal and the scope of his power are conterminous with that of ITO and he can do what ITO can do and also direct him to do what he has failed to do.(ii) The Hon’ble Supreme Court in the case of Jute Corporation of India Ltd. v. CIT (1991) 187 ITR 688 while dealing with the powers of the Appellate Assistant Commissioner observed that an appellate authority has all the powers which the original authority may have in deciding the question before it subject to the restrictions or limitations, if any, prescribed by the statutory provisions. In the absence of any statutory provision, the appellate authority is vested with all the plenary powers which the subordinate authority may have in the matter. Going over the above discussion and considering the binding case laws, we find no infirmity in the order of the ld. CIT(A) and the same is upheld.