ONKAR PARIVAHAN FINANCE PVT. LTD., ,KOLKATA vs. DCIT, CIRCLE - 9(2), KOLKATA

Apropos the issue raised in Ground No. 1 relating to the addition of Rs. 10,63,993/- made by the AO and confirmed by the Ld. CIT(A) on account of service and maintenance charges, the relevant facts are that the assessee is a company which is engaged in the business of construction and letting out properties. It also carries on the business of trading in clothes under the name and style of its propriety concern M/s. Onkar. The return of income for the year under consideration was filed by the assessee on 27.02.2013 declaring a total income of Rs. 72,31,744/-. In the said return, income earned by the assessee in the form of rent by letting out the properties was declared under the head income from house property and deduction u/s 24 of the Act @ 30% against such rental income was claimed. The assessee had also claimed service and maintenance charges amounting to Rs. 10,63,993/- under the head profits and gains or business profession. Keeping in view the deduction claimed by the assessee u/s 24 for repairs, maintenance etc. @ 30% of rental income, the AO held that the assessee was not entitled to claim separately any deduction on account of service and maintenance charges as business expenditure. He accordingly disallowed the claim of the assessee for deduction of Rs. 10,63,993/- on account of service and maintenance charges. On appeal, the Ld. CIT(A) confirmed the said disallowance.

We have heard the arguments of both the sides on this issue and also perused the relevant material available on record. The learned counsel for the assessee has submitted that some of the properties let out by the assessee were held as stock-in-trade of its business and therefore, the expenditure incurred on service and maintenance charges of the said properties was eligible for deduction as business expenditure. As rightly contended by the learned DR, the nature of property however is not relevant to decide this issue and what is relevant is the head of income under which the rental income was offered by the assessee. Since the entire rental income including the rental income from properties held as stock-in-trade was offered by the assessee under the head “income from house property” and deduction u/s 24 for repairs, maintenance etc. at a flat rate of 30% was claimed against the rental income, the assessee was not entitled for any deduction separately on account of service and maintenance charges as business expenditure as the same clearly amounted to claiming of double deduction which is not permissible. We, therefore, find no infirmity in the impugned order of the Ld. CIT(A) confirming the disallowance of Rs. 10,63,993/- made by the AO on account of service and maintenance charges and upholding the same, we dismiss Ground No. 1 of the assessee’s appeal.

Ground No. 2 raised by the assessee in this appeal is not pressed by the learned counsel for the assessee at the time of hearing before the Tribunal. The same is accordingly dismissed as not pressed.

As regards the common issue involved in Ground No. 3 and 4 relating to the addition of Rs. 3,91,50,000/- made by the AO u/s 68 and confirmed by the Ld. CIT(A) on account of share capital and share premium, it is observed that the assessee-company during the year under consideration had received share capital and share premium amount aggregating to Rs. 3,91,50,000/- from 17 share subscribers. In order to verify the claim of the assessee in terms of section 68, summons were issued by the AO on 27.02.2015 to all the 17 subscriber companies. Out of the 17 summons, 9 summons were returned unserved while there was no response to the remaining 8 summons. On 09.03.2015, summons u/s 131 was issued by the AO to the Pr. Director of the assessee-company asking for the relevant details of the share subscriber companies and requiring the personal appearance of the Pr. Director for deposition. Although the relevant details in the form of balance sheets, profit and loss accounts and copies of bank statements of all the investor companies were filed by the assessee in response to summons u/s 131, the Pr. Director of the assessee-company did not appear personally before the AO for examination on the ground that he was on business tour for some urgent work of the company. On examination of all the details pertaining to the investor companies furnished by the assessee, the AO recorded his adverse findings as under: “a. The investor companies disclose meagre ‘Revenue from Operations’. b. Total income in all the cases are either ₹ 0 of in a few thousands of rupees. c. They all have an inventory of stock & shares comprising only of private limited companies. d. The banking transactions through which moneys have been transferred from their bank accounts to the assessee company, for purchase of shares,

Keeping in view the above adverse findings recorded by him and the failure of the Pr. Director of the assessee-company to appear before him personally for examination, the AO held that the onus that lay on the assessee to explain the relevant cash credit in the form of share capital and share premium by establishing the identity and creditworthiness of the investor companies as well as to prove the genuineness of the relevant transactions was not discharged by the assessee in terms of section 68. He accordingly treated the entire share capital and share premium amount aggregating to Rs. 3,91,50,000/- as unexplained cash credit and made an addition to that extent to the total income of the assessee u/s 68. On appeal, the Ld. CIT(A) confirmed the said addition.

We have heard both the sides on this issue and also perused the relevant material available on record. The learned counsel for the assessee has submitted that the enquiry in respect of share capital and share premium amount in question received by the assessee was started by the AO at the fag end of the assessment proceedings and proper and sufficient opportunity was not given by him to the assessee to establish the identity and creditworthiness of the

In the result, the appeal of the assessee is treated as partly allowed for statistical purpose. Order Pronounced in the Open Court on 25th January, 2019.