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Income Tax Appellate Tribunal, B Bench, Mumbai
Before: Shri G.S. Pannu & Shri Pawan Singh
The assessee has raised one common grounds of appeal
related with section 2(22)(e) of the Act, therefore the appeals were consolidated. In A.Y. 2006-07 assessee has raised the following grounds of appeal: - “1. On the facts and in the circumstances and in law, the learned C.I.T. (A) erred in upholding the validity of the proceedings initiated u/s 147 of the I.T. Act.
2. On the facts and in the circumstances and in law, the learned C.I.T. (A) erred in upholding the validity of the assessment order passed u/s 143(3) r.w.s.147 of the I.T. Act.
3. On the facts and in the circumstances and in law, the learned C.I.T. (A) erred in confirming the action of the A.O. and upholding the addition made of Rs.6,21,306/- u/s 2(22)(e) of the Act.
4. On the facts and in the circumstances and in law, the learned C.I.T. (A) erred in confirming the action of the A.O. and upholding the disallowance of service charges amounting to Rs.34,18,011/- 2 & 6259/Mum/2012 Shri Narendra Kushalraj Kothari 5. On the facts and in the circumstances and in law, the learned C.I.T. (A) erred in confirming the action of the A.O. and upholding the disallowance of EMI lottery terminal charges amounting to Rs.15,36,000/- 6. On the facts and in the circumstances and in law, the learned C.I.T. (A) erred in confirming the action of the A.O. and upholding the disallowance of logistics paper charges amounting to Rs.7,82,869/- 7. On the facts and in the circumstances and in law, the learned C.I.T. (A) erred in confirming the action of the A.O. and upholding the disallowance of mobile charges amounting to Rs.1,01,997/- 8. On the facts and in the circumstances and in law, the learned C.I.T. (A) erred in confirming the action of the A.O. and upholding the disallowance made of Rs.15,590/- out of postage & courier charges of Rs.27,567/- and printing & stationery expenses of Rs. 1,28,339/- 9. On the facts and in the circumstances and in law, the learned C.I.T. (A) erred in sustaining disallowance made u/s 14A to the extent of 5% of the exempt income.
10. On the facts and in the circumstances and in law, the learned C.I.T. (A) erred in confirming the action of the A.O. in denying the benefits of the provisions of section 10(36) of the I.T. Act.”
The very crux of the case are that the assessee engaged in the business of online lottery and commission agent and is also Director in M/s. Model Sales Agency Pvt. Ltd. Assessee filed his return of income for the relevant assessment year on 01.11.2016 declaring total income of `15,94,758/-. The return was processed under Section 143(1). Subsequently, the assessment was reopened under Section 147. Notice under Section 148 dated 29.03.2010 was served upon the assessee. The assessee vide its reply dated 07.04.2010 contended that the return already furnished may be treated as return in response to the notice under Section 148. The assessment was reopened for the following reasons: -
“Assessee has filed his return of income for A.Y. 2006-07 on 01.11.2006 declaring total income at Rs.15,94,758/-. Assessee is one of the Directors of M/s. Model Sales Agency Pvt. Ltd. having 94.54% share holding in the company. During the course of assessment proceedings u/s 143(3) in the case of M/s. Model Sales Agency Pvt.
3 & 6259/Mum/2012 Shri Narendra Kushalraj Kothari Ltd., it was observed that M/s Model Sales Agency Pvt. Ltd. has advanced following amounts to the concerns/companies in which Mr. Narendra Kothari is having substantial interest :
(a) Rs. 1,52,408.06 M/s Kushalraj Land Developers Pvt. Ltd. (29.98%) share holding of Mr. Kothari. (b) Rs. 4, 68,898/- M/s N.K.K. finance (Prop. Mr. Narendra Kothari) Moreover the assessee company i.e. M/s Model Sales Agency Pvt. Ltd. has shown reserves & surplus of Rs. 38,08,093/- in their balance sheet as at 31.03.2006. Since Mr. Narendra Kothari is having substantial (94.54%) interest in the company M/s Model Sales Agency Pvt. Ltd., which has advanced loan to companies/ concerns in which Mr. Narendra Kothari is having substantial interest, the provisions of section 2(22)(e) are applicable. I, therefore have reason to believe that income has escaped assessment in the hands of Mr. Narendra Kothari for the A.Y. 06-07 needs to be reopened as per provision of section 147 of the I.T. Act. 1961.”
The assessee filed its objection vide letter dated 01.12.2010 and again on 08.12.2010. The objections of the assessee were not accepted by the AO and proceeded to make re-assessment of the income. The assessment was completed under Section 143(3) r.w.s 147 on 30.12.010. The AO while passing the assessment order made following additions: -
Addition under Section 2(22)(e) Rs.6,21,306/- Service Charges Rs.34,18,011/- EMI Lottery terminal charges Rs.15,36,000/- Logistic paper charges Rs.1,01,997/- Postage and courier charges Rs. 27,567/- Rs. 1,28,339/- Stationery and printing charges Disallowance under Section 14A to the extent of 5% of exempt income On appeal before the CIT(A) the reopening of assessment as well as various additions/disallowance were confirmed. Further aggrieved by the order of the CIT(A) the assessee filed present appeal before us.
None appeared on behalf of the assessee despite waiting. The copy of authority letter of Sh. R.M. Sawant CA is on record. The Ld AR for assess sought adjournment on 30.05.2016, 13.10.2016 and again on 30.05.2016.
4 & 6259/Mum/2012 Shri Narendra Kushalraj Kothari When none appeared on 27.02.2017, notice through RPAD was issued to assessee, despite service of notice of hearing through RPAD none appeared on behalf of assessee. Hence we have not option except to hear the learned D.R. for Revenue and to proceed to decide the appeal on the basis of the material available on record.
The learned D.R. for Revenue supported the orders of the Authorities below. The learned D.R. argued that the assessment was reopened during the assessment proceedings under Section 143(3) in the case of M/s. Model Sales Agency Pvt. Ltd., wherein the assessee is having substantial interest being one of the Directors. The assessee has taken advances which were out of the scope of provisions of Section 2(22)(e) which escaped from assessment. Thus, the case of the assessee was reopened under Section 147 of the Act. During the reassessment proceedings the AO made various additions/disallowances after affording full opportunity to the assessee. The assessee failed to substantiate his contention regarding various issues raised by the AO. Thus the various additions/disallowances were made. On appeal before the CIT(A) the assessee failed to substantiate his contention. Thus all the disallowances were confirmed. The assessee has neither appeared before the Tribunal nor submitted any material to substantiate the grounds of appeal raised.
7. We have considered the submissions of the learned D.R. for Revenue and perused the material available on record. The assessment was reopened by the AO observing that the assessee has substantial interest of 94.54% in M/s. Model Sales Agency Pvt. Ltd. which has advanced loans to the assessee and his other concerns. This fact came to the notice of the AO during the assessment of M/s. Model Sales Agency Pvt. Ltd. Thus, in our opinion this information was sufficient to make a belief by the AO that income has escaped assessment. Thus the reopening of assessment was valid. The assessee has not paced on record any material to prove the facts otherwise. Thus, the re-opening of assessment under section 147 is valid. In the result the ground No.1 &2 are dismissed.
5 & 6259/Mum/2012 Shri Narendra Kushalraj Kothari 8. The ground No.3 relates to the addition of deemed dividend under Section 2(22)(e) of Rs. 6,21,306/-. The AO treated the advance as deemed dividend holding that the assessee was having substantial interest of 94.54% in Model Sales Agency Pvt Ltd which has advanced loan to the concern. The ld CIT(A) confirmed the action of AO holding that in a company where the public have no substantial interest may not recover the loans or allow them to be barred by time, which would be that the amount of loan would become the income of the shareholder and they would not meet the requirement to pay the tax on such income. We have seen that the assessee has not placed on record any material to convince us to take a contrary view; hence the ground of appeal raised by assessee is dismissed.
Ground No.4 relates to confirming the disallowances of service charges of Rs. 34,18,011/-, The AO disallowed the service charges holding that no TDS was made on the payment of service charges. The ld CITA) confirmed the action of AO holding that the assessee has admitted that no TDS has been made. Secondly, the assessee had debited the expenses on the basis of debit notes sent be service provider. The said expenses have not paid by the assessee and claimed as not payable to Tripura on line Lottery so the expenses were not paid wholly and exclusively for the purpose of business. We have noted the assessee has not placed on record any material to convince us to take a contrary view; hence the ground of appeal raised by assessee is dismissed.
10. Ground No.5 relates to lottery terminal charges of Rs. 15,36,000/- and ground No. 6 relates logistic paper charges of Rs. 7,82,869/-. The AO disallowed due to non deduction of TDS as the provisions of section 40(a)(ia) are applicable. The ld CIT(A) confirmed the action of AO on both the disallowance holding that the assessee has admitted that no TDS has been made. Further, the assessee had debited the expenses on the basis of debit notes sent be service provider. The said expenses have not paid by the assessee and claimed as not payable to Tripura on line Lottery so the expenses were not paid wholly and exclusively for the purpose of business.
6 & 6259/Mum/2012 Shri Narendra Kushalraj Kothari We have noted the assessee has not placed on record any material to convince us to take a contrary view; hence the ground of appeal raised by assessee are dismissed.
Ground No.7 relates to disallowance of mobile charges of Rs. 1,01,997/-. The AO disallowed the mobile charges along with other disallowance of service charges and terminal charges holding that no TDS was made. The ld CIT(A) confirmed the same along with other disallowances with similar observation as referred above. We have noted that before us neither the assessee has filed any documentary evidence or any written submission to substantiate the grounds of appeal. Hence, this ground of appeal is also failed.
Ground No.8 relates to disallowance of various expenses postage expenses, courier expenses and stationary expenses. The AO disallowed 10% of the claims holding that the expenses are not verifiable. We have noted that the assessee has not raised any ground of appeal before ld CIT(A) challenging these disallowances. We have noted there is no adjudication of these grounds of appeal by ld CIT(A). Even otherwise the assessee has not filed any documentary evidences to substantiate his claim that all expenses were made wholly and exclusively for business. Hence, this ground of appeal is also dismissed.
Ground no.9 related to disallowance under section 14A. The AO made the disallowance as per Rule 8D and disallowed Rs.5,65,514/-. The ld CIT(A) partly sustained the disallowance @ 5% of the exempt income on the basis of decision of Hon’ble Bombay High Court in Godrej & Boyce Manufacturing Company Ltd. Vs DCIT [2010] 234 CTR1. We have seen that in absence of any explanation or documentary evidences on record the disallowance sustained by ld CIT(A is reasonable one. Hence, this ground of appeal is also dismissed.
14. Ground No10 relates to denial of benefit of section 10(36) of the Act. The AO denied the benefit of section10 (36) for the want of evidence. The ld CIT(A) confirmed the action of AO that no proof was furnished by assessee
7 & 6259/Mum/2012 Shri Narendra Kushalraj Kothari even at the stage of appeal. We have not that the assessee has not placed any evidence before us except raising the grounds of appeal. Thus, we do not find any merit in the ground of appeal; hence this ground of appeal is also dismissed.
In the result the appeal filed by the assessee is dismissed. – A.Y. 2009-10 16. Though the assessee has raised as many as four grounds of appeal, as per our considered view the only substantial ground of appeal by the assessee relates to confirmation of addition under Section 2(22)(e) of Rs.80,97,355/-.
The learned D.R. for Revenue argued that this ground of appeal is similar to ground No. 3 of the appeal for A.Y. 2006-07. The assessee is not filed any documentary evidence nor any statement of fact to substantiate his contention for deleting the addition. The learned D.R. pleaded for dismissal of the appeal.
Considering the fact that this ground of appeal is similar to ground No. 3 of appeal for A.Y. 2006-07 which have been dismissed in the absence of any contention or documentary evidence furnished by the assessee. Thus, we do not find any merit in the absence of any submission or any documentary evidence furnished by the assessee. In the result, grounds raised by the assessee are dismissed.
In the result, the appeals filed by the assessee are dismissed.