YASH FISCAL SERVICES P.LTD,NAVI MUMBAI vs. ITO WD 2(1)(2), MUMBAI

In this appeal the assessee has raised the following three grounds, which I shall deal in seriatim: -

The assessee before me is a company incorporated under the Companies Act, 1956 and is, inter alia, engaged in the business of consultancy services. The assessment under section 143(3) of the Act has been finalised by the AO at an income of `49,15,434/- as against the returned income of `10,03,140/-, after making certain additions/ disallowances which were carried in appeal before the CIT(A). The CIT(A) has given partial relief and not being satisfied with the order of the CIT(A) the assessee is in further appeal before the Tribunal.

Before me the first issue raised by the assessee is with regard to the action of the income tax authorities in disallowing the loss on sale of shares of `18,65,994/-. In this context the relevant discussion in para 4 of the assessment order reveals that the AO concluded that the claim of loss on sale of shares amounting to `18,65,994/- remains unexplained. The AO has noted that the assessee has failed to provide any details as regarding the origin of the loss, the genuineness of the claim of loss, etc. The CIT(A) in para 3.2 of his order also records that the assessee has failed to satisfy the genuineness of the share transactions. Also, as per the CIT(A), the assessee had not submitted any verifiable evidence to the AO and accordingly the CIT(A) affairmed the action of the AO in disallowing the loss of `18,65,994/-.

Before me the plea of the learned A.R. of the assessee is that both the authorities below have negated the claim of the assessee by only making general observations whereas the assessee had furnished appropriate materials and evidences which have not been referred to at all. On this aspect it is explained that the loss is on account of sale of purchase and sale of commodities and for that matter he has referred to pages 44 to 43 of the paper book wherein are placed copies of the contract notes issues by the respective brokers. It was explained that the aforesaid

On the other hand, the learned D.R. appearing for the Revenue pointed out that the application of the assessee seeking admission of additional evidence before the CIT(A) was responded to by the AO in his remand report dated 16.06.2016, a copy of which is in the paper book filed by the assessee. Therefore, according to her the CIT(A) did not find it justifiable to admit the additional evidence and hence the same has not been considered while adjudicating the plea of the assessee.

I have carefully considered the rival submissions. Ostensibly in the present case the assessee filed certain additional evidence before the CIT(A) which was not hitherto filed before the AO during the assessment proceedings. The additional evidence which is relevant for the impugned dispute is in the shape of contract notes issued by the broker for sale and purchase of commodities, which has resulted in the impugned loss of `18,65,994/-. The order of the CIT(A) is conspicuous by its silence as to why the additional evidence has not been admitted inspite of the fact that the CIT(A) also called for a remand report from the AO, who furnished the same vide report dated 16.06.2016. Before me the learned A.R. has also furnished a copy of the written submission addressed to the CIT(A) post the remand report of the AO. In this background, in my view, it was imperative to the CIT(A) to have considered the application of the assessee seeking admission of additional evidence in the manner mandated under Rule 46A of the Income Tax Rules. In the absence of the same having been done by the CIT(A), in my view, his order becomes unsustainable. As a consequence I set aside the order of the CIT(A) on this aspect and restore it back to the file of the CIT(A) to adjudicate the issue of claim of loss of `18,65,994/- afresh and as per law. Needless to mention that the assessee should be provided reasonable opportunity of hearing before passing fresh

The second ground raised by the assessee is with regard to addition of `3,00,000/- which has been sustained by the CIT(A) as unexplained cash credit under section 68 of the Act. At the time of hearing the learned A.R. has not pressed the said issue and accordingly the same is dismissed as not pressed.

The last ground in this appeal is with regard to the action of the income tax authorities in disallowing the expenditure on car rent of `1,20,000/-. At the stage of assessment it has been noted by the AO that an amount of `2,39,250/- towards rent was debited to the Profit & Loss Account and since the assessee could not furnish any details, the entire amount was disallowed. The CIT(A) noted that the sum of `2,39,250/- comprises of office rent – `1,19,250/- and car rent – `1,20,000/-. He has allowed the claim for office rent but sustained the disallowance of `1,20,000/- representing car rental on the ground that the assessee could neither furnish proper explanation for hiring car nor it was established that the car has been used for business purposes. Against such decision of the CIT(A) assessee is in appeal before the Tribunal.

Before me, apart from referring to page 44 of the paper book, which is the confirmation for payment of car rental to one M/s. RCS & Associates, there is no explanation with regard to the use of the car. Accordingly I find no justifiable reason to interfere with the findings of the CIT(A) on this aspect, which is hereby affirmed. Thus, on this aspect the assessee fails.

In the result, the appeal filed by the assessee is partly allowed.