PRESIDENCY FINANCE LIMITED ,CHENNAI vs. DCIT,CORPORATE CIRCLE-5(2), CHENNAI

This appeal filed by the assessee is directed against the order of the ld. Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi, dated 17.10.2023 relevant to the assessment year 2017-18.

Brief facts of the case are that the assessee filed its return of income for the assessment year 2017-18 on 11.10.2017 admitting a total income of ₹.80,45,362/- under normal provisions and book profit of ₹.44,41,615/-. The case was selected for scrutiny through CASS and notice under section 143(2) of the Income Tax Act, 1961 [“Act” in short] dated 06.09.2019 was issued and duly served on the assessee. As there was no response, the Assessing Officer afforded another opportunity vide letter dated 04.10.2019 to furnish the details. In response, the assessee had uploaded only the annual report of the company and did not furnish any other information which were required by the assessee to furnish in response to notice under section 142(1) of the Act dated 06.09.2019. The assessee has failed to furnish any proper documentary evidences and substantiate its claim as genuine. On perusal of the financial statement, the Assessing Officer has noted that during the year the assessee has issued 1,75,000/- equity shares at a face value of ₹.10/- each amounting to ₹.17,50,000/-. However, since there was no proper details/evidences to whom the shares have been issued and the mode of receipt of the amount, the Assessing Officer treated the same as unexplained cash credits in the books of the assessee under section 68 of the Act and brought to tax.

Further, the assessee has claimed total expenses to the tune of ₹.1,51,00,862/- incurred during the year. After perusal of the claim and in the absence of documentary evidences or proof, the Assessing Officer has disallowed 60% of the total expenses claimed by the assessee and added back to the total income of the assessee at ₹.90,60,517/-.

The assessee carried the matter in appeal before the ld. CIT(A). After considering the submissions of the assessee, the ld. CIT(A) confirmed the addition of ₹.17,50,000/- under section 68 of the Act and with regard to the claim of expenses, the ld. CIT(A) restricted the disallowance of expenses to the extent of 30% of the total unexplained expenditure and partly allowed the appeal.

On being aggrieved, the assessee is in appeal before the Tribunal. With regard to the addition made under section 68 of the Act, by filing various details in the form of paper book, the ld. counsel for the assessee has submitted that the assessee issued the shares to an existing shareholder company and adequately disclosed the details in the balance sheet schedules, which are further mandatorily filed before various regulatory authorities for statutory compliances. It was further submission that without affording adequate opportunities, the Assessing Officer has hurriedly concluded the assessment and prayed for affording one more opportunity of being heard to substantiate the claim of the assessee. So far as restriction of expenses at 30%, the ld. counsel has submitted that the assessee has complete details of expenses incurred and the expenses have to be fully allowed. Thus, it was prayed for one more opportunity to furnish the details of expenses.

On the other hand, the ld. DR supported the order passed by the ld. CIT(A).

We have heard both the sides, perused the materials available on record and gone through the orders of authorities below including paper book filed by the assessee. Since the assessee could not file any details as to whom the shares have been issued and mode of receipt for the amount, the Assessing Officer treated the same as unexplained cash credits in the books of the assessee under section 68 of the Act, which was confirmed by the ld. CIT(A) as no details were furnished even before the ld. CIT(A). However, by filing various details such as RBI Registration Certificate, PAN copy of investor, ITR-V of the investor, balance sheet schedule of investor, etc., the assessee has prayed for an opportunity to substantiate its case before the Department.

With regard to the restriction of disallowance of expenses, the assessee has claimed expenses to the tune of ₹.1,51,00,862/-. Since the claim was not supported by documentary evidences, the Assessing Officer disallowed 60% of the total expenses incurred and brought to tax. On appeal, after considering the submissions of the assessee, ld. CIT(A) restricted the disallowance of expenses to the extent of 30% of the total unexplained expenditure. Before us, by filing various details of expenses such as ledger extract for interest paid, TDS payment, TDS return acknowledgement, car purchase tax invoice, vehicle maintenance & insurance premium receipt, etc., it was the submission that the assessee has complete details towards expenses incurred and the entire expenses have to be allowed and prayed for affording one more opportunity of being heard to the assessee.

In the result, the appeal filed by the assessee is allowed for statistical purposes. Order pronounced on 27th March, 2024 at Chennai.