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Income Tax Appellate Tribunal, KOLKATA ‘B’ BENCH, KOLKATA
Before: SRI RAJESH KUMAR & PRADIP KUMAR CHOUBEY
order
: November 11th, 2024 ORDER
Per Pradip Kumar Choubey, Judicial Member:
The instant appeal filed by the Revenue pertaining to the Assessment Year (in short ‘AY’) 2017-18 is directed against the order passed u/s 250 of the Income Tax Act, 1961 (in short the ‘Act’) by ld. Commissioner of Income- tax (Appeals)-21, Kolkata [in short ld. ‘CIT(A)’] dated 08.08.2023 arising out of the assessment order framed u/s 153A of the Act dated 30.03.2022. 2 It is seen, at the outset, that the tax effect on the disputed additions before us is less than Rs. 60 Lakh as prescribed in the CBDT’s latest Circular No. 09/2024 dated 17.09.2024.
I.T.A. No.: 1320/KOL/2024 Assessment Year: 2017-18 Lakhotia Diagnostic Service Private Limited. 2.1. This circular prescribes that the revised monetary limits shall apply retrospectively to pending appeals as well.
The ld. DR has also fairly stated that tax effect involved in appeal is less than the prescribed limit but his argument is that it comes under the exception clause.
In light of the submissions made by the parties, we have perused the record and find that the case of the assessee is that the Appellant Company is engaged in healthcare business. The appellant filed return declaring a total income of Rs. 39,81,245/-. A search and seizure operation u/s 132 of the Income Tax Act, 1961 was conducted in various office premises cum residence of Lakhotia Group on 5/2/2021. The said Lakhotia group is engaged in real estate, manufacturing and export-import business, health care diagnostic including laboratory, radiology, cardiology & neurology services, industrial fabrication, industrial automation, woven and non-woven fabric business, education and services, hotel industry. During the course of search and seizure as well as survey operation Books of Accounts were seized or impounded. 4.1. In response to the notices, the ld. A/R of the assessee appeared, submitted necessary details/documents as per requisition. The ld. AO after examination of submissions and documents of the assessee company found it to be not tenable and the ld. AO added the unsecured loan of Rs. 63 Lakh u/s 68 of the Act and interest on unsecured loans to the tune of Rs. 343127/- is disallowed and added back to the total income of the assessee company u/s 69C of the Act. The ld. AO has further added the amount of Rs. 9.90 Lakh by way of interest and brokerage expenses and total income of the assessee has been computed at Rs. 1,21,58,977/-. The said order has been challenged by the assessee before the ld. CIT(A) wherein after hearing the submissions and documents, appeal of the assessee has been allowed with regard to the addition u/s 68 & 69C of the Act. But addition of interest and brokerage on cash loans to the tune of Rs. 9.90 Lakh has been sustained and appeal of the assessee has been partly allowed.
Page 2 of 7 I.T.A. No.: 1320/KOL/2024 Assessment Year: 2017-18 Lakhotia Diagnostic Service Private Limited.
The present appeal has been preferred by the Department against the said order. The first point raised by the assessee with regard to the tax effect as on the disputed addition before us is less than Rs. 60 Lakh. The assessee has also argued on the merit of the case by citing a decision of Coordinate Bench of Kolkata ITAT passed in the case of Lahotia Diagnostic Service Pvt. Ltd. vs. ACIT in IT(SS)A No. 164 & 165/KOL/2023 order dated 31.07.2024. The ld. D/R has submitted that the ld. CIT(A) has erred in facts and laws by allowing the appeal of the assessee by deleting the addition of Rs. 63 Lakh as bogus unsecured loans. 5.1. In light of the submissions, we have perused the order of the ld. CIT(A) and find that before deciding the appeal of the assessee ld. CIT(A) has discussed the facts of the case, documentary evidences filed by the parties as well as law. On perusal of the ld. CIT(A)’s order it appears to us that the issue before the ld. CIT(A) was as follows: (i) For that the addition made by the ld. AO u/s 153A of the Act proceedings did not have any nexus with the incriminating materials unearthed during the course of the search which were not produced or not already disclosed or made known in the course of original assessment. (ii) FOR THAT completed assessment can be interfered with while making the assessment u/s 153A of the Act only on the basis of some incriminating materials unearthed in course of the survey. (iii) FOR THAT there is no satisfaction recorded by the ld. AO in proceeding u/s 153A of the Act that the assessment made u/s 153A of the Act based on the material unearthed in course of the search. 5.2. The ld. CIT(A) has passed its order in favour of the assessee by stating that all the assessments in this case has been completed as on the date of search, he has given a chart which is as follows: Sl. Particulars Date/Amount Remarks No. i) Date of filing original return u/s 04.11.2017 - 139 of the Act ii) Date of assessment order u/s 16.12.2019 - 143(3) Page 3 of 7 I.T.A. No.: 1320/KOL/2024 Assessment Year: 2017-18 Lakhotia Diagnostic Service Private Limited. iii) Assessed Income u/s 143(3) Rs. Addition made u/s 40(a)(ia), Assessee 45,25,850/- opted VSVS against such addition iii) Date of search & Seizure operation 05.02.2021 - u/s 132 of the Act iv) Date of filing of Return u/s 153A 04.01.2022 - v) Returned Income in return filed Rs.39,81,240/- - u/s 153A 5.3. The ld. CIT(A) has discussed the judgment of the Hon'ble Calcutta High Court, Hon'ble Karnataka High Court and other High Courts on the issue of incriminating material and also discussed the decision of the Hon'ble Apex Court in the case of PCIT Vs Abhisar Buildwell Pvt. Ltd. in Civil Appeal Number 6580 of 2023. The observation of the ld. CIT(A) is thus:
“The AO made an addition of Rs.63,00,000/- by way of unexplained cash credit u/s 68 of the Act in relation to the unsecured loans obtained and duly recorded by the appellant in his regular books of accounts. The AO has also made an addition of Rs. 3,43,127/- u/s 69C of the Act towards the disallowance of interest on unsecured loan. It is observed that both the unsecured loans and the interest thereon was part of the assessee's books of account and was there before the AO during the course of assessment proceedings u/s 143(3), but no additions were made in this regard in the order u/s 143(3). So, in respect of these unsecured loans from alleged shell companies, two things are very clear, first that the AO did not refer to any incriminating material while making the additions made against such unsecured loans and the corresponding interests and second that the said unsecured loans and their interest were part of the books of account of the appellant. It is also worthwhile to mention that all the requisite documents pertaining to the said unsecured loans, such as the loan confirmations, the financial statements of lender companies, copies of ITR of the lender companies etc were furnished by the appellant during the course of assessment as well as appeal proceedings. It is observed that, in order to examine the identity and creditworthiness of the loan creditors and the genuineness of loan transaction, the Assessing Officer made independent enquiries u/s 133(6) of the Act in respect of the lender companies which has been discussed by him in Page 2 of his order. The AO has recorded that in response to notice u/s 133(6), the requisite documents were submitted by the loan creditors. However on perusal of such documents submitted, the AO concluded that the said lender companies lacked creditworthiness. Without addressing the merits of the AO's approach in rejecting the submissions made before him, what is most noteworthy, uncontroverted and material in this context is the fact that the AO has nowhere brought on record any material, incriminating or not, that was brought to light during the search, upon which the impugned addition could be said to have been made. Page 4 of 7 I.T.A. No.: 1320/KOL/2024 Assessment Year: 2017-18 Lakhotia Diagnostic Service Private Limited. The AO, during the course of the impugned assessment, has not been able to bring on record any material whatsoever which he can claim to have come to light solely as a result of the search. Seized material has to be distinguished from incriminating material, for, it is not necessary that all the seized material would be incriminating. For the material to be considered incriminating, the material in question has to satisfy the tests laid down by the judicial authorities as reproduced and discussed above. I find that the material relied upon by the AO does not satisfy any of the tests discussed above. Therefore by no form of reasoning can this existence of names of such lender companies appearing in the departmental database of shell companies be considered incriminating. The onus to establish that any particular such material/document/evidence found during a search should be considered incriminating lies upon the AO since it is he who is making such an assertion. Therefore, lawfully, it is he who has to adduce evidence that this is so. From the material on record this fact has not been established at all and no evidence in this regard has been led during assessment proceedings. Not only has this onus not been discharged by the AO, but the records themselves do not indicate anything that creates an impression that there was any incriminating material found during the search. It is also pertinent that the case of the appellant had been earlier scrutinized u/s 143(3) under CASS and no additions on this count had been made. In the above circumstances, it cannot be said that the said addition was based upon any incriminating material found during search.” 5.4. The ld. CIT(A) after discussing the entire documents filed by the assessee and the judgment pronounced by the various High Courts in this context has held that addition made by the ld. AO cannot be said to be based upon incriminating material found during search. On perusal of the documents, we are also in the view that in search assessment made u/s 153A, if assessment has been concluded, then no addition can be made without linkage to incriminating material found during the course of search. It is apparent from the record that original return of income had been filed on 04.11.2017 and the assessment u/s 143(3) was concluded on 16.12.2019. The case pertains to the AY 2017-18, date of search was 05.02.2021, the assessment had been concluded. Accordingly, we do not find any merit in the argument of the appellant, hence on this issue order of the CITA) is affirmed. 5.5. So far, the addition of interest on brokerage on cash loans to the tune of Rs. 9.90 Lakh is concerned, we have gone through the judgment passed by the Coordinate Bench of ITAT, Kolkata against the same assessee in IT(SS)A
Page 5 of 7 I.T.A. No.: 1320/KOL/2024 Assessment Year: 2017-18 Lakhotia Diagnostic Service Private Limited. No. 164/Kol/2023 - The assessee in this appeal has taken the following grounds of appeal:
“1. FOR THAT the CIT(A) erred in law in upholding in imaginary addition being Interest & Brokerage paid on alleged Cash Loan to the tune of Rs.9,70,000/- without considering the fact that the Cash Loan, as alleged, in the Order of Assessment was imaginary and not based upon any credible evidence and therefore. the penalty proceedings u/s 269SS initiated on that score was dropped by the Ld. Jurisdictional JCIT, Central Circle and accordingly, and when the foundation of Cash Loan is eliminated, the edifice build upon such foundation in form of imaginary interest and brokerage paid of Rs.9,70,000/- on alleged cash loan cannot stand in the eyes of law and the addition sustained by the Ld. CIT(A) on that score is liable to be deleted at this forum.
FOR THAT the Ld. Authority below erred in law in upholding the imaginary addition to the tune of Rs. 9,90,000/- on account of Commission and Brokerage paid on non-existent of "cash loan", taken by the Company.
FOR THAT the legal maxim "sublato fundamento cadit opus" is directly applicable in this case, and accordingly the addition sustained by the CIT(A)-21 is liable to be deleted. Your appellant craves leave to add supplement or amend further ground or grounds at the time of hearing.”
The issue raised by the assessee in this appeal is relating to the confirmation of addition of Rs.9,90,000/- made by the Assessing Officer on account of alleged unaccounted interest and brokerage expenses paid by the assessee on cash loans of Rs.75,00,000/-.
The ld. counsel for the assessee has invited our attention to the relevant part of the assessment order to submit that the allegation of the Assessing Officer was that the assessee had received cash loans in violation of provisions of section 269SS of the Act, for which the proceedings u/s 271D were initiated against the assessee. However, the assessee has demonstrated in the said proceedings that the assessee did not receive any such cash loans as alleged in the assessment order. Thereafter, the proceedings carried out u/s 271D were dropped against the assessee. Since the assessee did not receive any cash loans and the said fact stands accepted by the department and therefore, the alleged payment of interest & brokerage on such non-existed cash loans, does not arise at all.
In view of the above, the impugned additions in respect of alleged unaccounted interest and brokerage are not sustainable and the same are accordingly ordered to be deleted.”
Page 6 of 7 I.T.A. No.: 1320/KOL/2024 Assessment Year: 2017-18 Lakhotia Diagnostic Service Private Limited.
Keeping in view the facts and circumstances of the case as well as discussion made by the ld. CIT(A) and the order of the Coordinate Bench of this Court, we are in this view that the appeal do not deserve any merit. Accordingly, the same is hereby dismissed 7. Further, in view of above stated position, the appeal of the Revenue is also not maintainable u/s 268A of the Act because of low tax effect than the prescribed limits as per CBDT Circular No. 09/2024 (supra).
In the result, the appeal filed by the Revenue is dismissed. Order pronounced in the open Court on 11th November, 2024. Sd/- Sd/- [Rajesh Kumar] [Pradip Kumar Choubey] Accountant Member Judicial Member Dated: 11.11.2024 Bidhan (P.S.) Copy of the order forwarded to:
1. 1. DCIT, Kolkata.
2. Lakhotia Diagnostic Service Private Limited, 493/C/A Block-E Vivek Bihar, G.T. Road (South), Shibpur, Kolkata, West Bengal, 711102.
3. CIT(A)-21, Kolkata.
4. CIT- 5. CIT(DR), Kolkata Benches, Kolkata.
6. Guard File. //True copy // By order Assistant Registrar ITAT, Kolkata Benches Kolkata
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