KWALITY ICE CREAMS INDIA LLP(ERSTWHILE KWALITY ICE CREMS INDIA PVT. LTD.),KOLKATA vs. DCIT, CIRCLE -10, KOLKATA, KOLKATA

In this appeal the Assessee has challenged the order of CIT(A) whereby the CIT(A) confirmed the order of AO making addition of Rs.79,15,669/- on account of alleged undisclosed investment in mutual funds.

The Assessee is a company. It is engaged in the business of marketing of fats/oils besides making investments. In the course of assessment proceedings the AO found from the information from Annual Information Report (AIR) that the assessee had made investments in mutual funds. The assessee was able to explain the source of funds for making investments in many of the mutual funds. However in respect of investments in HDFC made on 01.12.2004 and 16.12.2004 of Rs.39,24,170/- and Kwality Ice Creams India LLP. A.Yr.2005-06 Rs.39,91,499/-, respectively in HDFC mutual fund the assessee could not offer proper explanation. The AO therefore made the impugned addition to the total income of the assessee.

Before CIT(A) the assessee filed a letter dated 07.12.2007 of Citi Bank. The assessee explained before CIT(A) that dividend which are received on the existing investments of units of mutual funds were re-invested in HDFC Equity fund and this was done by Citi bank as per the standing instruction given by the assessee. In the letter dated 07.12.2007 of Citi bank these facts were clarified by them to the assessee. The assessee thus pleaded before the AO that the source of funds out of which investments in HDFC Equity fund were made, were duly explained as out of dividend received on mutual funds which were reinvested.

The CIT(A) however did not accept the claim of the assessee and he held as follows :- “ 2.3. I have considered the submission of the appellant and also gone through the observation made by the AO in assessment order. I am of the view that the amount of Rs.79,15,669/- has been correctly added to the total income of the appellant as the said income has already accrued during the F.Y. 2004-05. Hence, the said addition of Rs.79,15,669/- is upheld. This ground of appeal is dismissed.”

The assessee has paid appealing fee only Rs.1500/-. The Registry has raised an objection that the fee payable in the appeal was Rs.10,000/-. In reply to the defect memo issued by the Registry in this regard the assessee has pointed out as follows :- “ In this connection we would like to invite your attention to the fact that in the instant case, Total Income assessed by the Ld. Assessing Officer is "NIL" vide his Order dt.07.12.2007 passed under section 143(3) of The 1. Tax Act, 1961 as per certified copy of the Order attached with Memorandum of Appeal filed with Hon'ble Tribunal on 11.06.2012 bearing 12.

The learned counsel for the asessee also drew our attention to the decision of the Hon’ble Bombay High Court in the case of Gilbs Computer Ltd. Vs ITAT [2009] 317 ITR 159 wherein the Hon’ble Bombay High Court took a view that the fees payable depends upon the total income and when the total income determined is at a negative figure the fees of Rs.500/- alone is payable.

We have considered the submissions of the learned counsel for the assessee and are of the view that the contentions put forth by him are correct and deserve to be accepted. Accordingly it is held that fees paid in the appeal is proper.

As far as the merits of the appeal of the assessee are concerned we have heard the rival submissions. It is seen that there was a hearing before CIT(A)13.11.2009. and this letter dated 07.12.2007 of Citi bank was filed by the assessee and it was contended that the investments in HDFC mutual fund were out of the dividend received which were automatically reinvested in mutual funds. The hearing before CIT(A) was thereafter adjourned and took place on 23.08.2008 and adjourned to 03.11.2011. Thereafter the impugned order was passed on 28.12.2011. It is clear from the order of CIT(A) that CIT(A) has not gone into the source out of which the investments in mutual funds were made and treated as unexplained by AO. It can be said that by implication the CIT(A) has accepted the claim of the assessee because CIT(A) has taxed the impugned sum as Kwality Ice Creams India LLP. A.Yr.2005-06 dividend that accrued to the assessee during the previous year relevant to A.Y.2005-06. In this regard the learned counsel for the assessee pointed out that in the subsequent assessment year the assessee had offered the dividend income to tax. The relevant ledger account was filed before us . The same is given as annexure to this order.

We are of the view that in the light of the evidence now available on record the issue has to be examined afresh by the AO. We therefore set aside the order of CIT(A) and remand the issue to the AO for fresh consideration in the light of the evidence brought to our notice during the course of hearing. AO will afford opportunity of being heard to the assessee in the set aside proceedings. The appeal of the assessee is treated as allowed for statistical purposes.

In the result the appeal of assessee is treated as allowed for statistical purposes.