M/S INDIAN CLOTHING LEAGUE PVT. LTD.,CHANDIGARH vs. DCIT, C-1(1), CHANDIGARH
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आयकर अपीलीय अिधकरण,च"ीगढ़ "ायपीठ “ए” , च"ीगढ़ IN THE INCOME TAX APPELLATE TRIBUNAL, CHANDIGARH BENCH “A”, CHANDIGARH HEARING THROUGH: PHYSICAL MODE "ी िव"म िसंह यादव, लेखा सद" एवं "ी परेश म. जोशी, "ाियक सद" BEFORE: SHRI. VIKRAM SINGH YADAV, AM & SHRI. PARESH M. JOSHI, JM आयकर अपील सं./ ITA NO. 372/Chd/2019 िनधा"रण वष" / Assessment Year : 2013-14 M/s Indian Clothing League Pvt. Ltd. बनाम The Dy. CIT S.C. No. 118-119, 2nd Floor, Circle-1(1) Sector 8-C, Chandigarh Chandigarh "ायी लेखा सं./PAN NO: AACCV3439R अपीलाथ"/Appellant ""थ"/Respondent िनधा"रती की ओर से/Assessee by : None राज" की ओर से/ Revenue by : Shri Danish Abdullah, JCIT, Sr. DR सुनवाई की तारीख/Date of Hearing : 21/08/2024 उदघोषणा की तारीख/Date of Pronouncement : 23/08/2024 आदेश/Order PER VIKRAM SINGH YADAV, A.M. : This is an appeal filed by the assessee against the order of the Commissioner of Income Tax (Appeals)-1, Chandigarh, dated 01.01.2019 and pertains to assessment year 2013-14, wherein, the assessee has taken the following grounds of appeal:
“1. That the order of the Ld. Commissioner of Income Tax (Appeals)-!, Chandigarh is defective both in law and facts of the case.
That the Ld. Commissioner of Income Tax (Appeals)-1 has erred in upholding Share Application Money received as deemed dividend u/s.2(22)(e) in the hands of the Assessee Company without correctly appreciating the facts and the laid down law on the matter.
That the Ld. Commissioner of Income Tax (Appeals)-1 has erred in upholding disallowance of depreciation on sewing machines without correctly appreciating the facts of the case.
That any other ground which would be taken up at the time of hearing with the kind permission of the Hon'ble bench.”
None appeared on behalf of the assessee nor any adjournment application was filed. From the record, it is noted that the appeal was filed way back in the year 2019, thereafter, vide order dt. 12/07/2022, the appeal was disposed off. Subsequently the assessee moved a Misc. Application and vide order dt. 22/11/2022 passed in M.A. No.
19/Chd/2022, the Coordinate Bench recalled the earlier order and the matter was fixed for hearing on 14/12/2022. Thereafter, the matter has been adjourned from time to time for one reason or other. Thereafter, on 21/02/2024, the ld AR withdrawn his power of attorney and notice was issued to the assessee and matter was adjourned to 25/04/2024 and there was no compliance. The Registry was against directed to issue notice by the RPAD and the matter was adjourned to 19/06/2024 again, there was no compliance on the part of the assessee and the Bench directed to issue notice though the Ld. DR and the matter was adjourned for today i.e; 21/08/2024. During the course of hearing, the Ld. DR submitted a report from the AO i.e; DCIT, Central Circle-1(1), Chandigarh stating that the notice has been served on the assessee company physically at the office address i.e; Plot no. ‘C’- 243A, Phase-8 Focal Point, Ludhiana and also been served though the affixtures under Rule 20 Order- 5 of CPC 1908. Inspite of the repeat service of notices through all possible means available, we find that there has been complete non-compliance on the part of the assessee company to prosecute the present appeal and therefore, keeping into account, consistent non compliance on the part of the assessee company in absence of any reasonable cause, it was decided that no useful purpose would be served in adjourning the matter any further and to decide the matter basis material available on record.
Ground No.1 is general in nature, which does not require any specific adjudication.
In Ground No. 2, the assessee has challenged the action of the ld. CIT(A) in upholding the share application money received as deemed dividend u/s.2(22)(e) of the Income Tax Act, 1961 (in short ‘the Act’) in the hands of the assessee. In this regard, we have carefully pursued the assessment order as well as the order of the ld.CIT(A) and find that the ld. CIT(A) has taken into consideration the entirety of the facts and circumstances of the case and has, thereafter, recorded the findings stating that the real nature of the share application money is interest free loan and advance parked in the books of the assessee company and the same is clearly covered u/s.56 r.w.s.2(22)(e) of the Act, and the relevant findings are contained at Para No.5.7.4, which is reproduced hereunder:
“……5.7.4 In view of above, the AO has rightly held that the appellant falls in the situation i.e. "Any payment by a closely-held company of any sum by way of advance or loan to any HUF or firm or AOP or BOI or a company in which a 10% voting power shareholder is a member or a partner and in which he has at any time during the PY beneficially entitled to not less than 20% of the income of the concern." The share application is just a mask used by the assessee. The paid up share capital was just Rs.2,37,50,000/- as against Authorized Share Capital Rs.3,00,00,000/-. The share application money amounting to Rs.316,65,000/- is lying with the assessee free of interest just as an advance. Assessee has failed to rebut the findings of the AO that share application is lying idle in the books of assessee and no shares were ever issued. The Ld.AO’s findings further confirmed when the appellant submits that to meet the fund requirements for rapid expansion of business operation of the Company, in the financial year 2012-13, the board of directors or the appellant Company has decidecl to raise money by issue of fresh share capital. Accordingly, the Company had given invitation of subscription of its shares to above mentioned three Companies and had received share application money amounting to Rs.3,16,65,000/-.In the later part of the financial year 2012-13, the appellant Company found an opportunity to get bigger investment of Rs.50 crores from a Venture Capital Fund (VCF). Appellant Company had appointed Ourea Capital Advisors Private Limited as an investment banker of the Company for raising private equity capital in the month of February, 2013. Copy of mandate signed with Ourea Capital Advisors Private Limited dated 11th February, 2013 is hereby submitted for perusal. As per the terms and conditions of the VCF which subsequently became a part of the written Securities Subscription Agreement (SSA) executed between the appellant Company and VCF, the Company and Promoters shall ensure that immediately prior to investment by the Investor (VCF) there shall not be any shareholders in the appellant Company other than promoters. Appellant reproduced relevant extracts of relevant clauses in his reply. Therefore, to grab aforesaid investment opportunity and to the best interest of the Company, the board of the Company had decided to refund the aforesaid share application money. These facts show that the real nature of these share application money is interest free loan & advance left parked in the books of the assessee company. Hence, the loan recipient is covered u/s 56 r.w.s. 2(22)(e) of the Act. The case laws relied by the assessee company do not help him as the facts are distinguishable. Action of AO is confirmed. The Ground of Appeal No.1 is dismissed…….”.
In light of above, we do not see any infirmity in the findings of the ld.CIT(A), which are hereby confirmed and the grounds of appeal taken by the assessee is dismissed.
In Ground No.3, the assessee has challenged the action of the ld.CIT(A) in upholding the disallowance of depreciation on sewing machine. In this regard, we find that the ld.CIT(A) has passed well reasoned order taking into consideration the entirety of the facts and circumstances of the case and his findings which are contained at Para No.7.2 are hereby confirmed. The relevant findings of the ld. CIT(A) are re- produced as under:
“………7.2 Held: I have perused the order of the Assessing Officer and, examined the reply of the assessee. The AO has given facts of findings that many of these sewing machines were found to have been received on 31.03.2013 at the time of closing i.e. 1700/1730 hrs. The assessee has failed to explain as to how the assets which merely entered the gate of assessee's premises at 5:30 PM on 31.03.2013 could be used for the purpose of business on 31.03.2013 itself relevant for FY 2013-14. AO has given such finding after perusing the bills
where inward entry has been made with date, time and signature of the person at the entry that the machinery in the form of sewing machine was received at 5:30 PM. AO has further pointed out that the assessee has also claimed depreciation on machinery which has not even been received during the FY 2012-13. The machinery purchased from IIGM Pvt. Ltd. amounting to Rs.6,78,300/- was purchased during the FY 2013-14 and not FY 2012-
AO concluded that it is a clear indication that assessee is resorting to claim excess depreciation. The ARs of the appellant has submitted that sewing machines need no expertise for installation and the same are used immediately after removing the packing. The Ld.ARs further submitted that depreciation is allowed even if the asset has been used for the purpose of the business of the assessee for as short as one day. It is apparent that the AR of the assessee company has miserably failed to rebut the findings of the AO. These assets have been received at the last day of the financial year. The assessee cannot take undue advantage of the plea that once the assets are merged into the block of assets it loses its identity and the question of actual use of a particular asset in the year should not be relevant for allowing depreciation in respect of the same. Here the AO has given specific findings on the basis of bills produced by the assessee. No positive evidence has been brought on record by the AR of the assessee during assessment or appellate proceedings to rebut AO's findings. The case laws relied by the AR do not help the case of the assessee. Action of the AO is confirmed. The Ground of Appeal No.3 is dismissed……”.
In light of above, Ground No.3 of the assessee’s appeal is hereby dismissed.
In the result, the appeal filed by the assessee is dismissed.
Order pronounced in the open Court on 23/08/2024. परेश म. जोशी िव"म िसंह यादव (PARESH M. JOSHI) ( VIKRAM SINGH YADAV) "ाियक सद" / JUDICIAL MEMBER लेखा सद"/ ACCOUNTANT MEMBER AG आदेश क" "ितिलिप अ"ेिषत/ Copy of the order forwarded to : 1. अपीलाथ"/ The Appellant
""यथ"/ The Respondent 3. आयकर आयु"/ CIT 4. आयकर आयु" (अपील)/ The CIT(A) 5. िवभागीय "ितिनिध, आयकर अपीलीय आिधकरण, च"डीगढ़/ DR, ITAT, CHANDIGARH 6. गाड" फाईल/ Guard File
आदेशानुसार/ By order, सहायक पंजीकार/
