VIZAG COMPANYS STEEL,VISAKHAPATNAM vs. ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE-3(1), VISAKHAPATNAM
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Income Tax Appellate Tribunal, VISAKHAPATNAM BENCH, VISAKHAPATNAM
Before: SHRI DUVVURU RL REDDY, HON’BLE & SHRI S BALAKRISHNAN, HON’BLE
PER S. BALAKRISHNAN, Accountant Member :
This appeal filed by the assessee against the order of the Ld. Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi [CIT(A)-NFAC] vide DIN and Order No. ITBA/NFAC/S/250/2022-23/1046044902(1), dated 28/09/2022
2 arising out of the order passed U/s. 143(3) of the Income Tax Act,
1961 [the Act], dated 11/8/2021.
At the outset, the Ld. AR submitted that there is a delay of
24 days filing the appeal. The Ld. AR drew our attention to the
petition, along with an affidavit, filed by the assessee seeking
condonation of delay wherein the assessee explained the reasons
for belated filing of the appeal before the Tribunal. The relevant
portion of the affidavit is extracted herein below for reference:
“1 …… 2. The Managing Partner Sri M. Ashok Chowdary a senior citizen was stuck with dengue fever from the last week of November 2022. He was advised to take rest for 3 weeks and again he was stuck with Flu and hence there was a delay of above 23 days. In fact the work was entrusted to L Vaitheswaran & Co., Chennai and they could not filed the appeal due to various other reasons. ……” 3
On perusal of the reasons advanced by the assessee for
filing the appeal before the Tribunal beyond the prescribed time
limit with a delay of 24 days, we find that due to ill health of the
assessee the assessee was prevented to file the appeal within the
stipulated time. In our considered opinion, the explanation given
by the assessee constitutes ‘reasonable and sufficient cause’ and
3 therefore we hereby condone the delay of 24 days in filing the
appeal and proceed to adjudicate the appeal on merits.
Briefly stated the facts of the case are that the assessee is a
partnership firm filed its return of income admitting a total
income of Rs. NIL with a current year loss of Rs. 4,32,89,009/-.
The case was summarily processed U/s. 143(1) of the Act.
Subsequently, the case was selected for the limited scrutiny
assessment for the issue of “business loss”. Thereafter, notice
U/s. 143(2) of the Act was issued and served through ITBA on
28/09/2019. Subsequently, notice U/s. 142(1) of the Act was
issued through ITBA portal and served on 4/2/2020. Since the
assessee did not respond to the notice, another notice U/s.
142(1) was issued and served on 21/7/2020. Considering the
partial response to the notice, another notice U/s. 142(1) was
issued and served on 23/9/2020. Again the assessee furnished a
partial reply and therefore another notice U/s. 142(1) of the Act
was issued and served on 4/11/2020. Since the assessee sought
adjournment to this notice, the Ld. AO issued another notice
U/s. 142(1) and served on 5/1/2021. The Ld. AO further issued
another notice U/s. 142(1) of the Act on 25/1/2021 and
19/2/2021. The assessee once again sought adjournment and
4 the Ld. AO thereafter issued a show cause notice dated 5/3/2021
requesting the assessee to furnish its submission through e-
portal by 10/3/2021. In response, the assessee furnished replies
on 24/3/2021. Another show cause notice was again issued by
the Ld. AO on 25/5/2021. Since the assessee did not furnish
any information, the Ld. AO concluded that the assessee has
nothing to submit in support of its contention. From the details
filed by the assessee, the Ld.AO observed that the assessee has
claimed interest expenditure amounting to Rs. 5,81,66,267/-.
The Ld. AO observed that the interest payment was not made by
the assessee and thereby disallowed the same U/s. 43B of the
Act. Further, the Ld.AO also observed that the assessee has
deposited cash of Rs. 1,11,00,000/- in Bank of Baroda and
treated the said amount as unexplained and taxed U/s. 69A of
the Act. However, the Ld. AO gave credit to an amount of Rs.
24,23,842/- being the opening balance thereby subjecting Rs.
86,76,158/- to tax U/s. 69A of the Act. Aggrieved by the above
additions, the assessee filed an appeal before the Ld. CIT(A).
During the first appellate proceedings, the assessee
submitted bank statements substantiating the payment of
interest. The Ld. CIT(A) on examining the bank statements,
allowed a sum of Rs. 1,07,92,909/- being the interest made to
Axis Bank which is reflecting in the bank statements. However,
the Ld. CIT(A) disallowed a sum of Rs. 4,52,58,180/- being
claimed as paid to Bank of Baroda, by the assessee, U/s. 43B of
the Act and sustained the order of the Ld. AO to this extent.
Similarly, the Ld. CIT(A) rejected the submissions made by the
Ld. AR with respect to cash deposits of Rs. 1,11,00,000/- and
sustained the addition made by the Ld. AO. Aggrieved by the
order of the Ld. CIT(A), the assessee is in appeal before us by
raising the following grounds of appeal:
“1. The order of the Ld. CIT(A)-NFAC is arbitrary and unjust. 2. The Ld. CIT(A)-NFAC is not justified in confirming the addition of interest paid to Bank of Baroda amounting to Rs. 4,52,58,180/-. 3. The Ld. CIT(A) on one hand accepted the interest paid to Axis Bank amounting to Rs. 1,07,92,909.27 and disallowing interest paid to Bank of Baroda. 4. The Ld. CIT(A) did not give any reason for disallowance of the interest payment amounting to Rs. 4,52,58,180/-. 5. The Ld. CIT(A) is not justified in confirming the addition of Rs. 86,76,158/- U/s. 69A of the Act. 6. The Ld. CIT(A) ought to have seen the draft assessment order passed by the Ld. AO where no such addition was made. 7. The Ld. CIT(A) ought to have verified that no notice U/s. 69A was placed before the appellant.”
6 6. Additionally, the assessee has also filed a petition for
admission of additional legal ground as follows:
“On the facts and in the circumstances of the case, the addition of Rs. 86,76,158/- made by the AO U/s. 69A towards alleged unexplained cash deposits in bank account is outside scope of limited scrutiny and hence this addition is liable to be deleted.”
From the above original grounds of appeal raised by the
assessee, two issues emanate as follows:
Addition towards Interest paid to Bank of Baroda of Rs. 4,52,58,180/- and
Addition of Rs. 86,76,158/- U/s. 69A of the Act.
The legal ground pertains to the second addition of Rs.
86,76,158/- made U/s. 69A of the Act.
At the outset, the Ld. AR argued that the bank statements
were produced before the Ld. Revenue Authorities substantiating
the payment of interest. Further, the Ld.AR also referred to page
30 of the paper book submitted before us wherein the statement
of Bank of Baroda is enclosed. It was submitted that the account
is a cash credit account and operate in the nature of current
account. The Ld. AR further submitted that the interest amount
of Rs. 4,52,58,180/- has been serviced and is evident from the
fact by comparing the opening balance and closing balance of the
bank statement. Further, the Ld. AR also referred to page 63 of
7 the paper book wherein the Bank of Baroda issued a Certificate
on the receipt of interest from the CC Account of the assessee.
He therefore pleaded that since the interest has been serviced by
the assessee, no deduction can be made U/s. 43B of the Act and
pleaded that it should be deleted.
With respect to the addition U/s. 69A of the Act, the Ld. AR
referred to the legal ground and argued that since it is a limited
scrutiny case for the issue of “business loss”, no additions can be
made U/s. 69A of the Act which is beyond the jurisdiction of the
Ld.AO. The Ld. AR further submitted that section 69 does not
fall within the scope of ‘profits and gains of business or
profession’ and hence it cannot be considered as a business loss
and no addition can be made. In support of his argument, the
Ld. AR relied on the decision of this Bench in the case of Vishnu
Srinivasa Rao Kakarla vs. ITO, ITA No.93/Viz/2023 (AY: 2018-
19), dated 15/06/2023. He therefore pleaded that the additions
made may please be deleted.
Per contra, the Ld. DR heavily relied on the orders of the Ld.
Revenue Authorities and argued that the business loss includes
both the debit and credit sides of the books of accounts and
hence cash deposits are also covered for the purpose of scrutiny
8 assessment. The Ld. DR vehemently argued that the issues are
indirectly connected and hence pleaded that the orders of the Ld.
Revenue Authorities be upheld.
We have heard the rival contentions and perused the
material available on record and the orders of the Ld. Revenue
Authorities. It is a fact that the assessee maintains a cash credit
account with Bank of Baroda which is in the nature of current
account. From the bank statement we observe that the opening
balance as on 1/4/2017 is Rs. 9,67,51,144.25 and the closing
balance as on 31/3/2018 is Rs. 8,28,19,048.25. It is also noticed
that the amount debited for Rs. 4,52,58,180/- on 29/12/2017
and even after such debit, the balance is within the limits which
indicates that the assessee has serviced the interest portion.
Further, it is also seen from the paper book submissions of the
Ld. AR that the bank has issued a Certificate dated 27/5/2022
regarding the receipt of interest from the CC Account. In view of
the above facts of the case, we have no hesitation to delete the
addition made by the Ld. Revenue Authorities for Rs.
4,52,58,180/- U/s. 43B of the Act. We therefore allow this
ground raised by the assessee.
9 12. With respect to legal ground, we find from the record that it is a limited scrutiny proceedings for examining “business loss”. In case, if the Ld. AO wants to take up the case for complete scrutiny, first the Ld. AO has to convert the limited scrutiny into
complete scrutiny case and then he may take up the case for complete scrutiny with the prior approval of the Ld. Pr. CIT / CIT concerned after being satisfied about the issue of converting it into a complete scrutiny. In the instant case, we find that no such approval has been granted to the Ld. AO. We therefore find that the Ld. AO has travelled beyond his jurisdiction in treating
the cash deposits U/s. 69A of the Act which is not valid in law and therefore we are inclined to delete the addition made by the Ld. Revenue Authorities for Rs. 86,76,158/- and allow the ground raised by the assessee.
In the result, appeal of the assessee is allowed.
Pronounced in the open Court on 22nd December, 2023.
Sd/- Sd/- (दु�वू�आर.एलरे�डी) (एसबालाकृ�णन) (DUVVURU RL REDDY) (S.BALAKRISHNAN) �या�यकसद�य/JUDICIAL MEMBER लेखासद�य/ACCOUNTANT MEMBER
Dated : 22.12.2023
OKK - SPS
आदेशक���त�ल�पअ�े�षत/Copy of the order forwarded to:- �नधा�रती/ The Assessee–M/s. Vizag Company’s Steel, Plot No. 185, 1. D-Block, Autonagar, Gajuwaka, Visakhapatnam, Andhra Pradesh – 5300026. राज�व/The Revenue –ACIT, Circle-3(1), Inifnity Towers, Dwaraka 2. Nagar, Visakhapatnam, Andhra Pradesh. 3. The Principal Commissioner of Income Tax, आयकरआयु�त (अपील)/ The Commissioner of Income Tax 4. �वभागीय��त�न�ध, आयकरअपील�यअ�धकरण, �वशाखापटणम/ 5. DR,ITAT, Visakhapatnam गाड�फ़ाईल / Guard file 6. आदेशानुसार / BY ORDER
Sr. Private Secretary ITAT, Visakhapatnam
