SH. DEVINDER KUMAR,LUDHIANA vs. ITO, W-VII(1), LUDHIANA

IN THE INCOME TAX APPELLATE TRIBUNAL DIVISION BENCH ‘A’, CHANDIGARH

BEFORE SHRI SANJAY GARG, JUDICIAL MEMBER AND MS. ANNAPURNA GUPTA, ACCOUNTANT MEMBER ITA No.1270/Chd/2017 (Assessment Year : 2011-12) Sh.Devinder Kumar, Vs. The Income Tax Officer, 14, Surya Vihar, Ward-VII (1), Rishi Nagar, Ludhiana. Ludhiana. New Address: C/o M/s Shree Aum Hospital Aashiana Complex, Bari Brahmana, Jammu. (Jammu & Kashmir). PAN: AENPK0344L (Appellant) (Respondent)

Appellant by : None Respondent by : Ms. Deepika Mohan, JCIT Date of hearing : 16.05.2018 Date of Pronouncement : 30.05.2018

ORDER PER ANNAPURNA GUPTA, AM:

This appeal has been preferred by the assessee against

the order of learned Commissioner of Income Tax (Appeals)-

4, Ludhiana (hereinafter referred to as CIT(Appeals)) dated

19.6.2017 relating to assessment year 2011-12.

is an architect by profession had filed his return of income

for the year under consideration on 21.03,2012 declaring

therein an income of Rs.2,33,090/- which was stated to be

processed under section 143(1) of the Act at the returned

income. However, the assessment in this case was

completed by the Assessing Officer vide order under section

143(3) of the Act dated 15.01.2014 at an assessed income of

Rs.19,30,496/-. making the following additions to the

returned income of the assessee:-

(i). Addition on account of unexplained cash deposits in Various bank accounts maintained by the assessee with Different banks Rs.7,30,500/-

(ii) Addition on account of disallowance of interest by invoking provisions of section 36(1)(iii) of the Act on the ground that assessee has given interest free loans advances to related/unrelated parties/concerns which were considered by the Assess- ing Officer for Non-business purposes. Rs.5,99,330/-

(iii) Addition on account of unproved Unsecured loans Rs.3,50,000/-

(iv) Addition on account of disallowance Of expenses by invoking provisions Of section 14A of the Act Rs.17,576/- 3. Aggrieved by the same, the assessee carried the matter

before the Ld.CIT(Appeals). The appeal was fixed for hearing

on various occasions which were either not attended or

adjournment sought by the assessee. The details of the

same are reproduced at para 5.1 of the CIT(Appeals)’s order.

Thereafter the CIT(Appeals) noted that even no written

submissions were filed in support of various grounds of

appeal and, therefore holding that the assessee being not

interested in pursuing the appeal ,he proceeded to dispose

off the same ,ex-parte, on the basis of material available on

record. The Ld.CIT(Appeals) noted thereafter that various

additions made in the case had been made after considering

the reply filed by the assessee from time to time and since

no submissions had been made in support of various

grounds raised in appeal despite sufficient opportunities

provided to the assessee, the Ld.CIT(Appeals) was of the

opinion that the assessee had nothing to say in the matter

with regard to various additions. Further noting that the

assessee could not demonstrate how the additions made by

the Assessing Officer were incorrect and that there was

nothing on record to suggest that the additions made were

not correct, the Ld.CIT(Appeals) held that the Assessing

Officer was fully justified in making various additions and

thereby dismissed the appeal filed by the assessee.

appeal before us raising the following grounds:

“1. That the Ld. Commissioner of Income Tax (A)-4, Ludhiana has erred in dismissing the appeal and hence confirming all the additions made by the Assessing Officer. 2. That the Ld. CIT(A) has erred in not considering that no sufficient and reasonable opportunity was afforded to the assessee to represent the case before him and also the assessee was prevented by sufficient/reasonable cause in not appearing before him. 3. That the Ld. CIT(A) has failed to take into consideration that though email sent to his office, it has been communicated to him that the appellant had undergone heart surgery and was admitted to the hospital and, therefore, requested for time and which has been ignored. 4. Notwithstanding the above said grounds of appeal, it is submitted that even otherwise while dismissing the appeal, the Ld. CIT(A) has erred in not considering the submissions filed by the assessee during the course of proceedings before the Assessing Officer and all other documents and material already on record before the Assessing Officer.” 5. Before us also despite various opportunities given to

the assessee either adjournment was sought verbally or

none came present, on the dates fixed for hearing. Even on

16.05.2018, when the case was finally heard, none

appeared on behalf of the assessee despite the

adjournment of the hearing of the case to the said date i.e.

16.5.2018, being made in the open court on the last date of

hearing i.e. 22.03.2018, when Shri Gaurav Sharma, proxy

counsel for the assessee who had sought adjournment

verbally, was present in person. We, therefore, agree with

the Ld.CIT(Appeals) that the assessee is not interested in

pursuing the appeal, having nothing to say with regard to

various additions made in this case and even the grounds

raised before us relating to reasonable opportunity of

hearing not being granted to the assessee ,or that there was

reasonable and sufficient cause with the assessee for not

appearing before the CIT(Appeals). We therefore dismiss

ground No.2 & 3 raised by the assessee in this regard.

against the act of the CIT(Appeals) in confirming all

additions made by the Assessing Officer, we shall be

separately dealing with each addition made on the basis of

orders of the lower authorities below us, which is the only

material available with us, since even before us the

assessee has not filed any submissions in writing.

that the addition made on account of unexplained cash

found deposited in Bank, of Rs.7,30,500/-, was made after

considering the reply filed by the assessee. The Assessing

Officer had noted that there was cash deposited in the

various Bank accounts of the assessee to the tune of

Rs.92,10,000/-. On asking the assessee to explain the

same, the assessee filed reply, reproduced in para 2 of the

Assessing Officer’s order, after considering which the

Assessing Officer accepted the explanation of the assessee

vis-a-vis cash deposits to the tune of Rs.84,79,500/-. The

balance, to the extent of Rs.7,30,000/-,was held to be still

remaining unexplained and addition made of the same to

the income of the assessee. Since the Assessing Officer

has made the addition after considering the assessees reply

and the assessee has nothing to say on the issue, as noted

above by us, we find no infirmity in the order of the

CIT(Appeals), upholding the addition so made of

Rs.7,30,500/- on account of unexplained cash deposits.

the Act, we find, that the Assessing Officer had noted that

the assessee had advanced interest free loans to his family

members and family concern/trust and at the same time

had paid interest on loans to financial institutions and

banks. The same was confronted to the assessee asking him

why interest @ 10% be not disallowed on the interest free

loans/advances given, to which, we find the assessee

replied that they were all friendly loans and loans given to

charitable trusts and therefore no interest was charged.

Further opportunities were also given to the assessee

wherein he contended that the loans raised were for

business purpose only. The Assessing Officer after

considering the reply filed by the assessee, held that the

assessee had failed to establish the commercial expediency

for making the said loans and also that the loans raised

were used in the business of the assessee. He therefore held

that the assessee had diverted interest bearing funds for

non business purposes and disallowed interest pertaining to

the same, resulting in disallowance of interest of

Rs.5,99,330/-. Since the Assessing Officer has made the

disallowance after considering the assessees reply and the

assessee has nothing to say on the issue, as noted above by

us, we find no infirmity in the order of the CIT(A),upholding

the disallowance made of interest u/s 36(1)(iii) of the Act,

of Rs.5,99,300/-.

of unsecured loans taken by the assessee amounting to

Rs.3,50,00/- from one Smt.Saroj Bhatia, for the reason that

the assessee had failed to discharge his onus of proving the

identity & creditworthiness of the loanee and also the

genuineness of the transaction. With respect to the same,

we find that the Assessing Officer had noted that the loan

was not taken in the impugned year and was outstanding as

at the end of the preceding year also i.e 31-03-2010,

pertaining to A.Y 2010-11. In view of the same, we hold that

the said loan cannot be treated as income of the assessee

for the impugned year. The addition so made to the income

of the assessee amounting to Rs. 3,50,000/- is therefore

deleted.

disallowance of expenses incurred in relation to income

earned which is exempt from tax, as per section 14A of the

Act, amounting to Rs.17,576/-. The Assessing Officer had

noted that the assessee had made investment in mutual

funds/shares, income from which by way of dividend was

exempt from tax. He therefore asked the assessee as to why

expenses relating to the same be not disallowed u/s 14A of

the Act, to which the assessee denied incurring any

expenses and also denied earning any exempt income from

the said investments. The AO dismissed the assessees

contentions and proceeded to disallow expenses calculated

as per Rule 8D of the Income Tax Rules,1962,which

amounted to Rs.17,576/-.

are not in agreement with the AO/CIT(A).The AO has noted

the fact that no dividend income was earned by the assessee

on the said investments. In view of the said fact, we hold

that no disallowance u/s 14A is warranted. The Hon’ble

jurisdictional High Court in the case of CIT vs Lakhani

Marketing Incl (2014) 272 CTR 265 (P&H) has held that no

disallowance u/s 14A is warranted when no exempt income

is earned. Respectfully following the same we delete the

disallowance made u/s 14A of the Act amounting to

Rs.17,576/- .

In view of the above we delete the additions made on

account of the following:

Unexplained loan Rs.3,50,000/- U/s 14A Rs.17,576/-

While the additions/disallowances made on account of

the following is upheld:

Unexplained cash deposited in bank Rs.7,30,500/- Interest u/s 36(1)(iii) Rs.5,99,330/-

partly allowed.

.

Order pronounced in the Open Court.

Sd/- Sd/-

(SANJAY GARG) (ANNAPURNA GUPTA) JUDICIAL MEMBER ACCOUNTANT MEMBER Dated : 30th May, 2018 *Rati* Copy to: 1. The Appellant 2. The Respondent 3. The CIT(A) 4. The CIT 5. The DR

Assistant Registrar, ITAT, Chandigarh