R.K.Manufacturing Co. Ltd., Jamnagar V. I.T.O.,Ward-4(1), Kolkata

ITA 119/KOL/2020

• Counselvise Citation: [2022] 106 COUNSELVISE.COM (IT) 1900 (ITAT-KOLKATA)
• Duration Of Justice: 2 year(s) 5 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-06-2022
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: C
• Assessment Year: 2009-2010
• Appeal Filed On: 27-01-2020
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Earning of tax free income; Rule 8D
• Section: 147; 148; 14A

Judgement Text

ITA No. 119/KOL/2020 Assessment Year : 2009-2010 R.K. Manufacturing Co. Limited 1 IN THE INCOME TAX APPELLATE TRIBUNAL, ‘C’ BENCH, KOLKATA Before Shri Rajpal Yadav, Vice-President (KZ) & Shri Rajesh Kumar, Accountant Member I.T.A. No. 119/KOL/2020 Assessment Year: 2009-2010 R.K. Manufacturing Co. Limited,..................................................Appellant C/o. B.K. Sahoo & Company, “Karnani Estates”, 209, A.J.C. Bose Road, 5 th Floor, Suite No. 188, Kolkata-700017 [PAN: AABCR5644R] -Vs.- Income Tax Officer,.......................................................................Respondent Ward-4(1), Kolkata, Aayakar Bhawan, P-7, Chowringhee Square, Kolkata-700069 Appearances by: N o n e, appeared on behalf of the assessee Shri Suvendu Dutta, Addl. CIT, appeared on behalf of the Revenue Date of concluding the hearing : June 28, 2022 Date of pronouncing the order: June 29, 2022 O R D E R Per Rajpal Yadav, Vice-President (KZ):- The assessee is in appeal before the Tribunal against the order of ld. Commissioner of Income Tax (Appeals)-2, Kolkata dated 02.12.2019 passed for the assessment year 2009-10. The assessee has taken five grounds of appeal, but in brief its grievance is that the ld. CIT(Appeals) has erred in confirming the addition of Rs.61,37,193/- by passing an ex- parte order against the assessee. The Tribunal has issued repeated ITA No. 119/KOL/2020 Assessment Year : 2009-2010 R.K. Manufacturing Co. Limited 2 notices to the assessee and adjournment was sought by Shri Bijaya Kumar Sahoo, FCA from B.K. Sahoo & Company, Chartered Accountants. Information was transmitted to the assessee also about this appeal, but inspite of the notices, no one has come present on behalf of the assessee from the last two dates of hearing. 2. With the assistance of ld. D.R., we have gone through the record carefully and found that none appeared before the ld. Assessing Officer as well as ld. CIT(Appeals). Both the orders are ex-parte orders. There is no explanation at the end of the assessee for its non-appearance before both the authorities in the statement of facts. Under these compelling circumstances, we heard the appeal ex-parte qua the assessee. 3. Brief facts of the case are that the assessee has filed its return of income declaring total loss at Rs.36,611/-. Ld. Assessing Officer made two additions i.e. Rs.60,30,000/- and Rs.1,07,193/-. The discussions made on these two issues in an ex-parte order by the ld. Assessing Officer read as under:- “An information has been received from D.D.I.T. (Investigation), Unit-2(3), Kolkata on 21.03.2016, wherein it has been stated that on verification of A/c.No.000601527711 & No.000605019116 of ICICI Bank Ltd., R. N. Mukherjee Branch, Kolkata maintained by Shri Panchanan Mondal, Proprietor of M/s. P Enterprises. It was observed that the bank account was opened on 20.02.2009 and closed on 08.08.2009 and there were multiple cash deposits in the account No.000605019116 ranging from Rs.35,000/- to Rs.8,50,000/- totaling to Rs, 140.44 Lacs and immediately after deposits funds were transferred electronically. Ongoing through transaction trails, it was found that funds were transferred mainly to M/s. Express Plastichem Ltd,, M/s. Speciality Vyapaar Pvt. Ltd. and M/s. Vista Vyapaar Pvt. Ltd. An amount of Rs 60,30,000/- was transferred to M/s. Express Plastichem Ltd. Further, investigation reveals that M/s. Express Plastichem Ltd. was amalgamated with M/s. R. K. Manufacturing Ltd. in the month of April, 2009. M/s, R. K. Manufacturing Ltd. is assessed to tax in this charge. On basis of this information this case has been re-opened u/s. 147 for scrutiny assessment with prior approval of Pr, C.I.T., Kolkata-2. Notice u/s. 148 was duly issued on 30-03-2016 and sent to the assessee-company. In response to the said notice none appeared on behalf of the assessee company to represent the case and no such any written submission received. ITA No. 119/KOL/2020 Assessment Year : 2009-2010 R.K. Manufacturing Co. Limited 3 A reminder letter of hearing was sent on 12/09/2016 to make comply or to submit requisitioned documents in connection with the assessment proceedings. The same was also returned by postal authority. Another re-fixation/reminder letter of hearing was sent to the both, the directors) and principal officer of the assessee-company on 24-10-2016 with a request to make comply or to submit documents as requisitioned in earlier letter(s)/ notices by 4 th November, 2016. But, till date no compliance made by the assessee company. From the e-filed returns of the assessee company., n is sees that the assessee company was engaged in the business of trading in shares during the F.Y. 2013-14. Since there is non-compliance from, the very beginning, the undersigned has no option to verify/reconcile the above mentioned information/transaction(s) with the books/documents of the assessee company. It is therefore concludes that in absent of any books/documents, such bogus transaction amounting to Rs.60,30,000/- is added back to the total of the assessee company. [Addition Rs.60,30,000] Disallowance of expenses related to exempt in come u/s.14A read with Rule 8D: On perusal of the computation of total income during the year, it is observed that the assessee-company has investment in unlisted equities during the financial year under consideration. In light of C.B.D.T.’s Circular No.5/2014 dated 11 th February, 2014. circular clarifies that disallowance of expenses u/s. 14A of the I.T. Act, 1961 is to be invoked even in those cases where no income has been earned by an assessee which has been claimed as exempt during the financial year. Thus, for invoking disallowance u/s. 14A, it is not material that the assessee company should have earned such exempt income during the financial year under consideration. The above position is further clarified by the usage of term includible in the Heading to section 14A of the Act and also the Heading to Rule 8D of I.T. Rules, 1962 which indicates that it is not necessary that exempt income should necessarily be included in a particular year's income, for disallowance to be triggered. Also, section 14A of the Act does not use the word "income of the year" but "income under the Act. This also indicates that for invoking disallowance under section 14A, it is not material that assessee should have earned such exempt income during the financial year under consideration. Hence, Disallowance u/s 14A read with Rule 8D(2)(ii) of the Income-tax Rules, 1962 is computed as under: (A) The amount of net Interest paid is Rs.NIL. (B) The average value of Investments is (2,19,23,000 + 2,09,54,000) =Rs,2,14,38,500/- 2 (C) The average value of total Assets is (38,97,473 + 38,97,473) =Rs,38,97,473/- 2 ITA No. 119/KOL/2020 Assessment Year : 2009-2010 R.K. Manufacturing Co. Limited 4 Hence, the amount of expenditure to be disallowed is Rs.NIL. {(A x B)/C} Rule 8D(2)(iii) : As per the Balance Sheets as at 31.03.2013 & 31.03.2014, the total of average investments stand at Rs.(2,19,23,000 + 2,09,54,000] respectively. Therefore, the average value of investments thereof comes to Rs.2,14,38,500/-. Hence, as per Rule 8D(2)(iii), the quantum of disallowable expenditure is ascertained for Rs.1,07,193/- being 1/2% of Rs.2,14,38,500/-. Therefore, the total disallowance of expenses u/s, 14A as per rule 8D comes at i.e, Rs.1,07,193/- [NIL + 1,07,193]. In view of the above, disallowance u/s. 14A read with Rule 8D is restricted to an amount of Rs, 1,07,193/- and added back to the total income of the assessee company. Since there is non-compliance from the very beginning, the undersigned has no option to verify/reconcile the above mentioned information' transaction(s) with the books/documents of the assessee company. It is therefore concludes that in absent of any books/documents, expenses relatable to exempted income as computed above is added back to the total of the assessee- company. [Addition Rs. 1,07,193] 4. Dissatisfied with the additions, the assessee carried the matter before the ld. 1 st Appellate Authority. Ld. CIT(Appeals) noticed that the appeal was listed for hearing on six occasions. Notices were sent to the assessee. They were either not served or returned back with the postal remarks ‘unclaimed’. The details of these notices and the remarks came have been noticed by the ld. 1 st Appellate Authority on page 2 of the impugned order. Thereafter the ld. 1 st Appellate Authority has confirmed the addition by way of an ex-parte order. 5. The ld. D.R. submitted that the assessee neither appeared before the ld. Assessing Officer nor before the ld. CIT(Appeals) as well as did not file any paper book before the Tribunal. On due consideration of the above facts and circumstances, we find that this appeal was posted on the Board on 10 th December, 2020. Thereafter it was fixed on 14 th January, 2021 but no one appeared on behalf of the assessee. Subsequent to that, the Bench did not function and on 28.12.2021, parties were informed through phone for hearing on 5 th of January, 2022. An adjournment letter was filed by B.K. Sahoo & Company, Chartered Accountants and hearing ITA No. 119/KOL/2020 Assessment Year : 2009-2010 R.K. Manufacturing Co. Limited 5 was adjourned to 28 th February, 2022. Thereafter Bench did not function and again notice was sent to the assessee but no one has come present on behalf of the assessee. 6. A perusal of the assessment order would reveal that a Bank Account was maintained by the assessee with ICICI Bank, where it has deposited more than Rs.140 lakhs and immediately after deposit, funds were transferred electronically. The ld. Assessing Officer reopened the assessment and directed the assessee to explain the reason for payment to Rs.60,30,000/- to M/s. Express Plastichem Limited. In other words, the inquiry at the end of the ld. Assessing Officer was about the investment in M/s. Express Plastichem Limited but the assessee did not submit any explanation or documents. Therefore, the ld. Assessing Officer treated it as unexplained payment either an expenditure or unexplained investment. He made the addition. In the absence of any explanation, we are of the view that the ld. Assessing Officer had no other choice except to make the addition of this amount. Similarly, the ld. Assessing Officer has made the addition under section 14A by considering the investment made by the assessee. After going through the impugned orders, we do not find any merit in this appeal. It is dismissed. 7. In the result, the appeal of the assessee is dismissed. Order pronounced in the open Court on June 29, 2022. Sd/- Sd/- (Rajesh Kumar) (Rajpal Yadav) Accountant Member Vice-President (KZ) Kolkata, the 29 th day of June, 2022 Copies to : (1) R.K. Manufacturing Co. Limited, C/o. B.K. Sahoo & Company, “Karnani Estates”, 209, A.J.C. Bose Road, 5 th Floor, Suite No. 188, Kolkata-700017 ITA No. 119/KOL/2020 Assessment Year : 2009-2010 R.K. Manufacturing Co. Limited 6 (2) Income Tax Officer, Ward-4(1), Kolkata, Aayakar Bhawan, P-7, Chowringhee Square, Kolkata-700069 (3) Commissioner of Income Tax(Appeals)-2, Kolkata, (4) The Departmental Representative (5) Guard File TRUE COPY By order Assistant Registrar, Income Tax Appellate Tribunal, Kolkata Benches, Kolkata Laha/Sr. P.S.