Dico Transport Corporation Ltd., Kolkata V. I.T.O.,Ward-1(4), Kolkata

ITA 1253/KOL/2019

AI Insights

The case involves Dico Transport Corporation Ltd, which appealed against the order of the Commissioner of Income Tax (Appeals) - 10, Kolkata, concerning the Assessment Year 2014-15. The primary issues in the appeal included the disallowance of expenses under section 14A, and additions related to unexplained expenditure and losses from dealing in shares, which were alleged to be accommodation entries. The Tribunal found that the Commissioner had not correctly addressed the issue of bogus losses and had treated them as long-term capital gains, which was incorrect. The Tribunal also noted that the assessee was not provided adequate opportunity for cross-examination during the assessment proceedings.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 132598 (ITAT-KOLKATA)
• Duration Of Justice: 4 year(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-06-2023
• Appeal Filed By: Assessee
• Order Result: PartlyAllowed
• Bench Allotted: B
• Next Hearing Date: 26-03-2023
• Assessment Year: 2014-2015
• Appeal Filed On: 22-05-2019
• Other Referred Cases: PCIT Vs. Era Infrastructure (India) Ltd.
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: MIRAJ D. SHAH
• Keywords: Unexplained expenditure; Earning of tax free income; Additional evidence; Capital Gains
• Section: 69C; 142(1); 14A; 250; 143(2)

Judgement Text

| आयकर अपीलीय अिधकरण ᭠यायपीठ, कोलकाता | IN THE INCOME TAX APPELLATE TRIBUNAL “B” BENCH, KOLKATA BEFORE SHRI RAJPAL YADAV, HON’BLE VICE PRESIDENT & DR. MANISH BORAD, HON’BLE ACCOUNTANT MEMBER I.T.A. No. 1253/Kol/2019 Assessment Years: 2014-15 Dico Transport Corporation Ltd. 5 th Floor, Room No. 502 P-41, Princep Street Kolkata - 700072 [PAN : AAACD8952H] Vs Income Tax Officer, Ward-6(1), Kolkata अपीलाथᱮ/ (Appellant) ᮧ᭜ यथᱮ/ (Respondent) Assessee by : Shri Miraj D. Shah, A/R Revenue by : Shri P.P. Barman, Addl. CIT सुनवाई कᳱ तारीख/Date of Hearing : 27/03/2023 घोषणा कᳱ तारीख /Date of Pronouncement: 21/06/2023 आदेश/O R D E R PER DR. MANISH BORAD, ACCOUNTANT MEMBER: The captioned appeal filed by the assessee pertaining to the Assessment Year 2014-15 is directed against order passed u/s 250 of the Income Tax Act, 1961 (in short the "Act") by Learned Commissioner of Income Tax (Appeals) - 10, Kolkata [in short "ld. CIT(A)"] dated 28/02/2019. 2. The assessee raised the following grounds of appeal:- "1. For that in the facts and circumstances of the case the assessment order passed was in violation of principals of natural justice hence is bad in law and be quashed. 2. For that in the facts and circumstances of the case the order passed u/s. 144 of the IT Act 1961 without considering the reply submitted by the assessee was not justified. Hence, the assessment order was bad in law and thus be quashed. 3. For that the facts and circumstances of the case the Ld. CIT(A) erred in upholding the addition of Rs.81.41,735/- on account of loss from I.T.A. No. 1253/Kol/2019 Assessment Years: 2014-15 Dico Transport Corporation Ltd 2 dealing in shares. The addition is uncalled for hence the same be deleted. 4. For that the facts and circumstances of the case the Ld. CIT(A) erred in upholding the addition of Rs.4,07,087/- on account of commission paid to being unexplained expenditure u/s 69C of the IT Act 1961. The addition is uncalled for hence the same be deleted. 5. For that the facts & circumstances of the case the Ld. CIT(A) erred in upholding the addition of Rs.72,088/- on account of expenses u/s 14A of the IT Act 1961. The addition is uncalled for hence the same be deleted. 6. For that the relevant documents/evidences was not made available and the parties were not made available for cross examination in the course of the assessment. Hence the said material could not be used for purpose of making addition in the assessment order 7. The appellant craves leave to produce additional evidences in terms of Rule of the Income Tax Tribunal Rules. 8. For that the interest computed u/s 234A/B/C/D of the IT Act 1961 is over charged a wrongly calculated and or is not applicable to the assessee case hence the interest deleted and or correctly computed. 9. The appellant craves leave to press new, additional grounds of appeal or modify, withdraw any of the above grounds at the time of hearing of the appeal." 3. The first issue for our consideration raised by the assessee in Ground No. 5 is that the ld. CIT(A) erred in upholding the addition of Rs.72,088/- on account of disallowance of expense u/s 14A of the Act. The claim of the assessee is that no tax free income was earned during the year and, therefore, in view of the settled judicial precedents, disallowance u/s 14A of the Act, is uncalled for. The ld. D/R failed to revert the contentions made by the assessee. We, therefore, on I.T.A. No. 1253/Kol/2019 Assessment Years: 2014-15 Dico Transport Corporation Ltd 3 considering the fact that the assessee has not earned any exempt income during the year, and in view of the latest judgment of the Hon'ble Delhi High Court in the case of PCIT Vs. Era Infrastructure (India) Ltd. (ITA 204/2022) judgment dt. 20/07/2022, wherein it has been held that the amendment made in Section 14A of the Act by Finance Act, 2022, will be applicable prospectively and also held that disallowance u/s 14A of the Act should not exceed the exempt income earned by the assessee during the year, delete the disallowance and allow Ground No. 5. 4. Another issues raised in Ground Nos. 1, 2, 3, 4, 6 and 7 is regarding the issue of disallowance of loss from dealing in shares of Rs.81,41,735/- and also an addition towards unexplained expenditure u/s 69C of the Act at Rs.4,07,087/- made towards deemed commission expenditure which the assessee may have been incurred for arranging the accommodation loss of Rs.81,41,735/-. Before us, the ld. Counsel for the assessee, has contended that the ld. CIT(A) while giving his finding is addressed the issue considering that the assessee has claimed exemption u/s 10(38) of the Act on account of Long term capital gain from sale of equity shares. However, the issue was regarding loss from dealing in shares. It is also submitted that the order of the ld. Assessing Officer is framed u/s 144 of the Act and the assessee was not provided proper opportunity to plead and also no opportunity was provided for cross examination. 4.1. On the other hand, the ld. D/R vehemently argued supporting the order of both the lower authorities and stated that the alleged loss is from dealing in shares of a company which was part of 84 odd I.T.A. No. 1253/Kol/2019 Assessment Years: 2014-15 Dico Transport Corporation Ltd 4 companies which are listed on BSE and the Income Tax Department has unearthed and identified them as bogus gains/loss. 5. We have heard rival contentions and perused the material placed before us. We notice that the assessee is a limited company and is a non-banking financial company and declared income of Rs. 316,554/- in the e-return filed for Assessment Year 2014-15 on 23/09/2014. Case of the assessee selected for scrutiny through CASS for the reason "suspicious transaction relating to long-term capital gains on shares". During the course of assessment proceedings which was commenced after serving valid notice u/s 143(2) and 142(1) of the Act, the assessee company was allowed opportunities for hearing on 06/12/2016 and 09/12/2016 but there was no compliance on the part of the assessee. Ld. Assessing Officer has gone through the audited statement of profit and loss account and balance sheet and also considered the information received from the Investigation Wing, stating that the assessee had received accommodation entry of loss from dealing in scrips, namely, S.R.K. Industries Ltd., Sreenath Commercial & Financial Ltd., Tuni Textile Mills Ltd. and Blue Circle Service Ltd., ld. Assessing Officer also observed that there was opening stock of equity shares at Rs.8,94,400/- and purchases and sales during the year amounted to Rs.1,05,97,386/- and Rs.33,14,275/- respectively and closing stock is shown at Rs.35,776/-and that there was a loss of Rs.81,41,735/- which the assessee had adjusted set off against the interest income from loans and fixed deposits. The ld. Assessing Officer has discussed the financials of the alleged scrips in detail in the assessment order and finally came to a conclusion that the said loss is I.T.A. No. 1253/Kol/2019 Assessment Years: 2014-15 Dico Transport Corporation Ltd 5 in the nature of accommodation entry and disallowed the same and further made an addition for unexplained expenditure of Rs.4,07,087/- which the assessee may have incurred for arranging the alleged loss. 5.1. We further note that when the assessee carried the matter before the ld. CIT(A) he has also discussed the financials of the alleged scrips and thereafter has relied on various judicial pronouncements. However, in the finding of the ld. CIT(A), we notice that he has adjudicated the issue treating that the assessee has claimed exemption u/s 10(38) of the Act from long-term capital gains from sale of equity shares. On going through the finding of the ld. CIT(A), though the figure of the alleged loss is appearing in the impugned order but the same has been treated as long-term capital gains. Entering of loss and earning of exempt income are two different transactions. In case of the gains, the amount received towards sale consideration is to be verified and buyer’s identity and creditworthiness is to be examined because on the basis of such sale consideration, a person is earning long-term capital gains from sale of equity shares. On the other hand, in case of loss, it needs to be examined that when was the purchase made, whether they are brought forward from preceding years or they have been purchase during the year, what is the source of such purchases and then comes the matter of examining the genuineness of sale transactions. Looking at the impugned order indicates that ld. CIT(A) has dealt the issue by treating it as long-term capital gains transaction from sale of equity shares and the assessee has claimed bogus exemption u/s 10(38) of the Act. I.T.A. No. 1253/Kol/2019 Assessment Years: 2014-15 Dico Transport Corporation Ltd 6 6. So far as the plea of the assessee that the ld. Assessing Officer has not granted proper opportunity, we fail to find any merit because sufficient opportunity was granted and the ld. Assessing Officer has discussed the issue in detail and has come to a conclusion. 7. However, since the ld. CIT(A) has not examined the issue correctly and has also not appreciated the facts of the case, by wrongly dealing the issue of bogus long term capital gain whereas the issue is of claiming bogus loss. We thus deem it proper to restore this issue of alleged claim of bogus loss and unexplained expenditure u/s 69C of the Act to the file of the ld. CIT(A) for afresh adjudication, who shall examine this issue after providing sufficient opportunity of being heard to the assessee and also to go through the transactions considering that the assessee is a non-banking financial company and some of the equity shares were held as opening stock. With these directions, Ground Nos. 1, 2, 3, 4, 6 & 7 are allowed for statistical purposes. 8. Ground Nos. 8 & 9 are consequential and general in nature. 9. In the result appeal of the assessee is partly allowed for statistical purposes. Order pronounced in the Court on 21 st June, 2023 at Kolkata. Sd/- Sd/- (RAJPAL YADAV) (DR. MANISH BORAD) VICE PRESIDENT ACCOUNTANT MEMBER Kolkata, Dated 21/06/2023 *SC SrPs I.T.A. No. 1253/Kol/2019 Assessment Years: 2014-15 Dico Transport Corporation Ltd 7 आदेश कᳱ ᮧितिलिप अᮕेिषत/Copy of the Order forwarded to : 1. अपीलाथᱮ / The Appellant 2. ᮧ᭜यथᱮ / The Respondent 3. संबंिधत आयकर आयुᲦ / Concerned Pr. CIT 4. आयकर आयुᲦ)अपील (/ The CIT(A)- 5. िवभागीय ᮧितिनिध ,आयकर अपीलीय अिधकरण, कोलकाता/DR,ITAT, Kolkata, 6. गाडᭅ फाई/ Guard file. आदेशानुसार/ BY ORDER, TRUE COPY Assistant Registrar आयकर अपीलीय अिधकरण ITAT, Kolkata