ASSTT. COMMISSIONER OF INCOME TAX CIRCLE-1(2)(1), MUMBAI V. CHERYL ADVISORY PVT LTD , MUMBAI

ITA 1975/MUM/2023

• Counselvise Citation: [2023] 102 COUNSELVISE.COM (IT) 0245 (ITAT-MUMBAI)
• Duration Of Justice: 5 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-10-2023
• Appeal Filed By: Department
• Order Result: PartlyAllowed
• Bench Allotted: C
• Next Hearing Date: 30-10-2023
• Assessment Year: 2013-2014
• Appeal Filed On: 25-05-2023
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Unexplained cash credit; Depreciation; Revenue expenditure
• Section: 32; 131; 148; 143(3); 133(6); 250; 13

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH “C” MUMBAI BEFORE SHRI OM PRAKASH KANT (ACCOUNTANT MEMBER) AND SHRI RAHUL CHAUDHARY (JUDICIAL MEMBER) ITA No. 1975/MUM/2023 Assessment Year: 2013-14 ACIT Circle 1(2)(1), Aayakar Bhavan, Maharishi Karve Marg, Mumbai-400020. Vs. Cheryl Advisory Pvt. Ltd., 501, Vraj Apt. 10 th Road Juhu, Mumbai-400049. PAN No. AADCC 3053 D Appellant Respondent Assessee by : Mr. Shyam Walve & Mr. Tanzil Padvekar Revenue by : Mr. H. M. Bhatt, Sr. DR Date of Hearing : 31/10/2023 Date of pronouncement : 01/11/2023 ORDER PER OM PRAKASH KANT, AM This appeal by the Revenue is directed against order dated 28.03.2023 passed by the Ld. Commissioner of Income-tax (Appeals) – National Faceless Appeal Centre, Delhi [in short ‘the Ld. CIT(A)’] for assessment year 2013-14, raising following grounds: 1. "Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) was justified in deleting the addition of Rs.540,00,000/-- without appreciating the fact that the onus is on the assessee to prove the genuineness of transaction of the share premium and creditworthiness of the Investors subscribing to the share capital?" 2. "Whether on the facts of case and in the circumstances of the case and in law the Ld. CIT(A) was justified in allowing the expenses of Rs. 38,24,085/- without appreciating the complete facts of the case that no business activities was carried out by the assessee". 2. Briefly stated, facts of the case are that consideration, the assessee company was engaged in providing services of consultancy and advisory commercial, legal etc. The assessee filed return of income declaring total income at Rs. Nil. The return of income filed by t assessee was selected for scrutiny assessment and statutory notices under the Income-tax Act, 1961 (in short ‘the Act’) were issued and complied with. In the assessment completed u/s 143( dated 01.03.2016, the Assessing Officer made additio capital/share premium allotment of shares holding the same as unexplained cash credit u/s 68 of the Act and disallowance for business expenses of Rs.38,24,085/-. On further appeal, the Ld. CIT(A) called remand report for the Assessing Officer and deleted both the additions made by the Assessing Officer. Aggrieved in appeal before the Tribunal by way of raising grounds as reproduced above. 3. Before us, the Ld. Counsel containing pages 1 to 897. 4. The ground No. 1 of the appeal relates to addition of Rs.5,40,30,000/- made u/s 68 of the Act which has been deleted by 2. "Whether on the facts of case and in the circumstances of the case law the Ld. CIT(A) was justified in allowing the expenses of Rs. without appreciating the complete facts of the case that no business activities was carried out by the assessee". Briefly stated, facts of the case are that during the year un the assessee company was engaged in providing services of consultancy and advisory commercial, legal etc. The assessee filed return of income electronically on 24.09.2013 declaring total income at Rs. Nil. The return of income filed by t assessee was selected for scrutiny assessment and statutory notices tax Act, 1961 (in short ‘the Act’) were issued and complied with. In the assessment completed u/s 143( he Assessing Officer made additio capital/share premium of Rs.5,49,30,000/- received against allotment of shares holding the same as unexplained cash credit u/s 68 of the Act and disallowance for business expenses of . On further appeal, the Ld. CIT(A) called remand report for the Assessing Officer and deleted both the additions made by the Assessing Officer. Aggrieved, the appeal before the Tribunal by way of raising grounds as Before us, the Ld. Counsel for the assessee filed a Paper book containing pages 1 to 897. The ground No. 1 of the appeal relates to addition of made u/s 68 of the Act which has been deleted by Cheryl Advisory Pvt. Ltd. 2 ITA No. 1975/Mum/2023 2. "Whether on the facts of case and in the circumstances of the case law the Ld. CIT(A) was justified in allowing the expenses of Rs. without appreciating the complete facts of the case that no during the year under the assessee company was engaged in providing services of consultancy and advisory commercial, legal etc. The electronically on 24.09.2013 declaring total income at Rs. Nil. The return of income filed by the assessee was selected for scrutiny assessment and statutory notices tax Act, 1961 (in short ‘the Act’) were issued and complied with. In the assessment completed u/s 143(3) of the Act he Assessing Officer made addition for the share received against allotment of shares holding the same as unexplained cash credit u/s 68 of the Act and disallowance for business expenses of . On further appeal, the Ld. CIT(A) called for the remand report for the Assessing Officer and deleted both the , the Revenue is appeal before the Tribunal by way of raising grounds as see filed a Paper book The ground No. 1 of the appeal relates to addition of made u/s 68 of the Act which has been deleted by the Ld. CIT(A). The facts in brief qua the issue in dispute are that the Assessing Officer observed shares issued at premium by the assessee which has been tabulated by him in para 5.1 of the assessment order. For ready reference said table is reproduced as under: As at 5 th October, 2012: Sr. No. Name of Applicant 1. Ms. Anju Batra 2. Plus Corporate Ventures Pvt. Ltd. Total As at 31 st March, 201 Sr. No. Name of Applicant 1. Ms. Anju Batra 2. Religare Finvest Ltd. Total 4.1 The Assessing Officer asked the assessee to justify the amount of share capital/share premium received in terms of section 68 of the Act. However, the Ld. Counsel the shareholders of the assessee company i.e. Ms. Anju Batra and Plus Corporate Ventures Pvt. Ltd. were not traceable by the assessee and hence assessee details of their income tax return, balance sheet and confirmation of shareholders. Consequently, the Assess 133(6) of the Act to the shareholder parties calling for the relevant information. However, only M/s Plus Corporate Ventures Pvt. Ltd. replied but in respect o the Ld. CIT(A). The facts in brief qua the issue in dispute are that Officer observed shares issued at premium by the assessee which has been tabulated by him in para 5.1 of the assessment order. For ready reference said table is reproduced as October, 2012: Name of Applicant No of shares Face value Amount including Premium (in Rs.) Ms. Anju Batra 805000 805000 16100000 Plus Corporate Ventures Pvt. Ltd. 1880000 1880000 37600000 2685000 2685000 53700000 2013: Name of Applicant No of shares Face value Amount including Premium (in Rs.) Ms. Anju Batra 815000 8150000 16200000 Religare Finvest Ltd. 1903000 19030000 37830000 2718000 27180000 54030000 The Assessing Officer asked the assessee to justify the amount of share capital/share premium received in terms of section 68 of the Act. However, the Ld. Counsel for the assessee submitted that the shareholders of the assessee company as on 5 th i.e. Ms. Anju Batra and Plus Corporate Ventures Pvt. Ltd. were not traceable by the assessee and hence assessee was unable to provide income tax return, balance sheet and confirmation of shareholders. Consequently, the Assessing Officer issued notice u/s 133(6) of the Act to the shareholder parties calling for the relevant information. However, only M/s Plus Corporate Ventures Pvt. Ltd. in respect of other two parties no reply had Cheryl Advisory Pvt. Ltd. 3 ITA No. 1975/Mum/2023 the Ld. CIT(A). The facts in brief qua the issue in dispute are that Officer observed shares issued at premium by the assessee which has been tabulated by him in para 5.1 of the assessment order. For ready reference said table is reproduced as Amount including Premium (in Rs.) 16100000 37600000 53700000 Amount including Premium (in Rs.) 16200000 37830000 54030000 The Assessing Officer asked the assessee to justify the amount of share capital/share premium received in terms of section 68 of the assessee submitted that th October, 2012 i.e. Ms. Anju Batra and Plus Corporate Ventures Pvt. Ltd. were not unable to provide income tax return, balance sheet and confirmation of ing Officer issued notice u/s 133(6) of the Act to the shareholder parties calling for the relevant information. However, only M/s Plus Corporate Ventures Pvt. Ltd. f other two parties no reply had been received. The assessee was fu documentary evidence in support of identity, creditworthiness and genuineness of the transaction However, no reply was filed on the part of the assessee and therefore, the Assessing Officer mad share capital/share premium received during the year under consideration amounting to Rs.5,40,30,000/ proceedings before the Ld. CIT(A), the assessee filed further documentary evidence genuineness of the transaction in respect of three parties. The Ld. CIT(A) called for the remand report from the Assessing Officer after considering the remand report, the Ld. CIT(A) deleted the addition observing as under: 6.1 I have carefully considered the findings of the AO, the submissions of the appellant and the facts of the case as placed before me. I have also gone through the remand report submitted by the present AOan this case. In the remand report dated 24/03/2023 appellant had furnished the following documents before him during the remand report proceedings, which is reproduced as under: A. With respect to Ms. Anju Batra 1. Copy of bank statement 2. Copy of PAN Card (PAN No. AJPS8459E) 3. Documents available from the records of the Registrar of Companies ("ROC")I, Ministry of Corporate Affairs "MCA")n relation to a Liability Partnership ("LLP"), namely, Cheryl Investment Advisors LLPin which Ms. Anju Batra is a designated Partner under the D 1. Form-9 (Consent to act as Designated Partner) dated 31.03.2017 2. LLP Form-2 filing dated 03.04.2017 he assessee was further asked to file necessary documentary evidence in support of identity, creditworthiness and genuineness of the transaction in respect of share subscribers However, no reply was filed on the part of the assessee and therefore, the Assessing Officer made addition for the amount of the share capital/share premium received during the year under consideration amounting to Rs.5,40,30,000/-. During appellate proceedings before the Ld. CIT(A), the assessee filed further documentary evidences in support of identity, creditworthiness and genuineness of the transaction in respect of three parties. The Ld. CIT(A) called for the remand report from the Assessing Officer considering the remand report, the Ld. CIT(A) deleted the addition observing as under: .1 I have carefully considered the findings of the AO, the submissions of the appellant and the facts of the case as placed before me. I have also gone through the remand report submitted by the present AOan this case. In the remand report dated 24/03/2023, the AO admits that the appellant had furnished the following documents before him during the remand report proceedings, which is reproduced as under: A. With respect to Ms. Anju Batra 1. Copy of bank statement 2. Copy of PAN Card (PAN No. AJPS8459E) ocuments available from the records of the Registrar of Companies ("ROC")I, Ministry of Corporate Affairs "MCA")n relation to a Liability Partnership ("LLP"), namely, Cheryl Investment Advisors LLPin which Ms. Anju Batra is a designated Partner under the DPIN 01319276, viz: 9 (Consent to act as Designated Partner) dated 31.03.2017 2 filing dated 03.04.2017 Cheryl Advisory Pvt. Ltd. 4 ITA No. 1975/Mum/2023 rther asked to file necessary documentary evidence in support of identity, creditworthiness and in respect of share subscribers. However, no reply was filed on the part of the assessee and the amount of the share capital/share premium received during the year under . During appellate proceedings before the Ld. CIT(A), the assessee filed further tity, creditworthiness and genuineness of the transaction in respect of three parties. The Ld. CIT(A) called for the remand report from the Assessing Officer and considering the remand report, the Ld. CIT(A) deleted the .1 I have carefully considered the findings of the AO, the submissions of the appellant and the facts of the case as placed before me. I have also gone through the remand report submitted by the present AOan this case. , the AO admits that the appellant had furnished the following documents before him during the ocuments available from the records of the Registrar of Companies ("ROC")I, Ministry of Corporate Affairs "MCA")n relation to a Liability Partnership ("LLP"), namely, Cheryl Investment Advisors LLPin which Ms. PIN 01319276, viz: 9 (Consent to act as Designated Partner) dated 31.03.2017 3. "List of subscribers of Cheryl Investment Advisors LLP" dated 31.03.2017 4."No Objection Certificate" dated 31.03.2017 confirming owner of the property situated at "42, Juhu Ashish CHS Ltd., NS Road No. 10, JVPD Scheme, Near HSBS Bank, Vile Parle (W) Mumbai, 400049" 4. Copy of the List of Allottees for allotment dated 05.10.2012 of the Assessees available on the ROC, MCA 5. List of directorships of Ms. Anju Batra as per the DPIN data available on ROC, MCA : 1. Smana Hospitality And Management Private Limited (U63090H2010PTC204869) 2. EPSCO Facility Management Private Limited (U93000MH2010PTC203940) 3. Trevin Investment Ad 4. TB Investment Advisors LLP (AAJ Copy of Assessee's letter dated 16.03.2023 enclosing the PAN Card of Ms. Anju Batra and stating its inability to provide Ms. Anju Batra's Income Tax Returns, requesting that the same may be ver Department itself. Similarly in the case of Religare Finvest Ltd, the appellant had produced the following documents before the AO in the remand report process. 1. Confirmation Letter dated 21.03.2616 r acquisition of Cheryl Transaction. 2. Copy of Annual Report of ReligareFinvest Ltd. for Fy 2012 available from the records of ROC, MCA, reflecting acquisition of stake in Assessee in satisfaction of debts. 3. Copy of Religare's parent listed company Annual Report for EX 2012 records of ROC, 4. Copy of Religare Enterprises Limited's Annual Report for the FY 2013 2014, as available from the Religare's stake in the Assessee. 6.2 In the case of Ms.Anju Batra, the AO observes in the remand report that on perusal of HDFC bank statement which is provided for the period from 01.08.2012 to 19.12.2012, it is 22.09.2012 &Rs.75,00,000/ debited on 24.09.2012 in favor of Cheryl Advisory and amount of Rs.41,00,000 Cheryl Advisory towards Share Capital & Premium. 3. "List of subscribers of Cheryl Investment Advisors LLP" dated 4."No Objection Certificate" dated 31.03.2017 confirming owner of the property situated at "42, Juhu Ashish CHS Ltd., NS Road No. 10, JVPD Scheme, Near HSBS Bank, Vile Parle (W) Mumbai, 400049" 4. Copy of the List of Allottees for allotment dated 05.10.2012 of the Assessees available on the ROC, MCA 5. List of directorships of Ms. Anju Batra as per the DPIN data available on ROC, MCA : 1. Smana Hospitality And Management Private Limited (U63090H2010PTC204869) 2. EPSCO Facility Management Private Limited (U93000MH2010PTC203940) 3. Trevin Investment Advisors LLP (AAJ-1589) 4. TB Investment Advisors LLP (AAJ-2150) Copy of Assessee's letter dated 16.03.2023 enclosing the PAN Card of Ms. Anju Batra and stating its inability to provide Ms. Anju Batra's Income Tax Returns, requesting that the same may be ver Department itself. Similarly in the case of Religare Finvest Ltd, the appellant had produced the following documents before the AO in the remand report process. 1. Confirmation Letter dated 21.03.2616 rồm Religare about share Cheryl Transaction. 2. Copy of Annual Report of ReligareFinvest Ltd. for Fy 2012 available from the records of ROC, MCA, reflecting acquisition of stake in Assessee in satisfaction of debts. 3. Copy of Religare's parent concern Religare Enterprise company Annual Report for EX 2012-2013, as available from the records of ROC, MCA, reflecting the Assessee as Religare'S subsidiary. 4. Copy of Religare Enterprises Limited's Annual Report for the FY 2013 2014, as available from the records of ROC, MCA reflecting the sale of Religare's stake in the Assessee. 6.2 In the case of Ms.Anju Batra, the AO observes in the remand report that on perusal of HDFC bank statement which is provided for the period from 01.08.2012 to 19.12.2012, it is seen that Rs.75,00,000/ 22.09.2012 &Rs.75,00,000/ debited on 24.09.2012 in favor of Cheryl Advisory and amount of Rs.41,00,000- is credited on 28.09.2012 from Cheryl Advisory towards Share Capital & Premium. Cheryl Advisory Pvt. Ltd. 5 ITA No. 1975/Mum/2023 3. "List of subscribers of Cheryl Investment Advisors LLP" dated 4."No Objection Certificate" dated 31.03.2017 confirming that she is owner of the property situated at "42, Juhu Ashish CHS Ltd., NS Road No. 10, JVPD Scheme, Near HSBS Bank, Vile Parle (W) Mumbai, 400049" 4. Copy of the List of Allottees for allotment dated 05.10.2012 of the 5. List of directorships of Ms. Anju Batra as per the DPIN data available 1. Smana Hospitality And Management Private Limited 2. EPSCO Facility Management Private Limited Copy of Assessee's letter dated 16.03.2023 enclosing the PAN Card of Ms. Anju Batra and stating its inability to provide Ms. Anju Batra's Income Tax Returns, requesting that the same may be verified by the Similarly in the case of Religare Finvest Ltd, the appellant had produced the following documents before the AO in the remand report process. m Religare about share 2. Copy of Annual Report of ReligareFinvest Ltd. for Fy 2012-2013, as available from the records of ROC, MCA, reflecting acquisition of stake in Religare Enterprises Limited's a as available from the MCA, reflecting the Assessee as Religare'S subsidiary. 4. Copy of Religare Enterprises Limited's Annual Report for the FY 2013 - records of ROC, MCA reflecting the sale of 6.2 In the case of Ms.Anju Batra, the AO observes in the remand report that on perusal of HDFC bank statement which is provided for the period seen that Rs.75,00,000/- debited on 22.09.2012 &Rs.75,00,000/ debited on 24.09.2012 in favor of Cheryl is credited on 28.09.2012 from 6.3 Further the AO observes that "t provide confirmation to which, being old matter, they referred PAN, bank statement, Annual ROC Returns, her filings with MCA and details of other directorships held by her as per ROC data about Anju Batra. However no direct available." 6.4 In the case of MIs Religare Finvest Ltd, he AO observes that " the Religare Finvest Limited is a NBFC registered with the RBI and is a subsidiary of a listed company i.e. Religare Enterpr disclosures made with ROC, statutory bodies and provided ROC annual returns. However the AO further submits that though the amounts totaled with the annual report, certificates and confirmation, specific bank statement of the shareho appellant. 6.5 With all these evidences filed before the AO, I am inclined to the view that the appellant has discharged the onus and the AO's observations that no details of transactions of bank details in t that "no direct evidence of the worthiness of the Ms. Anju Batra is available" cannot be accepted. Once the assessee produced evidences about identity, genuiness and credit worthiness of the share holders, the onus of proof shifted objectively with reference to the material available on record as application of mind is the sine qua non for forming the opinion. 6.6 In the case of M/s Religare Fininvest Ltd., the AO observes in the remand report that the assessee did not provide the IT copy. It is pertinent to note that the Income tax returns are filed with thesincome tax department in the fiduciary capacity. collect the IT copies of a third party on th empowered to acquire it. 6.7 It is well-settled principle that an obligation gets discharged due to impossibility of performance. The law of impossibility of performance does not necessarily require absolute impossibility, but al the concept of severe impracticability. performance applies in the instant case. Due to uncontrollable circumstances, the performance of the obligation as specified under section 68 of the Act became impossible impossibility of performance releases the assessee from its obligation for the noncompliance of the condition imposed under section 68 of the Act. A default occurs only when an obligation is not performed. When the assessee is released from the obligation, it cannot be said that it is in default. This finds support from the legal maxim "Lex non cogit ad impossibilia" meaning thereby that the law does not compel a man to do what he cannot possible perform. In the matters rel burden of proof cannot be discharged to the hilt on the particular facts of the case as well as on the basis of preponderance of probabilities. Further the AO observes that "the Assessee Company was asked to provide confirmation to which, being old matter, they referred PAN, bank statement, Annual ROC Returns, her filings with MCA and details of other directorships held by her as per ROC data about Anju Batra. However no direct evidence of the worthiness of the Ms. Anju Batra is 6.4 In the case of MIs Religare Finvest Ltd, he AO observes that " the Religare Finvest Limited is a NBFC registered with the RBI and is a subsidiary of a listed company i.e. Religare Enterprises Limited, with the disclosures made with ROC, statutory bodies and provided ROC annual returns. However the AO further submits that though the amounts totaled with the annual report, certificates and confirmation, specific bank statement of the shareholder and the copy of ITR is not provided by the 6.5 With all these evidences filed before the AO, I am inclined to the view that the appellant has discharged the onus and the AO's observations that no details of transactions of bank details in the case of Religare and that "no direct evidence of the worthiness of the Ms. Anju Batra is available" cannot be accepted. Once the assessee produced evidences about identity, genuiness and credit worthiness of the share holders, the onus of proof shifted to the revenue. The opinion of the AO is not formed objectively with reference to the material available on record as application of mind is the sine qua non for forming the opinion. In the case of M/s Religare Fininvest Ltd., the AO observes in the mand report that the assessee did not provide the IT copy. It is pertinent to note that the Income tax returns are filed with thesincome tax department in the fiduciary capacity. The appellant is not expected to collect the IT copies of a third party on the behalf of AO who is much empowered to acquire it. settled principle that an obligation gets discharged due to impossibility of performance. The law of impossibility of performance does not necessarily require absolute impossibility, but also encompass the concept of severe impracticability. The doctrine of impossibility of performance applies in the instant case. Due to uncontrollable circumstances, the performance of the obligation as specified under section 68 of the Act became impossible to perform for the assessee. The impossibility of performance releases the assessee from its obligation for the noncompliance of the condition imposed under section 68 of the Act. A default occurs only when an obligation is not performed. When the e is released from the obligation, it cannot be said that it is in default. This finds support from the legal maxim "Lex non cogit ad impossibilia" meaning thereby that the law does not compel a man to do what he cannot possible perform. In the matters related to section 68, burden of proof cannot be discharged to the hilt-such matters are decided on the particular facts of the case as well as on the basis of preponderance of probabilities. Cheryl Advisory Pvt. Ltd. 6 ITA No. 1975/Mum/2023 he Assessee Company was asked to provide confirmation to which, being old matter, they referred PAN, bank statement, Annual ROC Returns, her filings with MCA and details of other directorships held by her as per ROC data about Anju Batra. evidence of the worthiness of the Ms. Anju Batra is 6.4 In the case of MIs Religare Finvest Ltd, he AO observes that " the Religare Finvest Limited is a NBFC registered with the RBI and is a ises Limited, with the disclosures made with ROC, statutory bodies and provided ROC annual returns. However the AO further submits that though the amounts totaled with the annual report, certificates and confirmation, specific bank lder and the copy of ITR is not provided by the 6.5 With all these evidences filed before the AO, I am inclined to the view that the appellant has discharged the onus and the AO's observations he case of Religare and that "no direct evidence of the worthiness of the Ms. Anju Batra is available" cannot be accepted. Once the assessee produced evidences about identity, genuiness and credit worthiness of the share holders, the to the revenue. The opinion of the AO is not formed objectively with reference to the material available on record as application of mind is the sine qua non for forming the opinion. In the case of M/s Religare Fininvest Ltd., the AO observes in the mand report that the assessee did not provide the IT copy. It is pertinent to note that the Income tax returns are filed with thesincome tax The appellant is not expected to e behalf of AO who is much settled principle that an obligation gets discharged due to impossibility of performance. The law of impossibility of performance so encompass The doctrine of impossibility of performance applies in the instant case. Due to uncontrollable circumstances, the performance of the obligation as specified under to perform for the assessee. The impossibility of performance releases the assessee from its obligation for the noncompliance of the condition imposed under section 68 of the Act. A default occurs only when an obligation is not performed. When the e is released from the obligation, it cannot be said that it is in default. This finds support from the legal maxim "Lex non cogit ad impossibilia" meaning thereby that the law does not compel a man to do ated to section 68, such matters are decided on the particular facts of the case as well as on the basis of 6.8 In the case of ITO v. Anant Shelters (P.) Ltd. [2012] 20 taxma 153/51 SOT 234, the honorable Mumbai tribunal held that "Phrase appearing in the section " nature and sources of such credits" should be understood in right perspective, so that genuiness of the transaction can be decided on merits and not on prejud that the evidence produced by the assessee cannot be brushed aside in a casual manner. 6.9 This observation of the honorable tribunal is squarely applying to the instant case. The appellant has produced various evidences w can possibly collect to prove the identity, genuiness and credit worthiness of the share holders. Providing ITR copies and bank statements of third party is beyond the reasonable capacity of the appellant which finds support from the legal maxim " during the remand report proceedings had not made any attempt to either do further enquiries or gather additional data using the PAN; which is in his capacity as the Jurisdictional AO in the income tax department. In view of the above, it is hereby held that addition u/s 68 to the tune of Rs 5,40,30,000/ relating alleged section 68 is hereby allowed. 4.2 We have considered the rival submission of the parties on the issue in dispute and perused the relevant material on record. Before us, the Ld. Counsel 177, which is a copy of the PAN card of Ms. Anju Batra referred to pages 161 and 162 bank statement of the assessee company. The Ld. Counsel submitted that relevant share capital/share premium received has been reflected in the referred to Paper Book page 179 which is bank statement of Ms. Anju Batra. 4.3 The Ld. Departmental Representative (DR) submitted that during the assessment proceedings, notice Anju Batra was not complied with and same was not traceable by the assessee also ,therefore, during the remand proceeding the Ld. In the case of ITO v. Anant Shelters (P.) Ltd. [2012] 20 taxma SOT 234, the honorable Mumbai tribunal held that "Phrase appearing in the section " nature and sources of such credits" should be understood in right perspective, so that genuiness of the transaction can be decided on merits and not on prejudices. Courts are of the firm view that the evidence produced by the assessee cannot be brushed aside in a casual manner. This observation of the honorable tribunal is squarely applying to the instant case. The appellant has produced various evidences w can possibly collect to prove the identity, genuiness and credit worthiness of the share holders. Providing ITR copies and bank statements of third party is beyond the reasonable capacity of the appellant which finds support from the legal maxim "lex non cogit ad impossiblia" during the remand report proceedings had not made any attempt to either do further enquiries or gather additional data using the PAN; which is in his capacity as the Jurisdictional AO in the income tax department. In view of the above, it is hereby held that addition u/s 68 to the tune of Rs 5,40,30,000/- is unwarranted and hence deleted. Thus alleged unconfirmed/unsubstantiated securities premium under section 68 is hereby allowed.” e considered the rival submission of the parties on the issue in dispute and perused the relevant material on record. Before us, the Ld. Counsel for the assessee referred to Paper Book page copy of the PAN card of Ms. Anju Batra 161 and 162 of paper book, which is a copy of bank statement of the assessee company. The Ld. Counsel submitted that relevant share capital/share premium received has been reflected in the said bank statement. The Ld. Counsel also ed to Paper Book page 179 which is bank statement of Ms. The Ld. Departmental Representative (DR) submitted that during the assessment proceedings, notice issued u/s 133(6) to Ms. atra was not complied with and same was not traceable by therefore, during the remand proceeding the Ld. Cheryl Advisory Pvt. Ltd. 7 ITA No. 1975/Mum/2023 In the case of ITO v. Anant Shelters (P.) Ltd. [2012] 20 taxmann.com SOT 234, the honorable Mumbai tribunal held that "Phrase appearing in the section " nature and sources of such credits" should be understood in right perspective, so that genuiness of the transaction can ices. Courts are of the firm view that the evidence produced by the assessee cannot be brushed aside in a This observation of the honorable tribunal is squarely applying to the instant case. The appellant has produced various evidences which one can possibly collect to prove the identity, genuiness and credit worthiness of the share holders. Providing ITR copies and bank statements of third party is beyond the reasonable capacity of the appellant which finds The AO even during the remand report proceedings had not made any attempt to either do further enquiries or gather additional data using the PAN; which is in his capacity as the Jurisdictional AO in the income tax department. In view of the above, it is hereby held that addition u/s 68 to the tune of Thus the grounds unconfirmed/unsubstantiated securities premium under e considered the rival submission of the parties on the issue in dispute and perused the relevant material on record. Before Paper Book page copy of the PAN card of Ms. Anju Batra. He also of paper book, which is a copy of bank statement of the assessee company. The Ld. Counsel submitted that relevant share capital/share premium received has bank statement. The Ld. Counsel also ed to Paper Book page 179 which is bank statement of Ms. The Ld. Departmental Representative (DR) submitted that issued u/s 133(6) to Ms. atra was not complied with and same was not traceable by therefore, during the remand proceeding the Ld. CIT(A) was required to direct the assessee for carry out the process u/s 133(6) of the Act for identification of the share subscribe no such inquiry has been carried out. Further, no evidence support of creditworthiness of the share He further submitted that no finding has been given by the Ld. CIT(A) in respect of share subscriber M/s Plus Corporate Pvt. Ltd. Similarly, addition been deleted without verifying creditworthiness and genuineness of the transaction. 4.4 We have heard rival submission of the parties relevant material on rec year shares have been issued by the assessee company parties namely Ms. Anju Bhatra Corporate Venture Pvt. Ltd. end of the year i.e. 31.03.2013, Bhatra stood at 81,5000 shares and Religare Finvest Ltd. 19,03,000 shares. It is stated before the Ld. CIT(A) that shares of Pluc Corporate Ventures Pvt. Ltd. have been acquired by Religare Finvest Ltd. during the year under 31.03.2013. but on perusal of the table of the shares issued has been reproduced Religare Finvest Ltd is more than the shares which stood name of Plus Corporate Ven Religare Finvest Ltd must have been allotted additional shares by CIT(A) was required to direct the assessee for carry out the process u/s 133(6) of the Act for identification of the share subscribe no such inquiry has been carried out. Further, no evidence support of creditworthiness of the share subscriber He further submitted that no finding has been given by the Ld. CIT(A) in respect of share subscriber M/s Plus Corporate addition in respect of Religare Finvest Ltd. has been deleted without verifying creditworthiness and genuineness of We have heard rival submission of the parties and perused the relevant material on record. We find that in the beginning of the year shares have been issued by the assessee company parties namely Ms. Anju Bhatra (8,05,000 shares Corporate Venture Pvt. Ltd. (18,80,000 shares) whereas upto the nd of the year i.e. 31.03.2013, the shares issued to Ms. Anju at 81,5000 shares and Religare Finvest Ltd. 19,03,000 shares. It is stated before the Ld. CIT(A) that shares of Pluc Corporate Ventures Pvt. Ltd. have been acquired by Religare Finvest Ltd. during the year under consideration before the end of n perusal of the table of the shares issued has been reproduced above, we find that even no of Religare Finvest Ltd is more than the shares which stood Corporate Ventures Pvt. Ltd. This fact suggests that Religare Finvest Ltd must have been allotted additional shares by Cheryl Advisory Pvt. Ltd. 8 ITA No. 1975/Mum/2023 CIT(A) was required to direct the assessee for carry out the process u/s 133(6) of the Act for identification of the share subscriber but no such inquiry has been carried out. Further, no evidences in subscriber had been filed. He further submitted that no finding has been given by the Ld. CIT(A) in respect of share subscriber M/s Plus Corporate Ventures in respect of Religare Finvest Ltd. has been deleted without verifying creditworthiness and genuineness of and perused the ord. We find that in the beginning of the year shares have been issued by the assessee company to two 8,05,000 shares) and Plus whereas upto the he shares issued to Ms. Anju at 81,5000 shares and Religare Finvest Ltd. 19,03,000 shares. It is stated before the Ld. CIT(A) that shares of Pluc Corporate Ventures Pvt. Ltd. have been acquired by Religare Finvest consideration before the end of n perusal of the table of the shares issued, which no of shares held by Religare Finvest Ltd is more than the shares which stood in the . This fact suggests that Religare Finvest Ltd must have been allotted additional shares by the assessee company. We proceedings before the Ld. CIT(A) has been issued for verif We find that the Hon’ble Delhi High Court in March, 2015 in Marketing p Ltd Pvt. Ltd. authorities including the inquiries for determination of true facts if the Assessing Officer failed in doing so. The relevant finding of Hon’ble Delhi High Court(supra) is reproduced as under: 38. The provision of appeal, before the CIT (A ITAT, is made more as a check on the abuse of power and authority by the AO. Whilst it is true that it is the obligation of the AO to conduct proper scrutiny of the material, given the fact that the two appellate authorities above are also forums for fact his functions properly, the obligation to conduct proper inquiry on would naturally shift to the door of the said appellate authority. For such purposes, we only need to poi prescribed in Section 250 obligatory for the right of hearing to be afforded not only to the assessee but also the AO, the first appellate authority is given the liberty to make, or cause to be made, "further inquiry", in terms of sub as under:- ―The Commissioner (Appeals) may, before disposing of any appeal, make such further inquiry as he make further inquiry and report the result of the same to the Commissioner (Appeals).‖ 39. The further inquiry envisaged under generally by calling what is known as "remand report". The purpose of this enabling clause is essentially to ensure that the matter of assessment reaches finality with all the requisite facts found. The assessment proceedings re part of the income has escaped assessment, particularly when some unexplained credit entries have come to the notice (as in conclude, save and e three tests mentioned earlier; viz. the identity of the third party making the payment, its creditworthiness and genuineness of the transaction. Whilst it the assessee company. We notice that during the appellate proceedings before the Ld. CIT(A), no notice u/s 133(6) of the Act has been issued for verification of the identity of Ms. Anju Bhatra. We find that the Hon’ble Delhi High Court in judgment dated 11 in the case of Jansampark advertising and Pvt. Ltd. in ITA 525/214 held that authorities including the Ld. CIT(A) and the ITAT should carry out inquiries for determination of true facts if the Assessing Officer failed The relevant finding of Hon’ble Delhi High Court(supra) is reproduced as under: 38. The provision of appeal, before the CIT (Appeals) and then before the ITAT, is made more as a check on the abuse of power and authority by the AO. Whilst it is true that it is the obligation of the AO to conduct proper scrutiny of the material, given the fact that the two appellate authorities ve are also forums for fact-finding, in the event of AO failing to discharge his functions properly, the obligation to conduct proper inquiry on would naturally shift to the door of the said appellate authority. For such purposes, we only need to point out one step in the procedure in appeal as Section 250 of the Income Tax Act wherein, besides it being obligatory for the right of hearing to be afforded not only to the assessee but the AO, the first appellate authority is given the liberty to make, or cause to be made, "further inquiry", in terms of sub-section (4) which reads The Commissioner (Appeals) may, before disposing of any appeal, make such further inquiry as he thinks fit, or may direct the Assessing Officer to make further inquiry and report the result of the same to the Commissioner 39. The further inquiry envisaged under Section 250(4) generally by calling what is known as "remand report". The purpose of this enabling clause is essentially to ensure that the matter of assessment reaches finality with all the requisite facts found. The assessment proceedings re- opened on the basis of preliminary satisfaction that some part of the income has escaped assessment, particularly when some unexplained credit entries have come to the notice (as in Section 68 conclude, save and except by reaching satisfaction on the touchstone of the three tests mentioned earlier; viz. the identity of the third party making the payment, its creditworthiness and genuineness of the transaction. Whilst it Cheryl Advisory Pvt. Ltd. 9 ITA No. 1975/Mum/2023 that during the appellate no notice u/s 133(6) of the Act ication of the identity of Ms. Anju Bhatra. judgment dated 11 th advertising and held that the appellate Ld. CIT(A) and the ITAT should carry out inquiries for determination of true facts if the Assessing Officer failed The relevant finding of Hon’ble Delhi High Court(supra) ppeals) and then before the ITAT, is made more as a check on the abuse of power and authority by the AO. Whilst it is true that it is the obligation of the AO to conduct proper scrutiny of the material, given the fact that the two appellate authorities finding, in the event of AO failing to discharge his functions properly, the obligation to conduct proper inquiry on facts would naturally shift to the door of the said appellate authority. For such nt out one step in the procedure in appeal as of the Income Tax Act wherein, besides it being obligatory for the right of hearing to be afforded not only to the assessee but the AO, the first appellate authority is given the liberty to make, or section (4) which reads The Commissioner (Appeals) may, before disposing of any appeal, make thinks fit, or may direct the Assessing Officer to make further inquiry and report the result of the same to the Commissioner quoted above is generally by calling what is known as "remand report". The purpose of this enabling clause is essentially to ensure that the matter of assessment reaches finality with all the requisite facts found. The assessment is of preliminary satisfaction that some part of the income has escaped assessment, particularly when some Section 68), cannot xcept by reaching satisfaction on the touchstone of the three tests mentioned earlier; viz. the identity of the third party making the payment, its creditworthiness and genuineness of the transaction. Whilst it is true that the assessee cannot be called up on all these three questions, it is nonetheless legitimate expectation of the process that he would bring in some proof so as to discharge the initial burden placed on him. Since sum would have to be included in the income of the assessee in the absence of explanation, or in naturally follows that the material submitted by the asses explanation must itself be wholesome or not untrue. It is only when the explanation and the material offered by the assessee at this stage passes this muster that the initial onus placed on him would shift leaving it to the AO to start inquiri 40. The CIT (Appeals), as also the ITAT, in the case at hand, in our view, unjustifiably criticized the AO for not having confronted the assessee with the facts regarding return of some of the summons under not having given opportunity for the identity of all the share applicants to be properly established. The order sheet entries taken note of in the order of CIT (Appeals) seem to indicate otherwise. T was confirmed by ITAT in the second appeal, does not demonstrate as to on the basis of which material it had been concluded that the genuineness of the transactions had been duly established. There is virtually no discussio in the said orders on such score, except for vague description of the material submitted by the assessee at the appellate stage. Whilst it does appear that the time given to the assessee for proving the identity of the third party was too short, and furt assessee placed in such situation to be able to enforce the physical attendance of such third party (who, in the case of share applicants vis a company, would be individuals at large and may not be personal contact), the curtains on such exercise at verification may not be drawn and adverse inferences reached only on the basis of returning undelivered of the summonses under as to the genuineness of some of the parties persisting on account of non delivery of the processes, the initial burden on the assessee to adduce proof of identity cannot be treated as discharged. 41. We are inclined to agree ITAT, to the extent of their conclusion that the assessee herein had come up with some proof of identity of some of the entries in question. But, from this inference, or from the fact that the transactions were channels, it does not necessarily follow that satisfaction as to the creditworthiness of the parties or the genuineness of the transactions in question would also have been established. 42. The AO here may have failed to discharge his obli proper inquiry to take the matter to logical conclusion. But CIT (Appeals), having noticed want of proper inquiry, could not have closed the chapter simply by allowing the appeal and deleting the additions made. It was also the obligation of the first appellate authority, as indeed of ITAT, to have ensured that effective inquiry was carried out, particularly in the face of the allegations of the Revenue that the account statements reveal a uniform is true that the assessee cannot be called upon to adduce conclusive proof on all these three questions, it is nonetheless legitimate expectation of the process that he would bring in some proof so as to discharge the initial burden placed on him. Since Section 68 itself declares that the credited sum would have to be included in the income of the assessee in the absence of explanation, or in the event of explanation being not satisfactory, it naturally follows that the material submitted by the asses explanation must itself be wholesome or not untrue. It is only when the explanation and the material offered by the assessee at this stage passes this muster that the initial onus placed on him would shift leaving it to the AO to start inquiring into the affairs of the third party. 40. The CIT (Appeals), as also the ITAT, in the case at hand, in our view, unjustifiably criticized the AO for not having confronted the assessee with the facts regarding return of some of the summons under not having given opportunity for the identity of all the share applicants to be properly established. The order sheet entries taken note of in the order of CIT (Appeals) seem to indicate otherwise. The order of CIT (Appeals), which was confirmed by ITAT in the second appeal, does not demonstrate as to on the basis of which material it had been concluded that the genuineness of the transactions had been duly established. There is virtually no discussio in the said orders on such score, except for vague description of the material submitted by the assessee at the appellate stage. Whilst it does appear that the time given to the assessee for proving the identity of the third party was too short, and further that it is probably not always possible for the assessee placed in such situation to be able to enforce the physical attendance of such third party (who, in the case of share applicants vis a company, would be individuals at large and may not be personal contact), the curtains on such exercise at verification may not be drawn and adverse inferences reached only on the basis of returning undelivered of the summonses under Section 131. Conversely, with doubts as to the genuineness of some of the parties persisting on account of non delivery of the processes, the initial burden on the assessee to adduce proof of identity cannot be treated as discharged. 41. We are inclined to agree with the CIT (Appeals), and consequently with ITAT, to the extent of their conclusion that the assessee herein had come up with some proof of identity of some of the entries in question. But, from this inference, or from the fact that the transactions were through banking channels, it does not necessarily follow that satisfaction as to the creditworthiness of the parties or the genuineness of the transactions in question would also have been established. 42. The AO here may have failed to discharge his obligation to conduct a proper inquiry to take the matter to logical conclusion. But CIT (Appeals), having noticed want of proper inquiry, could not have closed the chapter simply by allowing the appeal and deleting the additions made. It was also on of the first appellate authority, as indeed of ITAT, to have ensured that effective inquiry was carried out, particularly in the face of the allegations of the Revenue that the account statements reveal a uniform Cheryl Advisory Pvt. Ltd. 10 ITA No. 1975/Mum/2023 on to adduce conclusive proof on all these three questions, it is nonetheless legitimate expectation of the process that he would bring in some proof so as to discharge the initial itself declares that the credited sum would have to be included in the income of the assessee in the absence the event of explanation being not satisfactory, it naturally follows that the material submitted by the assessee with his explanation must itself be wholesome or not untrue. It is only when the explanation and the material offered by the assessee at this stage passes this muster that the initial onus placed on him would shift leaving it to the 40. The CIT (Appeals), as also the ITAT, in the case at hand, in our view, unjustifiably criticized the AO for not having confronted the assessee with the facts regarding return of some of the summons under Section 131 or not having given opportunity for the identity of all the share applicants to be properly established. The order sheet entries taken note of in the order of he order of CIT (Appeals), which was confirmed by ITAT in the second appeal, does not demonstrate as to on the basis of which material it had been concluded that the genuineness of the transactions had been duly established. There is virtually no discussion in the said orders on such score, except for vague description of the material submitted by the assessee at the appellate stage. Whilst it does appear that the time given to the assessee for proving the identity of the third party was her that it is probably not always possible for the assessee placed in such situation to be able to enforce the physical attendance of such third party (who, in the case of share applicants vis-à-vis a company, would be individuals at large and may not be even in direct or personal contact), the curtains on such exercise at verification may not be drawn and adverse inferences reached only on the basis of returning . Conversely, with doubts as to the genuineness of some of the parties persisting on account of non- delivery of the processes, the initial burden on the assessee to adduce proof with the CIT (Appeals), and consequently with ITAT, to the extent of their conclusion that the assessee herein had come up with some proof of identity of some of the entries in question. But, from this through banking channels, it does not necessarily follow that satisfaction as to the creditworthiness of the parties or the genuineness of the transactions in gation to conduct a proper inquiry to take the matter to logical conclusion. But CIT (Appeals), having noticed want of proper inquiry, could not have closed the chapter simply by allowing the appeal and deleting the additions made. It was also on of the first appellate authority, as indeed of ITAT, to have ensured that effective inquiry was carried out, particularly in the face of the allegations of the Revenue that the account statements reveal a uniform pattern of cash deposits of equal amount preceding the transactions in question. This necessitated a detailed scrutiny of the material submitted by the assessee in response to the notice under Section 148 stage of appeals, if deemed proper by way of making or causing to be made a "further inquiry" in exercise of the power under approach not consequently that of CIT (Appeals), cannot be approved or upheld. 4.5 In the case, the Ld. CIT(A) has simply admitted the submission of the assessee without independent verification of the identity and creditworthiness of Ms. Anju Bhatra recorded documentary evidence who claimed to have Ventures Pvt. Ltd. and no credit from Religare Finvest Ltd. appearing in the books of the assessee. Though this fact is not getting reconciled with the fact of share holding of Religare Finvest Ltd. shown by the Assessing Officer had not made any payment to the assessee section 68 of the Act subscribed to Religare Finvest Ltd. But the Ld. CIT(A) has not taken into consideration facts recorded himself in the impugned order ,while deleting the addition in respect of share cap premium from Religare Finvest Ltd. Further the share capital/share premium received from Plus Corporate Venture Pvt. Ltd. has not been examined by the Ld. CIT(A) in the impugned order. In view of the aforesaid discussion, we feel it appropriate of addition of share capital/share premium amounting to Rs.5,40,30,000/- back to the file of the Assessing Officer for pattern of cash deposits of equal amounts in the respective accounts preceding the transactions in question. This necessitated a detailed scrutiny of the material submitted by the assessee in response to the notice Section 148 issued by the AO, as also the material submitted at the stage of appeals, if deemed proper by way of making or causing to be made a "further inquiry" in exercise of the power under Section 250(4) approach not having been adopted, the impugned order of ITAT, and consequently that of CIT (Appeals), cannot be approved or upheld. In the case, the Ld. CIT(A) has simply admitted the submission of the assessee without independent verification of the identity and reditworthiness of Ms. Anju Bhatra. Further the Ld. CIT(A) has d documentary evidences in support of Religare Finvest Ltd. who claimed to have purchased shares from Plus Corporate Ventures Pvt. Ltd. and no credit from Religare Finvest Ltd. appearing in the books of the assessee. Though this fact is not with the fact of share holding of Religare Finvest Ltd. shown by the Assessing Officer, but if the Religare Finvest Ltd. not made any payment to the assessee, then provi section 68 of the Act would not be applicable in case of share subscribed to Religare Finvest Ltd. But the Ld. CIT(A) has not taken facts recorded himself in the impugned order while deleting the addition in respect of share cap premium from Religare Finvest Ltd. Further the share capital/share from Plus Corporate Venture Pvt. Ltd. has not been examined by the Ld. CIT(A) in the impugned order. In view of the aforesaid discussion, we feel it appropriate to restore the issue of addition of share capital/share premium amounting to back to the file of the Assessing Officer for Cheryl Advisory Pvt. Ltd. 11 ITA No. 1975/Mum/2023 s in the respective accounts preceding the transactions in question. This necessitated a detailed scrutiny of the material submitted by the assessee in response to the notice he AO, as also the material submitted at the stage of appeals, if deemed proper by way of making or causing to be made Section 250(4). This having been adopted, the impugned order of ITAT, and consequently that of CIT (Appeals), cannot be approved or upheld. In the case, the Ld. CIT(A) has simply admitted the submission of the assessee without independent verification of the identity and . Further the Ld. CIT(A) has in support of Religare Finvest Ltd. from Plus Corporate Ventures Pvt. Ltd. and no credit from Religare Finvest Ltd. was appearing in the books of the assessee. Though this fact is not with the fact of share holding of Religare Finvest but if the Religare Finvest Ltd. then provision of applicable in case of share subscribed to Religare Finvest Ltd. But the Ld. CIT(A) has not taken facts recorded himself in the impugned order while deleting the addition in respect of share capital /share premium from Religare Finvest Ltd. Further the share capital/share from Plus Corporate Venture Pvt. Ltd. has not been examined by the Ld. CIT(A) in the impugned order. In view of to restore the issue of addition of share capital/share premium amounting to back to the file of the Assessing Officer for deciding afresh after providing due opportunity to the assessee for discharging its onus appeal of the Revenue is accordingly allowed for statistical purpose. 5. The ground No. 2 of the appeal of the Revenue relates to disallowance of miscellaneous expenses has been deleted by the Ld. CIT(A). The deta disallowed are reproduced as under: Sr. No. Particulars 1. Employee benefit expenses 2. Finance Costs 3. Depreciation and amortization expense 4. Other Expenses Total 5.1 The Assessing Officer has disallowed the expenses mainly for the reason that there is no business activity carried out by the assessee in the year under consideration assessment years. T under: “7.1 I have gone through the facts of the case and the material on record. The questiant is a registered company under the companies act and the said Tiat in question is held as an asset which served as a registered office of the said income from the business activity for the relevant assessment year, the appellant had to still under go fixed expenses such as depreciation and other finance cost. As a going concern, one cannot deny there is overhead expenses w for the purpose of business. The AOs observation that the assessee's intention is to book only losses in the return of income is baseless and arbitrary. The AO had not investigated or established the fact that the expenditur 7.2 It is pertinent to note that the finance act 2001 amended section 32, which clarified that in computing the profits and gains of business or profession for any previous year, deduction of deciding afresh after providing due opportunity to the assessee for onus u/s 68 of the Act. The ground No. 1 of the appeal of the Revenue is accordingly allowed for statistical purpose. The ground No. 2 of the appeal of the Revenue relates to disallowance of miscellaneous expenses of Rs.38,24,085/ has been deleted by the Ld. CIT(A). The details of the expenses disallowed are reproduced as under: Particulars Amount in Rs. Employee benefit expenses 1047000 Finance Costs 263309 Depreciation and amortization expense 2200334 Other Expenses 313442 3824085 The Assessing Officer has disallowed the expenses mainly for the reason that there is no business activity carried out by the in the year under consideration as well as in the preceding s. The Ld. CIT(A) deleted the addition observ 7.1 I have gone through the facts of the case and the material on record. The questiant is a registered company under the companies act and the said Tiat in question is held as an asset which served as a registered office of the said company. Though there is no income from the business activity for the relevant assessment year, the appellant had to still under go fixed expenses such as depreciation and other finance cost. As a going concern, one cannot deny there is overhead expenses which are wholly and exclusively for the purpose of business. The AOs observation that the assessee's intention is to book only losses in the return of income is baseless and arbitrary. The AO had not investigated or established the fact that the expenditure claimed are of bogus in nature. 7.2 It is pertinent to note that the finance act 2001 amended section 32, which clarified that in computing the profits and gains of business or profession for any previous year, deduction of Cheryl Advisory Pvt. Ltd. 12 ITA No. 1975/Mum/2023 deciding afresh after providing due opportunity to the assessee for und No. 1 of the appeal of the Revenue is accordingly allowed for statistical purpose. The ground No. 2 of the appeal of the Revenue relates to Rs.38,24,085/-, which ils of the expenses Amount in Rs. 1047000 263309 2200334 313442 3824085 The Assessing Officer has disallowed the expenses mainly for the reason that there is no business activity carried out by the as well as in the preceding he Ld. CIT(A) deleted the addition observing as 7.1 I have gone through the facts of the case and the material on record. The questiant is a registered company under the companies act and the said Tiat in question is held as an asset which served company. Though there is no income from the business activity for the relevant assessment year, the appellant had to still under go fixed expenses such as depreciation and other finance cost. As a going concern, one cannot hich are wholly and exclusively for the purpose of business. The AOs observation that the assessee's intention is to book only losses in the return of income is baseless and arbitrary. The AO had not investigated or established e claimed are of bogus in nature. 7.2 It is pertinent to note that the finance act 2001 amended section 32, which clarified that in computing the profits and gains of business or profession for any previous year, deduction of depreciation under section 32 finance bill of 2001). In this connection the CBDT in the circular no. 14/2001 in para 30.2 clearly mentions that depreciation shall be mandatory. Even if the assessee had not claimed depreciation in the books of accoun deprecation allowance by virtue of explanation 5 to section 32(1) of the act. In the instant case the other expenses such as employee benefit expenses, finance cost and other expenses are allowable unless the AO proves beyond doubt that there are bogus expenditure. In view of the above, it is hereby held that the disallowance to the tune of 38,24,085 does not hold water and hence deleted. Accordingly these grounds are allowed. 5.2 Before us, the Ld. DR submit substantiate carrying out any business activity in the year under consideration as well as in inception of the assessee company. H business has been commenced prior to commencing/setting as revenue expenditure. 5.3 On the contrary, the Ld. that it was not possible for the business of the assessee was commenced in earlier assessment year(s) or not. On being specifically asked by the Bench to file a copy of profit and loss account of the the Ld. Counsel express his inability in producing statement including Profit and loss account preceding assessment years facts and circumstances and in the interest of substantial justice we feel it appropriate to restore the Assessing Officer with the direction to the assessee to file all depreciation under section 32 shall be mandatory.(clause 21 of the finance bill of 2001). In this connection the CBDT in the circular no. 14/2001 in para 30.2 clearly mentions that depreciation shall be mandatory. Even if the assessee had not claimed depreciation in the books of account, the assessing officer is duty bound to grant deprecation allowance by virtue of explanation 5 to section 32(1) of the act. In the instant case the other expenses such as employee benefit expenses, finance cost and other expenses are allowable AO proves beyond doubt that there are bogus expenditure. In view of the above, it is hereby held that the disallowance to the tune of 38,24,085 does not hold water and hence deleted. Accordingly these grounds are allowed.” Before us, the Ld. DR submitted that the assessee has failed to substantiate carrying out any business activity in the year under consideration as well as in the preceding assessment year, s eption of the assessee company. He submitted that since no business has been commenced and therefore, the expenses claimed prior to commencing/setting up of the business, cannot be allowed as revenue expenditure. On the contrary, the Ld. Counsel for the assessee submitted it was not possible for the assessee to substantiate whethe business of the assessee was commenced in earlier assessment or not. On being specifically asked by the Bench to file a profit and loss account of the preceding assessment the Ld. Counsel express his inability in producing including Profit and loss account of the assessee for the preceding assessment years , since inception of the company. In the facts and circumstances and in the interest of substantial justice we feel it appropriate to restore this matter also back to the file of the Assessing Officer with the direction to the assessee to file all Cheryl Advisory Pvt. Ltd. 13 ITA No. 1975/Mum/2023 shall be mandatory.(clause 21 of the finance bill of 2001). In this connection the CBDT in the circular no. 14/2001 in para 30.2 clearly mentions that depreciation shall be mandatory. Even if the assessee had not claimed depreciation in t, the assessing officer is duty bound to grant deprecation allowance by virtue of explanation 5 to section 32(1) of the act. In the instant case the other expenses such as employee benefit expenses, finance cost and other expenses are allowable AO proves beyond doubt that there are bogus expenditure. In view of the above, it is hereby held that the disallowance to the tune of 38,24,085 does not hold water and ted that the assessee has failed to substantiate carrying out any business activity in the year under the preceding assessment year, since e submitted that since no and therefore, the expenses claimed cannot be allowed the assessee submitted substantiate whether business of the assessee was commenced in earlier assessment or not. On being specifically asked by the Bench to file a preceding assessment year(s), the Ld. Counsel express his inability in producing financial of the assessee for the of the company. In the facts and circumstances and in the interest of substantial justice, back to the file of the Assessing Officer with the direction to the assessee to file all necessary evidence to was commenced in earlier assessment years. The Assessing Officer accordingly may decide the issue ground No. 2 of the appeal of the Revenue is allowed for statistical purposes. 6. In the result, the appeal filed by the Revenue is allowed for statistical purposes. Order pronounced in the open Court on Sd/ (RAHUL CHAUDHARY JUDICIAL MEMBER Mumbai; Dated: 01/11/2023 Rahul Sharma, Sr. P.S. Copy of the Order forwarded to 1. The Appellant 2. The Respondent. 3. CIT 4. DR, ITAT, Mumbai 5. Guard file. //True Copy// necessary evidence to demonstrate that business of the assessee was commenced in earlier assessment years. The Assessing Officer accordingly may decide the issue in accordance with law ground No. 2 of the appeal of the Revenue is allowed for statistical In the result, the appeal filed by the Revenue is allowed for nounced in the open Court on 01/1 Sd/- Sd/ CHAUDHARY) (OM PRAKASH KANT JUDICIAL MEMBER ACCOUNTANT MEMBER Copy of the Order forwarded to : BY ORDER, (Assistant Registrar) ITAT, Mumbai Cheryl Advisory Pvt. Ltd. 14 ITA No. 1975/Mum/2023 that business of the assessee was commenced in earlier assessment years. The Assessing Officer in accordance with law. The ground No. 2 of the appeal of the Revenue is allowed for statistical In the result, the appeal filed by the Revenue is allowed for /11/2023. Sd/- OM PRAKASH KANT) ACCOUNTANT MEMBER BY ORDER, (Assistant Registrar) ITAT, Mumbai