Uttar Pradesh Udyog Pvt. Ltd., New Delhi V. ACIT, Circle- 27(1), New Delhi

ITA 3060/DEL/2019

AI Insights

The case involves Uttar Pradesh Udyog Ltd., which appealed against the order of the Commissioner of Income-tax (Appeals)-28, New Delhi, which upheld the addition of Rs. 13,47,500 made by the Assessing Officer under Section 68 of the Income-tax Act, 1961, for the assessment year 2010-11. The addition was made on the grounds that the source of investment in shares was unexplained. The assessee contended that the investment was made from its own funds, which were derived from previous share transactions and not from any undisclosed sources. The Tribunal found that the lower authorities did not adequately verify the assessee's claims and directed a re-examination of the evidence provided.

• Counselvise Citation: [2022] 140 COUNSELVISE.COM (IT) 112790 (ITAT-DELHI)
• Duration Of Justice: 6 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-12-2022
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Next Hearing Date: 05-12-2022
• Assessment Year: misc
• Appeal Filed On: 07-06-2022
• Laws Referred To: Income-tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Unexplained investment; Set aside
• Section: 147; 68; 148

Judgement Text

1 ITA no. 3060/Del/2019 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH “SMC”: NEW DELHI BEFORE SHRI KUL BHARAT, JUDICIAL MEMBER ITA No. _3060/DEL/2019 [Assessment Year: 2010-11 Uttar Pradesh Udyog ltd., C-119, East of Kailash, New Delhi-110065 PAN- AAACU5328A Vs ACIT, Circle 27(1), New Delhi. APPELLANT RESPONDENT Assessee represented by Sh. Sahil Sharma Adv. & Sh. Saurabh Nandy, Adv. Department represented by Sh.Sumesh Swani, Sr. DR Date of hearing 06.12.2022 Date of pronouncement 21.12.2022 O R D E R PER KUL BHARAT, JM: This appeal, by the assessee, is directed against the order of the learned Commissioner of Income-tax (Appeals)-28, New Delhi, dated 20.01.2019, pertaining to the assessment year 2010-11. The assessee has raised following grounds of appeal: “1. On the facts and in the circumstances of the case, the Ld. CIT(A)-28 has erred by dismissing the grounds taken by the Appellant Company and upholding the addition of Rs. 13,47,500.00 made in the Order dated 20 th 2 ITA no. 3060/Del/2019 December 2017 passed by the Ld. ACIT, Circle-27(1), New Delhi is arbitrary, unjust and against the law. 2. The Ld. CIT(A)-28 has erred by ignoring the plea of the Appellant Company that there is no information with the Income Tax Department that the Appellant Company has not purchased the shares from its own funds as no such information was given to the Appellant company by the Ld. ACIT, Circle-27(1), New Delhi. 3. The Ld. CIT(A)-28 has erred by ignoring the plea of the Appellant Company that the Appellant Company have purchased the said 1,10,943 shares of Duncan Industries Ltd. from its own funds through Consortium Securities Pvt. Ltd. through Bombay Stock Exchange vide Contract Note No. BSE-BR0002- 58432 dated 31-03-2010 for Rs. 13,61,641.90 and payment was made o Consortium Securities Pvt. Ltd. through bank. Neither any cash transaction is involved for the purchase nor any loan is taken from any other party. Photocopy of the said Contract Note dated 31-03-2010 have already been filed along with the application of appeal before the Ld. CIT(A)-28. 4. On 31-03-2010, the Appellant Company have paid Rs. 13,50,000.00 to Consortium Securities Pvt. Ltd. vide cheque No. 689307 for purchase of aforesaid 1,10,943 shares of Duncan Industries Ltd. The said cheque No. 689307 was cleared from bank on 05-04-2010. 5. The Ld. CIT(A)-28 has erred by ignoring the plea of the Appellant Company that during the whole Financial Year 2009-2010, the Appellant Company have not deposited any cash in its bank account except cash deposit of Rs.20,000/- (Rs. Twenty Thousand only) on 13/11/2009. 6. The Ld. CIT(A)-28 has erred by ignoring plea of the Appellant Company that the Appellant company also disclosed the source of fund. Earlier the Appellant Company has sold shares of Duncan Industries Ltd. through stock exchange and also done some Future & Option Trades through Consortium Securities Pvt. Ltd., the member of NSE and BSE. These shares were held by the company since F.Y. 2005-2006. The Appellant Company have received cheque No. 084691 for Rs. 31,13,056.96 from Consortium Securities Pvt. Ltd. on 03-11-2009 against the sale of aforesaid shares of Duncan Industries Ltd. and the Future & Option Trades 3 ITA no. 3060/Del/2019 done by the Appellant Company. Out of the said amount of Rs. 31,13,056.96, the Company have advanced Rs. 16,00,000.00 to Aryavart Overseas Pvt. Ltd. vide cheque no. 689301 dated 03-11-2009. The said amount of Rs. 16,00,000.00 was received back from Aryavart Overseas Pvt. Ltd. on 31-03- 2010 vide cheque No. 821591. The Appellant Company have submitted the photocopy of bank statement of its bank account for the financial year 2009- 10 and the contract notes of sale of shares and Future & Option Trades during the proceedings before the Ld. CIT(A)-28. 7. The Ld. C1T (A)-28 has erred by ignoring the plea of the Appellant Company that the Appellant Company has not received any notice dated 29- 03-2017 referred by the Ld. ACIT, Circle-27(1), New Delhi in its notice dated 01-12- 2017. In the absence of receiving the said notice dated 23-03- 2010 on or before 31-03-2010 the case for the AY 2010-2011 cannot be reopened in AY 2017-18. 8. The Ld. CIT (A)-28 has erred by ignoring the plea of the Appellant Company that no details of Assessment Year is mentioned in the said notice date 01-12- 2017 issued by the Ld. ACIT, Circle-27(1), New Delhi. Thus notice dated 01-12-2017 is unjust and invalid as it does not have the required information. On the strength of invalid notice, the proceeding is become Non-EST. 9. The Ld. CIT(A)-28 has erred by ignoring the plea of the Appellant Company that the Appellant Company have paid cheque No. 689304 dated 31-03-2010 for Rs. 13,50,000.00 to Consortium Securities Pvt. Ltd. which was cleared from its bank on 05-04-2010. 10. The Ld. CIT(A)-28 has erred by ignoring the plea of the Appellant Company that during the Financial Year 2010-11, the Appellant Company have sold the above said 1,10,943 shares of Duncan Industries Ltd. through Consortium Securities Pvt. Ltd. 11. The Ld. CIT(A)-28 has erred by ignoring the plea of the Appellant Company that the Appellant Company have received amount of Rs. 12,69,000/- on 10- 05-2010 and Rs. 4,34,000/- on 14-06-2010 from Consortium Securities Pvt. Ltd. 12. The Ld. CIT(A)-28 has erred by ignoring the plea of the Appellant Company that Return with Income Tax Department was not filed by the 4 ITA no. 3060/Del/2019 Appellant Company as Appellant Company had suffered heavy losses during the Financial Year 2009-10 and closed its business activities. Thereafter, Appellant Company have not done any business till date, except selling of its closing stock of 1,10,943 shares of Duncan Industries Ltd. during the financial year 2010-11. 13. The Ld. CIT(A)-28 has erred by mentioning that the accounts of the Appellant Company have not audited. It is submitted that the accounts of the Appellant Company were audited since its incorporation including during the year under appeal. 2. Further, the assessee has also taken additional grounds which reads as under: “Without prejudice, that on the facts and in the circumstances of the case and in law, the assumption of jurisdiction by the Ld. AO/CIT(A) by wrongly invoking the provisions of Section 68 of the Act to make/confirm the impugned addition amounting to Rs. 13,47,500/- on account of alleged unexplained investment in shares is bad in law and liable to be quashed.” 3. Facts giving rise to the present appeal are that in this case return of income was not filed by the assessee. Subsequently information regarding turn-over of the assessee was obtained through ITD & ITBA system. As per AIR information, the assessee had share purchase transactions of Rs. 13,47,500/- for the relevant assessment year. Therefore, the case was reopened u/s 147 of the Income-tax Act, 1961 (in short “the Act”). In response to the notice u/s 148 of the Act, Shri Ishwar Dayal Kansal, Director of the company, attended the proceedings. The Assessing Officer after considering the submissions of the assessee treated the source of investment of Rs. 13,47,500/- as unexplained and made addition u/s 68 of the Act. 5 ITA no. 3060/Del/2019 4. Aggrieved against this, the assessee preferred appeal before the learned CIT(Appeals), who after considering the submissions dismissed the appeal. Now the assessee is in appeal before this Tribunal. 5. Apropos to the grounds of appeal, learned counsel for the assessee submitted that the authorities below grossly erred in making the addition and sustaining the same on the basis that the assessee could not explain the source of income. However, he contended that the assessee had duly explained the source of income by placing the relevant material. He further contended that the claim of the assessee can be verified by the assessing authority by making necessary inquiry. He has drawn my attention to the various pages of the paper book to buttress the contention that the authorities below did not consider the facts in right perspective. He further drew our attention to paper book page 14, copy of bank statement of HDFC Bank relating to the assessee, depicting the deposit of sum of Rs. 16,00,000/- on 31.03.2010. 6. On the contrary, learned DR opposed the submissions and supported the orders of the authorities below. He contended that the assessee failed to explain the source of investment in shares. He submitted that under the facts and circumstances, no interference is called for. 7. I have heard rival submissions of the parties and perused the material 6 ITA no. 3060/Del/2019 available on record. I find that learned CIT(Appeals) has decided the issue by observing as under: “5. I have considered the facts of the case, basis of addition made by AO and submissions of the appellant. As it is dear from the facts that the despite of having business transactions in shares during the year as well as proceeding years, appellant did not disclose these transactions by filing the returns of income during the year as well as earlier years. The appellant has tried to explain the source of investments in shares by mentioning that the amount of Rs. 16,00,000/- was received from Aryawart Overseas Pvt. Ltd which was advanced by it in the earlier year out of the funds received from Consortium Securities Pvt. Ltd amounting to Rs. 31,13,056/- and all these funds were arranged through transactions in shares. However, again these transactions were not disclosed by appellant to the department by filing returns of income during the relevant years, therefore, the validity of the claim of appellant is not established. Since the returns have not been filed by appellant in any of the years or books of account have not been maintained or accounts have not been audited, any of the transactions on account of share purchase/sale cannot be treated as explained or disclosed. In view of this, I uphold the addition made by AO and dismiss the grounds taken by appellant.” 8. The above finding of the learned CIT(Appeals) is purely based on the premise that the assessee had not disclosed the transaction in earlier year. However, the issue before him was whether the assessee was having sufficient funds to make investment. Therefore, looking to the totality of the facts, the authorities below ought to have verified the claim regarding availability of funds. I, therefore, set aside the orders of the authorities below and restore the issue to the file of the Assessing Officer to decide the same afresh after verifying the documentary evidences filed by the assessee in support of its assertion that it had 7 ITA no. 3060/Del/2019 sufficient funds to make investment. Grounds raised in this appeal are allowed for statistical purposes. 9. Appeal of the assessee is allowed for statistical purposes. Order pronounced in open court on 21 st December, 2022. Sd/- (KUL BHARAT) JUDICIAL MEMBER *MP* Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(Appeals) 5. DR: ITAT ASSISTANT REGISTRAR ITAT, NEW DELHI