ZENOM VYAPAAR PRIVATE LIMITED, KOLKATA V. INCOME TAX OFFICER, WARD-3(1)

ITA 664/KOL/2022

AI Insights

The case involves Zenom Vyapaar Private Limited, which appealed against the order of the Commissioner of Income-tax (Appeals) sustaining additions made by the Income Tax Officer under sections 69A and 69C of the Income Tax Act, 1961, for the Assessment Year 2013-14. The additions were related to Rs. 4 lakh received from the sale of investments and an additional Rs. 16,000 for arranging the sale. The Tribunal examined whether these amounts constituted unexplained investments and expenditures. After reviewing the balance sheet and relevant documents, the Tribunal concluded that the investments were properly recorded and the income from their sale was explained, leading to the reversal of the additions.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 128755 (ITAT-KOLKATA)
• Duration Of Justice: 5 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-05-2023
• Appeal Filed By: Assessee
• Order Result: PartlyAllowed
• Bench Allotted: SMC
• Next Hearing Date: 20-02-2023
• Assessment Year: 2013-2014
• Appeal Filed On: 20-11-2022
• Other Referred Cases: M/s. Reliance Corporation vs. ITO in ITA No. 1069 to 1071/MUM/2017
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Unexplained investment; Unexplained expenditure; Principle of natural justice
• Section: 147; 69C; 250; 69A

Judgement Text

आयकर अपीलीय अधिकरण कोलकाता 'एसएमसी' पीठ, कोलकाता म ें IN THE INCOME TAX APPELLATE TRIBUNAL KOLKATA ‘SMC’ BENCH, KOLKATA श्री संजय गग ग , न्याधयक सदस्य एवं डॉ. मनीष बोरड, ल े खा सदस्य क े समक्ष Before SRI SANJAY GARG, JUDICIAL MEMBER & DR. MANISH BORAD, ACCOUNTANT MEMBER I.T.A. No.: 664/KOL/2022 Assessment Year: 2013-14 Zenom Vyapaar Private Limited...............................Appellant [PAN: AAACZ 0961 G] Vs. ITO, Ward-3(1) Kolkata.......................................Respondent Appearances by: Sh. Shiv Kumar Jaiswal, A/R, appeared on behalf of the Assessee. Smt. Ranu Biswas, Addl. CIT, Sr. D/R, appeared on behalf of the Revenue. Date of concluding the hearing : February 21 st , 2023 Date of pronouncing the order : May 9 th , 2023 ORDER Per Manish Borad, Accountant Member: This appeal filed by the assessee pertaining to the Assessment Year (in short “AY”) 2013-14 is directed against the order passed u/s 250 of the Income Tax Act, 1961 (in short the “Act”) by ld. Commissioner of Income-tax (Appeals)-NFAC, Delhi [in I.T.A. No.: 664/KOL/2022 Assessment Year: 2013-14 Zenom Vyapaar Private Limited. Page 2 of 6 short ld. “CIT(A)”] dated 20.09.2022 arising out of the assessment order framed u/s 147 r.w.s. 144B of the Act dated 15.09.2021. 2. The assessee is in appeal before the Tribunal raising the following grounds: “1. BECAUSE the Ld. CIT(A) has erred in law and on facts in sustaining the addition of Rs. 400000/- made on account of sale of investments by invoking the provision of section 69A of the Income Tax Act, 1961. 2. BECAUSE the Ld. CIT(A) has erred in law and on facts in not adjudicating the grounds relating to validity of initiation of reassessment proceeding under section 147 of the Income Tax Act, 1961. 3. BECAUSE the Ld. CIT(A) has erred in law and on facts in holding that AO has rightly rejected the request for cross examination of the witness. 4. BECAUSE the Ld. CIT(A) has erred in law and on facts in sustaining the addition of Rs. 16000/- made by invoking the provision of section 69C of the Income Tax Act, 1961. 5. BECAUSE the order appealed against is contrary to the facts, law and principle of natural justice.” 3. At the outset, ground nos. 2 & 3 have not been argued by ld. Counsel for the assessee, therefore, the same are deemed as not pressed and are dismissed accordingly. 4. Ground no. 5 is general in nature which needs no adjudication. 5. The effective issues raised in ground nos. 1 & 4 regarding addition u/s 69A of the Act at Rs. 4 lakh on account of sale of investment and addition of Rs. 16,000 for arranging the sale of investment. I.T.A. No.: 664/KOL/2022 Assessment Year: 2013-14 Zenom Vyapaar Private Limited. Page 3 of 6 6. At the outset, ld. Counsel for the assessee submitted that ld. AO erred in invoking the provisions of Section 69A of the Act. The alleged sum of Rs. 4 lakh has been received against sale of investments which are duly appearing in the balance sheet and are brought forward from last year. Further, reliance was placed on the decision of Coordinate Bench, Mumbai in the case of M/s. Reliance Corporation vs. ITO in ITA No. 1069 to 1071/MUM/2017 order dated 12.04.2017. 7. On the other hand, ld. D/R vehemently argued supporting the orders of both the lower authorities. 8. We have heard rival contentions and perused the records placed before us. The short issue for our consideration is that whether ld. CIT(A) erred in confirming the action of ld. AO making addition u/s 69A of the Act for unexplained investment and also making an addition of Rs. 16,000/- being the unexplained expenditure incurred by the assessee for the purpose of arranging such accommodation entry. 9. We notice that the assessee is a private limited company. An information was received by the Investigation Wing that suspicious transaction of large amount were conducted by M/s. KCA Allied Services Pvt. Ltd. It was also gathered that some of the companies related to such suspicious transactions are related to Shri Lalit Kumar Periwal, Kolkata. During the year the assessee received Rs. 4 lakh from M/s. Luckyprime Commercial Pvt. Ltd. which is alleged to be shell/paper company controlled by Shri Lalit Kumar Periwal. Ld. AO was of the view that since the assessee is a I.T.A. No.: 664/KOL/2022 Assessment Year: 2013-14 Zenom Vyapaar Private Limited. Page 4 of 6 beneficiary of accommodation entry of Rs. 4 lakh, it calls for an addition u/s 69C of the Act towards unexplained expenditure. 10. We, from perusal of the audited balance sheet filed in the paperbook containing 46 pages and specifically referring to page no. 17 showing the schedule of current investment, notice that in the preceding financial year i.e. FY 2011-12 are shown at Rs. 18,70,000/- and the same has reduced to Rs. 14,70,000/- as on 31.03.2013, thus, there is a decrease in investment by Rs. 4 lakh. The claim of the assessee is that the alleged sum is against the sale of said investment. However, ld. AO invoked the provisions of Section 69C of the Act which reads as follows: “Where in any financial year an assessee has incurred any expenditure and he offers no explanation about the source of such expenditure or part thereof, or the explanation, if any, offered by him is not, in the opinion of the Assessing Officer, satisfactory, the amount covered by such expenditure or part thereof, as the case may be, may be deemed to be the income of the assessee for such financial year: Provided that, notwithstanding anything contained in any other provision of this Act, such unexplained expenditure which is deemed to be the income of the assessee shall not be allowed as a deduction under any head of income.” 11. From perusal of the above provision, we note that the same relates to expenditure for which the assessee either offers no explanation about the source or part thereof or the explanation offered by him is not satisfactory in the opinion of the Assessing Officer. 12. However, under the given facts and circumstances of the case, provisions of Section 69C of the Act are not at all applicable as it is not the case of any unexplained expenditure. It is simply a I.T.A. No.: 664/KOL/2022 Assessment Year: 2013-14 Zenom Vyapaar Private Limited. Page 5 of 6 case that the assessee held investments in some equity shares which were purchased in the preceding year(s) and the same has been sold during the year. We, therefore, are of the considered view that both the lower authorities erred in treating the alleged sum received against the sale of investment as unexplained expenditure and, therefore, the finding of ld. CIT(A) is reversed and addition of Rs. 4 lakh made u/s 69C of the Act is deleted. Since we have deleted the addition of Rs. 4 lakh made u/s 69C of the Act the addition made by ld. AO for commission expenditure of Rs. 16,000/- for arranging the alleged sum will have no legs to stand for and the same is also deleted. Therefore, ground nos. 1 & 4 raised by the assessee are allowed. 13. In the result, the appeal filed by the assessee is partly allowed. Kolkata, the 9 th May, 2023 Sd/- Sd/- [Sanjay Garg] [Manish Borad] Judicial Member Accountant Member Dated: 09.05.2023 Bidhan (P.S.) I.T.A. No.: 664/KOL/2022 Assessment Year: 2013-14 Zenom Vyapaar Private Limited. Page 6 of 6 Copy of the order forwarded to: 1. Zenom Vyapaar Private Limited, 7/1A, 3 rd Floor, Room No. 309, Grant Lane, Kolkata-700 012. 2. ITO, Ward-3(1) Kolkata. 3. CIT(A)-NFAC, Delhi. 4. CIT- 5. CIT(DR), Kolkata Benches, Kolkata. //True copy // By order Assistant Registrar ITAT, Kolkata Benches Kolkata