Brothers Trading Private Limited. , Kolkata V. ITO,Ward-1(1),Kolkata. , Kolkata

ITA 697/KOL/2023

• Counselvise Citation: [2023] 100 COUNSELVISE.COM (IT) 5595 (ITAT-KOLKATA)
• Duration Of Justice: 3 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-11-2023
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Next Hearing Date: 23-08-2023
• Assessment Year: 2008-2009
• Appeal Filed On: 11-07-2023
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Unexplained cash credit; Unexplained investment; Set aside
• Section: 68; 148

Judgement Text

आयकर अपीलीय अधिकरण कोलकाता 'एसएमसी' पीठ, कोलकाता म ें IN THE INCOME TAX APPELLATE TRIBUNAL KOLKATA ‘SMC’ BENCH, KOLKATA श्री राजपाल यादव, उपाध्यक्ष (कोलकाता क्ष े त्र) एवं श्री राज े श क ु मार, ल े खा सदस्य क े समक्ष Before SRI RAJPAL YADAV, VICE PRESIDENT & SRI RAJESH KUMAR, ACCOUNTANT MEMBER I.T.A. No.: 697/KOL/2023 Assessment Year: 2008-09 Brothers Trading Private Limited.............................Appellant [PAN: AABCB 4460 H] Vs. ITO, Ward-1(1), Kolkata........................................Respondent Appearances by: Assessee represented by – Sh. Rajiv Khandelwel, C.A. Department represented by – Sh. Bonnine Debarma, JCIT. Date of concluding the hearing : August 24 th , 2023 Date of pronouncing the order : November 6 th , 2023 ORDER Per Rajesh Kumar, Accountant Member: This appeal preferred by the assessee is against the order passed by Learned Commissioner of Income-tax (Appeals)-NFAC, Delhi [hereinafter referred to Ld. ‘CIT(A)’] dated 12.05.2023 for the Assessment Year (in short ‘AY’) 2008-09. I.T.A. No.: 697/KOL/2023 Assessment Year: 2008-09 Brothers Trading Private Limited. Page 2 of 7 2. The assessee has challenged the order of Ld. CIT(A) on the ground that NFAC has framed the assessment ex-parte. The assessee has also filed additional grounds vide letter dated 18.08.2023 received in the Registry on 21.08.2023 raising the following grounds: “1. The Income-tax Officer - 1(1), Kolkata (hereinafter referred to as the Assessing Officer) erred in serving notice under section 148 of the Act through affixation. The appellants contend that on the facts and in the circumstances of the case and in law, the Assessing Officer ought not to have served the notice under section 148 through affixation without following the due process of law contained in the provisions of section 282 of the Act and hence, the impugned notice and the consequent proceedings is bad in law and consequently, the assessment order ought to be annulled. 2. The Commissioner of Income-tax (Appeals) at the National Faceless Assessment Centre. Delhi (hereinafter referred to as the CIT(A)) erred in upholding the action of the Assessing Officer in making an addition of Rs 17,00,000, as alleged unexplained investments made in the shares of Ambey Mining Private Limited, on the ground that the said investments are not verified. The appellants contend that on the facts and in the circumstances of the case and in law. the CIT(A) ought not to have upheld the action of the Assessing Officer in making the impugned addition inasmuch as the said investments are duly recorded in the books of account and are accordingly, reflected in the balance sheet of the appellants, and hence, the provisions of unexplained investments, in terms, are not applicable and as such, the impugned addition of Rs 17,00,000 made by the Assessing Officer ought to be deleted. 3. The CIT(A) erred in upholding the action of the Assessing Officer in making a disallowance of Rs 3,37,145, being entire expenditure debited to the profit and loss account, on the ground that the same is not verified. The appellants contend that on the facts and in the circumstances of the case and in law, the CIT(A) ought not to have upheld the action of I.T.A. No.: 697/KOL/2023 Assessment Year: 2008-09 Brothers Trading Private Limited. Page 3 of 7 the Assessing Officer in making the disallowance inasmuch as he has not appreciated the facts of the case in its entirety and hence, the impugned disallowance of Rs 3.37.145 made by the Assessing Officer is not warranted and needs to be deleted. The appellant craves leave to add to, alter or amend the aforestated grounds of appeal.” 3. The issue raised in ground no. 1 is against the framing of ex- parte order by Ld. CIT(A) and the issue raised in ground no. 2 is against the order of Ld. CIT(A) not condoning the delay. 4. After hearing the rival contentions and perusing the order of Ld. CIT(A) we observe that Ld. CIT(A) though has passed the order ex-parte however, has decided the issues on merit issue-wise. Once Ld. CIT(A) has passed the order on merit, then the assumption has to be drawn that Ld. CIT(A) has condoned the delay in filing the appeal and only then has decided the issues involved on merits. Accordingly, we are inclined to dismiss the issues raised in ground nos. 1 & 2 in the memorandum of appeal. 5. The issue raised in ground no. 1 of additional grounds is not pressed at the time of hearing therefore, the same is dismissed as not pressed. 6. The issue raised in additional ground no. 2 is against the confirmation of addition of Rs. 17 Lakh by Ld. CIT(A) as made by the Assessing Officer (in short ld. 'AO') on account of unexplained investments in the shares of M/s. Ambey Mining Pvt. Ltd. on the ground that the said investments were not verified. 7. The facts in brief are that during the year the assessee has invested Rs. 17.00 Lakh in the equity shares of M/s. Ambey Mining I.T.A. No.: 697/KOL/2023 Assessment Year: 2008-09 Brothers Trading Private Limited. Page 4 of 7 Pvt. Ltd. by making payments from its bank account held with Bank of Rajasthan Limited, Kolkata, G.C.A. The said investments were duly shown in the balance sheet in Schedule 3 which contained the details of unlisted securities. The AO on perusal of the balance sheet came to the conclusion that during the year the assessee has invested Rs. 17.00 Lakh in the equity shares of M/s. Ambey Mining Pvt. Ltd. which could not be verified and added the same to the income of the assessee as unexplained investment u/s 68 of the Act in the assessment framed 144 r.w.s. 147 of the Act. It is pertinent to state that the assessee has not appeared before the AO in the assessment proceedings. 8. In the appellate proceedings, Ld. CIT(A) upheld the order of the AO by recording observations that there is no infirmity in the assessment order and the same is valid and proper order when the assessee failed to appear before Ld. CIT(A) also thus, deciding the issues on merit. 9. We have heard the rival contentions and perused the material on record. The undisputed facts are that the assessee has invested in the equity shares of M/s. Ambey Mining Pvt. Ltd. amounting to Rs. 17.00 Lakh and the same was done by issuing cheques from the bank account maintained with Bank of Rajasthan Limited. We note that investment was shown under the head ‘Investments’ in the balance sheet and thus, the amount invested by the assessee has been fully accounted in the books of accounts and shown accordingly under the appropriate head of account in the anuual accounts. Now, when the assessee did not appear before the AO he has made the addition as unexplained investments u/s 68 of the I.T.A. No.: 697/KOL/2023 Assessment Year: 2008-09 Brothers Trading Private Limited. Page 5 of 7 Act which was also confirmed by Ld. CIT(A). In our opinion, the conclusion drawn by both the authorities below is not in consonance with the provisions of the Act as the provisions of Section 68 of the Act deals with the unexplained cash credit found credited in the books of accounts of the assessee during the year whereas in the present case the assessee has invested in the equity shares of M/s. Ambey Mining Pvt. Ltd. and shown the amount in the books of accounts. Therefore, the very understanding of the provisions of law by the AO is wrong and contrary the provisions of the Act. Besides, even if the addition is made on account of unexplained investments, the same is not correct in the present case as the investments are fully shown in the books of accounts of the assessee and the same cannot be treated to be unexplained considering the factual as well as legal infirmity in the orders passed by the authorities below. Thus, we are inclined to set aside the order of Ld. CIT(A) and direct the AO to delete the addition. Therefore, additional ground no. 2 raised by the assessee is allowed. 10. The issue raised in additional ground no. 3 is against the confirmation of disallowance of Rs. 3,37,145/- by Ld. CIT(A) as made by the AO on account of disallowance of expenses on the ground that the same were not verified. 11. The facts in brief are that the assessee has debited expenses under various heads aggregating to Rs. 3,37,145/- in the profit and loss account. When the assessee did not appear in the assessment proceedings, the AO treated the entire expenses as unexplained I.T.A. No.: 697/KOL/2023 Assessment Year: 2008-09 Brothers Trading Private Limited. Page 6 of 7 expenses and added the same to the income of the assessee which was affirmed by Ld. CIT(A). 12. After hearing the rival contentions and perusing the material on record including the audited profit and loss account filed by the assessee, we note that the expenses were disallowed by the AO and added as unexplained expenditure. In our opinion, the said disallowance is incorrect and against the provisions of the Act as the assessee has shown these expenses in the books of accounts with corresponding sources as the assessee has maintained books of accounts which were duly audited. Therefore, to treat the same as unexplained expenses is against the provisions of the Act. In our opinion, the unexplained expenses are those which are not accounted for in the books of accounts and which came to the notice of the AO in the assessment proceedings or under any other proceeding under the Act. Accordingly, we set aside the order of Ld. CIT(A) and direct the AO to delete the addition. Therefore, the additional ground no. 3 raised by the assessee is allowed. 13. In the result, the appeal filed by the assessee is allowed. Kolkata, the 6 th November, 2023. Sd/- Sd/- [Rajpal Yadav] [Rajesh Kumar] Vice-President Accountant Member Dated: 06.11.2023 Bidhan (P.S.) I.T.A. No.: 697/KOL/2023 Assessment Year: 2008-09 Brothers Trading Private Limited. Page 7 of 7 Copy of the order forwarded to: 1. Brothers Trading Private Limited, 2 nd Floor, Room No. 210, 1, Crooked Lane, Kolkata-700 069. 2. ITO, Ward-1(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