NICE INTERNATIONAL LTD,DELHI V. .ITO, WARD-13(2), NEW DELHI

ITA 2529/DEL/2023

AI Insights

The case involves Nice International Ltd., which appealed against the order of the CIT(A)-5, Ludhiana, concerning various disallowances made under the Income Tax Act, 1961 for the Assessment Year 2015-16. The primary issues included the disallowance of cash contributions to share capital and the conversion of directors' credit balances into share capital, which were contested under sections 269SS and 271D. The Tribunal found that the CIT(A)/NFAC needed to re-examine the issues of unexplained cash credits and investments from directors, and it also provided partial relief regarding the disallowance of certain expenses due to lack of documentation.

• Counselvise Citation: [2024] 140 COUNSELVISE.COM (IT) 471607 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 3 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-12-2024
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: E
• Assessment Year: 2011-2012
• Appeal Filed On: 06-09-2023
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: AKHILESH KUMAR YADAV
• Assessee Lawyers: RUCHESH SINHA
• Keywords: Unexplained cash credit
• Section: 143(3); 68; 271D

Judgement Text

"IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH ‘E’, NEW DELHI Before Sh. Satbeer Singh Godara, Judicial Member & Sh. M. Balaganesh, Accountant Member ITA No. 2529/Del/2023 : Asstt. Year : 2011-12 Nice International Ltd., 194B, Ramesh Market, New Delhi-110065 Vs Income Tax Officer, Ward-13(2), New Delhi (APPELLANT) (RESPONDENT) PAN No. AAACN9682L Assessee by : Sh. Ruchesh Sinha, Adv. Revenue by : Sh. Akhilesh Kumar Yadav, Sr. DR Date of Hearing: 03.12.2024 Date of Pronouncement: 12.12.2024 ORDER Per Satbeer Singh Godara, Judicial Member: This assessee’s appeal for Assessment Year 2015-16, arises against the CIT(A)-5, Ludhiana’s order dated 13.02.2019 in case No. 255/ROT/IT/CIT(A)-5/LDH/2018-19, in proceedings u/s 143(3) of the Income Tax Act, 1961 (in short “The Act”). 2. Heard both the parties at length. Case file perused. 3. The assessee pleads the following substantive grounds in the instant appeal: “1. That, during the relevant assessment year, there was no bar on issue of share capital against cash contribution. The Ld. Commissioner of Income Tax (Appeals) has erred in restricting capital contribution in cash beyond Rs. 20000 as disallowable u/s 269SS/ 271D. The provisions invoked by the Ld. Commissioner applied to loans and deposits and not to share application money. The addition of Rs. 24,88,500 being cash contribution to share capital by the following has therefore wrongly been disallowed: a. Aditya Mathur 16,64,000 b. Parasuram Ram Behara 4,35,500 ITA No. 2529/Del/2023 Nice International Ltd. 2 c. Anima Mathur 25,000 d. Sameer Mathur 25,000 e. Choube Singh 22,000 f. Suresh Kumar 25,000 g- Raj Singh 48,000 h. Devender Rauthan 26,000 i. S N Nag 24,000 j- Rajeev Mathur 25,000 k. Rajini Mathur 25,000 1. Paras Kumar Jain 48,000 m. Inayat Hussain 49,000 n. Devender Singh 47,000 2. That, under the Companies Act, 1956 as applicable to the assessee for the year under review, there was no restriction on converting director's credit balance in books into share capital whether or not the credit balance was created due to loan or due to expenses incurred by the director on behalf of the assessee company. In the absence of any specific law or provision prohibiting such issuance of share capital, the Ld. Commissioner of Income Tax (Appeals) has grossly erred in disallowing a sum of Rs. 26,85,566 being issuance of shares out of credit balance in the account of the director in the following cases: a. Aditya Mathur 20,90,066 b. Seema Mathur 5,95,500 3. That, the Ld. Commissioner of Income Tax Appeals has erred in upholding an addition of Rs. 62,881 being difference in balances of two sundry creditors when compared to confirmation received from the party. The Ld. Commissioner has admitted that the creditors accounts were running accounts and transactions were taking place frequently. The Ld. Commissioner has wrongly observed that assessee was not able to reconcile the difference during the appeal. No hearing was provided in this case to the assessee. The contention of the assessee was that any differences in account are reconciled over a period of time and any mutual agreement to any write-off takes place from time to time and therefore there was no reason for disallowance of this amount during the assessment year under review. 4. That, the Ld Commissioner of Income Tax Appeals has erred in upholding an addition of Rs. 700000 on account of adhoc disallowance out of expenses on failure of assessee to produce expense vouchers The Ld Commissioner has failed to appreciate the fact that one of the directors of the company is a cancer survivor and in view of the ordeal the family has faced - which is duly explained In the statement of fact - the assessee was forced to collect basic documents relating to appeal through inspection of file in the income tax department Under the circumstances, and particularly in view of the fact that the accounts of the assessee were duly audited, the upholding of addition was not justified.” ITA No. 2529/Del/2023 Nice International Ltd. 3 4. We advert to the assessee’s first and foremost substantive grievance challenging both the learned lower authorities action making section 68 unexplained cash credit addition of Rs.94,77,000/- representing it’s share capital received in the relevant previous year, in assessment dated 30.03.2014 as upheld in the CIT(A)/NFAC’s detailed discussion. 5. It emerges from a perusal of the case file that the Assessing Officer held the assessee not to have proved identity, genuineness and creditworthiness of the impugned share capital coming from various parties. The CIT(A)/NFAC on the other hand has mainly considered the foregoing alleged share capital received in cash as not genuine since violative of section 269SS r.w.s. 271D of the Act than having examined the issue on the foregoing three parameters. 6. Faced with this situation and in absence of any rebuttal coming from the Revenue side, we are of the considered view that the CIT(A)/NFAC needs to be re-examine the instant issue of section 68 unexplained cash credits afresh as per law in tune with section 250(6) of the Act after framing points of determination followed by a detailed speaking discussion. Ordered accordingly. 7. Learned counsel next submits that the assessee’s second substantive ground involves similar addition qua investments coming from it’s director(s) namely Sh. Aditya Mathur and Ms. Seema Mathur amounting to Rs.20,90,066/- and Rs.5,95,500/-, respectively. We conclude that once we have restored this entire issue to the CIT(A)/NFAC, the instant second substantive ground also needs to follow the suit in very terms. Ordered accordingly. ITA No. 2529/Del/2023 Nice International Ltd. 4 8. Learned counsel does not press for the assessee’s third substantive ground of Rs.62,881/- representing difference in sundry creditor balance. Rejected in very terms. 9. Lastly comes the assessee’s fourth substantive ground wherein the Assessing Officer disallowed expenses of Rs.6,10,51,048/- other than opening stock to the extent of Rs.10,00,000/- in absence of all the details, and reduced to Rs.7,00,000/- only in the CIT(A)/NFAC’s lower appellate discussion. We find that neither the assessee has been able to plead and prove the necessary all the relevant facts qua the impugned expenditure nor there is any specific defect being pinpointed from the departmental side. Faced with this situation, we conclude that a lump sum disallowance of Rs.2,00,000/- only as just and proper in the peculiar facts and circumstances of the case. The assessee gets relief of Rs.5,00,000/- in other words. 9.1 No other ground or arguments has been pressed before us. 10. This assessee’s appeal is partly allowed in above terms. Order Pronounced in the Open Court on 12/12/2024. Sd/- Sd/- (M. Balaganesh) (Satbeer Singh Godara) Accountant Member Judicial Member Dated: 12/12/2024 *Subodh Kumar, Sr. PS* Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(Appeals) 5. DR: ITAT ASSISTANT REGISTRAR "