2021 (1) TMI 613 - AT - Income Tax

Maintainability of appeal due to low tax effect - Bogus loan taken - Addition u/s 68 - Assessee obtained bogus share application money of premium - HELD THAT - It is not the case where claim of bogus long term capital gain or short term capital gain is made. It could be a case of suspicious loan transaction. Since the suspicious loan transaction is not covered in the exceptions clause of CBDT circular. We find merit in the contention of the Ld. counsel for the assessee. Hence, we hold that the present appeal is not maintainable in view of the monetary limit prescribed by CBDT Circular No. 17 of 2019 dated 8th August 2019. The appeal is dismissed as not maintainable.

Issues Involved:
1. Deletion of addition of ?90,00,000 on account of bogus unsecured loan under section 68.
2. Deletion of addition of ?1,18,330 on account of interest paid on the alleged bogus loan.
3. Applicability of CBDT Circular No. 17/2019 regarding monetary limits for filing appeals.

Detailed Analysis:

1. Deletion of Addition of ?90,00,000 on Account of Bogus Unsecured Loan Under Section 68:
The Revenue challenged the deletion of an addition of ?90,00,000 made by the Assessing Officer (AO) on account of unsecured loans received from three companies: M/s. Purvi Finvest Ltd., M/s. East West Finvest Ltd., and M/s. Trimurti Finvest Ltd. The AO had reopened the assessment under section 147 read with section 143(3) of the Income Tax Act, 1961, on the grounds that these companies had procured bogus share application money from paper companies in Kolkata and subsequently advanced loans to the assessee. The AO concluded that the loans were merely entries and added the amount as unexplained credits under section 68. However, the Commissioner of Income Tax (Appeals) [CIT(A)] deleted the addition, which led to the Revenue's appeal before the Tribunal.

2. Deletion of Addition of ?1,18,330 on Account of Interest Paid on the Alleged Bogus Loan:
Along with the principal amount, the AO also disallowed the interest paid on these loans, amounting to ?1,18,330, stating that the interest was paid on unsecured loans that were deemed bogus. This addition was also deleted by the CIT(A), leading to the Revenue’s appeal.

3. Applicability of CBDT Circular No. 17/2019 Regarding Monetary Limits for Filing Appeals:
The assessee contended that the appeal was not maintainable based on the monetary limits set by CBDT Circular No. 17/2019 dated 8th August 2019, which raised the threshold for filing appeals to ?50,00,000. The tax effect in this case was ?28,17,564, which is below the specified limit. The Department argued that the case falls under the exception clause for organized tax evasion activities, as mentioned in Circular No. 23/2019 dated 6th September 2019, and Office Memorandum dated 16th September 2019, which exempted cases involving bogus Long Term Capital Gains (LTCG)/Short Term Capital Loss (STCL) through penny stocks from the monetary limits.

Tribunal's Findings:
The Tribunal examined the contentions and found that the case involved suspicious loan transactions rather than bogus LTCG/STCL through penny stocks. Since suspicious loan transactions are not covered under the exception clause of the CBDT Circular, the Tribunal agreed with the assessee's contention that the appeal was not maintainable due to the low tax effect.

Conclusion:
The Tribunal dismissed the Revenue's appeal as not maintainable based on the monetary limits prescribed by CBDT Circular No. 17/2019. The Tribunal concluded that the case did not fall under the exceptions for organized tax evasion activities involving bogus LTCG/STCL through penny stocks. As a result, the appeal was dismissed, and the additions made by the AO were not sustained.

Order Pronouncement:
The order was pronounced in the open court on 08.01.2021.

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