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TMI Blog2023 (7) TMI 1512X X X X Extracts X X X X X X X X Extracts X X X X ..... y if, he could point out the discrepancies or insufficiency in the evidence and details furnished in his office and also as to what further investigation was needed by him by way of recording of statement of the directors of the assessee and the subscriber company. We find that assessee has discharged its onus to prove the identity and creditworthiness of the share subscribing company and the genuineness of the transaction towards sum received during the impugned year. Accordingly, considering these facts and in the light of the judicial precedence referred above, we set aside the order of the ld. CIT(A) and delete the addition so made. Accordingly, grounds taken by the assessee in this respect are allowed. Disallowance of expenditure in respect of payment made for mediclaim insurance which was paid for the staff members of the assessee, by Director of the company, through his credit card - HELD THAT:- We find that claim of assessee is justifiable as the disallowance has been made owing to the mode of payment which is through the credit card of the Director but for the benefit of the employees of the assessee which is towards mediclaim insurance premium and the same has been adequa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Act in respect of payments made to both SHGHP and MIERE(the done trusts). Relief granted by ld. CIT(A) on this issue is set aside. Grounds taken by the Revenue are allowed. Disallowance on account of interest expenses for late payment of statutory liabilities - an interest paid on delayed payment of sales tax etc. being adding to the cost/purchase price or decreasing the profit margin on sales may be taken into account for computation of profit or to say computation of taxable income, but that concession is not available in respect of interest on Income tax. Hence, any case laws dealing with the levy of indirect taxes and interest thereupon are not applicable for the purpose of interpretation of the relevant provisions of the Income Tax Act. The Coordinate Bench in Premier Irrigation Adritec Pvt. Ltd. [ 2023 (1) TMI 1124 - ITAT KOLKATA ] thus, held that the interest payment on delayed deposit of income tax whether TDS or otherwise is not an allowable expenditure. - SHRI SANJAY GARG, JUDICIAL MEMBER AND SHRI GIRISH AGRAWAL, ACCOUNTANT MEMBER For the Appellant: Shri S. K. Tulsiyan, Advocate Ms. Puja Somani, CA For the Respondent: Shri P. P. Barman, Addl. CIT, Sr. DR ORDER PER GIR ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eld the addition of Rs. 4,01,00,000/- in the guise of unexplained cash credit u/s 68 of the Act on account of allotment of 3,20, 800 shares of Rs. 100 each at a premium of Rs. 25/- per share to the group company M/s. Laa Dhan Vyapaar Pvt. Ltd. without considering that the said company was existing shareholder, its bank statement, statement of accounts and audited Balance Sheet for earlier F. Ys along with identity proof of the directors of the said company were furnished. 5. That, the Ld. CIT(A) further erred in having upheld the disallowance of expenditure of Rs. 1,15,000/- incurred on payment of medic1aim of staff members through the Credit Card of the Director of the company as his personal expenditure without considering that the expenditure incurred on behalf of the company through the credit card of the Director was debited on being paid to the said Director and the said expenditure was not personal expenditure of the Director. 6. That, the Ld. CIT(A) has wrongly upheld the disallowance of prior period expenses of Rs. 3,54,730/- for lack of supporting details in spite of the fact that the excess provision of income accrued and credited on account of interest on fixed deposits ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d with the notices fixed for hearing and, therefore, passed an ex parte order, confirming all the additions made by the Ld. AO. Aggrieved, assessee is in appeal before the Tribunal. 4.1. At the outset, Ld. Counsel for the assessee strongly submitted that non-compliance by the assessee at the first appellate stage as alleged by the Ld. CIT(A) while disposing of the appeal ex parte is completely on wrong facts without verifying the documents placed on record. Ld. Counsel asserted that the appellate proceedings before the Ld. CIT(A) were first undertaken in the erstwhile regime where personal hearings were attended physically and all the required details and documents were placed on record, in the submissions made by the assessee. Ld. CIT(A) had called for a remand report from the ld. AO for which Ld. Counsel referred to the order sheet entry of the appellate proceedings, dated 28.02.2018. In this order sheet entry, it is noted that Shri M. S. Murty, FCA attended. Filed some of the details. Matter to be remanded. Case adjourned to 30 the April at 11.30 AM. 4.2. Ld. Counsel further referred to the replies filed physically before the Ld. AO in the remand proceedings in respect of the fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... issue holistically in respect of the newness of the faceless regime, by adopting a lenient approach, we take up the issues raised in the present appeal before us for appropriate adjudication, on the strength of arguments made before us and by considering the material placed on record in the form of two paper books and a case law compilation. 4.5. At this juncture, we also take note of the written arguments sent by Ld. DR by e-mail to the Registry dated 11. 05.2023 which is after the conclusion of the hearing on 09. 05.2023. These are nothing but reiteration of the oral arguments made in the course of hearing. Recourse to such a procedure in absence of any direction by the Bench in this regard is not appreciated. However, in the interest of justice, this is taken on record. Copy of the same was supplied to the Ld. Counsel of the assessee with the liberty to file reply on this, if so desired. Ld. Counsel has furnished a reply to this effect, dated 24. 05. 2023 which is also taken on record. 5. On the first issue in respect of disallowance of commission paid of Rs. 15 lakh, Ld. Counsel submitted that assessee, in the course of rendering service to its customers engaged service staff ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aking these payments under the above heads since its inception. The AO disbelieved the claim of the assessee only on the ground for non-submissions of any evidence. Further, the CIT(A) found that the AO himself allowed an amount of Rs. 9,00,000/- each paid on account of brokerage to M/s. Vita Vinimoy Viniyog Pvt. Ltd and M/s. Saffron Financial Services Pvt. Ltd in the year under consideration. It is also noticed from the impugned order of the CIT- A that the assessee has given names, addresses and PAN to the AO. The assessee deducted the TDS on such payments. The entire transactions were through banks. Relevant port of order of CIT-A is reproduced herein below: . 5.5. Per contra, Ld. DR in his e-mailed written submission has alleged that assessee has not furnished the addresses of customers who were provided the services by these companies and that the Principal Officers of these companies were not produced before the AO. 6. From the perusal of the above order of the Coordinate Bench and the facts along with corroborative documentary evidence placed on record, we find that there is no change in the facts of the case and applicable law. Accordingly, we allow the claim of the assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssed by the department u/s. 143(3) read with section 147 for AY 2012- 13 vide order dated 13. 12. 2019 passed by ITO, Ward-3(3), Kolkata, wherein the investment of Rs. 45 lakh made by the said company in the share capital of the assessee in the immediately preceding assessment year as well as the current investment made in the year under consideration has been accepted and no addition made in this respect. Copy of the said assessment order is placed on record at pages 172 to 173 of the paper book. 8.2. Ld. Counsel also pointed out to the important fact in respect of assessment in assessee s own case for the immediately preceding year i.e. AY 2011-12 which has been completed u/s. 143(3) dated 30.03.2014 wherein the subscribing company had invested a sum of Rs. 45 lakh in the share capital of the assessee and no addition has been made in this respect in the said assessment completed by DCIT, Circle-10, Kolkata. Ld. Counsel thus, strongly submitted that onus on the assessee has been discharged in totality and the addition so made calls for deletion. All the three ingredients for section 68 in respect of identity and creditworthiness of the investor and the genuineness of the transacti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not. When it was found by the CIT (Appeal) on fact having examined the documents that the advance given by the creditors have been established the Tribunal should not have ignored this fact finding. 10.1. Ld. AO has not bothered to discuss or point out any defect or deficiency in the documents furnished by the assessee, of the share subscribing company. These evidences furnished have been neither controverted by the Ld. AO during the assessment proceedings and the remand proceedings nor anything substantive brought on record to justify the addition made by him. Ld. AO has simply added the amount of share capital and share premium on the ground that assessee has not produced the directors/shareholders. Thus, going by the records placed by the assessee of the share subscribing company, it can be safely held that the assessee has discharged its initial burden and the burden shifted on the Ld. AO to enquire further into the matter which he failed to do so. It is also noted from their audited financial statement that the investing company had sufficient own funds available with it to make investment in the assessee. It is pertinent to note that investor is a group company with common di ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the ld. CIT(A) and delete the addition so made. Accordingly, grounds taken by the assessee in this respect are allowed. 11. The third issue is in respect of disallowance of expenditure in respect of payment made for mediclaim insurance of Rs. 1,15,000/- which was paid for the staff members of the assessee, by Shri Saurav Kedia, Director of the company, through his credit card. 11.1. Assessee claimed that this amount was paid by the Director of the assessee for the mediclaim insurance premium duly accounted in its books and was subsequently reimbursed to the Director. It is claimed by the assessee that the payment of mediclaim insurance premium for the employees is incidental to its business and is an allowable expenditure u/s. 37 of the Act. Assessee submitted that Director of the assessee has made the payment through his credit card and later claimed it as reimbursement which has been duly accounted in the audited books of account. Details in this respect containing credit card statement were furnished in the course of assessment proceedings also. Ld. Counsel thus, asserted that this claim of the assessee is ought to be allowed. 11.2. From the perusal of records and the facts, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... untrue allegation that the appellant had chosen not to furnish any reply to the notices deserves to be set aside as void. 3. That, even on merits of the case the Ld. C.I.T.(A) in NFAC proceeding without any application of mind has ignored the evidences on record in relation to interest bearing unsecured loan and arbitrarily treated the entire unsecured loan of Rs. 8,37,58,545/- received during the relevant previous year as unexplained cash credit u/s 68 of the Act and added back to the total income of the assessee. 3(a) That, the Ld. C.I.T.(A) while upholding the addition of Rs. 8,37,58,545/- u/s 68 of the Act has grossly erred in not having considered/consulted the remand report of the Ld. A.O. on the written submission filed before the Ld. CIT( A) clearly admitting that upon requisition u/s 133( 6) of the Act from the loan creditors and verifying the money receipts issued to the customers, invoices of sale, bank statement, certificate issued by the auditor firm etc. there was no irregularity in the claim of the assessee. 3(b). That, the order of the Ld. C.I.T.(A), NFAC also suffers from illegality and perversity inasmuch as he has failed to appreciate that the touchstone points ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as under: (i) Addition made u/s. 68 of the Act on account of unsecured loan alleged ground that the assessee was unable to prove the genuineness and creditworthiness of such creditors. Rs. 8,37,58,545/- (ii) Disallowance as a corollary of the entire interest accrued to such loan creditors Rs. 66,88,007/- (iii) Addition made u/s. 68 of the Act on account of unexplained share application money with premium Rs. 4,12,50,000/- (iv) Disallowance of deduction claimed u/s. 35 (1)(iii) of the Act. Rs. 87,50,000/- (v) Disallowance of expenditure incurred on payment of interest on late payment of statutory liabilities Rs. 5,04,790/- 15. In the course of first appellate proceedings, matter was remanded by the Ld. CIT(A) to the Ld. AO to submit a remand report vide letter no. CIT(A)-4/ Kol/2017-18/ 1317, dated 05.03.2018. In the remand proceedings, assessee vide its letter dated 27.04. 2018 filed detailed explanation along with all the relevant supporting documents, all of which are placed in the paper book. Upon consideration of the submissions made by the assessee in the course of remand proceedings, Ld. AO considered them meritoriously and accepted the claim of the assessee on all the five ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cted at source. In this respect, assessee submitted that post dated cheques on predetermined EMIs were issued to the well-known financiers and hence, there was no scope to deduct tax at source on the EMIs paid to them. It was also stated that this interest receiving financiers have shown the interest income in their respective returns which has suffered due tax, therefore, there was no loss to the revenue on account of tax payable on the said interest component. Reference was made to first proviso to sec. 201 of the Act according to which payer shall not be deemed to be an assessee in default in respect of non-deduction of tax if the payee has furnished its return and taken into account such sum for computing the income and paid the taxes due thereon. Considering the overall factual matrix on this issue, we accept the finding of the Ld. AO as stated in the remand report allowing the interest expense. We also allow the claim of interest which has been sustained by the Ld. AO of Rs. 4,74,643/- based on the submissions made by the Ld. Counsel of the assessee as discussed above. Accordingly, disallowance of interest expense on the unsecured loan amounting to Rs. 66,88,007/- is allowed. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it is observed that the decision is solely based on placing reliance on the judgment of Hon ble Supreme Court in the case of CIT Vs. Chotatingrai Tea (supra), as is evident from the finding recorded in para 7 which is reproduced as under: 7. In the light of the above decision, we find the reasoning given by the tribunal to be just and proper and cannot be held to be perverse. In the result, the appeal filed by the revenue (ITA/42/2020) is dismissed and the substantial question of law is answered against the revenue. 8.1. This leads us to delve into the judgment of Chotatingrai Tea (supra) for a better appreciation of the facts and finding dealt therein. At the outset, it is a judgment passed in October 2002. Before the matter travelling to the Hon ble Apex court, despite holding in favour of the assessee, Tribunal had remanded the matter back to the Assessing Officer for fresh disposal for the purpose of determining whether the money had in fact been utilised for an approved programme. Thus, there were apprehensions even in this case about the utilisation of money for the approved programme at the end of the donees. The reasoning arrived at by the Hon ble Court is on the premise of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n such statement since the assessee was entitled to exemption u/s 80G and u/s 35 of the Act their organization was chosen by the brokers for giving donations to SHG and PH as well as for giving donations by SHG and PH. Till now the Assessee's name did not figure in the statement recorded on 27-1-2015. However, pursuant to the Survey in the case of SHG PH proceedings for cancellation of registration u/s 12A of the Act granted to them were initiated. In such proceedings, Smt. Samadrita Mukherjee Sardar (in a letter dated 24-8-2015) had given a list of donations which were given by them after getting cash of equivalent amount. It is not disputed that the name of the assessee figures in the said list and the fact that SHG PH to the Assessee were against cash received from them in Financial Year 2012-13 of a sum of Rs. 1,23,87,550/-. Even at this stage all admissions were by third parties and the same were not binding on the Assessee. However, in a survey conducted in the case of the Assessee on 24 - 8- 2015, the Managing Trustee of the Assessee admitted that it gave cash and got back donations. We have already extracted the statement given by the Managing Trustee. Even in the proce ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , therefore, deserves to be allowed. [ emphasis supplied by us by bold and underline] 8.5. From the above judgment of Batanagar Education and Research Trust (supra), the apprehension on the factual aspect of utilization of money by the recipient donee trusts for the approved programme which remained open, is set to rest by the fact- based conclusion arrived at, as quoted above. Hon ble Court has made reference to the outcome of the survey at SHGPH and the post survey enquiry conducted upon Batanagar Educaiton and Research Trust to conclude about the organized fraud. 8.6. This very judgment of Batanagar Education and Research Trust (supra) was relied upon and analysed in the decision of Tarasafe International Pvt. Ltd. Ors. (supra) by the Coordinate Bench of ITAT, Kolkata in para 39 which is reproduced for ease of reference: 39. We are aware of the facts that a large number of orders have been passed in favour of the assessee by ITAT and some of those were upheld by Hon ble High Courts also. We have extracted one of the orders from Hon ble Gujarat High Court. The Hon ble Supreme Court in the case of CIT vs.- Batanagar Education Research Trust reported in 129 taxmann.com 30, whose co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... conducted u/s. 133 A in the case of the donee trusts as well as post survey enquiries. In the present case before us, the donee trusts are the same whose facts and credible material were brought on record by the Revenue and considered by the Coordinate Bench. Claim of deductions by the donors have already been disproved by the Revenue by dispelling the claim of first onus discharged by the donors, on the strength of credible material. These fact findings are substantive and cannot be overlooked in the present case wherein the donee trusts are the same. There is nothing brought on record by the Ld. Counsel of the assessee to rebut these factual findings except for relying on the judgment of Hon ble Supreme Court in the case of Chotatingrai Tea (supra) which is distinguished in the light of recent judgment of Batanagar Education and Research Trust (supra) as discussed above. 8.8. Respectfully taking into account the fact- based finding in the judgment of Hon ble Supreme Court in the case of Batanagar Education and Research Trust ( supra) and which has been elaborately dealt with by the Coordinate Bench in Tarasafe International Pvt. Ltd. Ors, we hold that assessee is not entitled fo ..... X X X X Extracts X X X X X X X X Extracts X X X X
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