9911796707
TMI Blog2025 (2) TMI 442X X X X Extracts X X X X X X X X Extracts X X X X ..... rary, illegal, baseless and not justified. 2. Ld. CIT(A) erred in confirming addition of Rs. 68,62,394/- made by the A.O on account of amount being offered by appellant during assessment proceedings while explaining credit of Rs. 2 crore in capital a/c. The addition represents double addition. The addition made by the A.O and sustained by the Ld. CIT(A) is arbitrary and not justified. 3. Ld. CIT(A) erred in confirming addition of Rs. 6,12,607/- made by the A.O on account of amount shown as "deemed sales tax" in balance sheet treating it to be revenue receipt. The addition made by the A.O and sustained by the CIT(A) is arbitrary, baseless and not justified. 4. Ld. CIT(A) erred in confirming the addition of Rs. 1,45,75,000/- made by the A.O on account of deemed dividend u/s. 2(22)(e) without appreciating the facts/evidences. The addition made by the A.O and confirmed by the Ld. CIT(A) is arbitrary, illegal and not justified. 5. Ld. CIT(A) erred in confirming the disallowance of Rs. 15,000/- out of donation expense. The disallowance made by A.O and confirmed by the Ld. CIT(A) is arbitrary and not justified. 6. The appellant reserves the right to add, amend or modify any of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... same were brought under one head as addition to capital. The A.O called upon the assessee to put forth an explanation as to why the aforementioned amount of Rs. 2 crore may not be added to his income as an unexplained cash credit in his capital account. As the reply filed by the assessee did not find favour with the A.O, therefore, the latter held the entire amount of Rs. 2 crore as an unexplained cash credit u/s. 68 of the Act. 4. Although the assessee had in his return of income disclosed the agricultural income of Rs. 2 lacs, but as per the details filed by the assessee in the course of assessment proceedings, he had reflected the net surplus agricultural income (after all expenses) at Rs. 13,78,830/-. As there was deficit/short agricultural income of Rs. 11,78,830/-disclosed by the assessee in his return of income, therefore, the assessee filed before the A.O a consolidated statement of affairs as on 31.03.2012 for A.Y.2010-11 to A.Y.2012-13, as under: S. No. A.Yr. Agricltrl. Income as per ITR Rs. Agricltrl. Income as per reply Rs. Difference short fall Rs. 1. 2010-11 16,00,00/- 80,19,60/- 641960/- 2. 2011-12 18,00,00/- 10,70,000/- 890000/- 3. 2012-13 200,000 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , the A.O furthrer observed that the assessee had during the subject year made an investment in the equity share capitals of six companies and in agricultural assets aggregating to Rs. 1,61,53,680/-. As the assessee had not disclosed on a suo-motto basis any disallowance u/s. 14A r.w.r. 8D, therefore, the A.O worked out the disallowance on the said count of Rs. 55,06,957/-. 8. As the assessee had in two tranches received loans from M/s. Atmastco Pvt. Ltd., a company in which the assessee was having more than 10% shareholding, viz. (i) loan of Rs. 1,35,00,000/-; and (ii) loan of Rs. 10,75,000/-, therefore, the A.O made an addition of the same by treating it as "deemed dividend" u/s. 2(22)(e) of the Act. Also, the A.O disallowed the assessee's claim for donation of Rs. 15,000/-. 9. Accordingly, the A.O vide his order passed u/s. 143(3) of the Act, dated 26.03.2015 after, inter alia, making the aforesaid additions, determined the income of the assessee at Rs. 6,99,24,738/-. 10. Aggrieved the assessee carried the matter in appeal before the CIT(Appeals), but without success. For the sake of clarity, the observations of the CIT(Appeals) are culled out as under: "4. DECISION: The co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it is marked as "Atmastco (P) Ltd, Bhilai (Sundry Creditors)". Copies of these ledger accounts have been enclosed as Annexure-1 (collectively) and form part of the assessment order. The closing balance in these accounts are carried over to the respective balance sheets. The AO has observed that the claim of additional capital coming out of said accounts to explain the source is misleading. The AO has observed that the appellant's contention that le said amount of Rs. 2 Crores was infused to reduce sundry creditors and associate credit balances is another false claim and it leads to the conclusion that relevant balances in sundry creditors and associate credit balance are also not correct. This establishes the fact that the appellant has made unexplained investment in acquisition of corresponding assets from his undisclosed income. The AO treated the amount of unexplained credit of Rs. 2,00,00,000/- as unexplained cash credit under section 68 of the I.T. Act, 1961. 5.2. The appellant has submitted that it is the result of transfer entry made by appellant, transferring credit balances appearing in the account of creditors in the books of business concerns, to the capital accou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... considering the effect in both the years, the entries in books are to the effect of reducing the creditors/credit balances by Rs. 3,25,00,000/- and increasing the balance in capital account of appellant by Rs. 3,25,00,000/- and the appellant has stated that the credit entry of Rs. 2,00,00,000/- in the capital account of appellant which is shown in the schedule/balance sheet is the result of above explained adjustments only and there was no fresh infusion of fund. 5.2.1. The AO in the Remand Report has noted that these transfers/adjustments are not made through passing of entries in the relevant books of accounts of the appellant. In view of above, the claim of the appellant with regard to additional capital coming out of these accounts cannot be accepted. On carefully going through these documents, it is noted by the AO that the claim of the appellant that the credit of Rs. 2 cr (as additional capital in the balance sheet) was intended to reduce sundry creditors and associate credit balances is misleading. In view of above, the unexplained credit in the capital account in the balance sheet deserves to be treated as unexplained cash credit u/s. 68 of the IT Act, 1961. 5.2.2. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ivision) and Apex Industries (Trading Division). Out of these credit balances, a sum of Rs. 2.00 crore was transferred by journal entry to the capital account of appellant in the instant year. The appellant has stated that he was enjoying credit facility in the form of CC limit from State Bank of India and the appellant was required to bring in capital of Rs. 2 crore so as to meet the bank's requirements; and therefore, the appellant transferred a sum of Rs. 2 crore through transfer entries from the account of Atmastco (p) Ltd., debiting the account of above company and crediting his capital account. During the appellate proceedings, it is seen that the closing balances in the accounts of above parties were carried over to the balance sheets. These transfers/adjustments are not made through passing of entries in the relevant books of accounts of the, appellant. In view of above, the claim of the appellant with regard to additional capita' coming out of these accounts cannot be accepted. I find no reason to interfere with the AO's order on the above issue. Appeal on Ground no. 1 is dismissed." 6. Ground No. 2: [In the ground No. 2, the appellant has challenged the addi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... amount of Rs. 68,62,394/- was offered for tax only while explaining the credit entries of Rs. 2.00 crore. The credit entry of Rs. 2.00 crore has been separately added by the AO. Therefore, to the extent of Rs. 68,62,394/-, 'here is double addition, which is not justified. The appellant has been giving contusing arguments to justify the credit entries. The appellant has argued that out of Rs. 68,62,394/-, a sum of Rs. 56,83,564/- (Rs.41,51,604/- + Rs. 15,31,960/-) represents the difference in the earlier year and Rs. 11,78,830/- only related to the year under consideration; therefore, to the extent of Rs. 56,83,564/-, addition could not have been made. This argument of the appellant cannot be accepted. The appellant is trying to build up a case that he generated tax free agricultural income in earlier years which were not part of returned income. I find no reason to interfere with the AO's order on the issue. The appeal on ground No.2 is dismissed." 7. Ground No. 3: In the ground No.3, the appellant has challenged the addition on a/c of demand sales tax - Rs. 6,12,607/- 7.1. In the assessment order, the A.O has noted that the appellant has shown an amount of Rs. 6,12,607 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aced in the formula prescribed in Rule 8D(2)(ii), the result would be as under: - A x B C = Rs. 53,03,221/-x Rs. 1,42,17,930/- = Rs. 8,16,636/- Rs.9,23,31,014/- As a result of above mistake on the part of AO, the amount of disallowance computed under clause (iii) of Rule 8D(2) is also computed at a higher figure because the figure derived at item "B" in the above formula is required to be adopted for computing disallowance under clause (iii) also. With the above correction, the amount of disallowance of Rs. 4,41,000/-worked out in para (c) on page no. 8 of assessment order [under Rule 8D(2)(iii)] would also become Rs. 71,090/- (i.e. 0.5% of Rs. 1,42,17,930/-in place of 0.5% of Rs. 8,82,00,165/-). Thus, with the above corrections, the amount disallowable as per AO would come to Rs. 8,87,725/- (Rs.8,16,636/- + Rs. 71,090/-) in place of Rs. 55,06,957/- taken in the assessment order. Thus, the appellant has argued that the disallowance made by the AO of Rs. 55,06,957/- is otherwise also excessive by Rs. 46,19,232/- (Rs.55,06,957/- (-) Rs. 8,87,725/-). The appellant has also stated that the appellant had own funds of Rs. 9,98,71,015/- as on 31.3.2012, which is much more than t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ents that have been pressed into service by the Ld. AR to drive home his contentions. 13. Shri Milind Bhusari, Ld. Authorized Representative (for short 'AR') for the assessee, at the threshold of hearing, submitted that as per instructions he is not pressing ground of appeal No.5. Considering the concession of the Ld. AR the Ground of appeal No.5 is dismissed as not pressed. 14. As multiple issues are involved in the captioned appeal, therefore, the same are being adjudicated in a chronological manner in the backdrop of the contentions of the Ld. Authorized Representatives of both the parties: (A). Re: Addition u/s. 2(22)(e) of the Act : Rs. 1,45,75,000/- 15. Apropos the addition of "deemed dividend" u/s. 2(22)(e) of the Act of Rs. 1,45,75,000/-, Shri Milind Bhusari, Ld. AR submitted that the said loans were raised by the assessee from M/s Atmastco Pvt. Ltd. not during the year under consideration but the same were the brought forward balances of the preceding year i.e. A.Y.2011-12. The Ld. AR to buttress his aforesaid claim had taken us through the "balance sheet" of M/s. Apex Industries, Unit-1 for the immediately preceding year, i.e A.Y.2011-12, wherein loan of Rs. 1.35 cror ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f any sum (whether as representing a part of the assets of the company or otherwise) made after the 31st day of May, 1987, by way of advance or loan to a shareholder, being a person who is the beneficial owner of shares (not being shares entitled to a fixed rate of dividend whether with or without a right to participate in profits) holding not less than ten per cent of the voting power, or to any concern in which such shareholder is a member or a partner and in which he has a substantial interest (hereafter in this clause referred to as the said concern) or any payment by any such company on behalf, or for the individual benefit, of any such shareholder, to the extent to which the company in either case possesses accumulated profits" (emphasis supplied by us) 18. As stated by the Ld. AR, and rightly so, as the company viz. M/s. Atmastco Pvt. Ltd had advanced a loan aggregating to Rs. 1.45 crore (approx.) not during the year under consideration but in the preceding year, therefore, in absence of any payment by the company during the subject year, there was no justification for the A.O to have held the amount so received by the assessee in the preceding year as "deemed dividend" in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h the parties in the backdrop of the orders of the lower authorities. We are principally in agreement with the Ld. AR that in absence of any exempt income having been earned by the assessee during the subject year, the A.O as per the pre-amended Section 14A of the Act, as was applicable to the subject year, could not have worked out any disallowance in his hands. Our aforesaid view is fortified by the judgment of the Hon'ble Supreme Court in the case of CIT Vs. Chettinad Logistics Pvt. Ltd. (2018) 257 Taxmann 2 (SC) and also of the Hon'ble High Court of Delhi in the case of Cheminvest Limited Vs. CIT, (2015) 378 ITR 33 (Delhi). In the backdrop of the facts involved in the case before us r/w. the aforesaid settled position of law, we find substance in the claim of the Ld. AR that now when the assessee had not received any exempt dividend income during the year under consideration, therefore, no disallowance u/s. 14A of the Act was warranted in his case. However, we are of the view that as the aforesaid claim that the assessee was not in receipt of any exempt income during the subject year, cannot be summarily accepted on the very face of it, and would require verification, therefore ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed sales tax of Rs. 6,12,607/- had been paid by the assessee on 14.04.2012 i.e. prior to the "due date" of filing return of income under sub-section (1) of Section 139 of the Act, therefore, no disallowance of the said amount was called for in his hands. 28. Per contra, the Ld. Departmental Representative (for short "DR") relied on the orders of the lower authorities. 29. We have thoughtfully considered the aforesaid issue, and are of the view that the explanation of the assessee qua the addition of Rs. 6,12,607/- requires to be looked into in the backdrop of the documents that have been placed on our record, viz. (i) copy of sales tax payable A/c. for F.Y.2011-12 and 2012-13; (ii) copy of bank statement evidencing making of the payment; and (iii) copy of the bank receipts evidencing payment of Rs. 6,65,030/- by the assessee on 14.04.2012. Accordingly, we herein restore the matter to the file of the A.O for re-adjudication. Needless to say, the A.O shall in the course of the set-aside proceedings afford a reasonable opportunity of being heard to the assessee who shall remain at a liberty to substantiate his claim on the basis of fresh documentary evidence, if any. Thus, the Groun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... upra) being taken over by the assessee in his personal/individual capacity. Elaborating further on his contention, the Ld. AR submitted that the addition in the "capital a/c" of Rs. 2 crore (supra) was sourced out of, viz. (i) transfer out of the "opening balance" of Rs. 2,32,61,506.37 as on 01.04.2011 of M/s. Atmastco P. Ltd., Bhilai (appearing in the books of account of M/s. Apex Industries, Unit-1) : Rs. 1,05,00,000/-; (ii) transfer out of the "opening balance" of Rs. 1,49,10,000/- as on 01.04.2011 of M/s. Atmastco P. Ltd., Bhilai (appearing in the books of M/s. Apex Industries, trading division) : Rs. 87,50,000/-; (iii) transfer from the account of M/s. Atmastco P. Ltd., Bhilai [as appearing in the books of M/s. Apex Industries (trading division)] during the year under consideration : Rs. 7,50,000/-. 32. The Ld. AR to substantiate his aforesaid claim had drawn our attention to the "capital a/c" of the assessee in the books of M/s. Apex Industries, Unit-1 for the subject year i.e. A.Y.2012-13, which revealed the bifurcated details of the aforesaid addition aggregating to Rs. 2 crore (supra), Page 8 of APB. Apart from that, the Ld. AR had taken us through a "Chart" which provide ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he assessee in the course of the proceedings before the lower authorities had duly substantiated his claim that the addition of Rs. 2 crore (supra) in his "capital a/c" with M/s. Apex Industries, Unit-1 during the year under consideration i.e. A.Y.2012-13 was sourced out of the accounts of M/s. Atmastco P. Ltd., Bhilai (appearing in the books of accounts of M/s. Apex Industries, Unit-1 and M/s. Apex Industries (trading division), which in turn were primarily sourced out of the brought forward balances of the preceding year, therefore, there was no justification for the A.O to have drawn adverse inferences and held the amounts so credited in the "capital a/c" of the assessee as unexplained cash credits u/s. 68 of the Act. Elaborating further on his contention, the Ld. AR submitted that as the assessee in the course of the assessment proceeding had duly discharged the onus that was cast upon him as regards explaining the "nature" and "source" of the credit of Rs. 2 crore (supra) in his "capital a/c" with M/s.Apex Industries, Unit-1, therefore, he had wrongly been visited with the impugned addition u/s. 68 of the Act. 34. On being queried as to what was the purpose of the aforementio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e sheet. Elaborating further, the CIT(Appeals), had observed, that the assessee during the year under consideration i.e. A.Y.2012-13, had though credited his "capital a/c" with an amount of Rs. 3.25 crore, which adjustment was made to reduce the credit balance of the creditors and increasing the "capital a/c" of the proprietor, but as per the "Schedule-1" of the balance sheet for A.Y.2012-13 the increase in the balance of capital was Rs. 2 crore only, against the transfer entry of Rs. 3.25 crore. Referring to the aforesaid discrepancy, the CIT(Appeals), observed that the same was for the reason that though transfer entries of Rs. 3.25 crore were passed in A.Y.2012-13, but the capital of the assessee was already increased by Rs. 1.25 crore in A.Y.2011-12 i.e. only in the balance sheet and not in the books of the account. Accordingly, the CIT(Appeals) observed that the amount of capital balance that was brought forward as "opening capital" of A.Y.2012-13 already included the increased amount of Rs. 1.25 crore, which was effected outside the books of accounts, i.e. only in the balance sheet. 38. Accordingly, the assessee based on the aforesaid facts, claimed that there was an increas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t sum of money is received/credited in the books of the assessee, therefore, based on the aforesaid observation of the A.O that the relevant entries were not routed through the books of account would in itself render the provisions of Section 68 of the Act as unworkable. 40. We find that considering the facts that the explanation of the assessee as regards the addition of Rs. 2 crores (supra) in his "capital a/c" was considering the remand report filed by the A.O; the rejoinder filed by the assessee, had rendered the same as contentious, therefore, the assessee had requested the CIT(Appeals) that an opportunity may be allowed to him for explaining the evidences by personally appearing before the A.O. However, we find that the CIT(Appeals) had summarily rejected the said claim of the assessee, for the reason, that as sufficient opportunities were already allowed to him during the assessment/appellate proceedings, therefore, the issue was to be decided based on the material and submission that were available on record. 41. Ostensibly, the CIT(Appeals) had observed that the assessee in his attempt to justify the capital introduction of Rs. 2 crores (supra) with M/s. Apex Industries, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 12, Page 4 of APB. On a similar footing, the assessee had during the subject year filed before us copy of the account of M/s. Atmastco Pvt. Ltd., Bhilai in the books of account of M/s. Apex Industries (trading division), wherein an amount of Rs. 87.50 lacs (supra) and Rs. 7.50 lacs (supra) had been debited to the account of the aforesaid company as on 31.03.2012. Apparently, the CIT(Appeals) had remained guided by the facts of A.Y.2011-12, wherein the addition of an amount of Rs. 1.25 crore to the assessee's capital a/c was not routed through his books of accounts, but the same was made only in the financial statement/Schedule/on the face of balance sheet. 43. We, thus, in terms of our aforesaid observation are of the view that the aforesaid issue, i.e. as to whether or not the assessee's claim that the addition of Rs. 2 crores (supra) in his "capital a/c" (during the subject year) was made by transfers/adjustments through passing of entries in the relevant books of account of the proprietary concerns/divisions of the assessee and not through adjustments made in the Schedule/financial statement/on the face of balance sheet would require verification. 44. At this stage, we may her ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he owned 14.95 acres of agricultural lands at Village :Mahamara and Village: Ahivara and was engaged in agricultural activities, from which, he had derived income @ Rs. 92,000/- per acre. However, the A.O did not find favour with the aforesaid claim of the assessee. 47. During the course of the assessment proceedings, the assessee had filed before the A.O a "Chart" vide his reply dated 18.09.2014, wherein he had furnished details of difference in the agricultural income (as actually earned) vis-à-vis agricultural income (disclosed in the return of income) for the year under consideration i.e. A.Y.2012-13 and the immediately two preceding years aggregating to Rs. 27,10,790/-, as under: S.No A.Y. Agricultural income as per ITR Rs. Agricultural income as per reply Rs. Difference short fall Rs. 1. 2010-11 1,60,000/- 8,01,960/- 6,41,960/- 2. 2011-12 1,80,000/- 10,70,000/- 8,90,000/- 3. 2012-13 2,00,000/- 1,37,830/- 11,78,830/- Total 5,40,000/- 32,50,790/- 21,10,790/- The A.O observed that a perusal of the statement of affairs as on 31.02.2012 filed by the assessee revealed, viz. (i) shortfall relatable to agricultural income (for the subject year ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ffairs" that was filed before the A.O), had vide his reply dated 18.09.2014 filed in the course of the assessment proceedings offered an additional income of Rs. 54,15,250/-, viz. (i). the total of short fall of agriculture income: Rs. 27,10,790/-; and (ii). Other credits: Rs. 27,04,460/- for buying peace of mind. Thereafter, the assessee vide his another reply dated 07.11.2014, had revised his offer for additional income to Rs. 68,62,539/-. As observed by the A.O, the revised amount of the additional income that was offered by the assessee for tax comprised of, viz. (i). the total of short fall of agriculture income; and (ii). the higher of opening and closing balances of "Other Credits". Ostensibly, now when the assessee in absence of any plausible explanation had offered the total credits of Rs. 68,62,394/- (supra) appearing in his "books of account" as his undisclosed additional income, therefore, no infirmity can be attributed to the view taken by the A.O who had rightly made an addition of the same u/s. 68 of the Act. Our aforesaid view is fortified by the judgment of the Hon'ble High Court of Punjab & Haryana in the case of Banta Singh Kartar Singh Vs. CIT (1980) 125 ITR 239 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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