TaxTMI 
TaxTMI 
2022 (4) TMI 958
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....s and conclusions for A.Y. 2003-04 shall also apply to the A.Y. 2004-05 as well. ITA No. 1030/Ahd/2013 A.Y 2003-04 3. The assessee has raised following grounds of appeal:- "1. The ld. CIT(A) has erred in law and on the facts of the case in confirming the action of ld. AO in framing and passing the assessment order u/s. 144 of the Act as valid and appropriate action. 2. The ld. CIT(A) has erred in law and on the facts of the case in confirming the action of ld. AO in disallowing entire business expenditure of Rs. 5,82,162/- after holding that no business was carried out by the Appellant during the year under consideration. 3. The ld. CIT(A) has erred in law and on the facts of the case in confirming the action of ld. AO in treating interest income of Rs. 6,98,780/- as income from other sources and adding the same to total income of the Appellant. 4. Alternatively and without prejudice to above, both the lower authorities ought to have allowed deduction of expenditure amounting to Rs. 5,82,162/- u/s. 57 of the Act, against the interest income of Rs. 6,98,780/- treated as income from other sources, which has been laid out or expended wholly an....
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....best judgment assessment order u/s. 144 of the Act on the basis of material available on record. The ld. CIT(A) observed that the assessee has earned interest income of Rs. 6,98,780/- which has been shown as 'business income', whereas it should have been considered as 'income from other sources'. Against the above interest income, the assessee had debited various expenses on account of depreciation, donation, insurance expenses and loan interest amounting to Rs. 5,82,162/-. The ld. Assessing Officer held that in absence of any explanation, the assessee did not conduct any business and the assessee has earned only 'interest income' which is considered as 'income from other sources'. Since the expenses claimed are not allowable against any income other than 'income from business or profession', therefore, the above expenses were disallowed and added to the total income. On verification of balance sheet, the ld. Assessing Officer observed that a total of Rs. 94,41,503/- have been shown under the head "loans". The assessee was asked to furnish names, addresses, PAN, copies of accounts with confirmations of these depositors. But since the assessee....
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....similar indirect income. There is no consistency of treatment of income by the assessee. The ld. CIT(A) further noted that no evidences were filed by assessee that he is engaged in the business of providing need based finance. Even the earning of brokerage is a non-recurring activity. Therefore, the ld. CIT(A) held that the assessee did not earn business income. On the alternate argument that payment of interest be given to the assessee if the income is assessed under the head "income from other sources", in absence of evidence that such borrowing is directly linked with such loan advances, such deduction cannot be allowed u/s. 57 of the Act. The ld. CIT(A) observed that the assessee did not produce books of accounts or any details to establish the nexus between borrowed fund to such loans and advances. Accordingly, the ld. CIT(A) dismissed this ground of the assessee. 5.1. Regarding the addition of Rs. 94,41,503/- u/s. 68 of the Act, the ld. CIT(A) gave part relief to the assessee and confirmed addition in respect of Rs. 5 lakhs from M/s. Radhe Shyam Investment Corporation on the ground that no PAN or present address of the party was furnished and hence the appellant had not di....
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....in absence of any evidence from the appellant's side that such borrowing is directly linked with granting of such loan and advances and not for other personal expenditure of purchase of flat, car or other assets, deduction of such amount cannot be allowed u/s. 57 of the Act. 7. We have heard arguments of both the parties and perused the material on record. Ground No. 1 of the assessee's appeal regarding the action of the ld. Assessing Officer in framing assessment order u/s. 144 of the Act. The ld. counsel for the assessee did not specifically press for the same and even otherwise from perusal of material on record despite several opportunities being granted, since the assessee did not cause appearance, we are of the view that ld. CIT(A) has not erred in law and on facts of the case in confirming the action of the ld. Assessing Officer in framing and passing assessment order u/s. 144 of the Act. Ground Nos. 2 to 4 which is in relation to treating the interest income of Rs. 6,98,780/- as 'income from other sources' and consequentially disallowing business expenditure of Rs. 5,82,162/- after holding that no business was carried out by the appellant during the year ....
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.... under the head 'Income from other sources', I am inclined with the contention of the appellant that if there is no business activity these earning of interest can be linked with payment of interest on borrowed fund and deduction of such interest is allowable but in the absence of evidences from the appellant that such borrowing is directly linked with such loan advances and not for other personal expenditure of purchase of flats, car or other asset, such deduction can be allowed u/s. 57 of the Act. The appellant submitted profit & loss account and balance sheet only reflecting various asset, sundry creditor & debtor but not produced books of account pr my details to establish the nexus between borrowed fund to such loan & advances. It is therefore such alternative ground cannot be accepted. In totality this ground is dismissed." From the above observations of ld. CIT(A) for A.Y. 2004-05 and from the material on record, it can be concluded that no evidence has been filed by the assessee in support of its claim that it was engaged in the business of providing need based finance. The assessee either during the course of assessment or at appeal stage did not produc....
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....tity of the creditor itself has not been established. The Supreme Court of India in the case of C.V Ravi v. ITO [2021] 129 taxmann.com 44 (SC) dismissed the SLP against High Court ruling that where assessee took loan from an entity, however, failed to produce any confirmation from such entity or produce its owner in person for cross-examination and also failed to produce any document to establish identity of such creditor or genuineness of alleged loan transaction, impugned addition made under section 68 in respect of such loan amount was justified. In the result, we are of the view that ld. CIT(A) has not erred in law and on facts of the case in sustaining addition made by the ld. CIT(A) to the extent of Rs. 5 lakhs u/s. 68 of the Act. 10. In the result, the ground no. 5 of the assessee is dismissed. 11. Regarding Ground No. 6 in respect of addition of Rs. 1,09,200/- u/s. 22 of the act as noted in the preceding paragraphs, the ld. counsel for the assessee has already submitted before us that the Department has already granted 30% standard deduction u/s. 24 of the Act and he has nothing further to submit in the matter. Therefore ground no. 6 of the assessee hereby is dismisse....
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....hat the assessee is an individual earning interest income in the profit and loss account enclosed with the return of income. The assessee has shown interest receipts of Rs. 6,58,498/- and other income of Rs. 90,346/-. The assessee, in the statement of income, treated the above income as 'income from business' and after claiming expenses against the same, the net profit worked out at Rs. 1,50,227/-. During the course of assessment, the ld. Assessing Officer asked the assessee to provide details of one party namely, Shriram Lakhan Sharma from whom the assessee had accepted Rs. 2,80,000/- in cash but the assessee neither provided the PAN No. of such party and nor the address details. In absence thereof, the ld. Assessing Officer added an amount of Rs. 2,80,000/- as unexplained cash credit u/s. 68 of the Act. During the course of assessment, the ld. Assessing Officer noted that the assessee had debited expenses amounting to Rs. 5,98,616/- against interest receipt of Rs. 6,58,498/- and other receipts of Rs. 90,346/- by treating the above said as its business income but from the records available the assessee had not carried out any business activity. The ld. Assessing Officer ac....
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....ance in the capacity of 'shroff or 'Non banking financing Agent' No evidences in this regard were filed by appellant that his business was to provide need based finance.' The, appellant was director of a company and involved in real estate dealing on commission basis. In the absence of any evidences on record to show that appellant devoted regular time and his interest to earn interest income as basic requirement, it cannot' he held that appellant has taken any risk in such continuous activity of providing finance and therefore the same is business activity. Even the earning of brokerage is also a non recurring activity. It is therefore, 1 am not inclined with the contention of the appellant that expenditure so disallowed by A.O. being there no business activity, the same be allowed since there is 'Lull in business' or 'out of business'. The all important aspect of disallowance is non production of books of accounts, bills, vouchers etc. for such claim being genuine. Even in appeal proceeding no such bills, vouchers, were produced. It is in this regard, the A.O. in the final para of computing income has not treated interest of Rs. 658498 as incom....
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....itworthiness of the party. The Supreme Court of India in the case of C.V Ravi v. ITO [2021] 129 taxmann.com 44 (SC) dismissed the SLP against High Court ruling that where assessee took loan from an entity, however, failed to produce any confirmation from such entity or produce its owner in person for cross-examination and also failed to produce any document to establish identity of such creditor or genuineness of alleged loan transaction, impugned addition made under section 68 in respect of such loan amount was justified. In absence of the details of parties like PAN or address etc. being furnished by the assessee, we are of the view that the burden u/s. 68 of the Act has not been discharged by the assessee and we therefore uphold the addition sustained by the ld. CIT(A). 23. In the result, the ground no. 2 of the assessee is dismissed. 24. Regarding ground no. 3 in respect of disallowance of entire business expenditure of Rs. 5,98,616/- after holding that no business was carried out by the assessee during the year under consideration, since the facts are similar to the facts immediately preceding assessment year 2003-04, the observations made by us for A.Y. 2003-04 would eq....
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....ction of AO in initiating and levying penalty under section 271(1)(c) of the Act without recording mandatory satisfaction as contemplated under the Act at the time of framing the assessment order. 5. Both the lower authorities have passed the orders without properly appreciating the fact and that they further erred in grossly ignoring various submissions, explanations and information submitted by the appellant from time to time which ought to have been considered before passing the impugned order. This action of the lower authorities is in clear breach of law and Principles of Natural Justice and therefore deserves to be quashed. The appellant craves leave to add, amend, alter, edit, delete, modify or change all or any of the grounds of appeal at the time of or before the hearing of the appeal." 32. The brief facts of the case have been mentioned in ITA No. 1030/Ahd/2013 A.Y. 2003-04 and hence the same are not reiterated again for the sake of brevity. At the time of assessment order, the ld. Assessing Officer initiated penalty proceedings u/s. 271(1)(c) of the Act and notice was issued to the assessee on 27-03-2006 but assessee failed to comply and hence anothe....
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....hat Assessing Officer has erroneously concluded that no business activity has been carried out by the assessee and consequentially treated such interest income as income from other sources. The ld. counsel for the assessee submitted that Assessing Officer simply changed head of income under which income shall be taxed i.e. "income from other sources" as against "business income". Therefore, the assessee has neither consequentially concealed any income nor furnished inaccurate particulars of income. The assessee placed reliance on the case of Reliance Petro-products Ltd. 322 ITR 158 (SC). Regarding penalty of business expenditure of Rs. 5,82,162/-, the ld. counsel submitted that Assessing Officer has not found any fault with the genuineness of such expenses and therefore under such circumstances no penalty can be levied u/s. 271(1)(c) of the Act. Regarding penalty on account of addition of Rs. 5 lakhs u/s. 68 of the Act, the ld. counsel for the assessee submitted that initially onus was already discharged by assessee on production of ledger account of party and therefore there is no cause for confirmation of penalty on account of this addition. Regarding the penalty in respect of ad....
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.... the initial onus cast upon him. From the above facts of the case, we are of the view that the ld. CIT(A) has not erred in law and on facts in confirming the penalty levied u/s. 271(1)(c) by the Assessing Officer. We shall now take up individual grounds raised by the assessee. 36. Ground No. 1 of the assessee's appeal, which is to the effect that Ld. CIT(A) has erred in upholding levy of penalty u/s. 271(1)(c) of the Act is being dismissed for reasons cited above. 37. In the result Ground No. 1 of the assessee's appeal is dismissed. 38. Ground No. 2 of the assessee's appeal, which is to the effect that penalty order passed by Ld. CIT(A) is barred by limitation is being dismissed since assessee has himself has filed appeal against penalty order passed by Ld. AO after a substantial delay of 1492 days (which was subsequently condoned by Ld. CIT(A) in his order). The assessee himself has not availed legal remedy available to it within stipulated time frame and hence now cannot take a plea that Ld. CIT(A) has not passed order within reasonable time, when such delay in passing of order was occasioned by the assessee. 39. In the result Ground No. 2 of the assess....
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....eal." 46. The brief facts of the case have been mentioned in ITA No. 1032/Ahd/2013 A.Y. 2004-05 and hence the same are not reiterated again for the sake of brevity. At the time of assessment order, the ld. Assessing Officer initiated penalty proceedings u/s. 271(1)(c) of the Act and notice was issued to the assessee on 12/12/2006 but assessee failed to comply and hence another show cause notice dated 31/05/2007 was issued. The assessee again did not comply with the aforesaid notice and accordingly the ld. Assessing Officer passed minimum penalty u/s. 271(1)(c) of the Act at 100% of concealed income which worked out to Rs. 3,29,529/-. The assessee filed appeal against the order of penalty passed by ld. Assessing Officer. 47. In appeal, the ld. CIT(A) observed that on perusal of records of appellant from A.Y. 2003-04 to A.Y. 2006-07, the appellant has inconsistently taken up the income assessable income from other sources as business income to claim deduction of various expenditure which are otherwise not allowable. Against such head he held that despite being good receipts, the appellant through his dubious and deliberated method has not paid any tax from A.Y. 2003-04 to A.Y. ....
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....hs u/s. 68 of the Act, the ld. counsel for the assessee submitted that initially onus was already discharged by assessee and therefore there is no cause for confirmation of penalty on account of this addition. Regarding the penalty in respect of penalty of addition of Rs. 1,09,200/- in respect of annual value of property, the ld. counsel for the assessee submitted that such addition has been made with respect to notional income estimated by Assessing Officer. No such income has been actually earned by the assessee and therefore when there is no real income, then, even if addition is confirmed in quantum proceedings then no case is made out for penalty u/s. 271(1)(c). The ld. counsel for the assessee cited various case laws in support of his contention that mere fact addition has been confirmed in quantum proceedings does not straightway result penalty u/s. 271(1)(c) of the Act. He further submitted that it is a settled law that once any assessee offers plausible explanation, substantiated the same with documentary evidence and such explanation is not found to be false by Department then even if such explanation is not acceptable to the Department then also the penalty u/s. 271(1)(c....
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....order within reasonable time, when such delay in passing of order was occasioned by the assessee. 53. In the result Ground No. 2 of the assessee's appeal is dismissed. 54. Ground Nos. 3 and 5 of the assessee's appeal are general in nature and do not require any specific adjudication. 55. In the result Ground No. 3 and 5 of the assessee's appeal is dismissed. 56. Ground No. 4 of the assessee's appeal that Ld. AO did not record mandatory satisfaction for initiating penalty proceedings u/s. 271(1)(c) of the Act, is factually incorrect and hence being dismissed. Such satisfactions forms part of the assessment order. 57. In the result Ground No. 4 of the assessee's appeal is dismissed. 58. In the result, the appeal of the assessee is dismissed. ITA 2771/Ahd/2013 and ITA 2772/Ahd/2013 59. Both these appeals have been filed against the common order of ld. CIT(A)-XV Ahmedabad dated 24-09-2013 u/s. 271D and section 271E of the Act. Since both the appeals are emanating out of the same order, both are being taken up together. ITA 2771/Ahd/2013: 60. The assessee has taken up the following grounds of appeal:- "1. The ld. CIT(A) has erre....
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....IT(A) ought to have appreciated that powers as envisaged u/s. 251 of the Act would ceases to be operational once the appellate order has already been passed. 5. Ld. CIT(A) has accordingly erred in law in passing the order on 24/09/2013 by invoking provisions of S. 251 of the Act to impose penalty u/s. 271E of the Act after the appellate order has already been passed by him on 28/01/2013 and no appeal was pending before him while imposing penalty. 6. The ld. CIT(A) has further erred in law in imposing penalty for the year under consideration after a gap of almost 10 years, which is beyond the reasonable period of time to pass any order. 7. Alternatively and without prejudice to above raised grounds, the ld. CIT(A) has erred in law in not appreciating that there was a reasonable cause for alleged breach of provisions of S. 269T of the Act, and therefore, in view of provisions of S. 273B of the Act no penalty could have been levied by him. The appellant craves leave to add, amend, alter, edit, delete, modify or change all or any of the grounds of appeal at the time of or before the hearing of the appeal." 62. The brief facts of the case are that ....
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....B of the Act for not levying penalty u/s. 271D and 271E of the Act. The assessee submitted that since the assessee has already deceased, his legal heir is not in a position to explain the business expediency of such transactions. 63. The ld. CIT(A) disposed of the observations by observing that there is an admitted infringement related to section 269SS and section 269T of the Act. So far as the question of time tag of 10 years is concerned, the ld. CIT(A) held that this is occasioned by the fact that the legal heir of the assessee himself filed the appeal after delay of 1600 days with a condonation of delay application. In the assessment order u/s. 143(3) of the Act dated 27-03-2016 for the captioned year, various opportunities were provided to the assessee, who was alive at that time did not attend the proceedings nor responded to notices thereby leading to ex-parte assessment order being passed u/s. 144 of the Act. The assessee expired on 06-02-2008 and legal heir Shri Pawan Sharma filed an appeal with condonation of delay of 1600 days. Importantly, PAN, confirmation, address of all such parties from whom cash was accepted and repaid were filed by the legal heir and therefore ....
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....gislature intended to extend powers of levying penalty to CIT(A), it has been specifically provided in the respective sections viz. 270A, 271(1), 271A, 271AA, 271G and 271J. Further, as per plain language of the statute, only Joint Commissioner can levy penalty u/s. 271BB, 271CA, 271D, 271E and 271DB. Thus, when the legislature has consciously not empowered CIT(A) to levy penalty u/s. 271D/271E, ld. CIT(A) cannot levy such penalty. As regards, CIT(A)'s observations that the ld. CIT(A) being a statutory officer and exercises power of JCIT (i.e. a subordinate officer), the assessee submitted that it is a settled legal position that there is no statutory provision under which a power to be exercised by officer can be exercised by a superior officer. The assessee placed reliance on several cases in support of the aforesaid legal proposition. The ld. counsel for the assessee further submitted that while disposing of an appeal against order of assessment, ld. CIT(A) would not have initiated penalty proceedings u/s. 271D and section 271E. Section 251 of the Act provides for power of CIT(A) in disposing of an appeal. Once the appeal before CIT(A) has been disposed off, no further actio....
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....0 ITR 137, held that when the literal meaning is clear, one need not bother any more for the intention or the purpose. The five Judges Constitutional Bench of the Supreme Court in the case of Padmasundara Rao v. State of Tami Nadu [2002] 255 ITR 147 while discussing the period of limitation for declaration, the court reaffirmed the literal rule and held that the language of section 6 of the Land Acquisition Act, 1984, is plain and unambiguous; there is no scope for reading something into it. It may be useful to refer to the Ahmedabad special bench Tribunal decision in the case of AMP Spg. & Wvg. Mills (P.) Ltd. v ITO [2006] 100 ITD 142 (Ahmedabad - ITAT) (SB), where is the Tribunal observed as under: 12. Therefore, one of the pillars of statutory interpretation, viz., the literal rule, demands that if the meaning of the statutory interpretation is plain, the Courts must apply the same regardless of the result. The very concept of interpretation connotes the introduction of elements as are necessarily extrinsic to the words in the statute. Though the words 'interpretation' and 'construction' are used interchangeably, the idea is somewhat different. The rule ....