DCIT Vs Laser Power & Infra Private Limited (ITAT Kolkata)
Summary: The Income Tax Appellate Tribunal, Kolkata, in DCIT Vs Laser Power & Infra Private Limited, decided a batch of Revenue appeals and assessee cross-objections relating to Assessment Years 2017-18 to 2022-23, along with a penalty appeal for Assessment Year 2019-20. The proceedings arose following a search under Section 132(1) and survey under Section 133A of the Income-tax Act, 1961, conducted on 15 March 2022. The principal disputes concerned unexplained unsecured loans under Section 68, disallowance of related interest expenditure, estimated contractual labour expenses, alleged unaccounted cash transactions and penalty under Section 271D.
Regarding the unsecured loans, the Assessing Officer treated borrowings aggregating to ₹5,17,00,000 from five companies as unexplained cash credits for Assessment Year 2017-18 and disallowed related interest expenditure of ₹32,33,151. The assessee submitted loan confirmations, audited financial statements, bank statements, ledger accounts and evidence of subsequent repayments to establish the identity of the creditors, their creditworthiness and genuineness of the transactions. The Tribunal observed that the Assessing Officer had not identified specific defects in the documentary evidence or established that the creditors lacked financial capacity. It also considered earlier Tribunal decisions arising from the same search material involving Dailmer Industries, Maxcab Industries and Lumino Industries. Accordingly, the Tribunal upheld the deletion of the disputed loan additions and consequential interest disallowance.
The Tribunal also examined estimated disallowances of ₹19,62,037 and ₹5,04,969 relating to contractual labour expenses. The assessee was engaged in manufacturing electrical cables and executing labour-intensive rural electrification contracts involving numerous contractors and workers. The Tribunal observed that the business activities and supporting records had been examined, while the Assessing Officer had neither identified specific defects in the expenditure claims nor rejected the books of account under Section 145(3). Consequently, the estimated disallowances were considered arbitrary and unsupported by sufficient evidence. The Tribunal upheld the relief granted by the Commissioner of Income Tax (Appeals), emphasising that expenditure additions must rest on identifiable discrepancies rather than general assumptions.
Concerning alleged cash loans and transactions inferred from third-party seized documents, the Tribunal found that the Revenue had failed to establish the necessary connection between the documents and the assessee through reliable corroborative evidence. The interpretation of certain recorded amounts as substantially larger cash transactions was not adequately substantiated. In the penalty proceedings, the Tribunal upheld deletion of the ₹4,00,00,000 penalty imposed under Section 271D for alleged contravention of Section 269SS, holding that the alleged acceptance of prohibited cash loans had not been established. The Tribunal accordingly dismissed the Revenue appeals and cross-objections, sustaining the appellate relief on the disputed additions and penalty.
