Case Law Details
ACIT Vs Smt B. Sujata Subudhi (ITAT Cuttack)
A perusal of the assessment order clearly shows that the provisions of section 145 (3) have not been invoked and the books of account of the assessee have not been rejected. This being so, admittedly, estimation of the assessee’s income is not permissible.
FULL TEXT OF THE ORDER OF ITAT CUTTACK
This is an appeal filed by the revenue against the order of the CIT(A) Cuttack dated 24.10.2019 in Appeal No.0613/2016 -17 for the assessment year 2014-15. The cross objection filed by the assessee is against the appeal filed by the revenue in ITA No.69/CTK/2020.
2. In the cross objection, the assessee has raised the issue that the appeal of the revenue is not maintainable in view of monetary limits prescribed by the CBDT for filing the appeals before the Tribunal.
3. Shri J.K.Lenka, ld Sr DR appeared on behalf of the assessee and Shri Braja Kishore Mohapatra, ld AR appeared on behalf of the assessee.
4. At the outset, ld AR of the assessee submitted that the appeal of the revenue is not maintainable on account of monetary limit. It was the further submission that though the appeal of the assessee did include the issue of penny stock, still there was no specific order for filing of the appeal in respect the assessee, therefore, the appeal was not maintainable in view of the Circular No. 23 of 2019 dated 6.9.2019.
5. In reply, ld Sr DR submitted that after circular 23 of 2019, the CBDT has issued an Office Memorandum dated 16.9.2019, wherein, it has been directed that where there is case of claim of bogus long term capital gain, the appeals are to be filed. It was the submission that in view of the above memorandum, the appeal is maintainable.
6. We have considered the rival submissions. As it is noticed that the CBDT has issued instruction dated 16.9.2019 in regard to filing of appeal in respect of cases, which involved alleged bogus long term capital gain, the appeal filed by the revenue is not hit by the circular No.23 of 2019 dated 6.9.2019.Therefore, the appeal filed by the revenue is heard on merits.
7. In Ground No.1 of appeal, the revenue has challenged the action of the ld CIT(A) in deleting the addition representing estimation of gross profit on account of non-availability of stock register.
8. It was the submission of ld Sr DR that the Assessing Officer, in the course of assessment proceedings, had called for stock register of the assessee, which was not produced. It was the submission that in the absence of stock register, the AO had made reasonable estimation of the gross profit in respect of various trades undertaken by the assessee. It was the submission that the ld CIT(A) had deleted the same. It was the submission that the order of the ld CIT(A) on this issue be reversed.
9. In reply, ld AR submitted that as the books of account of the assesseee have not been rejected, the estimation of gross profit is not permissible.
10. We have considered the rival submissions. A perusal of the assessment order clearly shows that the provisions of section 145 (3) have not been invoked and the books of account of the assessee have not been rejected. This being so, admittedly, estimation of the assessee’s income is not permissible. In these circumstances, we find no reason to interfere with the order of the ld CIT(A). Consequently, Ground No.1 of appeal of the revenue stands dismissed.
11. In respect of second Ground, it was submitted by ld Sr DR that the assessee had taken loan and had invested Rs.3,29,07,371/- in the assessee’s sister concern. It was the submission that as the assessee had invested in the shares of sister concern, the AO had estimated the disallowance u/s.14A of the Act. It was the submission that the ld CIT(A) had deleted the said addition on the ground that no exempt income has been earned by the assessee.
12. Ld AR submitted that the assessee has not made any investment in the shares of sister concern. The assessee has given loan in the formation of the sister concern. It was the submission that as the issue is not one of share application but one of the granting loan, the provisions of section 14A does not apply.
13. We have considered the rival submissions. Admittedly, the provisions of section 14A apply to a case where investments have been made and exempt income has been received by the assessee. In the present case, the assessee has not received any exempt income and consequently provisions of section 14A would not apply to the facts of the assessee’s case. We are also perturbed by the fact that the fact as brought on record by the AO is that the assessee has invested in the shares of the sister concern M/s. Ananta Automobiles Pvt Ltd., The balance sheet as on 31.3.2014 shows an investment in M/s. Ajanta Automobiles Pvt Ltd., of Rs.3.29 crores. Similarly, the balance sheet as on 31.3.2013 also shows such investments. The balance sheet is showing the investment and the assessee is claiming that it has only given the loan out of interest bearing funds to the sister concern and the AO is saying that it is actually investment in the shares of sister concern, therefore, this issue is restored to the file of the AO for verification and ascertainment of the actual fact whether this is actually an investment in the shares of sister concern by the assessee or whether it is actually loan given by the assessee out of its interest bearing funds to sister concern. In the event it is found that the investments are made in shares of sister concern and such investment has not earned any exempt income, then no disallowance u/s.14A of the Act is to be done. Consequently, Ground No.2 is partly allowed for statistical purposes.
14. Ld Sr DR submitted that Ground Nos.3 to 8 was against the action of the ld CIT(A) in deleting the addition representing the disallowance of exempt income claimed u/s.10(38) of the Act in respect of long term capital gain earned by the assessee on the purchase and sale of shares of M/s. Cressanda Solutions Limited. It was the submission that the ld CIT(A) had deleted the addition by simply relying upon various cases laws.
15. In reply, ld AR submitted that the assessee had purchased the shares through brokers and sale was done through brokers. It was the further submission that the so called alleged statement of various brokers which have been relied upon by the AO for making the disallowance of the assessee’s claim u/s.10(38) of the Act have not been given to the assessee for cross examination. It was the submission that the ld CIT(A) has considered all the facts including the fact that the Securities Transaction Tax (STT) has been paid by the assessee and then deleted the disallowance.
16. We have considered the rival submissions. A perusal of the facts of the present case clearly shows that the assessee has earned long term capital gain on the sale of shares of Cressanda Solutions Limited. The assessee has claimed exemption u/s.10(38) of the Act. The holding of shares is more than 12 months as required u/s.10(38) of the Act and STT has also been paid at the time of transfer of shares. Thus, all the requirements for the claim of exemption u/s.10(38) of the Act are fully met. It is also an accepted fact that the statement of the brokers on which the AO is relying has not been put to the assessee for his rebuttal. These being so, we find no error in the order of the ld CIT(A) and same stands concerned. Consequently, Ground Nos.3 to 8 of the revenue stand dismissed.
17. In the cross objection, the assessee has challenged the maintenance of the appeal filed by the revenue. As we have held that the appeal of the revenue is maintainable, the cross objection of the assessee stands dismissed.
18. In the result, appeal of the revenue is partly allowed for statistical purposes and cross objection of the assessee is dismissed.
Order dictated and pronounced in the open court on 14.6.2022.
