Case Law Details
Bagla Agro Limited Vs DCIT (ITAT Kolkata)
The Income Tax Appellate Tribunal (ITAT), Kolkata bench, has allowed appeals filed by Bagla Agro Limited for the assessment years (AY) 2019-20 and 2021-22, deleting an addition made by the Assessing Officer (AO) and confirmed by the Commissioner of Income-tax (Appeals) [CIT(A)] regarding interest paid on a loan.
The case for AY 2021-22 involved an addition of ₹1,70,607 made by the AO. The AO had treated this amount, paid as interest on a loan from M/s Chordia Trade Credits Private Limited, as a bogus expenditure. The AO’s reasoning was based on information suggesting M/s Chordia Trade Credits Pvt. Ltd. was a shell company, included in a database by the Directorate of Income Tax (Investigation), Kolkata. Consequently, the interest payment was considered non-genuine and added back to the assessee’s income.
Bagla Agro Limited challenged this addition before the CIT(A). However, the CIT(A) upheld the AO’s order, stating that the AO had “rightly added the addition of non genuine business expenditure” and saw “no need to intervene” after examining the assessment order and the assessee’s submission.
Before the ITAT, the assessee contested the confirmation of this addition. The Tribunal reviewed the facts and found that the loan itself, from which the interest arose, had been taken by the assessee in earlier assessment years. Importantly, the ITAT noted that both the loan and the interest paid thereon had been accepted by the Revenue in those preceding assessment years.
The Tribunal also considered that a search action under Section 132(1) of the Income Tax Act was conducted on the assessee’s premises. However, the ITAT found that during this search, no incriminating material was seized by the tax authorities that related to or disputed the genuineness of this specific interest payment or the underlying loan.
Furthermore, the ITAT observed that the AO had not challenged or disputed the rate at which the interest was paid on the loan.
Taking these factors into account – the acceptance by the Revenue of the loan and interest in prior assessment years, the absence of any incriminating evidence found during the search regarding this item, and the fact that the interest rate itself was not questioned – the ITAT concluded that the Revenue could not validly dispute the same interest payment in the current assessment year (2021-22). The Tribunal held that since the loans, advances, and unsecured loans taken in the preceding assessment year had been accepted, the interest paid in connection with those loans, which was also accepted previously, could not be challenged in the current year.
Based on this reasoning, the ITAT deleted the addition of ₹1,70,607 made by the AO for AY 2021-22, thereby allowing the assessee’s appeal for that year.
For the assessment year 2019-20, the ITAT noted that the issue raised in the appeal was similar to the one addressed and decided for AY 2021-22. Accordingly, the Tribunal’s decision and reasoning for AY 2021-22 were applied mutatis mutandis (with necessary changes) to the appeal for AY 2019-20, and that appeal was also allowed.
Both appeals filed by Bagla Agro Limited were thus allowed by the ITAT.
It is worth noting that the appeals were filed with a delay of 174 days. The assessee explained that the CIT(A) orders were passed ex-parte, and they were unaware of these orders as no notice of hearing was received via email, which was the usual mode of communication. The dismissal of the appeals by the CIT(A) came to the assessee’s knowledge only while updating the list of pending appeals for finalizing accounts. Upon discovering this, they collected the documents and filed the appeals before the Tribunal. The ITAT considered these reasons, finding them to be sufficient and bonafide, and condoned the delay in filing the appeals before proceeding to decide the case on its merits.
While the ITAT’s order primarily relies on the factual consistency of the Revenue’s treatment of the loan and interest in prior years and the lack of contradictory evidence, the principle of consistency in tax matters, where the facts and circumstances remain unchanged, has been an aspect considered in various judicial pronouncements.
FULL TEXT OF THE ORDER OF ITAT KOLKATA
These are appeals preferred by the assessee against the orders of the Commissioner of Income-tax (Appeals), Kolkata-27 (hereinafter referred to as the “Ld. CIT(A)”] even dated 15.03.2024 for the AY 2019-20 & 2021-22.
2. At the outset, we note that there is delay of 174 days for which condonation petition along with affidavit was filed, explaining the reasons for delay. It was stated in the affidavit that the appellate orders passed ex-parte and unaware of the impugned ex-parte of the order as not received any notice of hearing vide email, which is general mode of communication. It was only come to notice while updating list of pending appeal for the purpose of finalization of accounts. It was only after the fact was noticed from the portal qua the assessee’s appeal having been dismissed, ex-parte and all the documents were accordingly collected and handed over to the counsel of the assessee and finally the appeal was filed with 174 days delays.
3. The ld. DR on the other hand strongly opposed the condonation of delay on the ground that the delay is not properly explained.
4. After hearing the rival contentions and perusing the materials available on record, we find that the reasons for delay appear to be sufficient and bonafide and accordingly, the delay is condoned.
2203/KOL/2024 for A.Y. 2021-22
5. The only issue raised by the assessee is against the order of ld. CIT (A) confirming the addition of ₹1,70,607/- as made by the ld. AO on account of interest on loan paid to M/s Chordia Trade Credits Private Limited.
6. The facts in brief are that the assessee filed the return of income u/s 139(1) of the Act on 04.02.2022, declaring total income of Nil and current liabilities of ₹1,73,512/-. A search action u/s 132(1) of the Act was conducted on assessee on 05.10.2021 and accordingly, notices were issued and served upon the assessee. During the course of assessment proceedings, the ld. AO has debited ₹1,70,607/- by way of interest which according to the ld. AO was bogus as the same was paid to a shell company M/s Chordia Trade Credits Pvt. ltd. as included in the data base by the DIT(Inv), Kolkata. Accordingly, the same was treated as non-genuine and added to the income of the assessee.
7. In the appellate proceedings, the ld. CIT (A) on his order dismissing the appeal of the assessee by observing and holding as under:-
“5.2. Discussion and decision:
5.2.1. I have perused the assessment order as well as the submission of the assessee. On examining the same, it is noticed that the Ao has rightly added the addition of non genuine business expenditure, hence there is no need to intervene in the AO’s orders. Hence the appeal is dismissed.
6. In the appeal Ground No. 2: In this ground, the assessee claimed that the AO was wrong in initiating penalty proceedings u/s 270A of the Act. Relevant portion of the assessment order is as follows:
6.1. Aggrieved by the decision laid down by the AO, the assessee contended that the AO was wrong in initiating penalty proceedings u/s 270A of the Act. Relevant portion of the assessee’s submission is as follows:”
8. After hearing the rival contentions and perusing the materials available on record, we find that assessee paid interest to a group of companies and M/s Chordia Trade Credits Pvt. ltd. We note that the assessee has taken loan so granted in the earlier assessment years, wherein the interest as well as the loan has been accepted by the Revenue. The ld. AO has not disputed the rate of interest at which the interest was provided. We also note that during the course of search proceeding, no incriminating material was seized qua this item. Therefore, considering these facts, we are not in a position to agree with the conclusion of ld. CIT (A) on this issue. Thereby, on the ground that the loans and advances and the unsecured loan taken in the preceding assessment year has been accepted and even the interest paid was not disputed in the earlier years, the same cannot be disputed during this year. Hence, we delete the addition as made by the ld. AO and the appeal of assessee is allowed.
2204/KOL/2024 for A.Y. 2019-20
9. The issue raised in this appeal is similar to one as decided by us in ITA No. 2203/KOL/2024. Accordingly, our decision would apply mutatis mutandis to this appeal of assessee in ITA No.2204/KOL/2024. Hence, the appeal of assessee in ITA No. 2204/KOL/2024 is allowed.
10. In the result, both the appeals of the assessee are allowed.
Order pronounced in the open court on 04.03.2025.
Author Bio
