2014 (11) TMI 96 - AT - Income Tax

Condonation of appeal Delay of 638 days Held that - Except for a bald submission, there is nothing on record to substantiate that the earlier counsel did not properly guide the assessee - The theory of mistake of counsel propounded by the assessee is absolutely without any foundation - The assertion so made in the application for condonation of delay is a mere self serving statement - The further argument that the appellant was ignorant of the legal provisions also does not stand in view of the fact that it is a private limited company regularly filing returns of income - there is no substance in the plea for condonation of delay which is to the extent of one year and 318 days - Cross objection filed by the assessee is dismissed as barred by time. There should be some ground decided or some ground taken up before the CIT(A) which would have remained undisposed off - The natural corollary which follows is that the assessee must have raised a particular ground before the CIT(A) which should have been either been decided against it or had remained undecided - unless there is a specific ground raised before the CIT(A), there can be no question of taking recourse to the Rule 27. No material has been placed on record to demonstrate that the validity of search was challenged before the ld. CIT(A) on all the issues now sought to be taken up - The reason for the no discussion of such issues in the order is that these were not at all raised before the CIT(A) - If such issues had actually been raised before the CIT(A), then the least to be expected of the assessee was the moving of a rectification application u/s 154 pointing out his failure in dealing with such issues - the assessee s application under Rule 27 of the ITAT Rules, 1963 is not maintainable because there is no adverse decision of the CIT(A) on the issues which are now sought to be raised through the application. Deletion of unconfirmed, unexplained and unverified share capital in the books of the assessee Held that - The assessee did not furnish complete details during the course of assessment proceedings in support of the genuineness of the share applicants - When the assessee furnished documentary evidence before the CIT(A) in support of the genuineness of the credits, the AO in remand proceedings ventured to conduct inquiries from the six companies who the assessee claimed to have given share application money to it - the assessee failed to prove the very first ingredient of sec. 68, being the identity of the creditors - The addresses of these corporate entities turned out to be fake or not available - the AO conducted due and proper inquiry which transpired that these six companies were non-existent and further the assessee took no steps to prove the existence of such companies thus, the order of the CIT(A) is set aside Decided in favour of revenue.

Summary

Issues Involved:
1. Condonation of delay in filing the Cross Objection (CO) by the assessee.
2. Application under Rule 27 of the ITAT Rules, 1963.
3. Deletion of addition of Rs. 50,00,000/- made by the Assessing Officer (AO) on account of unconfirmed, unexplained, and unverified share capital.

Issue-wise Detailed Analysis:

1. Condonation of Delay in Filing the Cross Objection (CO):
The assessee's CO was time-barred by 683 days. The assessee pleaded for condonation of delay, arguing that the delay was due to the previous counsel's incorrect advice and the assessee's lack of awareness of the technicalities of the Income-tax provisions. However, the Tribunal noted that no affidavit from the previous counsel was provided to substantiate this claim. The Tribunal referred to the binding judgment of the Hon'ble jurisdictional High Court in Surendra Boveja Vs CWT (2006) 287 ITR 52 (Delhi), which held that want of due care, ignorance of law, or failure to seek legal advice are not sufficient grounds for condonation of delay. Consequently, the Tribunal found no substance in the plea for condonation of delay and dismissed the CO as barred by time.

2. Application under Rule 27 of the ITAT Rules, 1963:
The assessee sought to support the CIT(A)'s order by challenging the validity of the assessment order under Rule 27 of the ITAT Rules, 1963. The Tribunal explained that Rule 27 allows the respondent to support the order appealed against on any ground decided against them. The assessee argued that the assessment order should be quashed because the search warrant was in a joint name, no incriminating material was found during the search, and the original assessment for the assessment year 2002-03 was already made u/s 143(3). However, the Tribunal noted that there was no adverse finding by the CIT(A) on these issues. The ground raised before the CIT(A) was a general one without specific limbs challenging the validity of the assessment order. Since these issues were not raised before the CIT(A), the Tribunal held that the application under Rule 27 was not maintainable.

3. Deletion of Addition of Rs. 50,00,000/-:
The AO made an addition of Rs. 50,00,000/- treating it as unexplained cash credit due to the assessee's failure to furnish complete details of share application money received from six corporate entities. During the appellate proceedings, the assessee provided details and supporting evidence, which were sent to the AO for a remand report. The AO reported that summons sent to the six entities were unresponded, and inquiries revealed that five companies did not exist at the given addresses, and the address of the sixth company was incomplete.

The Tribunal noted that the assessee failed to prove the identity of the creditors, as the addresses turned out to be fake or unavailable. The Tribunal referred to the Hon'ble Jurisdictional High Court's decisions in CIT Vs Nova Promoters and Finlease (P) Ltd. (2012) 342 ITR 169 (Delhi) and CIT Vs Empire Builtech Pvt. Ltd. (2014) 366 ITR 110 (Delhi), which upheld additions u/s 68 when the AO proved that the share applicants were non-existent. The Tribunal distinguished between cases where the AO conducted proper inquiry and proved non-existence of entities, and cases where the AO made additions based on information without inquiry. In this case, the AO conducted due inquiry and proved the non-existence of the companies. Therefore, the Tribunal set aside the CIT(A)'s order and restored the addition of Rs. 50,00,000/- made by the AO.

Conclusion:
The appeal by the Revenue was allowed, and the CO filed by the assessee was dismissed. The Tribunal pronounced the order in the open Court on 30/9/2014.