2019 (12) TMI 1550 - AT - Income Tax

Addition u/s 68 - addition in Share Capital only by making the reference of RBI Inspection report - whether CIT (A) not giving the proper opportunity to plead the case before it and by passing ex-parte order the order is not tenable as it is not based on natural ground realities and justice - HELD THAT - None was present from the assessee s side. In the absence of any representation from assessee s side at the time of hearing before us we heard the Ld. Sr. DR. Appellant is a cooperative bank and AO after obtaining statutory inspection of appellant from RBI examinee the share capital introduced in the appellant bank and after detailed enquiry and having confronted appellant made an addition as appellant failed to discharge requisite onus u/s 68 of the IT Act. Similarly an addition was made on account to failure to substantiate genuineness identity and creditworthiness of eight investors of share capital. Appellant failed to discharge the primary onus u/s 68. An addition appellant s claim regarding addition to share capital and incurrence of business expenses u/s 37 at assessment stage as well as during appellate stage. Thus the additions made by AO are upheld and accordingly appellant s grounds of appeal are dismissed We find that the Ld. CIT(A) has given detailed reasons for his decision on merits in the aforesaid impugned appellate order of Ld. CIT(A). During appellate proceedings in Income Tax Appellate Tribunalno material has been brought for our consideration to persuade us to take a view different from the view taken by the Ld. CIT(A) in the impugned ord er on merit. After hearing the Ld. Sr. DR and after perusal of materials on record and further in view of the foregoing discussion we decline to interfere with the aforesaid impugned appellate order of Ld. CIT(A); and dismiss this appeal of assessee.

Summary

Issues Involved:

1. Opportunity to Plead and Ex-parte Order
2. Adjournment Requests and Principles of Natural Justice
3. Addition of ?1,15,00,000/- under Section 68 of Income Tax Act, 1961
4. Addition of ?29,50,000/- under Section 68 of Income Tax Act, 1961
5. Disallowance of ?2,17,95,629/- under Section 37 of Income Tax Act, 1961

Issue-wise Detailed Analysis:

1. Opportunity to Plead and Ex-parte Order:
The assessee argued that the Commissioner of Income Tax (Appeals) [“Ld. CIT(A)”] erred by not providing a proper opportunity to plead the case and by passing an ex-parte order. The order was claimed to be untenable as it was not based on natural ground realities and justice. The Tribunal noted that despite multiple opportunities, the assessee did not appear for the hearings or provide adequate reasons for adjournment, leading the Ld. CIT(A) to pass an ex-parte order.

2. Adjournment Requests and Principles of Natural Justice:
The assessee contended that the Ld. CIT(A) failed to adjourn the hearing despite genuine requests on 28/03/2017 and 30/03/2017 due to the counsel being out of station. The Tribunal found that the assessee repeatedly sought adjournments without proper authorization or legitimate reasons. The Tribunal upheld the Ld. CIT(A)’s decision to proceed ex-parte, citing the lack of assistance and vague reasons for adjournment.

3. Addition of ?1,15,00,000/- under Section 68 of Income Tax Act, 1961:
The assessee challenged the addition of ?1,15,00,000/- in share capital based on the RBI Inspection Report, arguing that all evidence to prove creditworthiness was submitted and no queries were raised by the Assessing Officer (AO). The Tribunal noted that the AO made the addition after detailed inquiry and confrontation with the assessee, who failed to discharge the onus under Section 68. The Tribunal upheld the Ld. CIT(A)’s decision, finding no material to persuade a different view.

4. Addition of ?29,50,000/- under Section 68 of Income Tax Act, 1961:
The assessee also contested the addition of ?29,50,000/- in share capital made by three companies, stating that all evidence to prove creditworthiness was provided, and no queries were raised by the AO. The Tribunal observed that the AO made the addition due to the assessee’s failure to substantiate the genuineness, identity, and creditworthiness of the investors. The Tribunal upheld the Ld. CIT(A)’s decision, affirming the addition.

5. Disallowance of ?2,17,95,629/- under Section 37 of Income Tax Act, 1961:
The assessee argued against the disallowance of ?2,17,95,629/- for expenditure under Section 37, based on the RBI Inspection Report. The assessee maintained that the books of account were properly maintained and audited, and the AO did not reject them. The Tribunal found that the AO disallowed the expenditure due to the diversion of funds through bad loans, as highlighted in the RBI report. The Tribunal upheld the Ld. CIT(A)’s decision, finding no deficiencies in the AO’s assessment.

Conclusion:
The Tribunal dismissed the appeal filed by the assessee, upholding the Ld. CIT(A)’s order on all grounds. It emphasized that the assessee failed to provide sufficient material to challenge the Ld. CIT(A)’s detailed and reasoned decision. The Tribunal also clarified that the assessee could approach ITAT for restoration of the appeal in accordance with Rule 24 of the Income Tax (Appellate Tribunal) Rules, 1963.