2022 (12) TMI 111 - AT - Income Tax

Revision u/s 263 - Addition u/s 68 - unexplained cash credits of share capital and share premium received - HELD THAT - Statutory notice u/s. 143(2) of the Act duly served upon the assessee and when the case of the assessee was selected for scrutiny, there was no proper compliance. The assessee failed to produce the alleged parties who had subscribed to the equity shares of the assessee company and did not file any documentary evidence to explain the alleged credit. Assessee was asked to explain the cash credits received by it during the year. Assessee failed to file necessary details to explain the source of alleged cash credit u/s. 68 and also unable to prove identity, creditworthiness of the cash creditors as well as genuineness of the transaction. The assessee company has miserably failed to explain the source of alleged cash credits. If the assessee had sufficient details to explain the alleged sum, it could have certainly filed those details at any stage. Consistently escaping from appearing/producing the documents and alleged parties before the ld. AO and the appellate authority(ld.CIT-A) indicates that the assessee has no plausible explanation to explain the source of alleged sum of share capital and security premium and, therefore, the provisions of section 68 have rightly been invoked by ld. AO treating the alleged sum as the unaccounted income of assessee, which seems to be routed in the books through bogus/accommodation entry in the form of share capital and security premium. Therefore, we find no infirmity in the finding of the ld. CIT(A) confirming the addition made u/s. 68 of the Act. This ground of assessee s appeal is dismissed. Disallowance made u/s. 14A - On perusal of order passed u/s.144 of the Act, we find that this addition/disallowance was correctly made as there was no submission/satisfactory explanation. We thus fail to find any infirmity in the findings of the ld. CIT(A). Therefore, we dismiss ground no. 3 raised by the assessee

Summary

Issues involved:
1. Ex parte order passed by the ld. CIT(A)
2. Addition of share capital and premium under Sec. 68 of the Income Tax Act
3. Disallowance under Sec. 14A read with Rule 8D
4. Levy of interest under Sec. 234B of the Income Tax Act

Issue 1: Ex parte order passed by the ld. CIT(A)

The appeal for the assessment year 2008-09 was directed against the order passed by the ld. Commissioner of Income-tax, Appeals (CIT(A)-19, Kolkata). Despite multiple opportunities, the assessee did not appear, leading to an ex parte adjudication of the appeal on merits with the assistance of the ld. DR. The ld. CIT(A) passed an ex parte order, citing the precedent of H.M Esufali H.M Abdulali (1973) 90 ITR 271 (SC), as the assessee failed to attend the hearings or submit any supporting documents, resulting in the dismissal of the appeal.

Issue 2: Addition of share capital and premium under Sec. 68 of the Income Tax Act

The assessee company, engaged in trading shares and securities, raised share capital of Rs. 11,12,00,000, including premium, which was challenged by the ld. CIT(A). The case was reopened under Sec. 148, and subsequent assessments raised demands. However, during the reassessment, the assessee failed to comply with the requests for necessary documentation and information to prove the genuineness of the share transactions. The ld. AO proceeded with best judgment assessment under Sec. 144, making additions for unexplained share capital and premium under Sec. 68. The Tribunal upheld the additions, noting the lack of compliance, explanation, and evidence from the assessee, leading to the invocation of Sec. 68 for treating the sums as unaccounted income.

Issue 3: Disallowance under Sec. 14A read with Rule 8D

The ld. CIT(A) confirmed the disallowance made under Sec. 14A read with Rule 8D, as the assessee failed to provide satisfactory explanations or submissions regarding the disallowance. The Tribunal found no infirmity in the ld. CIT(A)'s decision, dismissing the grounds raised by the assessee concerning the disallowance under Sec. 14A.

Issue 4: Levy of interest under Sec. 234B of the Income Tax Act

The levy of interest under Sec. 234B was considered consequential and academic in nature, requiring no adjudication by the Tribunal. The general nature of the fifth ground raised by the assessee also did not warrant adjudication. Consequently, the appeal of the assessee was dismissed by the Tribunal, upholding the decisions of the lower authorities regarding the additions and disallowances made under the Income Tax Act.