2023 (8) TMI 36 - AT - Income Tax

Unexplained investment - Purchase of shares at premium - as per DR whole transaction is a pre-structured transaction and a colourable device used by the assessee only for the purpose of introducing a huge amount of undisclosed income of the assessee in the form of investments - HELD THAT - We find that the lower authorities have found the assessee to be not doing any business activity at its premises and have found the assessee to be showing no sales/receipts and only a meagre taxable income of Rs. 8000. AO found the assessee to be having very weak financials, which cannot lead to investment to an extent of Rs. 7,93,50,000 by any prudent businessman. Accordingly, the AO treated the assessee to be a shell company, which is used to launder money as reflected in the books of account. Assessee failed to substantiate the huge investment by purchasing shares at a premium of Rs. 10,000 per share having a face value of Rs. 100 of a loss-making company. Therefore, in the absence of any contradictory material being available on record to controvert the aforesaid findings recorded by the lower authorities, grounds raised in assessee s appeal are dismissed. Ex-parte order u/s 250 - non affording any opportunity of being heard in the matter which is against the principles of natural justice and hence the order passed be quashed - HELD THAT - As no material has been brought on record to justify non-compliance with the various notices of hearing issued by the CIT(A). Accordingly, we find no infirmity in the impugned order whereby the appeal filed by the assessee was decided on the basis of material available on record. As a result, ground no.1 raised in assessee s appeal is dismissed.

Summary

Issues involved:
The judgment involves challenging an order passed under section 250 of the Income Tax Act, 1961 for the assessment year 2011-12. The appellant raised grounds related to an ex-parte order, unexplained investments, unexplained cash credit, interest levied under sections 234B and 234C, and penalty proceedings under section 271(1)(c) of the Income Tax Act, 1961.

Ex-parte Order:
The appellant contended that the authorities erred in passing an ex-parte order under section 250 without affording any opportunity of being heard, contravening the principles of natural justice. The tribunal noted that despite various notices, the appellant failed to appear before the authorities or provide explanations, leading to the disposal of the appeal ex-parte. The tribunal found no justification for non-compliance with the hearing notices, upholding the decision based on the available record.

Unexplained Investments and Cash Credit:
The Assessing Officer (AO) initiated proceedings under section 147 based on information received regarding investments and share application money. The AO concluded that the appellant, a company, engaged in pre-structured transactions to introduce undisclosed income. The AO treated the investments and share application money as unexplained, adding them to the total income. Despite opportunities, the appellant failed to provide material to rebut the findings, leading the Commissioner of Income Tax (Appeals) to uphold the additions under sections 68 and 69 of the Act. The tribunal affirmed these findings due to the lack of contradictory evidence.

Interest and Penalty Proceedings:
The tribunal dismissed grounds related to the levy of interest under sections 234B and 234C, considering them consequential based on the upheld findings. Additionally, the tribunal deemed the initiation of penalty proceedings premature and dismissed them. The appeal by the appellant was ultimately dismissed, with the tribunal upholding the impugned order.

Conclusion:
The tribunal upheld the decision based on the material available on record, noting the appellant's failure to substantiate claims and provide necessary explanations. The judgment affirms the additions made by the authorities regarding unexplained investments and cash credit, while dismissing the appellant's contentions against the ex-parte order and other grounds raised in the appeal.