2003 (8) TMI 179 - AT - Income Tax

Summary

Issues Involved:
1. Legality of the ex parte assessment under section 144.
2. Application of section 68 regarding share capital and unsecured loans.
3. Adequacy of show-cause notice and opportunity of being heard.
4. Professional misconduct of the appellant's counsel.
5. Rectification of Tribunal's order under section 254(2).

Detailed Analysis:

1. Legality of the Ex Parte Assessment under Section 144:
The appellant contended that the ex parte assessment under section 144 was illegal due to non-compliance with notices under sections 142(1) and 143(2). The Tribunal found that the appellant failed to comply with the notices and did not produce the required documents or attend hearings. The Tribunal upheld the Assessing Officer's action, stating that the appellant's non-compliance justified the ex parte assessment.

2. Application of Section 68 Regarding Share Capital and Unsecured Loans:
The appellant argued that the share application money and unsecured loans should not be treated as income under section 68. The Tribunal referred to the decision in CIT v. Stellar Investment Ltd., which held that share application money cannot be considered as income. However, the Tribunal noted that the appellant, being a private limited company, failed to prove the identity, capacity, and genuineness of the transactions. Consequently, the Tribunal upheld the addition of Rs. 8,66,000 as share application money and Rs. 39,80,985 as unsecured loans under section 68.

3. Adequacy of Show-Cause Notice and Opportunity of Being Heard:
The appellant claimed that the Assessing Officer did not issue a proper show-cause notice before making the ex parte assessment. The Tribunal found that the notices under section 142(1) were duly issued and served, and there was no requirement for an additional show-cause notice under section 144. The Tribunal rejected the appellant's plea, stating that the Assessing Officer's action was in accordance with the law.

4. Professional Misconduct of the Appellant's Counsel:
The Tribunal found that the appellant's counsel, Mr. Santhanam, made false statements regarding the filing of documents before the Assessing Officer. The Tribunal held that Mr. Santhanam's conduct amounted to gross professional misconduct and administered a severe warning, hoping for responsible behavior in the future.

5. Rectification of Tribunal's Order under Section 254(2):
The appellant filed a miscellaneous petition under section 254(2) for rectification of the Tribunal's order, claiming several errors. The Tribunal found that ground Nos. 9 and 10 were not disposed of and that adverse comments against the appellant's counsel were not appropriate. However, the Tribunal held that the entire order could not be recalled, as it would amount to a review, which is not permissible under section 254(2). The Tribunal decided to rectify the mistakes without recalling the entire order.

Conclusion:
The Tribunal upheld the ex parte assessment under section 144 and the additions under section 68. It rejected the appellant's claims regarding the inadequacy of the show-cause notice and found the appellant's counsel guilty of professional misconduct. The Tribunal partially allowed the rectification petition, deciding to rectify specific mistakes without recalling the entire order.