SHANAYAA INDUSTRIES PRIVATE LIMITED,PANVEL vs. INCOME TAX OFFICER, PANVEL

Since the assessee remained absent Ld. CIT(A)/NFAC dismissed the appeal & confirmed the additions made by the Assessing Officer.

5. Ld. DR appearing from the side of the Revenue relied on the orders passed by subordinate authorities & requested to confirm the same.

“xii. In view of the proviso to section 68, it is concluded that the assesse is under statutory obligation to prove the genuineness of the source of capital introduction i.e. the identity and creditworthiness of the subscriber needs to be proved and authenticity of the transaction involving subscription of capital introduction. However, in the instant case, the assesse has failed through and through to prove the identity, genuineness and creditworthiness of the persons/entities who subscribed to its shares and contributed in the capital. Failure to prove identity, authenticity and genuineness and creditworthiness of share subscribers on the part of assesse invite application of section 68 of the Act. Therefore, amount of Rs. 10,00,000/- is considered as unexplained cash credit of the assesseu/s 68 r.w.s. 115BBE of the Act and added to the total income of the assesse for the A.Y. 2022-23. [Addition:Rs.10,00,000/-] xiii. Penalty proceedings u/s 271AAC of the Income Tax Act are being initiated separately for A.Y. 2022-23 as per variation/addition to total income as mentioned in para 4.6(xii) above. xiv. The assesse had declared and claimed an amount of Rs. 23,26,666/- under the head “Long-term loans and advances - Loans and advances to related parties” in its ITR filed for A.Y. 2022-23. Vide notice u/s 142(1) dated 01.08.2023, 23.08.2023, 07.12.2023, 22.12.2023 and 29.12.2023, the assesse was specifically requested to establish existence and nature and quantum of its claim of Long Term Loans and advances extended to related entities during the year under consideration. The assesse was also requested to provide documentary evidence of existence of debtors during the year under consideration. Basic details such as name, address, PAN, agreement if any with debtors, etc were requested. However, the assesse has merely filed name and ledger of Mr. Arshad Khan to whom loan was extended during the year. The assesse has neither furnished copy of loan agreement nor provided any details regarding date and mode of loan disbursal. Also, the assesse failed to provide any justification on creditworthiness of the lendee entity. The assesse has merely filed ITR declaring Long term loans and advances amounting to Rs. 23,26,666/. The assesse has failed to establish creditworthiness of these debtor entities and genuineness of these loan transactions claimed by it in its ITR. xv. From the definition itself, it becomes amply clear that loans and advances given are an asset for an entity. However, the source and genuineness of such loan/advance extended and creditworthiness of the entity to whom loan is extended needs to be proved beyond doubt. The assesse has, in spite of being requested repeatedly vide notices u/s 142(1), failed to prove the genuineness of loans/advances extended to ITR. Failure to prove authenticity and genuineness of loans and advances claimed in the ITR on the part of assesse invite application of section 69A of the Act. The same is reproduced as under: “[69A. Unexplained money, etc.—Where in any financial year the assessee is found to be the owner of any money, bullion, jewellery or other valuable article and such money, bullion, jewellery or valuable article is not recorded in the books of account, if any, maintained by him for any source of income, and the assessee offers no explanation about the nature and source of acquisition of the money, bullion, jewellery or other valuable article, or the explanation offered by him is not, in the opinion of the [Assessing Officer], satisfactory, the money and the value of the bullion, jewellery or other valuable article may be deemed to be the income of the assessee for such financial year.]” xvi. Further, the assesse has not provided the genuineness of loan and advance given to related entities and creditworthiness of these related entities. Therefore, amount of Rs. 23,26,666/- is considered as unexplained money of the assesseeu/s 69A r.w.s 115BBE of the Act and added to the total income of the assesse for the A.Y. 2022-23. [Addition:Rs.23,26,666/-] xvii. Penalty proceedings u/s 271AAC of the Income Tax Act are being initiated separately for A.Y. 2022-23 as per variation/addition to total income as mentioned in para 4.6(xvi) above. xviii. The assesse had declared and claimed an amount of Rs. 16,88,149/- under the head “Trade Receivables” in its ITR filed for A.Y. 2022-23. Vide notice u/s 142(1) dated 01.08.2023, 23.08.2023, 07.12.2023, 22.12.2023 and 29.12.2023, the assesse was specifically requested to explain the nature and source of these trade receivables amounting to Rs. 16,88,149/-.However, the assesse neither furnished any details regarding trade receivables claimed nor provided any documentary evidence in support of its claim regarding trade receivables. The assesse has merely filed ITR declaring trade receivables amounting to Rs. 16,88,149/-. The assesse has failed to establish genuineness and authenticity of trade receivables amounting to Rs. 16,88,149/-. xix. Since, the trade receivables are part of sales which could not be received during the previous year, they are an integral part of the sales/turnover of the assesse for the year under consideration. However, it is the onus of the assesse to prove genuineness and authenticity of such sales which remained unpaid or is yet to be received. In the instant case, the assesse has remained silent on this issue despite being repeatedly requested to explain the amount claimed as trade receivable and prove the genuineness of pendency of sales consideration. Also, the assesse has not disclosed the identity of the entities from whom such sales consideration remained pending during the previous year. Due to failure on the part of the assesse, the genuineness and authenticity of the claim of trade receivables amounting to Rs. 16,88,149/- remained unexplained and unverified. xx. In such scenario, the provisions of section 69A are attracted: “[69A. Unexplained money, etc.—Where in any financial year the assessee is found to be the owner of any money, bullion, jewellery or other valuable article and such money, bullion, jewellery or valuable article is not recorded in the books of account, if any, maintained by him for any source of income, and the assessee offers no explanation about the nature and source of acquisition of the money, bullion, jewellery or other valuable article, or the explanation offered by him is not, in the opinion of the [Assessing Officer], satisfactory, the money and the value of the bullion, jewellery or other valuable article may be deemed to be the income of the assessee for such financial year.]” xxi. The assesse had declared and claimed trade receivables amounting to Rs. 16,88,149/- in its ITR filed for A.Y. 2022-23. Further, the assesse has not provided the identity of the entities nor proved genuinenessofsuchclaim.Therefore,amountofRs.16,88,149/-is considered as unexplained money of the assesse u/s 69A r.w.s. 115BBE of the Act and added to the total income of the assesse for the A.Y.2022-23. [Addition:Rs.16,88,149/-] xxii. Penalty proceedings u/s 271AAC of the Income Tax Act are being initiated separately for A.Y. 2022-23 as per variation/addition to total income as mentioned in para 4.6(xxi) above. xxiii. The assesse had declared and claimed an amount of Rs. 5,01,525/- under the head “Short-term loans and advances” in its ITR filed for A.Y. 2022-23. Vide notice u/s 142(1) dated 01.08.2023, 23.08.2023, 07.12.2023, 22.12.2023 and 29.12.2023, the assesse was specifically requested to establish existence and nature and quantum of its claim of Short Term Loans and advances extended to various entities during the year under consideration. The assesse was also requested to provide documentary evidence of existence of debtors during the year under consideration. Basic details such as name, PAN, agreement if any with debtors, etc were requested. However, the assesse has remained silent on this issue and refrained from divulging any details of the entities to whom loan were extended during the year. The assesse has neither furnished copy of loan agreement nor provided any details regarding date and mode of loan disbursal. Also, the assesse failed to provideany justification on creditworthiness of the lendee entities. The assesse has merely filed ITR declaring Short term loans and advances amounting to Rs. 5,01,525/-. The assesse has failed to establish creditworthiness of these debtor entities and genuineness of these loan transactions claimed by it in its ITR. xxiv. From the definition itself, it becomes amply clear that loans and advances given are an asset for an entity. However, the source and genuineness of such loan/advance extended and creditworthiness of the entity to whom loan is extended needs to be proved beyond doubt. The assesse has, in spite of being requested repeatedly vide notices u/s 142(1), failed to prove the genuineness of loans/advances extended to various entities and their creditworthiness claimed in its ITR. Failure to prove identity, authenticity and genuineness of loans and advances claimed in the ITR on the part of assesse invite application of section 69A of the Act. The same is reproduced as under: “[69A. Unexplained money, etc.—Where in any financial year the assessee is found to be the owner of any money, bullion, jewellery or other valuable article and such money, bullion, jewellery or valuable article is not recorded in the books of account, if any, maintained by him for any source of income, and the assessee offers no explanation about the nature and source of acquisition of the money, bullion, jewellery or other valuable article, or the explanation offered by him is not, in the opinion of the [Assessing Officer], satisfactory, the money and the value of the bullion, jewellery or other valuable article may be deemed to be the income of the assessee for such financial year.]” xxv. Further, the assesse has not provided the genuineness of short term loan and advance given to various entities and creditworthiness of these entities. Therefore, amount of Rs. 5,01,525/- is considered as unexplained money of the assesse u/s 69A r.w.s. 115BBE of the Act and added to the total income of the assesse for the A.Y. 2022-23. [Addition:Rs.5,01,525/-] xxvi. Penalty proceedings u/s 271AAC of the Income Tax Act are being initiated separately for A.Y. 2022-23 as per variation/addition to total income as mentioned in para 4.6(xxv) above. xxvii. The assesse had declared and claimed an amount of Rs. 4,61,813/- under the head “Cash-in- hand” in its ITR filed for A.Y. 2022-23. Vide notice u/s 142(1) dated 01.08.2023, 23.08.2023, 07.12.2023, 22.12.2023 and 29.12.2023, the assesse was specifically requested to furnish details of the source of cash in hand amounting to Rs. 4,61,813/- as reported by the assesse in its ITR. The assesse was also requested to provide documentary evidence in support of its claim such as cash book, day book, ledgers maintained by it during the year under consideration which resulted in generation of such cash in hand claimed by the assesse. However, the assesse has remained silent on this issue and has avoided divulging any details/documentary evidences. As the assesse has grossly failed to produce documentary evidence and justification for the cash in hand amounting to Rs. 4,61,813/-claimed by it in its ITR for the year under consideration, the same is treated as unexplained. In absence of any reply, the assessment is completed as per material available on record. The assesse had declared and claimed cash in hand amounting to Rs. 4,61,813/- in his ITR filed for F.Y. 2021-22 relevant to A.Y. 2022-23. Further, the assesse has not provided the source of such cash in hand. xxviii. Here, it would be pertinent to refer to Section 69A of the Income Tax Act,1961. “[69A. Unexplained money, etc.—Where in any financial year the assessee is found to be the owner of any money, bullion, jewellery or other valuable article and such money, bullion, jewellery or valuable article is not recorded in the books of account, if any, maintained by him for any source of income, and the assessee offers no explanation about the nature and source of acquisition of the money, bullion, jewellery or other valuable article, or the explanation offered by him is not, in the opinion of the [Assessing Officer], satisfactory, the money and the value of the bullion, jewellery or other valuable article may be deemed to be the income of the assessee for such financial year.]” xxix. The assesse had declared and claimed cash in hand amounting to Rs. 4,61,813/- in its ITR filed for A.Y. 2022-23. Further, the assesse has not provided the source of such cash in hand. Therefore, amount of Rs. 4,61,813/- is considered as unexplained money of the assesseu/s 69A r.w.s. 115BBE of the Act and added to the total income of the assesse for the A.Y. 2022-23. [Addition:Rs.4,61,813/-] xxx. Penalty proceedings u/s 271AAC of the Income Tax Act are being initiated separately for A.Y. 2022-23 as per variation/addition to total income as mentioned in para 4.6(xxix) above. xxxi. On perusal of the ITR filed by the assesse u/s 139 for the A.Y. 2022-23, it is noticed that the assesse has claimed to have made following expenses: S.No. Expense particular Amount Direct Wages 10,48,330/- i. Carriage inward 15,75,200/- ii. Compensation to employees 13,36,350/- iii. Salaries and wages Power and fuel 60,793/- iv. Workmen and staff welfare expenses 16,000/- v. Traveling expenses other than on foreign 78,800/- vi. traveling Telephone expenses 15,599/- vii. Packing Material 5,22,100/- viii. Office Expenses 39,530/- ix. Repairs & Maintenance 68,352/- x. Total 47,61,054/- xxxii. Vide notices issued u/s 142(1) dated 01.08.2023, 23.08.2023, 07.12.2023, 22.12.2023 and 29.12.2023, the assesse was specifically requested to establish genuineness of these above mentioned expenses amounting to Rs. 47,61,054/-. The assesse was also requested to furnish name and address of entities to whom these expenses were paid, copy of invoices, ledger, proof of payment, copy of bank statement highlighting payment of these expenses incurred during the year under consideration. However, the assesse has remained silent on these issues and did not comply with the notices issued to it from time to time. Moreover, the assesse neither furnished any details regarding these expenses claimed to have been incurred by it nor provided any documentary evidence such as name and address of entities to whom these expenses were paid, copy of invoices, ledger, proof of payment, copy of bank statement highlighting payment of these expenses. The assesse has merely filed ITR u/s 139 of the Act. The assesse has failed to establish genuineness of these expenses incurred/claimed to have been incurred by it. A mere mention of certain amount as expenses does not tantamount to valid, reliable, allowable and genuine business expense. Even after being repeatedly requested through statutory notices, the assesse has not furnished even a single evidence in support of its contention/claim. This proves that the claim of the assesse regarding these expenses was not genuine and the assesse has merely tried to hoodwink the revenue authorities by claiming bogus and fictitious expense incurred in business. Since, the assesse has grossly failed to establish the very genuineness of its claimed expenses, the claim of the assesse regarding expenses amounting to Rs. 47,61,054/- as reported by the assesse in his ITR filed u/s 139 cannot be treated as genuine expenses. But since, the assesse has shown/admitted Rs.47,61,054/-as expenses incurred by it in its ITR but failed to establish the genuineness of such expenses and source of funds/money utilised to incur such expenses, the provisions of section 69C of the Act are attracted in this case. “69C. Unexplained expenditure, etc. —Where in any financial year an assessee has incurred any expenditure and he offers no explanation about the source of such expenditure or part thereof,ortheexplanation,ifany,offeredbyhimisnot,intheopinionof the [Assessing Officer], satisfactory, the amount covered by such expenditure or part thereof, as the case may be, may be deemed to be the income of the assessee for such financial year:” xxxiii. In light of above discussion, it is evident that the expenses claimed by the assesse amounting to Rs. 47,61,054/- during the F.Y. 2021-22 remained unverified and hence unexplained. Since, the assesse has failed to establish the genuineness of these expenses and also the source of funds utilised for incurring these expenses due to failure on the part of the assesse, these expenses are treated as unexplained. Accordingly, an amount of Rs. 47,61,054/- is treated as unexplained expenditure of the assessee u/s 69C r.w.s. 115BBE of the