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Facts
The assessee, a non-filer, was issued a notice under section 147 and subsequently filed a return. During assessment, the AO added back Rs. 38 crores as unexplained investment credit received from M/s Highpoint Trading Company Pvt Ltd due to the assessee's inability to explain the source of funds. The assessee's appeal to CIT(A) was ex-parte due to non-compliance.
Held
The Tribunal noted that the assessee failed to provide documentary evidence or comply with notices from both the AO and CIT(A). Despite the significant demand and the lack of a reasonable explanation, the Tribunal, in the interest of natural justice, restored the issue to the CIT(A) for adjudication on merits, imposing a cost of Rs. 5,000 on the assessee for non-compliance.
Key Issues
Whether the addition of Rs. 38 crores as unexplained cash credits is justified, considering the assessee's repeated non-compliance and failure to provide substantiating evidence.
Sections Cited
68, 144, 147, 148, 250, 142(1), 144B, 63
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, MUMBAI BENCH “C”, MUMBAI
Before: SHRI BR BASKARAN & SHRI ANIKESH BANERJEE
Instant appeal of the assessee was filed against the order of theNational Faceless Appeal Centre, Delhi [for brevity, ‘Ld.CIT(A)’] passed under section 250 of the Income-tax Act, 1961 (in short, ‘the Act’), for Assessment Year 2014-15, date of order14.03.2024.The impugned order was emanated from the order of the Prayer Tech Solutions Pvt Ltd National Faceless Assessment Centre, Delhi (in short, ‘the A.O.’) passed under section147r.w.s. 144 r.w.s. 144Bof the Act date of order27/03/2022.
The assessee has taken the following grounds of appeal:-
“1. In the facts and circumstances of the case and in law, the Ld. CIT(A) erred in confirming the addition of Rs. 38,00,00,000/- on account of alleged unexplained cash credits.
2. In the facts and circumstances of the case, the Appellant's director who was supervising and responsible for assisting the Ld. CIT(A) was medically ailed being the pre-dominant reason for not having been able to submit detailed grounds of appeal.
3. In the facts and circumstances of the case and in law, the Ld. CIT(A) erred in confirming the addition of Rs. 38,oo,oo,ooo/- on account of alleged unexplained cash credits debtors the flagrant violation of principles of natural justice occasioned while passing of the assessment order
4. In the facts and circumstances of the case and in law, the Ld. CIT(A) erred in confirming the addition of Rs. s8,oo,oo,ooo/- despite there being parimateria assessment orders passed on the same subject matter whereby no addition was made.
5. In the facts and circumstances of the case and in law, the Ld. CIT(A) erred in confirming the penalty and interest imposed on the Appellant for the relevant assessment year.
The Appellant craves leave to add/alter any of the grounds of appeal on or before the date of final hearing or during the course of appeal proceedings.”
3. The brief facts of the case are that the assessee is a non-filer of income-tax return. Notice under section 147 was issued and the assessee filed the return in Prayer Tech Solutions Pvt Ltd pursuance of notice U/s 148 of the Act. During the assessment proceedings, the Ld.AO asked to clarify the advances received from “M/s Highpoint Trading Company Pvt Ltd” amount to Rs.38 crores. But the assessee had not been able to explain the advances received from this party before the Ld.AO. The Ld.AO added back Rs.38 crores under section 68 related to unexplained investment credit in the books of account. Being aggrieved, the assessee filed an appeal before the CIT(A). The ld.CIT(A) issued the several notices, but all are remained un-complied. Finally, the appeal order was passed exparte by upholding the assessment order. Being aggrieved, the assessee filed an appeal before us.
When the appeal was called for hearing, none was present on behalf of the assessee. The assessee had not filed any adjournment petition before the Bench. Considering the merit of the case, we proceed to dispose of the appeal exparte qua for assessee after hearing the ld.DR.
We heard the submission of the ld.DR, considered the documents available in the record and perused the order of the revenue authorities. Considering the addition of Rs.38 crores, the assessment was completed under section 144 of the Act on exparte basis. The relevant part of the assessment order is reproduced as below:-
“Details of immediate source of fund:-
Date Immediate Name of Source of immediate Invested Source of Party/discription credit entries in bank amount Fund 14-05-2013 9,96,00,000 Highpoint Advances from party 10,00,000 Trading Company Pvt Ltd 14-05-2013 5,00,000 Own Capital
Prayer Tech Solutions Pvt Ltd 15-05-2013 9,99,85,000 Highpoint Advances from party 8,26,00,000 Trading Company Pvt Ltd 16-05-2013 8,25,10,000 Highpoint Advances from party 8,25,10,000 Trading Company Pvt Ltd 16-05-2013 8,37,15,000 Highpoint Advances from party 87,00,000 Trading Company Pvt Ltd 16-05-2013 7,00,000 Highpoint Advances from party 7,00,000 Trading Company Pvt Ltd 01-08-2013 24,00,000 Own capital Own capital 25,00,000 08-01-2014 4,53,09,896 Own capital Amount received from 19,00,0000 trade Receivables Total 38,00,00,000 In spite of notices issued u/s 142(1) dated 13/01/2022 and 14/02/2022, no documentary evidence like ledgers, books of accounts, copies of bank statements etc. have been produced to substantiate its claim. Further, no break up to ascertain the nature of current liabilities as well as the details of the parties have been provided. Further a draft Assessment Order was sent to assessee on 24/03/2022, in response to which the assessee submitted reply dated 24/03/2022 vide which he submitted copy of ITR filed in response to notice u/s 148, copy of financial statements. Valuation report of Vakragee Holding Pvt. Ltd, copy of bank statements etc. However, the reply of the assessee is not acceptable on the basis of the discussion on the following paragraph:
It can be seen from the financial of M/s. Prayer Tech Solutions Pvt. Ltd, there is negligible Share Capital, almost Nil Fixed Asset and very less employee benefit expenses in the company to carry out such huge turnover. Therefore, company has characteristics of a paper company and thus creditworthiness af M/s. Prayer Tech Solutions Pvt Ltd is not verified.
Further, it can be seen from the financial of M/s. Highpoint Trading Co. Pvt. Lid, there is negligible Share Capital, almost Nil Fixed Asset and very less employee benefit expenses in the company to carry out such huge turnover. Therefore, company has characteristics of a paper company and thus creditworthiness of M/s. Highpoint Trading Co. Pvt Ltd Is not verified which makes the investment made by M/s. Prayer tech Solutions Pvt Ltd completelydubious.
As per die information in possession of the undersigned, statement recorded under oath of Mr. Sal Krishna Yadav, office boy at High Point Trading Company, registered address Flat No, 18, Ground Floor Samikaran Apartment, Sant Janabai Marg, Ville Parley, Mumbai East and Mr. Ajay Jangird, CA for High Point, Trading Company was recorded by ITO, Mumbai on 28.12.2018 during the course of its assessment proceedings. These statements lead to the conclusion that in High Point Trading Company no business of trading in DMS goods was being carried out. This clearly brings out the picture that it was a bogus/paper company.
Thus, in the light of the facts mentioned above, the credits as appearing in the books of accounts of M/s, Prayer Tech Solutions Pvt. Ltd vide which investment of Rs. 380000000/- has been made by M/s. Prayer Tech Solutions Pvt Ltd in the shares of Vakrangee Holding Pvt Ltd remains unexplained from the parameters of creditworthiness and genuineness and is hereby added to the total income of the assessee u/s 63 of IT Act, 1961 as unexplained cash credits. (Addition of Rs. 38,00,00,000/-)” We find that the assessee had not been able to explain the advances received from the party, “M/s Highpoint Trading Company Pvt Ltd”. Further, the assessee introduced the own capital which was also remain unexplained before the Ld.AO. As a result, the addition was made under section 68 of the Act. During the appeal proceedings, the appellate authority allowed several opportunities to the assessee for submission of the evidence. The relevant part of the appeal order is reproduced as below: - “4. During the course of appeal proceedings, the following notices/letters for hearing were issued to the appellant, but till date the appellant has neither filed any response nor filed any submissions in support of grounds of appeal. The details of the notices issued are as under: -
Prayer Tech Solutions Pvt Ltd S.No. Date of Notice Compliance Date Remarks Sent 1. 16.11.2022 - Issued Enablement of Communication Window. No response from the appellant. 2. 18.09.2023 03.10.2023 No response from the appellant 3. 13.10.2023 30.10.2023 No response from the appellant 4. 01.12.2023 18.12.2024 No response from the appellant 5. 27.12.2023 11.01.2024 No response from the appellant 4.1 A Can be seen from the above table the appellant was given ample opportunities by way of notices issued as narrated above. However, the appellant / AR has not furnished any submission.
4.2 There is a well-known dictum of law "VIGILANTIBUS, NO DORMENTIBUS, JURA SUBVENIUNT" which means law will help only those who are vigilant Law will not assist those who are careless of his/her right. In order to claim one's right, he/shemust be watchful of his/her right. Only those persons, who are watchful and careful of using his/her rights, are entitled to the benefits of law Law confers rights on persons who are vigilant of their rights.”
6. The ld.DRargued that the assessee has not made any compliance either before the ld. AO nor before the ld.CIT(A). In the grounds of the assessee placed that one of the directors, who dealt with the legal matters of income-tax, was medically ill and that is the predominant reason for non submission of documents before the ld.CIT(A). In our considered view, the assessee is carrying the high demand, i.e. addition of Rs.38 crores. Hence, we are of the view that, in the interest of natural justice, that assessee may be given one more opportunity to represent its case properly before the ld. CIT(A). Since the assessee is non- complied before the ld. AO and the ld. CIT(A), we are of the view that the Prayer Tech Solutions Pvt Ltd assessee should be imposed a cost in order to make him understand the importance of income tax proceedings. Accordingly, we impose the cost amount to Rs.5,000/- (Rupees five thousand only) upon the assessee which shall be paid to the credit of Income Tax Department within two months from the date of receipt of this order. Subject to the payment of above cost which shall be verified by the ld. CIT(A). All the issues are restored to the file of the ld. CIT(A) for adjudicating the case on merits. We are not expressing any views on the merits of the case so as to limit the appellate procedure before the ld. CIT(A). Needless to say, the assessee should get a reasonable opportunity of hearing. On the other hand,the assessee should be diligent in appeal proceeding for expeditious disposal of appeal.