2019 (12) TMI 1550 - AT - Income Tax

Tribunal Affirms Commissioner's Decision on Income Tax Appeal

The Tribunal upheld the Commissioner of Income Tax (Appeals) ['Ld. CIT(A)'] decision in a case involving issues of opportunity to plead, ex-parte orders, ... Dismissal for non-prosecution - non-appearance at hearing - adjournment application and authority to represent - onus of proof under section 68 - disallowance under section 37 - reliance on Reserve Bank of India inspection report - power to restore appeal under Proviso to Rule 24 of the Income Tax (Appellate Tribunal) Rules, 1963Dismissal for non-prosecution - non-appearance at hearing - adjournment application and authority to represent - Whether the appeal should be dismissed for non-prosecution for failure of the assessee to appear or properly authorise representation and for filing an unauthorised adjournment request - HELD THAT: - The Tribunal recorded that no authorised representative appeared for the assessee at the hearing before the Tribunal and that the only communication purportedly seeking adjournment was a letter from a firm of chartered accountants without any authorization from the assessee. The Tribunal found that in the absence of proper authorization the adjournment request lacked legitimacy and, having heard the Revenue and found no material to take a view different from the appellate authority, proceeded under Rule 24 of the Income Tax (Appellate Tribunal) Rules, 1963. The Tribunal noted that the CIT(A) had treated repeated non-attendance and merely applications for adjournment as justifying dismissal for non-prosecution and relied on established authorities for the principle that filing an appeal requires effectively pursuing it. The Tribunal therefore upheld the consequence of non-prosecution in the circumstances of this case.Appeal dismissed for non-prosecution for failure to appear or to produce proper authorization for representation and for improperly seeking adjournment.Onus of proof under section 68 - disallowance under section 37 - reliance on Reserve Bank of India inspection report - Whether the additions made by the Assessing Officer under section 68 and the disallowance under section 37, founded on the RBI inspection report and affirmed by the CIT(A), warranted interference by the Tribunal - HELD THAT: - The Tribunal examined the record and noted that the CIT(A) had delivered a speaking order dealing with the Assessing Officer's additions under section 68 (treating certain share subscriptions as not genuine for want of proof of identity, genuineness and creditworthiness) and the disallowance under section 37 based on the RBI inspection report regarding diversion of funds and related cost of funds. The Tribunal found no material placed before it during the hearing that would justify taking a view different from that taken by the CIT(A). Having considered the AO's and CIT(A)'s reasoning and the reliance placed on the RBI report, the Tribunal declined to interfere with the appellate authority's decision on merits.ITAT declines to interfere with the CIT(A)'s affirmance of the additions under section 68 and the disallowance under section 37 which were founded on the RBI inspection findings and the assessee's failure to discharge the requisite onus.Power to restore appeal under Proviso to Rule 24 of the Income Tax (Appellate Tribunal) Rules, 1963 - Whether the assessee may seek restoration of the dismissed appeal - HELD THAT: - The Tribunal explicitly recorded that the assessee is at liberty to apply for restoration of the appeal in accordance with the Proviso to Rule 24 of the ITAT Rules. The Tribunal stated that any such restoration application will be considered in accordance with law and the facts and circumstances of the case.Assessee permitted to approach the Tribunal for restoration of the appeal under the Proviso to Rule 24; such application to be considered as per law.Final Conclusion: The appeal filed by the assessee is dismissed for non-prosecution; on the merits the ITAT declined to interfere with the CIT(A)'s affirmance of additions under section 68 and disallowance under section 37 based on the RBI inspection report. The assessee may seek restoration of the appeal under the Proviso to Rule 24, which will be considered in accordance with law. Issues Involved:1. Opportunity to Plead and Ex-parte Order2. Adjournment Requests and Principles of Natural Justice3. Addition of Rs. 1,15,00,000/- under Section 68 of Income Tax Act, 19614. Addition of Rs. 29,50,000/- under Section 68 of Income Tax Act, 19615. Disallowance of Rs. 2,17,95,629/- under Section 37 of Income Tax Act, 1961Issue-wise Detailed Analysis:1. Opportunity to Plead and Ex-parte Order:The assessee argued that the Commissioner of Income Tax (Appeals) [“Ld. CIT(A)”] erred by not providing a proper opportunity to plead the case and by passing an ex-parte order. The order was claimed to be untenable as it was not based on natural ground realities and justice. The Tribunal noted that despite multiple opportunities, the assessee did not appear for the hearings or provide adequate reasons for adjournment, leading the Ld. CIT(A) to pass an ex-parte order.2. Adjournment Requests and Principles of Natural Justice:The assessee contended that the Ld. CIT(A) failed to adjourn the hearing despite genuine requests on 28/03/2017 and 30/03/2017 due to the counsel being out of station. The Tribunal found that the assessee repeatedly sought adjournments without proper authorization or legitimate reasons. The Tribunal upheld the Ld. CIT(A)’s decision to proceed ex-parte, citing the lack of assistance and vague reasons for adjournment.3. Addition of Rs. 1,15,00,000/- under Section 68 of Income Tax Act, 1961:The assessee challenged the addition of Rs. 1,15,00,000/- in share capital based on the RBI Inspection Report, arguing that all evidence to prove creditworthiness was submitted and no queries were raised by the Assessing Officer (AO). The Tribunal noted that the AO made the addition after detailed inquiry and confrontation with the assessee, who failed to discharge the onus under Section 68. The Tribunal upheld the Ld. CIT(A)’s decision, finding no material to persuade a different view.4. Addition of Rs. 29,50,000/- under Section 68 of Income Tax Act, 1961:The assessee also contested the addition of Rs. 29,50,000/- in share capital made by three companies, stating that all evidence to prove creditworthiness was provided, and no queries were raised by the AO. The Tribunal observed that the AO made the addition due to the assessee’s failure to substantiate the genuineness, identity, and creditworthiness of the investors. The Tribunal upheld the Ld. CIT(A)’s decision, affirming the addition.5. Disallowance of Rs. 2,17,95,629/- under Section 37 of Income Tax Act, 1961:The assessee argued against the disallowance of Rs. 2,17,95,629/- for expenditure under Section 37, based on the RBI Inspection Report. The assessee maintained that the books of account were properly maintained and audited, and the AO did not reject them. The Tribunal found that the AO disallowed the expenditure due to the diversion of funds through bad loans, as highlighted in the RBI report. The Tribunal upheld the Ld. CIT(A)’s decision, finding no deficiencies in the AO’s assessment.Conclusion:The Tribunal dismissed the appeal filed by the assessee, upholding the Ld. CIT(A)’s order on all grounds. It emphasized that the assessee failed to provide sufficient material to challenge the Ld. CIT(A)’s detailed and reasoned decision. The Tribunal also clarified that the assessee could approach ITAT for restoration of the appeal in accordance with Rule 24 of the Income Tax (Appellate Tribunal) Rules, 1963.