2020 (2) TMI 244 - AT - Income Tax

Tribunal confirms disallowances & additions for assessment years 2006-2011 due to lack of evidence.

Pearl Vision Pvt Ltd Versus The Deputy Commissioner of Income tax, Central Circle-13, New Delhi

Pearl Vision Pvt Ltd Versus The Deputy Commissioner of Income tax, Central Circle-13, New Delhi - TMI Issues Involved:1. Addition on account of issue of share capital to allegedly bogus non-existing companies.2. Purchases of software from companies allegedly incapable of supplying the software.3. Claim of depreciation and expenses from allegedly non-existing bogus companies and non-production of books of accounts.4. Allegations of tax evasion and non-cooperation by the assessee.5. Violation of principles of natural justice.6. Disallowance of depreciation on plant and machinery.7. Addition on account of unexplained share capital.8. Addition on account of unsecured loans.9. Addition on account of unexplained investment in properties.10. Addition on account of unexplained investment in plant and machinery.11. Disallowance under section 14A of the Income Tax Act.Detailed Analysis:1. Addition on account of issue of share capital to allegedly bogus non-existing companies:The assessee received share capital from various companies and individuals, but failed to prove the identity, capacity, and genuineness of the transactions. The AO issued notices under section 133(6), but either received no reply or found the addresses to be non-existent. Consequently, an addition of Rs. 15.29 crores was made as unexplained share capital. The CIT(A) confirmed the addition, noting that the assessee did not discharge its initial onus of proving the identity, creditworthiness, and genuineness of the share capital received.2. Purchases of software from companies allegedly incapable of supplying the software:The assessee claimed to have purchased software worth Rs. 38.31 crores from various companies. However, the AO found that these companies did not have the capability to produce the software and were essentially bogus. The AO disallowed the depreciation claimed on these software purchases amounting to Rs. 1,92,06,750/-. The CIT(A) upheld the disallowance, citing the lack of evidence to prove the genuineness of the transactions.3. Claim of depreciation and expenses from allegedly non-existing bogus companies and non-production of books of accounts:The AO disallowed the depreciation claimed on plant and machinery, as the assessee failed to produce evidence of ownership, use, and cost of the assets. The CIT(A) confirmed the disallowance, noting that the assessee did not provide any details to substantiate the claim. The same reasoning applied to the disallowance of other expenses, as the assessee did not produce books of accounts or vouchers to justify the expenditures.4. Allegations of tax evasion and non-cooperation by the assessee:The AO noted that the assessee did not file any return of income under section 139 for the relevant years and failed to cooperate during the assessment proceedings. The CIT(A) also noted the assessee's non-cooperation, citing multiple opportunities given to the assessee to furnish details, which were not availed. The Tribunal upheld the findings of the lower authorities, emphasizing the assessee's deliberate non-cooperation.5. Violation of principles of natural justice:The assessee argued that the CIT(A) passed an ex-parte order without considering the reasons for non-appearance, such as the illness of directors and financial crises. However, the Tribunal found that the assessee had sufficient opportunities to present its case but failed to do so. Therefore, the Tribunal dismissed the grounds related to the violation of principles of natural justice.6. Disallowance of depreciation on plant and machinery:The AO disallowed the depreciation claimed on plant and machinery, citing the lack of evidence to prove the acquisition and use of the assets. The CIT(A) confirmed the disallowance, and the Tribunal upheld the decision, noting that the assessee failed to provide requisite details to substantiate the claim.7. Addition on account of unexplained share capital:The AO made an addition of Rs. 15.29 crores as unexplained share capital, which was confirmed by the CIT(A). The Tribunal upheld the addition, noting that the assessee failed to prove the identity, creditworthiness, and genuineness of the investors.8. Addition on account of unsecured loans:The AO made an addition of Rs. 8.39 crores as unexplained unsecured loans, as the assessee failed to provide details of the lenders' identity, creditworthiness, and genuineness of the transactions. The CIT(A) confirmed the addition, and the Tribunal upheld the decision.9. Addition on account of unexplained investment in properties:The AO made additions for unexplained investments in properties at Mumbai and Noida, as the assessee did not provide details of the source of funds. The CIT(A) confirmed the additions, and the Tribunal upheld the decision.10. Addition on account of unexplained investment in plant and machinery:The AO made an addition of Rs. 25.60 crores for unexplained investment in plant and machinery, as the suppliers were found to be bogus. The CIT(A) confirmed the addition, and the Tribunal upheld the decision, noting the lack of evidence to prove the genuineness of the purchases.11. Disallowance under section 14A of the Income Tax Act:The AO disallowed Rs. 22,93,450/- under section 14A, as the assessee did not provide details to justify the claim. The CIT(A) confirmed the disallowance, and the Tribunal upheld the decision.Conclusion:The Tribunal dismissed all the appeals filed by the assessee for the assessment years 2006-07 to 2011-12, confirming the additions and disallowances made by the AO and upheld by the CIT(A). The Tribunal found no merit in the assessee's arguments and emphasized the lack of cooperation and failure to provide requisite details to substantiate the claims.