ITAT uphold section 68 addition for Non-Responsiveness & Failure to Produce Evidence

SSC Hospitality Pvt Ltd Vs ITO (ITAT Delhi)

The case of SSC Hospitality Pvt Ltd vs ITO (Income Tax Appellate Tribunal, Delhi) involves an appeal by the assessee against the Commissioner of Income-tax (Appeals) [CIT(A)]’s order for the assessment year 2014-15. The key issue revolves around the addition of Rs.1,26,23,000 under section 68 of the Income-tax Act, 1961 (“the Act”).

Background

• Non-Responsiveness of Assessee: The appeal was called for a hearing on multiple occasions, but the assessee consistently failed to appear. Notices sent through registered post/speed post were returned unserved, indicating that no such person was available at the given address. Even attempts to communicate through the provided email address yielded no response.
• Ex Parte Proceedings: Due to the assessee’s persistent non-compliance and absence, the proceedings were conducted ex parte. The tribunal decided to proceed with the appeal based on the materials available on record.
• Assessment and Addition: The assessee, a resident corporate entity, filed its return of income for the relevant year but was selected for scrutiny. The Assessing Officer observed that despite several statutory notices, the assessee did not respond. Only shortly before the completion of the assessment, one of the directors appeared but failed to provide conclusive evidence regarding the genuineness of unsecured loans amounting to Rs.1,26,23,000. The Assessing Officer treated these unexplained loans as cash credits under section 68 of the Act, adding them to the income of the assessee.
• First Appellate Authority’s Decision: The assessee appealed to the CIT(A), but the appeal was dismissed. The CIT(A) noted the lack of proper compliance and failure to furnish conclusive evidence to prove the identity, creditworthiness of creditors, and genuineness of the unsecured loans.

Assessee’s Grounds of Appeal

The assessee raised two grounds in the appeal:

• Ex Parte Orders: Challenged the ex parte orders passed by the departmental authorities.
• Addition of Rs.1,26,23,000: Contested the addition made by the Assessing Officer under section 68 of the Act.

Tribunal’s Decision

The tribunal, having considered the materials on record, observed the following:

• Non-Compliance by Assessee: The assessee consistently failed to respond to statutory notices during the assessment proceedings, and even when one of the directors appeared, conclusive evidence was not provided.
• Lack of Proper Compliance: The tribunal noted that the assessee did not make proper compliance before the first appellate authority and merely furnished photocopies of confirmations that lacked credibility.
• Chronic Default by Assessee: The tribunal characterized the assessee as a chronic defaulter, consistently remaining non-compliant in various proceedings.
• Section 68 Addition Justified: Since the assessee failed to provide evidence to establish the genuineness of the unsecured loans, including proof of the identity and creditworthiness of the creditors, the tribunal upheld the addition made by the Assessing Officer under section 68 of the Act.
• No Proper Opportunity Claim: The tribunal dismissed the assessee’s contention regarding a lack of proper opportunity, highlighting the chronic non-compliance exhibited by the assessee throughout the proceedings.

Conclusion

The tribunal, considering the persistent non-compliance and failure of the assessee to provide credible evidence, upheld the addition of Rs.1,26,23,000 under section 68 of the Act. The decision emphasizes the importance of proper compliance and furnishing conclusive evidence to substantiate claims during assessment proceedings. The grounds raised by the assessee were dismissed, and the appeal was rejected. 

FULL TEXT OF THE ORDER OF ITAT DELHI

This is an appeal by the assessee against order dated 09.11.2017 of learned Commissioner of Income-tax (Appeals)-28, New Delhi for assessment year 2014-15.

2. When the appeal was called out, none appeared on behalf of the Even, there is no application filed by the assessee seeking adjournment. Perusal of record reveals that beginning from 22^nd March, 2022, the appeal has been listed for hearing on at least ten occasions. However, each and every time, the assessee has remained absent. The record further reveals that multiple notices for hearing sent through registered post/speed post to the assessee in the address given in Form No. 36, have returned back un-served with the postal remark that no such person is available in the given address. Even, repeated attempts made by the Registry to communicate the date of hearing through email address provided by the assessee in the memorandum of appeal have failed to evoke any response from the assessee. The aforesaid facts clearly reveal the recalcitrant attitude of the assessee in the matter of the present appeal filed by it. Since, sufficient opportunities of being heard have already been extended, which the assessee has failed to avail, we are of the considered opinion that the assessee does not deserve any further indulgence of this Bench. Accordingly, we will proceed to dispose of the appeal ex parte qua assessee after hearing learned Departmental Representative and based on materials available on record.

3. In the memorandum of appeal, the assessee has raised two In ground No. 1, the assessee has raised the issue of ex parte orders passed by the departmental authorities. Whereas, in ground No. 2, the assessee has challenged the addition of Rs.1,26,23,000/-.

4. Briefly, the facts are, the assessee is a resident corporate For the year under dispute, the assessee filed its return of income on 30.09.2014 declaring income of Rs.5,50,460/-. Assessee’s case was selected for scrutiny. As observed by the Assessing Officer, though, several statutory notices were issued under section 142(1) and 143(2) of the Income-tax Act, 1961 calling upon the assessee to furnish various information/details to explain its returned income, however, the assessee never complied to any of the notices. Finally, one of the Directors of the assessee company appeared before the Assessing Officer on 16.12.2016 and furnished copies of returns of income filed by two persons to explain genuineness of unsecured loans of Rs.1,26,23,000/-. As alleged by the Assessing Officer, except furnishing copies of returns of income of two persons, the assessee failed to furnish any other details including confirmations from the parties from whom the assessee claimed to have availed unsecured loans. Thus, in absence of any evidence furnished by the assessee to explain the genuineness of unsecured loans amounting to Rs.1,26,23,000/-, the Assessing Officer treated such loans as unexplained cash credit under section 68 of the Act and added back to the income of the assessee. The assessee contested the aforesaid addition by filing appeal before learned first appellate authority. However, appeal was dismissed.

5. We have heard learned Departmental Representative and perused materials on record. It is observed, in course of assessment proceedings, the assessee did not respond to multiple statutory notices issued by the Assessing Just prior to completion of assessment, one of the Directors of the assessee company appeared and furnished some documents. However, no conclusive evidence was furnished by the assessee to prove the identity and creditworthiness of the creditors and genuineness of the unsecured loans of Rs.1,26,23,000/-. Even, the assessee failed to furnish any confirmation from the creditors. Before the first appellate authority also, the assessee did not make proper compliance and merely furnished certain photocopies of confirmations, which did not inspire any confidence. There is no improvement in the position even before us, as the assessee has remained non-compliant all through. Since, the assessee has failed to furnish any evidence worth its name to prove the genuineness of the unsecured loans, we are unable to interfere with the decision of the first appellate authority.

6. In so far as assessee’s contention regarding lack of proper opportunity is concerned, we are not The material on record reveals that the assessee is a chronic defaulter and in each and every proceeding, be it Assessing Officer, be it first appellate authority or even before us, the assessee has remained non-compliant. In view of the aforesaid, we find no reason to interfere with the decision of learned first appellate authority. Grounds are dismissed.

7. In the result, appeal is dismissed.

Order pronounced in the open court on 28/11/2023.