2025 (7) TMI 1501 - AT - Income Tax

Reopening of assessment - appeal is decided ex-parte - receipt of information from sales tax/ Vat department regarding bogus purchases made from hawala dealers - Addition u/s. 68 of the Act on account of being unexplained cash credits - HELD THAT - Before the Tribunal the case was fixed for hearing several times however adjournment had been sought on all earlier occasions. Vide order sheet entry dated 05.03.2025 when the case was fixed giving final opportunity to the assessee it again sought an adjournment. In order to give fair opportunity one more adjournment was allowed by the bench subject to the deposit of a cost of Rs. 11, 000/- in the revenue s account and the case was fixed for 07.05.2025. On this date the case was again adjourned for 10.07.2025 on a specific request made by the assessee. Finally on 10.07.2025 none appeared on behalf of the assessee. In view of the non-cooperative conduct of the assessee the appeal is decided ex-parte after hearing the departmental representative. We note that Ld. CIT(A) has passed a reasoned order giving partial relief to the assessee. It is seen that despite numerous opportunities given the assessee has not furnished any details/evidences in support of the grounds of appeal taken before us. From the assessee s non-compliant behaviour we infer that it is not interested in pursuing its appeal and the same is therefore dismissed.

Summary

ISSUES:

Whether the issuance of notice under section 148 of the Income-tax Act, 1961 was valid and not illegal or void-ab-initio due to lack of jurisdiction or failure to obtain approval under section 151.Whether the assessment orders passed without issuing notice under section 143(2) or without affording adequate opportunity of hearing violate the principles of natural justice.Whether additions made on account of unexplained cash credits under section 68 and disallowance of interest paid on unsecured loans are justified, considering the evidence furnished by the assessee.Whether the rejection of books of accounts under section 145(3) and consequent estimation of income is appropriate in the absence of proper documentary evidence.Whether additions made on account of alleged bogus purchases and application of gross profit rate are justified.Whether the levy of interest under sections 234A, 234B, 234C, and 234D and initiation of penalty proceedings under sections 271(1)(C), 271B, 271(F), and 272A(1)(c) are valid.Whether the appellate authority erred in not remanding matters to the Assessing Officer for further inquiry regarding unsecured loans and related transactions.Whether disallowance of depreciation claimed on additions to fixed assets is justified given the circumstances of forceful acquisition of business premises and loss of records.

RULINGS / HOLDINGS:

The court confirmed the validity of the jurisdiction exercised by the Assessing Officer (AO) in issuing notices under section 148, rejecting claims that such notices were "wholly without jurisdiction and null and void" despite absence of specific designation of the approving authority under section 151.The court held that assessment orders passed without notice under section 143(2) and without affording "reasonable and adequate opportunity of hearing" do not comply with the principle of natural justice, but found no sufficient ground to invalidate the orders on this basis alone where procedural opportunities were provided.Additions under section 68 relating to unexplained cash credits and disallowance of interest on unsecured loans were upheld where the assessee failed to provide satisfactory evidence such as confirmations from loan parties, PAN details, or adequate documentary proof, notwithstanding claims of repayments and TDS compliance.The rejection of books of accounts under section 145(3) was upheld due to failure of the assessee to produce evidence regarding transportation and genuineness of purchases, leading to application of estimated gross profit rate for income computation.The court accepted that additions on account of alleged bogus purchases were not justified separately when gross profit rate was applied on total sales, thereby negating the need for separate addition.The imposition of interest under sections 234A, 234B, 234C, and 234D and initiation of penalty proceedings under relevant sections were upheld, dismissing the appellant's grounds challenging these levies.The appellate authority did not err in declining to remand the matter for further inquiry on unsecured loans, holding that the powers of the appellate tribunal are co-terminus with those of the AO and that adequate opportunity was provided to the assessee to produce evidence.The disallowance of depreciation on additions to fixed assets was upheld due to lack of documentary evidence, despite the appellant's claim of hardship caused by forceful acquisition of business premises and loss of records.

RATIONALE:

The court applied provisions of the Income-tax Act, 1961, particularly sections 143(2), 145(3), 147, 148, 151, 68, 40(a)(ia), 234A-D, and penalty provisions under sections 271(1)(C), 271B, 271F, and 272A(1)(c).The decision reflects adherence to procedural requirements regarding issuance of notices and the principle that jurisdictional approvals under section 151 must be obtained but need not always be explicitly stated, provided the authority is valid.The court emphasized the requirement of "reasonable and adequate opportunity of hearing" in assessment proceedings, consistent with principles of natural justice, but balanced this against the assessee's failure to substantively engage or produce evidence.The rejection of books under section 145(3) was justified on the basis of the assessee's failure to discharge the burden of proof regarding genuineness of transactions, supported by non-cooperation in producing witnesses or documents.The court recognized that once books are rejected and income estimated, separate additions for the same items (e.g., bogus purchases) are not warranted, reflecting a doctrinal approach to avoid double addition.The appellate tribunal's powers are held to be co-terminus with those of the AO, limiting its ability to independently investigate beyond the record and evidence before the AO, thereby justifying refusal to remand for further inquiry.The court noted the assessee's repeated non-cooperation and failure to furnish evidence or attend hearings, leading to dismissal of appeals ex parte, reinforcing procedural discipline in tax proceedings.