Recently, the Income Tax Appellate Tribunal ( ITAT ) in Delhi dismissed the appeal filed by the assessee, Shivam Leasing Pvt. Ltd., upholding a substantial income tax addition of ₹1.05 crore for the assessment year 2008-09. The case involved the assessee-company’s alleged concealment of income and failure to maintain proper financial records.
The assessee, Shivam Leasing Pvt. Ltd, had initially filed its income tax return on September 29, 2008, declaring a modest income of ₹13,045. This return was processed under Section 143(1) of the Income Tax Act, 1961 (ITA). However, the assessee- company’s financial activities came under scrutiny when the Investigation Wing reported that it had introduced unaccounted money into its books during the fiscal year 2007-08, corresponding to the assessment year in question. Based on this information, the assessing officer (AO) reopened the assessment under Section 147 of the tax legislature.
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In response to the reopening, the assessee contended that its return filed on February 29, 2016, should be considered valid against the notice served under Section 148 of ITA. The assessee-company further argued that its investment of ₹50 lakhs in M/s Goldline Enterprises Ltd. was properly recorded and that the AO’s decision to reopen the assessment was unjustified. Additionally, the assessee challenged the basis of the reopening, claiming that the reasons provided by the AO were undated, speculative, and lacked substantive evidence.
Despite these defenses, the AO proceeded to make an addition of ₹1,05,31,500 under Section 69A of ITA for unexplained cash deposits in the assessee-company’s bank accounts. This substantial addition was based on the assessee-company’s inability to provide adequate documentation, such as vouchers, bills, and detailed ledger accounts, to substantiate the legitimacy of the funds. Consequently, the assessee’s income was reassessed to ₹1,05,31,500, reflecting the undisclosed income from unverified sources.
Aggrieved by this development, the assessee appealed to the Commissioner of Income Tax (Appeals) [CIT(A)] in New Delhi, challenging both the reopening of the assessment and the subsequent addition. The CIT(A) upheld the AO’s decision, affirming that the evidence presented was sufficient to warrant the reopening and the income addition.
The case eventually reached the ITAT, where the assessee sought to overturn the decisions of both the AO and the CIT(A). The assessee-company’s representatives argued that the lower authorities had failed to appreciate the proper recording of investments and that the reasons for reopening were based on unfounded assumptions. They further contended that no substantial evidence was presented to justify the addition and that the process violated mandatory jurisdictional conditions under the tax legislature.
However, during the Tribunal proceedings, the assessee did not present any representation or counter-evidence, leaving the Tribunal to rely solely on the documentation and arguments of the lower authorities. The Tribunal, presided over by Judicial Member Shri Kul Bharat and Accountant Member Shri Avdhesh Kumar Mishra, meticulously reviewed the case records and the submissions from both parties.
The Tribunal observed that the Assessing Officer had acted within his jurisdiction by reopening the assessment based on credible information from the Investigation Wing. The failure of the assessee to produce adequate books of account and supporting documents, despite multiple opportunities, substantiated the AO’s decision to disallow 30% of the total expenses claimed. The Tribunal found no merit in the appellant’s arguments and noted the absence of any meaningful representation or evidence to challenge the lower authorities’ findings.
Furthermore, the Tribunal observed that the CIT(A) had thoroughly examined the case, considering the comprehensive report from the Investigation Authorities, which highlighted the assessee-company’s modus operandi in concealing income and the deliberate failure to maintain proper financial records. The Tribunal affirmed the addition of ₹1,05,31,500, agreeing with the CIT(A)’s assessment that the company’s inability to substantiate its cash deposits warranted such a significant tax addition.
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In addition to the income addition, the Assessing Officer had initiated penalty proceedings under Section 271(1)(c) of the Income Tax Act for the concealment of income. The Tribunal upheld these penalty proceedings, reinforcing the severity of the assessee’s non-compliance with tax regulations.
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