MINUTEX PROCESSORS PVT LTD., MUMBAI V. ITO, WARD-15(2)(3), MUMBAI

ITA 1232/MUM/2023

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Minutex Processors Pvt. Ltd. appealed against the order of the learned Commissioner of Income Tax (Appeals), which had confirmed the additions made by the Assessing Officer regarding unexplained investments and cash credits. The Assessing Officer had treated substantial investments and share application money received by the company as unexplained, attributing these to money laundering activities. The Tribunal, after considering the submissions of the Departmental Representative and the material on record, dismissed the appeal, agreeing with the lower authorities' findings that the company was a shell entity with no genuine business activities.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 125831 (ITAT-MUMBAI)
• Duration Of Justice: 3 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-07-2023
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 09-07-2023
• Assessment Year: 2011-2012
• Appeal Filed On: 12-04-2023
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Unexplained investment; Principle of natural justice; Initiation of penalty proceedings
• Section: 147; 68; 148; 271(1)(c); 143(3); 234B; 133(6); 143(1); 250

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL “D” BENCH, MUMBAI BEFORE SHRI G.S. PANNU, PRESIDENT, AND SHRI SANDEEP SINGH KARHAIL, JUDICIAL MEMBER ITA no.1232/Mum./2023 (Assessment Year : 2011–12) Minutex Processors Pvt. Ltd. 6/10, Vijay Nagar Sangh Shaikh Misree Road, Antop Hill Mumbai 400 037 PAN – AACCM1084H ................ Appellant v/s Dy. Commissioner of Income Tax Circle–15(1)(1), Mumbai ................ Respondent Assessee by : None Revenue by : Ms. Riddhi Mishra Date of Hearing – 10/07/2023 Date of Order – 27/07/2023 O R D E R The present appeal has been filed by the assessee challenging the impugned order dated 28/02/2023, passed under section 250 of the Income Tax Act, 1961 ("the Act") by the learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi, [“learned CIT(A)”], for the assessment year 2011–12. 2. When this appeal was called for hearing neither anyone appeared on behalf of the assessee nor was any application seeking adjournment filed. From the perusal of the record, we find that the notice of hearing sent to the assessee at the address mentioned in Form no.36 has been returned unserved by the postal authorities with the remark „not known/left’, despite the fact that Minutex Processors Pvt. Ltd. ITA no.1232/Mum./2023 Page | 2 there is no change in the address of the assessee as mentioned in orders of lower authorities. Therefore, in view of the above, we proceed to dispose off the present appeal ex–parte, qua the assessee after hearing the learned Departmental Representative (“learned DR”) and based on the material available on record. 3. In its appeal, the assessee has raised the following grounds:– “1. On the facts circumstances of the case and in law the authorities have erred in passing an ex-pate order u/s 250 without affording any opportunity of being heard in the matter which is against the principles of natural justice and hence the order passed be quashed. 2. On the facts and circumstances of the making/sustaining Rs.3,19,00,000/- being the investment made by appellant treating as un- explained investment u/s 69 and the reasons assigned for doing so, were wholly wrong inconsistent with the facts of the case and not in accordance with the provision of the Income Tax Act, 1961 and rules made thereunder. 3. On the facts and circumstances of the case and in law the authorities below have erred making/sustaining addition of in an Rs. 7.93,50,000/- being the un- explained cash credit u/s 68 and the reasons assigned for doing so, were wholly wrong. inconsistent with the facts of the case and not in accordance with the provision of the Income Tax Act, 1961 and rules made thereunder. 4. On the facts and circumstances of the case and in law, the authorities below have erred in levying the interest u/s 234B and 234C of the IT which was wholly wrong, and against the provisions of Income Tax At, 1961 and rules thereunder. 5. On the facts and circumstances of the case and in law, the authorities below have erred in initiating the penalty proceedings u/s 271(1)(c) of the Income Tax Act, 1961 which were wholly wrong, irrelevant, and not in accordance with the facts and circumstances of the case as no income is concealed nor any inaccurate particulars were furnished. 6. The appellant craves leave to add, alter, modify and delete all or any of the aforesaid grounds of appeals on or before the date of hearing.” 4. We have considered the submissions of the learned DR and perused the material available on record. The brief facts of the case are that the assessee is a company and filed its return of income on 11/08/2012 declaring a total Minutex Processors Pvt. Ltd. ITA no.1232/Mum./2023 Page | 3 income of Rs.1349. The return filed by the assessee was initially processed under section 143(1) of the Act. Subsequently, on the basis of information received from DGIT (Investigation), Mumbai as well as the Registrar of Companies, Mumbai that the assessee has invested/purchased shares at a premium of Rs.10,000 per share with the face value of Rs.100 from M/s Parvesh Construction Ltd., which is a loss-making company and has also received share application money of Rs.7,93,50,000, when it has no sale/receipts and only income from other sources of Rs.8000 has been offered to tax, proceedings under section 147 of the Act were initiated and notice under section 148 dated 30/03/2016 was issued to the assessee. During the proceedings under section 147 of the Act, the assessee was asked to furnish details/documents/information to explain the nature, source, and genuineness of the transactions involving investments of Rs.13,19,00,000 made in M/s Parvesh Construction Ltd. The Assessing Officer (“AO”) vide order dated 29/12/2016 passed under section 143(3) read with section 147 of the Act did not agree with the submissions of the assessee and found them to be general in nature. The AO held that the assessee is a shell company and is used to launder money which is reflected in the books of account submitted by the assessee. Further, the assessee‟s net worth is negligible, it does not have any capacity to invest and no business activities are being carried out at its premises. Thus, it was held that the whole transaction is a pre-structured transaction and a colourable device used by the assessee only for the purpose of introducing a huge amount of undisclosed income of the assessee in the form of investments. Accordingly, the AO treated the amount of Minutex Processors Pvt. Ltd. ITA no.1232/Mum./2023 Page | 4 Rs.13,19,00,000 as an unexplained investment and added the same to the total income of the assessee. 5. During the proceedings under section 147 of the Act, the assessee was also asked to furnish details/documents/information to explain the nature, source, and genuineness of the transaction involving the receipt of share application money of Rs.7,93,50,000. The AO also issued notices under section 133(6) of the Act to the share applicants to prove the nature, source, and genuineness of the transactions involving share application money received. However, till the finalisation of the assessment proceedings, no submission was received from the share applicants in response to the notice issued under section 133(6) of the Act. The AO, vide assessment order, held that since the assessee was having no business activity at its premises, no prudent businessman or company will invest in the shares of a company in which the net worth is negligible and the company is defunct and inoperative. Accordingly, the AO treated the receipt of share application money of Rs.7,93,50,000 as unexplained cash credit in the books of the assessee and added the same to the total income under section 68 of the Act. 6. We find that even during the appellate proceedings before the learned CIT(A), despite issuance of various notices of hearing as noted in para 5 of the impugned order, the assessee failed to appear before the learned CIT(A) and furnish explanation/submission in support of its contentions. Since no material has been brought on record to rebut the findings of the AO and prove the identity and creditworthiness of the share applicants and the genuineness of the transaction, the learned CIT(A), vide impugned order, upheld the addition Minutex Processors Pvt. Ltd. ITA no.1232/Mum./2023 Page | 5 made by the AO under section 68 of the Act. Similarly, in the absence of material to rebut the findings of the AO regarding the addition of Rs.13,19,00,000 in respect of investment made in M/s Parvesh Construction Ltd., the learned CIT(A) upheld the findings of the AO and confirmed the addition on account of unexplained investment. 7. We find that the lower authorities have found the assessee to be not doing any business activity at its premises and have found the assessee to be showing no sales/receipts and only a meagre taxable income of Rs.8000. Further the AO also found the assessee to be having very weak financials, which cannot lead to investment to an extent of Rs.7,93,50,000 by any prudent businessman. Accordingly, the AO treated the assessee to be a shell company, which is used to launder money as reflected in the books of account. Further, as noted above, the assessee failed to substantiate the huge investment of Rs. 13,19,00,000 in M/s Parvesh Construction Ltd. by purchasing shares at a premium of Rs.10,000 per share having a face value of Rs.100 of a loss-making company. Therefore, in the absence of any contradictory material being available on record to controvert the aforesaid findings recorded by the lower authorities, we are of the considered view that the impugned order passed by the learned CIT(A) requires no interference and, therefore, is upheld. Accordingly, grounds no. 2 and 3 raised in assessee‟s appeal are dismissed. 8. As regards ground no.1, no material has been brought on record to justify non-compliance with the various notices of hearing issued by the learned CIT(A). Accordingly, we find no infirmity in the impugned order Minutex Processors Pvt. Ltd. ITA no.1232/Mum./2023 Page | 6 whereby the appeal filed by the assessee was decided on the basis of material available on record. As a result, ground no.1 raised in assessee‟s appeal is dismissed. 9. The levy of interest under section 234B and section 234C of the Act is consequential in nature and in view of the aforesaid findings is accordingly dismissed. 10. Ground No. 5 is pertaining to the initiation of penalty proceedings, which is premature in nature and therefore is dismissed. 11. In the result, the appeal by the assessee is dismissed. Order pronounced in the open Court on 27/07/2023 Sd/- G.S. PANNU PRESIDENT Sd/- SANDEEP SINGH KARHAIL JUDICIAL MEMBER MUMBAI, DATED: 27/07/2023 Copy of the order forwarded to: (1) The Assessee; (2) The Revenue; (3) The PCIT / CIT (Judicial); (4) The DR, ITAT, Mumbai; and (5) Guard file. True Copy By Order Pradeep J. Chowdhury Sr. Private Secretary Assistant Registrar ITAT, Mumbai