ACIT, CC- 15, NEW DELHI vs. M/S. BRAHMAPUTRA REALTORS (P) LTD., NEW DELHI

Facts of the case, in brief, are that the assessee is a company, engaged in the business of builders, developers and promoters, etc. It filed its return of income on 18.05.2013, declaring loss of Rs.49,506/-. Since, there was no sale and purchases during the year the assessee has not earned any income. However, the assessee has incurred project development expenses of Rs.3,39,17,329/- and has claimed loss of Rs.49,506/- as per profit & loss account.

During the course of assessment proceedings, the AO observed that the assessee has raised share capital from the following companies/persons, the details of which are as under:-

Vide letter dated 11.11.2014, he asked the assessee to furnish the details of share capital, share premium and share application money along with confirmations and evidences for addition made to the share capital, share premium and share application money with copies of relevant bank accounts. Vide letter dated 30.03.2015, the assessee filed required details. For making independent enquiries, the AO issued notices u/s 133(6) of the Act in the forms of letters to the above mentioned parties. The notices issued u/s 133(6) of the Act dated 17.03.2015 fixing the compliances on 23.03.2015 were received undelivered with the remarks of Postal Authority “Not Known” in case of the following parties:-

M/s Barak Agro Pvt. Ltd.

No reply of notice issued u/s 133(6) of the Act of the remaining parties were received on the stipulated date on or before 23.03.2015. Even till i.e. 31.03.2015, no replies with required documents from these parties were received. In view of the above, the AO held that there is no need to verify the information/documents filed by the assessee in respect of share capital. He therefore, treated the amount of share capital of Rs.10,38,25,000/- as unverified and accordingly made addition of the same to the total income of the assessee.

Before the learned CIT(A), it was submitted that the assessee filed the following details to substantiate the identity and creditworthiness of the persons and genuineness of the transactions:-

It was argued that the AO without giving proper/reasonable opportunity made addition without going through the various details furnished before him. Relying on various decisions, it was submitted that when the assessee has discharged the initial burden cast upon it by producing various documents to substantiate the identity and creditworthiness of the parties and genuineness of the transactions, there was no reason on the part of the AO to make addition u/s 133(6) of the Act. It was argued that one of the investor namely M/s M.L.

Based on the arguments advanced by the assessee, the learned CIT(A) called for the assessment record of M/s M.L.

So far as other investors are concerned, the learned CIT(A) observed that all those investors had sufficient funds available with them. They are basically the promoters of the assessee company as individuals. He gave a finding that the funds available with each investor are again received from entities from the same group being firm/corporate. All these investors are taxpaying entities and have been filing income tax returns on regular basis and funds available with them have been independently assessed as such. He did not find any dubious transaction in the hands of the investors company.

Aggrieved with such order of the learned CIT(A), the Revenue is in appeal before the Tribunal by raising following grounds of appeal:-

The learned DR strongly supported the order of the Assessing Officer. He submitted that the assessee in the instant case did not file the requisite details/documents till 31st March, 2015. Notices issued u/s 133(6) of the Act were returned un- served or were not complied with. Therefore, under the facts and circumstances of the case, the learned CIT(A) was not justified in deleting the addition made by the AO u/s 68 of the Act. He also relied on the following decisions:-

The learned counsel for the assessee on the other hand strongly supported the order of the learned CIT(A). He submitted that the assessee has filed all the requisite details before the AO on 30th March 2015 i.e. before completion of assessment. The notice issued u/s 133(6) were also complied with since the Authorized Representative of the assessee wanted to file all the details before the AO on 31.03.2015 but the AO refused to accept such details for which the assessee had no other option but to send all those details by speed post on 31st March, 2015 itself. He submitted that when the same AO is the Assessing Officer of M/s M.L. Singhi & Associates Private Limited and has passed order u/s 143(3) of the Act accepting the investment made by it in the shares of assessee company, therefore, notwithstanding that no reply was received by the AO from such company in respect of notice issued u/s 133(6), the AO could not have made the addition. Since, the learned CIT(A) has verified from the assessment records of M/s M.L. Singhi & Associates Private Limited that it has invested an amount of Rs.4,04,25,000/- in the share capital of the assessee company and detailed explanation was given before the AO of M/s M.L. Singhi & Associates Private Limited for which he had accepted the same in the order passed u/s 143(3) of the Act and who incidentally is the AO of the assessee also, therefore, the learned CIT(A) was fully justified in deleting the amount of Rs.4,04,25,000/-.

So far as the other concerns are concerned, he submitted that all these individuals and private companies are promoters of the assessee company as individuals. Every company is having huge share capital/reserves and are income tax payee and have filed tax return on regular basis and the funds available with them have been independently assessed as such. Therefore, the learned CIT(A) was fully justified in deleting the addition made by the AO.

So far as the non receipt of reply of notice u/s 133(6) of the Act is concerned, he submitted that due to very little time given by the AO i.e. from the date of the issue and till the date of compliance being very little and the investor companies are located at Guwahati, the information could not reach the AO within the stipulated time. However, it is a matter of fact that all the concerns have replied to such notice u/s 133(6) of the Act. The Authorized Representative had tried to produce the same before the AO but he refused to accept the same on account of fag end of the time barring assessment.

The learned counsel for the assessee relying on various decisions submitted that mere non-submission of reply by the investor company in response to notice u/s 133(6) of the Act or even non-production of directors before the AO in response to notice 131 of the Act cannot justify the addition u/s 68 of the Act especially in a case where the assessee has substantiated with evidence regarding the identity and creditworthiness of all the investors and genuineness of the transactions. He accordingly heavily relied on the order of the learned CIT(A) in deleting the addition. He also relied on the following decisions:-

We have considered the rival arguments made by both the sides, perused the orders of the AO and the learned CIT(A) and the paper book filed on behalf of the assessee. We have also considered the various decisions cited before us. We find the assessee in the instant case has raised share capital and share premium of Rs.10,38,25,000/- from 12 companies/individuals, the details of which are already given in para-3 of this order. Although, the assessee filed the requisite details as required by him, however, the AO made addition of Rs.10,38,25,000/- to the total income of the assessee on the ground that the notices issued u/s 133(6) of the Act calling for certain information were either returned unserved by the postal authorities with the remark as “not known” or were not complied with. We find in appeal, the learned CIT(A) deleted the addition on the ground that one of the concerns M/s M.L. Singhi & Associates Private Limited was assessed by the same AO who has passed order u/s 143(3) of the Act accepting the investment made by the M/s M.L. Singhi & Associates Private Limited in the shares of the assessee company. So far as the other persons are concerned, the learned CIT(A) has deleted the addition on the ground that these are basically promoters of the assessee company and they have sufficient funds available with them for investment in shares of the assessee company. Further, all these investors are taxpaying entities and are filing return on regular basis.

From the various details furnished by the assessee, we find the learned CIT(A) called for the assessment rcord from M/s M.L. Singhi & Associates Private Limited for AY 2012-13 and found that the AO has completed the assessment u/s 143(3) of the Act for AY 2012-13. From the said assessment record he also found that detailed questionnaire was issued by the AO, who examined the source of funds available with the same entity for investment in shares of the assessee company and after being satisfied accepted the claim of the assessee company. It is the settled proposition of law that powers of the learned CIT(A) are co-terminus with that of the Assessing Officer. The learned CIT(A) can do which the AO has failed to do. Since, the learned CIT(A) in the instant case after verification of the assessment record of M/s M.L. Singhi & Associates Private Limited, whose assessment was done by the very same Assessing Officer found that it has fully explained the source for making investment in the shares of the assessee company, therefore, we do not find any infirmity in his order in deleting addition of Rs.4,04,25,000/-. Accordingly, the order of the learned CIT(A) deleting Rs.4,04,25,000/- is upheld.

Now, coming to the remaining eleven persons i.e. individuals and corporate entities, we find the AO basically made the addition on the ground that in absence of reply to notice u/s 133(6) of the Act, he could not verify the information/documents filed by the assessee in respect of amount received on account of share capital. It is the submission of the learned counsel for the assessee that all those details were available with the assessee on 31st March, 2015 and the Authorized Representatives of the assessee went to the AO for filing of the same but the AO refused to accept for which those documents were sent by speed post on 31st March, 2015 itself. Although the learned CIT(A) has given a finding that all these concerns are promoters of the assessee company and have sufficient funds available with them and are regular taxpayers, however, due to non receipt of the information u/s 133(6) of the Act, the AO could not verify these details.

In the result, the appeal filed by the Revenue is partly allowed for statistical purposes.