PRIMELAND REAL ESTATES PVT. LTD.,NEW DELHI vs. DCIT, NEW DELHI

Brief facts of the case relevant for the disposal of this appeal, as summarised by the Ld. CIT(A) in a most apt way, are that the assessee company created Harmohan Shashi Trust in 2007 for the benefit of one Mr.Harmohan H Sahni and Mr.Shashi Menon who are the joint

Assessee filedreturn of income for the assessment year 2012-13 on 29/9/2012 declaring a loss of Rs.95,28,042/-. Assessing officer observed from the P&L Account that the assessee company had debited loss on transfer of investment of Rs.94,09,812/-. On being asked assessee vide letter dated 7/11/2015 stated that the assessee company had transferred 12,41,400 shares from its investment in G Corp Private Properties Ltd. to Harmohan Shashi Trust, wherein Harmohan Shashi and Shashi Menon were the joint managing directors of the court to properties private limited are the beneficiaries. Assessee further stated that the business loss of Rs.94,09,812/-be treated as capital loss on the ground that the losses incurred on account of transfer of shares at nil value. Learned Assessing Officer disallowed the above and added it back to the income of the assessee.

Simultaneously, learned Assessing Officer initiated proceedings under section 271(1)(c) of the Act and concluded the same by order dated 28/7/2015 with the levy of penalty of Rs.29,14,017/-. Assessee

Ld. CIT(A), however, did not agree with the submissions of the assessee and rejected the same on two grounds. Ld. CIT(A) recorded that the whole transaction is completely tilted in favour of the consent beneficiaries Mr.Harmohan H Sahney and Mr. Shashi Menon; that the assessee had tried to give the transaction a corner of business transaction whereas no apparent business motive could be assigned to this transaction; that it has not been clarified how the assessee company had to safeguard its business interest by investing in a company and completely transcending the shares to two individuals on preconditions; and, therefore, there have been no business activities reflected in the assessment year, 2012-13. The CIT(A) further held that the argument of the assessee about the difference of opinion is also not valid, because in this case there was no iota of doubt that the losses not for the purpose of business at all and has to be disallowed as revenue loss, and on the other hand the assessee was merely a conduit for transferring of this user amount of money from G Corp Properties to the two individuals and along the way the assessee claims the loss as revenue loss to be obviously carried forward. Ld. CIT(A) further observed that the agreement of the assessee to treat this loss as capital loss cannot be a guaranteed or a residence for the penalty proceedings not to be initiated or imposed and the learned Assessing Officer nowhere in his order mentioned that there was any such residence. On this premise, Ld. CIT(A) confirmed the levy of penalty and dismissed the appeal.Aggrieved by the impugned order, assessee preferred this appeal.

None appeared on behalf of the assessee. Notice was issued to the address given in Form-36 and the postal envelope was returned with the assessment of the postal servant stating that the assessee is left. If the assessee is available in such address, such notice should have been served on the assessee. If for any reason, the assessee is not available there, it is for the assessee to make arrangements with the postal department for service of such notice by furnishing the new temporary address where the assessee would be available, or to deliver it to some authorised person, or by making request to the postal department to detain the mail till the assessee claims the same. Since the assessee does not seem to have adopted any of these methods, we are of the considered opinion that no useful purpose would be served by sending notice to the address where the assessee cannot be found. In the Ld. DR and decide the matter on merits.

We have gone through the record in the light of the submissions made on either side. Though the assessee pleaded before the Ld. CIT(A) that the difference of opinion as to the nature of expenditure, whether it is revenue in nature or capital in nature, the record does not reveal that the assessee clarified as to whether there is any element of business motive in the transaction. There is no rebuttal to the observations of the Ld. CIT(A) that the whole transaction is completely tilted in favour of the concerned beneficiaries Mr Harmohan H Shaw and Mr Shashi Menon and the assessee had tried to give the transaction a colour of business transaction; whereas no apparent business motive could be assigned to the transaction. So also there is no reason for us to brush aside the factual finding of the Ld. CIT(A) that there is no clarification from the side of the assessee as to how the assessee company has safeguarded its business interest by investing in a company and completely transcending the shares to two individuals on preconditions. This suspicion entertained by the authorities below is corroborated by the fact that there has not been any business activity reflected in the assessment year 2012-13 even as per the submissions of the assessee.

As rightly observed by the Ld. CIT(A), in the absence of any material supporting the contentions of the assessee, there was no iota of doubt that the loss was not for the purpose of business at all so that it could be allowed as a revenue loss. We find it difficult to disagree with the findings of the Ld. CIT(A) that the assessee was merely a conduit for transfer of the user amount from G Corp properties to the two

On the face of the factual findings returned by the Ld. CIT(A) and in the absence of any material before us to rebut the same we are of the considered opinion that we cannot interfere with the impugned order. We, accordingly, do not find any merits in this appeal and hold that the appeal is liable to be dismissed. We, therefore, dismiss the appeal of the assessee.

In the result, appeal of the assessee is dismissed