M/S. CAPITAL INSTITUTE OF COMPETITION TRAINING (P) LTD.,NEW DELHI vs. DCIT, FARIDABAD

Brief facts of the case are that the assessee is a private limited company. A search and seizure operation was carried out in the case of CHD Developers group of cases on 23.11.2012 to which assessee belonged. The office premises of the assessee was also searched and thus proceedings u/s 153A were initiated in the case of assessee for the block period of six years. The notice u/s 153A for the year under appeal was issued on 20.05.2014, in response to which assessee filed its return of income for AY 2012-13 on 14.08.2014 declaring NIL. The assessment was completed vide order passed u/s 153A(1)(b) by making addition of Rs. 1,50,00,000/- u/s 68 of the Act, by holding the share capital received from various companies as bogus by placing reliance on the statements of the director of the assessee company Shri R.K. Mittal recorded u/s 132(4) wherein he offered this share capital of Rs. 1.50 crores as additional income. Aggrieved by the said order, assessee preferred appeal before the ld. CIT(A) who vide impugned order dt. 10/03/2017 has dismissed the appeal of the assessee.

Against the said order of the ld. CIT(A), the assessee is in appeal before the Tribunal. M/s Capital Institute of Competition Training (P) Ltd. vs. DCIT

The assessee challenged the appellate order on the strength of following grounds of appeal:- “1. That notice issued u/s 153A of the Act and, assessment framed u/s 153A(1)(b) of the Act without satisfying the statutory preconditions contained in the Act were without juri iction and therefore, deserves to be quashed as such.

1 That in absence of any search having been conducted on the appellant company, the conclusion of the learned Commissioner of Income Tax (Appeals) upholding the validity of notice issued u/s 153A of the Act is illegal, invalid and untenable.

2 That the learned Commissioner of Income Tax (Appeals) has also failed to appreciate that warrant drawn in the name of the appellant in respect of the premises of plot no. 10-11. Second Floor, Nelson Mandela Marg, Vasant Kunj, New Delhi could not confer juri iction since on the date of drawing of the warrant, the premises of the appellant was at Bhikaji Gama Place, New Delhi.

3 That further the learned Commissioner of Income Tax (Appeals) has proceeded to record findings and, observations which are factually incorrect, contrary to record, legally misplaced and in any case, wholly irrelevant to uphold the illegality of initiation of proceedings u/s 153A of the Act.

1 That the learned Commissioner of Income Tax (Appeals) has further erred both in law and on facts in proceeding to confirm an addition on the basis of statement recorded of Shri R.K. Mittal under section 132(4) of the Act on 24.11.2012 without appreciating that such statement neither in law and nor on fact could have been made a basis to assume that the share capital received by the assessee represented income of the appellant company.

2 That the learned Commissioner of Income Tax (Appeals) has further erred both in law and on fact in overlooking the documentary evidence placed on record to establish that the share capital received by the appellant was from identifiable shareholder who had requisite creditworthiness and also met the test of genuineness of transaction.

That the learned Deputy Commissioner of Income Tax has erred both in law and on facts in upholding the levy of interest of Rs. 1,94,670/- under section 234A of the Act and Rs. 17,03,363/- under section 234B of the Act which are not leviable on the facts of the appellant company.

In grounds of appeal No. 1 to 2, assessee has challenged the legality of the assessment proceedings initiated u/s 153A and consequent order passed, thus the same are taken up first for consideration.

Before us, Ld. AR argued that the warrant issued in the name of assessee company was on different address and thus no search was carried out in the case of the assessee company. According to ld.AR when no search warrant was issued at the correct address the notice issued u/s 153A is bad in law. He further submits that when no search was carried out in the case of assessee, assumption of M/s Capital Institute of Competition Training (P) Ltd. vs. DCIT juri iction u/s 153A is illegal and he requested to quash the entire proceedings.

On the other hand, ld. CIT DR vehemently supported the orders of the lower authorities and submitted that the assessee never intimate the change of address and even filed the returns of income for all the six years falling under the block period with the same address i.e. 10-11, Second Floor, Nelson Mandela Marg, Vasant Kunj, New Delhi where the search was carried out. Ld. CIT-DR further submitted that search warrant was executed in the name of the assessee, thus the proceedings initiated u/s 153A are as per law and he prayed for the confirmation of the orders of the lower authorities on legal aspect.

We have heard both the parties and gone through the material available before us. Before dwelling upon the issue, the provisions as contained in section 153A needs to be considered:

From the plain reading of section 153A, it is clear that the provisions of this section are applicable to cases where a search is initiated u/s 132 of the Act. In the instant case, a search warrant was executed in the name of the assessee company which is also confirmed from the perusal of the copy of search warrant dt.17/11/2012, available in the paper book pages 178-179. Once the search was carried out in the name of the assessee, proceedings u/s 153A has been rightly initiated. It is also a matter of fact that assessee has made due compliance to the notices issued for all the six years falling under the block period and not only filed the returns of income but also never objected the issue of notice u/s 153A. Further before M/s Capital Institute of Competition Training (P) Ltd. vs. DCIT us also assessee had failed to controvert the findings of the ld. CIT(A) by placing on record any cogent material. Even till today the address of the assessee company is remained as 10-11, Nelson Mandela Marg, Vastant Kunj, New Delhi. In view of these facts, we are not interfering in the order of ld. CIT(A) which is hereby upheld on this issue. The grounds of appeal No. 1 to 2 taken by the assessee are dismissed.

Grounds of appeal No. 3 & 4 are in relation to the addition of Rs.1,50,00,000/- made u/s 68 on account of share capital received from various companies as the assessee has failed to establish the identity and credit worthiness of the share applicant companies.

From the perusal of the order of the lower authorities, we find that the assessee has failed to file any reply to the show cause notice issued by the AO on 02/02/2015. Further before the ld. CIT(A) also no details were filed in order to establish the identity and creditworthiness of the share applicant companies. During the year under appeal, assessee company had received fresh share capital of Rs. 3,99,00,000/- by total Eleven subscribers. From the table at page 5 of the assessment order, it appears that share capital of Rs. 2,49,00,000/- were subscribed by the directors and their family members and remaining amount of Rs. 1,50,00,000/- were subscribed by eight companies, whereabout of which were not submitted by the assessee company. It is also a matter of fact that Shri R. K. Mittal, director in his statement recorded u/s 132(4) had offered the same as additional income which was not honored. During the course of hearing the ld. AR of the assessee had prayed that one M/s Capital Institute of Competition Training (P) Ltd. vs. DCIT more opportunity be allowed to the assessee company to file the necessary details in order to establish the genuineness of the share- holders. Thus looking to the fact that assessee company except challenging the validity of the assessment order, had not filed any details with respect to the share subscribing companies, therefore, in the interest of justice we sent back this issue to the file of the AO with the directions to the assessee company to file all the necessary details of the share subscribers to the satisfaction of the AO. The AO is also directed to provide sufficient opportunity to the assessee of being heard. With these directions, grounds of appeal Nos. 3 & 4 taken by the assessee are partly allowed for statistical purposes.

Ground of appeal No. 5 is in respect to the levy of interest u/s 234A and 234B. Since levy of interest u/s 234A and 234B are mandatory thus AO is directed to recalculate the same on the income finally determined in terms of the directions given herein above. Thus this ground of appeal partly allowed.

In the result appeal of the assessee is partly allowed.