M/S. BRAHMAPUTRA REALTORS (P) LTD.,NEW DELHI vs. DCIT, NEW DELHI

Facts, in brief, are that the original return of income for the Asstt. Year 2007-08 was filed by the assessee on 13.10.2007 declaring nil income and it was processed u/s 143(1) of the Income-tax Act, 1961 (“the Act”). However, subsequently, search and seizure operation u/s132 of the Act was conducted in Brahmaputra group of companies on 28.9.2010 during which various books of accounts and documents including some belonging to the assessee were found and seized. Notice u/s 153 read with section 153A of the Act and subsequently u/s 153A/153C of the Act was issued. Basing of certain documents in the form of Annexures A-6, A-7 and A-10 and also on the statement of one Mr. Sampath Sharma, Director, learned AO made an addition of Rs.10 lacs under section 68 of the Act on account of unexplained share capital. Assessee preferred an appeal before the ld. CIT(A), who by way of impugned order dismissed the same.

It is the submission of the learned AR that though the learned AO made Annexures A-6, A-7 and A-10 as the basis for making the addition, he failed to substantiate how these documents are incriminating the assessee so as to make the addition in their hands. Nowhere learned AO brought on record to connect these documents to the additions under the head “share capital” and even if the authority failed to notice that the said documents go unexplained to have any nexus with the addition in dispute or to show that those relate to any accommodation entries entered by the Brahamputra group. Further, the additions in respect of the amounts mentioned in some of the documents were made in the case of another company M/s Brahmputra Infrastructure Ltd. in the Asstt. Year 2009-10. The sum and substance of the argument of the learned AR is that the documents neither belong to nor pertain to the assessee and they do not establish any nexus as alleged between the contention of the department that the assessee obtained the accommodation entries thereunder and the additions made in this case. For these reasons, it is contended that in so far as all the proceedings u/s 153C of the ACt are bad and even on merits, the addition is liable to be deleted.

According to the learned DR, during the course of search hard discs of computers were seized, which contain incriminating material and the recordings on the documents reflected accommodation entries obtained by the Brahmputra group, as such, the authorities below are justified in making addition and sustaining the same.

At the outset, learned AR submitted that the five documents relied upon by the learned AO in this matter were also relied upon by the revenue in the case of another group company i.e. M/s Brahmputra Finlease P. Ltd. and a coordinate bench of this Tribunal by order dated 29.12.2017 discussed the matter at length and found that the revenue failed to bring on record any cogent reasons to connect these documents with the additions of share capital and inasmuch as no material, much less incriminating, supporting the addition is available on record, the addition cannot be sustained and since as the documents neither belong to nor pertain to the assessee thereon by applying the principle laid down by the Hon’ble Delhi High Court in the case of CIT vs Kabul Chawla,380 ITR 573, the bench held that no addition could be sustained.

We have perused the record. The assessment order reads that the Ld. AO placed reliance on five documents and also the statement of one Shri Sampath Sharma, Director, to reach the conclusion that the assessee obtained accommodation entries. On a careful perusal of the description of the documents given in this matter with the documents relied upon in the case of Brahmputras Finlease Co. (supra), we find that they are identical as demonstrated below:

On considering the above documents vide para 4.11, a coordinate bench of this Tribunal considered the relevance of these documents to the companies of Brahmputra group and also the incriminatory nature of these documents inasmuch as the names of Shri Shyam Trexim and Fincom P. Ltd., Shri Murari Lal Aggarwal, Shri Sarat Aggar5wal, and Shri A. Singhal are mentioned in these documents and nothing incriminating the assessee could be inferred from these documents. Relevant observations of the Tribunal are as follows:

Further, in respect of relevance and reliability of the statement of Shri Sampath Sharma, Director, the Tribunal observed as follows: 4.19 We find that in the case of best infrastructure (India) private limited (supra), despite the admission of accommodation entry in statements under section 132(4) of the Act, the court held that the statement do not constitute as incriminating material. In the instant case, neither is there any statement of any accommodation entry operator claiming that any entry was not provided nor any director has admitted that assessee obtained accommodation entry. Thus, the case of the assessee is on better footing then the case of Best Infrastructure (I) P. Ltd (supra). In such facts and circumstances, respectfully following the decision of the Hon'ble Delhi High Court in the case of best infrastructure (India) private limited (supra), we do not have any hesitation to hold that the statement under section 132(4) of Sh. Sampat Sharma cannot be treated as incriminating material found during the course of search. In the result, we hold that addition of share capital in the year under consideration has been made without relying on any incriminating material found during the course of search.

On a consideration of the entire material in the light of the law laid down in the case of CIT vs. Kabul Chawla reported in 380 ITR 573, the coordinate Bench of this tribunal concluded that, - 4.20 In view of the above finding, both the conditions as completed assessment and no incriminating material, have been satisfied in the case, thus,no addition could have been made in the instant assessment year in view of the finding of the Hon'ble Delhi High Court in the case of Kabul Chawla (supra). The grounds No. 1 and 1.1 of appeal are accordingly allowed.

Since the facts of these two cases are identical and the observations of the Tribunal are very much applicable to the facts of this case also. In these circumstances, while respectfully following the reasoning and the conclusions reached by a coordinate bench of this Tribunal in the Brahmputra group case in M/s Brahmputra Finlease P. Ltd. vs DCIT, we find it difficult to sustain the additions made. We, therefore, while allowing the grounds of appeal