RAMI REDDY INFRA PROJECTS PRIVATE LIMITED,VISAKHAPATNAM vs. INCOME TAX OFFICER, WARD 2(1), VISAKHAPATNAM

This appeal is filed by the assessee against the order of the Ld. Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi [“Ld. CIT(A)-NFAC”] in DIN & Order No. ITBA/NFAC/S/250/2024-25/1067156129(1), dated 30/07/2024 arising out of the order passed U/s. 147 r.w.s 144 of the Income Tax Act, 1961 [“the Act”] for the AY 2015-16.

Briefly stated the facts of the case are that the assessee is a Private Limited Company incorporated on 19/01/2015. The assessee company registered an immovable property in its name on 22/01/2015 being purchased by promoters earlier by making advances. The assessee company filed its return of income from the AY 2016-17 onwards. For the AY 2015-16, the assessee has not filed its return of income, being except the above property registered on its name, no other transactions / business takes place. A notice U/s. 148 of the Act was issued on the assessee- company on 30/03/2021 for filing the return of income for the AY 2015-16. Since the assessee was not able to track the notice the assessee has not filed the return of income in response to the notice U/s. 148 of the Act. Subsequently, notices U/s. 142(1) of the Act was issued on the assessee on 19/07/2021 and called for certain information. The assessee failed to furnish the return of income as they could not track the notice. Since the assessee has not filed its return of income for the AY 2015-16, the Ld. AO came to the conclusion that the assessee has failed to explain the source of investment made in the immovable property.

The Ld. CIT(A)-NFAC is wrong in dismissing the appeal on 30/07/2024 when time was granted till 31/07/2024 in the hearing notice and hence is against the principles of natural justice.

At the outset, it was the submission of the assessee that the assessee-company has not purchased the immovable property ie., land and the entire sale considered was paid by its Director viz., K. Bhaskar Reddy. He further submitted that all the payments details were reflected in the sale deed itself. Further, the Ld. AR also submitted that all the payments were made even prior to incorporation of the assessee-company and also all the payments were made through banking channels. The Ld. AR also submitted that the assessee has also filed the ledger copies of the bank account which clearly establishes the source of purchase of the immovable property and also the entire transaction was recorded in the company’s books of account showing the sale consideration as loan amount of the Director of the assessee- company. However, the Ld. Revenue Authorities failed to consider the same even though all the details are very much available in the sale deed itself. Therefore, the Ld. AR pleaded to set-aside the orders passed by the Ld. Revenue Authorities and allow the grounds raised by the assessee.

On the other hand, the Ld. DR heavily relied on the orders of the Ld. Revenue Authorities and argued in support of their decision.

We have heard both the sides and perused the material available on record as well as the orders of the Ld. Revenue Authorities. It is an admitted fact that the assessee-company was incorporated on 19/01/2015. The assessee purchased the immovable property under a registered sale deed on 22/01/2015. We have also perused the sale deed copy of the immovable property. On perusal of the sale deed copy, page-5 contains the details of payments made to the purchaser. We have also perused the bank statements of the Director of the assessee- company by name Mr. K. Bhaskar Reddy and on perusal of these documents, it is clear that all the payments were made from Karur Vysya Bank, Oriental Bank of Commerce and Union Bank of India. All these bank accounts are belonging to the Director of the assessee-company and it clearly establishes that the assessee-company has not invested even a single rupee from its account. Moreover, the assessee-company has also filed the Director’s current account summary and ledger account of the Director, details of payment made to Sardar Projects Pvt Ltd. All these documents are clearly establishes that the assessee- company has not invested any amount for the purpose of purchase of the immovable property in the name of the assessee- company. Therefore, we have no hesitation to come to the conclusion that the Director Mr. K. Bhaskar Reddy had made the payments for purchase of the immovable property in the name of the assessee-company. However, the Ld. DR brought to our notice that even though all the details filed by the assessee company is establishing that the assessee has not incurred an expenditure to purchase the immovable property, the Ld. Revenue Authorities had no occasion to verify these details. Therefore, considering the plea of the Ld. CIT-DR, we remit the matter back to the file of the Ld. AO with a specific direction that the Ld. AO should examine whether the payments are made by the assessee-company or its Director Mr. K. Bhaskar Reddy. If the Ld. AO finds that the entire amount is paid by Mr. K.