NAFTOGAZ CONSTRUCTION LTD., NEW DELHI V. DCIT, CENTRAL CIRCLE- 29, NEW DELHI

ITA 7494/DEL/2017

AI Insights

Naftogaz Construction Ltd. appealed against the order of the CIT(A) which confirmed the addition of Rs. 5,00,000 to their income as unexplained share capital following a search and seizure operation under Section 132 of the Income Tax Act, 1961. The Tribunal noted that the assessee failed to comply with multiple notices and did not provide any substantial evidence or details to prove the genuineness of the share capital during the assessment and appellate proceedings. The Tribunal dismissed the appeal, agreeing with the CIT(A)'s decision and the Assessing Officer's findings.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 108263 (ITAT-DELHI)
• Duration Of Justice: 5 year(s) 5 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-05-2023
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: E
• Next Hearing Date: 30-05-2023
• Assessment Year: 2009-2010
• Appeal Filed On: 12-12-2017
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Bogus Share capital; Source of fund; Non compliance; Liquidation
• Section: 68; 132; 144; 142(1); 153A; 133(6)

Judgement Text

1 7494/Del/2017 Naftogaz construction Ltd. IN THE INCOME TAX APPELLATE TRIBUNAL [ DELHI BENCH: ‘E’ NEW DELHI ] BEFORE SHRI ANIL CHATURVEDI, ACCOUNTANT MEMBER AND SHRI YOGESH KUMAR U.S., JUDICIAL MEMBER I.T.A. No. 7494/DEL/2017 (A.Y 2009-10) Naftogaz Construction Ltd. 64, Poorvi Marg, 2 nd floor, Vasant Vihar, New Delhi PAN No. AACCN9791J ( APPELLANT ) Vs. DCIT Central circle-29, New Delhi ( RESPONDENT ) ORDER PER YOGESH KUMAR U.S., JM This appeal is filed by the assessee against the order dated 16/12/2016 passed by the CIT(A)-30, New Delhi,(hereinafter referred to ‘CIT(A)’ for Assessment Year 2009-10. Assessee by : None Department by: Ms. Sarita Kumari, CIT DR Date of Hearing 31.05.2023 Date of Pronouncement 31.05.2023 2 7494/Del/2017 Naftogaz construction Ltd. 2. The grounds of Appeal are as under:- 1. “The Ld. CIT(A) has erred in confirming the addition made by the LD A.O. consequent upon the search carried on 01.06.2012 because of the following: a. Because after the search the assessments were to be framed under sec 153A on " the basis of the search material found in the course of search and additions were to be made on the basis of incriminating material found during the course of search. Since no incriminating material found, the additions made outside the search material! as such the order passed by LD CIT(A) is illegal. b. Because any additions made without search material is outside the scope of assessment framed u/s sec 153A so the order passed by LD CIT(A) is illegal. 2. On the factual position also, the order passed by LD CIT(A) is not tenable as the group company of the assessee company was under liquidation and the records of the assessee company were also in the possession of the official liquidator and the directors of the company were not allowed to have any access on the records as such the assessee company was unable to produce the A.R. on behalf of the company before the LD.CIT(A). 3. Because after the search carried on the group by the department Shri Mahdoom - Bava Bahrudeen Nooral was also a party to the search and was assessed by the same A.O. while assessing the income of Shri Mahdoom Bava Bahrudeen Nooral the investment made by him in the assessee company was held as genuine, how 3 7494/Del/2017 Naftogaz construction Ltd. the same investment done by him in the assessee company can be termed as unexplained. The stand taken by Ld. AO and consequently confirmed by the Ld. CIT(A) is contrary and thereby the confirmations of the additions of Rs.500000 is contrary to the basic tenets of the tax principles.” 3. None appeared for the assessee, the repeated notices sent by the registry have been served on the assessee and even after service of the noticed not even a single occasion, the assessee or its representatives appeared before the Tribunal. Considering the above facts, we deem it fit to decide the matter after hearing the Ld. DR. 4. Brief facts of the case as per the Assessment order are that, a search & seizure action u/s 132 of the Income Tax Act, 1961 was initiated in the case of assessee as part of Naftogaz Group on 01-06-2012. The key person of the group are by Sh. Mahdoom. Bava. Consequent to search action, notice u/s 153A dated 03-06-2014 was issued, requiring the assessee company to submit the return of income within 20 days as per the manner and form prescribed in Rule 12 of Income Tax Rule, 1962. No return of income in response to notice u/s 153A submitted by the assessee within the time allowed. Therefore, vide notice u/s 142(1) dated 16-07-2014, the assessee was again asked to submit return of income. This notice was also not complied. The assessment proceedings cannot be kept in abeyance due to non filing of return by the assessee, therefore, a detailed questionnaire vide notice dated 02-12-2014 was 4 7494/Del/2017 Naftogaz construction Ltd. issued to assessee requiring him to submit the details of nature of business carried out, accounting polices followed, income earned, expenses incurred, name and address of directors, details of loan, share capital received, assets purchased, bank account maintained, details of projects / work contracts undertaken, details of sundry creditors and debtors in the books of accounts. The assessee did not submit any reply on date fixed for hearing i.e. 10-12- 2014. Therefore, another notice dated 09-01-2015 was issued fixing the case for hearing on 19-01-2015 in which the assessee. was again requested to submit all the details called for vide notice dated 02-12-2014 and submit explanation of seized material relating to assessee. The assessee did not comply with this notice also. Therefore, the assessee was issued a final show cause notice on 27- 02-2015. The assessee was intimated that no return of income have been submitted by him and no details in response to notice dated 02-12-2014 as well as 19-01-2015. In this notice, the assessee was also confronted to the information’s contained in the hard disc seized during the course of search operation at C-125, Sector-2, Noida. The assessee was also asked to explain the information’s available in the MCA site in respect of the company. In response to this notice, letter dated 09-03-2015 was received from Sh. Mahdoom Bava. He informed that he is no more director of company since F.Y. 2009-10 and the company is not in operation from F.Y. 2010-11. He further stated that the record of the company are in the premises of M/s Naftogaz India (P) Ltd., C-125A, Sector-2, Noida. M/s Naftogaz India (P) Ltd. 5 7494/Del/2017 Naftogaz construction Ltd. has gone into liquidation and the asset and records of the Company are sealed by Official Liquidator of Delhi. Hence, he do not have any access to record. He requested for adjournment for submitting the reply. The assessee did not comply with various notices issued by the A.O. Therefore, the assessment order came to be passed u/s 153A read with Section 144 of the Act by making addition of Rs.5,00,000/- u/s 68 of the Act being unexplained share capital. 4. As against the assessment order, the assessee preferred an Appeal before the CIT(A) and the Ld.CIT(A) vide order dated 16/12/2016 dismissed the Appeal filed by the assessee. 5. Aggrieved by the order dated 16/12/2016, the assessee preferred the present Appeal on the grounds mentioned above. It is to be observed that after filing the Appeal, not even a single occasion, the assessee appeared before the Tribunal. Multiple notices have been issued to the assessee and the record shows that the assessee has been served with the notice but failed to appear. Therefore, we deem it fit to decide the Appeal after hearing the Ld. DR and verifying the material on record. 6. The Ld. DR submitted that there is no error or infirmity in the order passed by the CIT(A) which requires no interference at the hands of the Tribunal and taken us through the order of the A.O. & CIT(A) and sought for dismissal of the Appeal. 6 7494/Del/2017 Naftogaz construction Ltd. 7. We have heard the Ld. DR and perused the material available on record. The Ld.CIT(A) while dismissing the Appeal observed as under:- “5.3. Findings:-The findings are as under: 5.4. I have carefully considered assessment order, statement of facts and grounds of appeal. The grounds of appeal are disposed of as under:- (i) The search and seizure action u/s 132 took place on 01.6.2012 in M/s Naftogaz Group. Notice u/s 153A of the Act. was issued on 03.6.2014 and in response to this notice, no income tax return was filed by the assessee. (ii) In the assessment proceedings, assessee was allowed adequate opportunities to represent the case. However, assessee failed to file any return of income in compliance to notice issued u/s 153A, as well as the details required through questionnaire/ show cause. During the assessment proceedings, several opportunities were allowed by the A.O., to file the return of income and represent :. case and details are as under:- S l N o . Notice u/s Date of notice Date of hearing Remarks 1 142(1) 16/07/2014 28/07/2014 None appeared 2 142(1)/q uestionna ire 02/12/2104 10/12/2014 None appeared 3 142(1)/q uestionna ire 09/01/2105 19/01/2105 None appeared 7 7494/Del/2017 Naftogaz construction Ltd. 4 Show cause 27/02/2015 09/03/2015 Request letter for adjournme nt 09/03/2015 16/03/2015 None appeared In view of the above, the A.O. was of the view that assessee has deliberately and willfully, did not comply the above notices and therefore, completed the assessment on the basis of information available on record, information from the hard disc seized during the course of search operation and information available on MCA site. (iii) It has been stated by the A.O. that the assessee has received share capital of Rs. 5,00,000/-, during the F.Y. 2008-09, relating to A.Y. 2009-10, which has been shown in the balance sheet, as well as in the hard disk seized. For this share capital, the A.O. has specifically asked the assessee vide notice u/s 142(1) alongwith questionnaire dated 02.12.2014 to furnish the details relating to share capital in para 3, as under:- "Assessment Year wise complete names and addresses of the Directors of the company and of all the shareholders. Details of shareholding of the company. Details of increase in share capital during the year with confirmation of parties/PAN and source of funds. " (Bold: Emphasis supplied) However, assessee failed to submit any such details and therefore, another notice u/s 142(1) alongwith questionnaire was issued on 09.01.2015, asking for details and also to furnish the 8 7494/Del/2017 Naftogaz construction Ltd. details already asked vide questionnaire dated 02.12.2014. However, again the assessee failed to fde any details on given date and time. Further, the A.O. issued a show cause notice dated 27.02.2015, fixing the date of hearing for 09.3.2015 and the appellant was required to submit the following details:- ”(i) During the course of search at C-125A, Sector-2, Noida, hard disc containing tally data was- seized. In this hard disc, balance sheet and P & L account belonging to you were found. The returns submitted by you with ROC were downloaded. It was found that in the baltTnce sheet with the ROC data, the capital of Rs. 5 lacs were introduced. You are requested to submit the complete details of identity, creditworthiness of share holders and genuineness of transactions. In case to failure to submit the details addition of Rs. 5 lacs will be made u/s 68 of the Act. You are requested to submit the details of expenses shown in the P & L account alongwith the documentary evidences. (iii) You are requested to submit the details of bank accounts alongwith copy o same." In the above show cause notice, the appellant was specifically asked to submit the reply on or before 09.3.2015, which was subsequently adjourned on request to 16.3.2015 and it was categorically stated that in case of non compliance, the matter will be decided ex-parte on the basis of documents/information available on record. However, none appeared on this date, nor file any written 9 7494/Del/2017 Naftogaz construction Ltd. submission. Therefore, it is clear that the appellant did not comply these notices and failed to furnish the details, as were required in these notices. In view of the above, the A.O. was of the view that the assessee failed to discharge its onus cast upon. In these facts, the A.O. considered the share capital of Rs.5,00000/-, as unexplained u/s 68 of the Act and made the addition to the total income. (iv) In the appellate proceedings, inspite of affording several opportunities, the appellant failed to furnish any details/evidences to substantiate the objections taken in the grounds, in respect of addition of Rs. 5,00,000/- u/s 68 of the Act, on account of share capital. In the statement of fact, the appellant has stated that an amount of Rs. 5,00,000/- was introduced by the assessee company as share capital, which is minimum capital ought to have been held by a limited company. As the premises of company was sealed, therefore, it was not possible to furnish the information. This submission of the appellant is not acceptable, since nothing was stated before the A.O. in the assessment proceedings and also in the appellate proceedings, except mentioning in the statement of fact and therefore, this claim is not substantiated by the appellant. From the above, it is clear that, if A.O. can fetch the information from MCA site, then who prevented the appellant to file such details before the A.O., as well as in the appellate proceedings to prove the genuineness of the alleged transaction entered in the form of share capital. The details of share holders were not furnished by the appellant before the A.O. and therefore, it was not possible for the 10 7494/Del/2017 Naftogaz construction Ltd. A.O. to call the information u/s 133(6) of the Act, as suggested by the appellant in the statement of fact. On perusal of assessment record, it is clear that in the annual return filed on 30.9.2009 under the company's Act for F.Y. 2008-09, the name of the share holders for the fresh 50,000 shares are as under:- (a) M/s Naftogaz India Private Limited 10,000 b) Shri Mahdoom Bava Bahrudeen Nooral 39995 c) Shri Ramendra Kumar Jain 1 d) Shri Mohammad Naim Khan 1 e) Shri Kishor Kumar Pahraj 1 f) Shri Pankaj Kumar Gupta 1 g) Shri Sergil KJiliupin 1 TOTAL 50,000 Shri Mahdoom Bava Bahrudeen Nooral, holding majority of shares is the Director of the appellant company, who has filed this appeal and similarly, M/s Naftogaz India Private Limited, is also a group concern of Naftoz Group. In these facts, the submission of the appellant through statement of fact that the A.O. should have called the information u/s 133(6) of the Act, is not acceptable, since all the information relating to atleast these 2 persons, was available with the appellant and it is not the case of the appellant, that these shareholders are third parties. Accordingly, it is clear that the appellant failed to furnish the information in the assessment proceedings and also in the appellate proceedings, to prove the genuineness of the fresh share capital. In view of the above, I am of the considered opinion that the appellant failed to prove the genuineness of transactions relating to fresh share capital of Rs. 5,00,000/- and therefore, I do not find any 11 7494/Del/2017 Naftogaz construction Ltd. infirmity in the findings of the A.O. for making the addition u/s 68 of the Act. Therefore, addition of Rs.5,00,000/-, is confirmed. Accordingly, ground No. 2, is hereby dismissed. Ground No. 3 is against initiation of penalty u/s 271 (1 )(c) and 271(1 )(b) of I.T. Act. This ground of appeal is premature, as no order has been passed by the A.O., which is challenged in this appeal. Accordingly, this ground of appeal is dismissed.” 8. It is found from the record that the assessee had failed to prove either before the A.O. or before the CIT(A) regarding the genuineness of transaction relating to fresh share capital of Rs. 5,00,000/-. Apart from the same, there is no material before us to show that the transaction relating to fresh share capital are genuine. Thus, we find no error or infirmity the order of the CIT(A), accordingly, the grounds of Appeal of the assessee are dismissed. 9. In the result, the Appeal of the assessee is dismissed. Order pronounced in the open court on : 31/05/2023. Sd/- Sd/- ( ANIL CHATURVEDI ) (YOGESH KUMAR U.S.) ACCOUNTANT MEMBER JUDICIAL MEMBER Dated : 31/05/2023 *R.N, Sr. PS* 12 7494/Del/2017 Naftogaz construction Ltd. Copy forwarded to :- 1. Appellant 2. Respondent 3. CIT 4. CIT (Appeals) 5. DR: ITAT ASSISTANT REGISTRAR ITAT NEW DELHI