TaxTMI 
TaxTMI 
2013 (4) TMI 659
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....sessee's case. 3. Whether on the facts and in the circumstances of the case, the Ld. CIT(A) is justified in saying that in the proceedings initiated u/s 153A, the AO has all powers to go beyond the seized material during the search?" 2.2. Ld. Counsel for the assessee at the time of hearing, did not press these grounds. Therefore, they are dismissed accordingly. 3. The other common grounds are as under: (i) Addition in respect of share capital received by the assessee as under: A.Y. 2002-03 - Rs. 24,44,300/- received by the assessee from the promoter company based in Russia. A.Y. 2003-04 - Nil A.Y. 2005-06 - Rs. 55,44,000/- - received from promoter companies Russian Technology Centre Holdings Ltd. (RTCHL) & Protex Trading Co. Ltd. A.Y. 2007-08 - Rs. 1,17,72,500/- received from promoter companies Russian Technology Centre Holdings Ltd. (RTCHL) & Protex Trading Co. Ltd. (ii) disallowance of the expenditure debited to the P& L A/c (except audit fee), relating to A.Y. 2002-03, 2003-04 & 2005-06. (iii) Awarding of suitable cost u/s 254(2B) in all the appeals. (iv) CIT(A)'s rejection for admissi....
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....for your ready reference in support of the genuineness and to-provide identity of shareholders. 1. FIPB Approval dt. 16 September 1998 received by the Company authorizing to raise share capital up to (USD 3 lakhs.) 2. Copy of certificates of incorporation of share holders 3. Copy of bank statement | 4. Copy of form 2 filed before ROC In respect of squared up loans, assessee has furnished that" during the year the assessee company has accepted loan of Rs. 5,00,000 from M/s Tsunami Technologies India P. Ltd by DD no. 080863 dtd 12-04-2004. The sum has been repaid vide cheque no. 211661 drawn on Union bank, of India, Vasant Vihar. Copy of confirmation is attached herewith." 4.4. Assessing officer, however, was not satisfied and was of the view that the share capital provided by the appellant company was not genuine and the amount was channelized by assessee through tax haven. Assessing officer held that assessee has not established the financial capacity and creditworthiness of the share holders by following observations:- "Therefore, in view of the partial details furnished by the assessee company, the unsecured loan taken by t....
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....idence filed to assessing officer for furnishing his remand report vide his letter dated 18-7- 2011. Assessing officer submitted remand report to the following effect:- (a) assessee had attended the proceedings three times before. Therefore, sufficient opportunities were given before completing the assessment. (b) On merits, the additional evidence proposed to be filed, did not prove the creditworthiness of the share holders. 5.1. The assessee was furnished with a copy of the remand report on which it filed a rejoinder dated 24-8-2011, reiterating the facts about the insufficiency of time and admissibility of additional evidence. CIT(A) however passed the following order on the admission of additional evidence as well as the merits of the evidence:- "5.2. At the appellate stage, the assessee has produced certain additional evidence under rule 46 A but has not given any satisfactory explanation as to why it could not produce these documents before the Assessing Officer. These documents are stated in page 5 and 6 of the paper book submitted on 02/09/2011. 5.3. I have gone through the contention of the appellant and it is observed that the fresh ....
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....has not been admitted and a mere reference of "without prejudice" based on the contents of the documents filed cannot be construed to be deemed admission of additional evidence. 7. Apropos the grounds about additional evidence, we have heard rival contentions and perused the relevant material on record. The assessee had already filed various documents in respect of identity, genuineness and creditworthiness of the shareholders. In our considered view when the assessee is able to make out a case of insufficient time for complying with the requirement, the additional evidence is to be admitted as per the prescription of Rule 46A. Besides, the remand was called by CIT(A) from assessing officer and further assessee was asked to file the rejoinder thereon. After consideration of entire material in this behalf, the CIT(A) has given findings on the contents of the additional evidence. In our view, all these circumstances lead to a conclusion that CIT(A) considered the additional evidence and gave a finding on merits against assessee. Thus, the consideration of additional evidence by CIT(A) appears to be inbuilt in the order. In any case to avoid any controversy in facts and circumstanc....
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.... sought to be explained by the assessee by submitting following documents before the assessing officer:- (i) FIPB approval dt 16 September 1998 authorising the company to raise share capital upto USD 3 Lakhs. (ii) Amendment to FIPB approval dt 09-06-2004 (iii) FIPB approval dtd 20-12-2005 received by the company authorizing to raise share capital upto Rs. 600 Crores (iv) Copy of certificates of incorporation of shareholders (v) Confirmation given by remitter towards remittance for share capital (vi) Copy of FIRC (vii) Copy of bank statements (viii) Copy of Form 2 filed with ROC 8.3. Thus the assessee before assessing officer provided all possible information which was humanly possible in the matter to discharge primary onus cast by Sec. 68. The moneys have undisputedly come through banking channels, approvals by the highest investment board i.e. FIPB has been sought before bringing capital in the country, all statutory compliances relating to share capital received from foreign company had been duly made and the source of the source had also been established in as much as the Balance Sheet of RTCHL clearly s....
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....e share application money. Ignoring various documents procured from FIPB confirmations, ROC records, vehement insistence has been made only on the bank statements of the shareholders. According to ld. Counsel when the burden of the assessee can be amply proved from the documents filed by it, cash credit/ share application money cannot be held to be non-genuine without adjudicating them and picking up the non-filing of bank statements of shareholders. The assessing officer has a quasi judicial duty to weigh the quality of evidence produced before it and if it is sufficient to discharge the burden of assessee, the same cannot be cryptically disregarded in the pretext of document which was not filed by the assessee. (iii) Coming to CIT(A)'s order, ld. Counsel contends that the Hon'ble Delhi High court in the case of Oasis Hospitalities Pvt Ltd. (supra) no where lays down that production of bank statement of a shareholder was a mandatory requirement for discharging the onus in respect of establishing the creditworthiness of the shareholders. Oasis Hospitalities Pvt Ltd. (supra) has been rendered on totally different facts and circumstances. The case law is decided on t....
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.... share capital. The assessee company was subsidiary of RTCHL and it used up what ever share capital it had received over a period of 5 to 6 years. No revenue could be generated by the company and no material could be imported due to the paucity of funds and other circumstances. Hence, according to the assessee, in such a case, section 68 would not apply. 9.2. Ld. Counsel for the assessee Shri Ajay Wadhwa further contends that the law itself provides that section 68 cannot apply to remittance made by the non-resident into India for deposit in bank account or for purchase of shares etc. The assessee contended that section 68 or 69 would apply only when the income is otherwise wise taxable u/s 5(2) in the hands of non- resident who remits the money. According to the assessee, section 5(2) states that in the case of non-resident, income which accrues or arises in India or is received in India would be taxable in India. When the non- resident remits money from his bank account abroad then, the said remittance is treated as capital receipt and cannot be said to be income. This is because the money must have been first received by the non-resident outside India in his bank account and ....
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....brought from outside otherwise than through banking channels and there is no evidence regarding the transfer of money that the Department has to make enquiries about the source thereof. Even in these cases, having regard to the difficulties experienced by persons migrating from Pakistan, Burma and East African countries, instructions have been issued to the ITOs that such claims should be freely admitted upto the limit of Rs. 50,000 in each case provided the following conditions are satisfied. (a) The assessee migrated to India on or after the dates mentioned below from the countries shown against each and had no source of income in India :- (i) 30th July, 1962 Mozambique (vide Ministry of Finance Press Note dt. 22nd May, 1967); (ii) 1st Nov., 1963 (Sic.) Zanzibar, Kenya, Tanzania and Uganda (vide Ministry of Finance Press Note dt. 22nd May, 1967); (iii) 1st Jan., 1964 East Pakistan and Burma (vide Ministry of Finance Press Note dt. 25th June, 1964/22nd May, 1965); (iv) 1st Oct., 1965 West Pakistan (vide Ministry of Finance Press Note dt. 3rd Feb., 1969). (b) He had sufficient resources in the foreign country. (c) He ha....
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....o the facts of the case in as much as, the identity of the share holders has been established and there is no reasons to even suspect that the funds brought in belong to the assessee. The assessee placed further reliance on the decision of Delhi High Court in CIT v. Tulip Finance Ltd (2008) 15 DTR (Del) 185 and CIT v. Pondy Metals - ITA No. 788/2006 wherein confirmation from the non-resident remitter and the fact that remittance came in through banking channels was found to be sufficient compliance. 10. Ld. CIT (DR), on the other hand, relied on the order of assessing officer and CIT(A). She further relied on the judgment of Hon'ble Delhi High Court in the case of CIT Vs. Nova Promoters and vehemently argued that the share capital route has been misused by the assessee in laundering dubious money. The assessee failed to discharge its burden as cast by sec. 68 in terms of identity, creditworthiness and genuineness of transaction. In view thereof, additions have been made. 11. We have heard rival contentions and perused the material available on record. The first and foremost question to be decided is whether on the basis of material furnished by the assessee and available ....
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....t between the provisions of s. 5(2) and the provisions of s. 68 or 69. It is the settled legal position that burden is on the Revenue to prove that income of an assessee falls within the net of taxation. Once it is so proved then the burden is on the assessee to prove that such income is exempt from taxation. Reference can be made to the Supreme Court judgment in the case of Parimisetti Seetharamamma vs. CIT (1965) 57 ITR 532 (SC). Sec. 52 being charging section, the burden is on the Revenue to prove that the income of the non-resident falls within the ambit of such section. On the other hand, the legislature has cast the onus on the assessee to explain the source of money falling within the ambit of s. 68 or s. 69. These sections are of universal application and do not make any distinction between a resident or non-resident. Therefore, there is conflict between the provisions of s. 5(2) on one hand and the provisions of s. 68 or 69 on the other hand with reference to the burden of proof. Hence, in our opinion, if there is any cash credit in the books of account of the non-resident then the source and genuineness of the same will have to be proved by him. For the similar reasons, t....
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....through banking channel and the manner in which this money was utilized in India is described in the Annexure. We have observed in the above paras that because of the mode of banking channel, admittedly, used for the remittance in this case, the onus on the assessee under s. 69 stood discharged, and therefore it was not taxable in India under s. 5(2)(b) of the Act. The CBDT circular (supra) squarely supports the case of the assessee. The fact that the transactions and events narrated in the Annexure look curious and suspicious makes no difference to the conclusions that we have drawn in this case, as per law, in the above paras" 11.3. Apropos applicability of CBDT Circular no. 5 dated 20-2-1969, the ITAT in the case of Saraswati Holding (supra), while examining the issue in question in the light of CBDT Circular no. 5 dated 20-2-1969 and the decision of Finlay Corporation (supra) held as under:- "10. In the light of the above decision of the Tribunal, and Circular No. 5 of CBDT, we are of the view that the action of the Revenue authorities in bringing to tax the sum of Rs. 3,83,11,550 cannot be sustained. We have already held that the assessee is a tax resident of Mauri....
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....), the independent existence of the share applicants in Russia is clearly established. The assessee's application to FIPB for raising the capital contains all the relevant details which is favourably accepted by the Board, particularly by allowing the assessee to raise further the capital without approaching the FIPB. The transactions are through banking channels. Thus the gamut of evidence does not leave any doubt in the discharge of primary burden of the assessee. On the issue CBDT Circular and Finlay Corporation judgment (supra) also we are in agreement with the ld. Counsel for the assessee that in these circumstances of the case moneys remitted by non-residents through banking channel outside India has to be held as capital receipts, not exigible to tax and cannot be treated as deemed income on the fictions created by sections 68 and 69 of the Act. In consideration of all these observations, we are inclined to hold that the share application money as raised in the grounds of appeal cannot be held as non-genuine and added as income of the assessee u/s 68 of the Act. Consequently, additions made on this count, as raised in grounds of appeal, are deleted. Assessee's ground....
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.... show various business activities and the same are produced herewith Apart from this the assessee has carried out various business activities during the year by conducting meetings with prospective customers and suppliers. The assessee carries sufficient records in support of all expenditures incurred by them. In view of the above it is humbly requested that the entire expenditure may be allowed" A.Y. 2005-06- The assessee had participated in the tenders in bigger volume and had become L1 in few cases. As the volume of business activity increased the assessee had inducted necessary man power to carry out the work. We would like to further reiterate that the process of getting tender enquiries, furnishing of quotes, becoming L1, receiving of supply order, supply of items etc takes minimum 4 to 8 months time depending on the items asked and availability of the same. So it is not necessary that just by started receiving tender enquiries or by becoming l_1 the company can show income in the books of accounts. Your good self can see that the sale booked by the company in the FY 2005-06 is pertaining to the tender enquiry floated on Feb 2005 and the same was ex....
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....preferred first appeal before CIT(A) where assessee reiterated its stand and filed detailed written submissions dated 2-9- 2011 for the activities undertaken and for allowability of expenses. 12.7. Before CIT(A), reliance was placed on following judgments:- - CIT v. Saurashtra Cement & Chemical Industries Ltd. (1973) 91 ITR 170 (Guj.); - CIT v. Electron India (2003) 241 ITR 166 (Mad); - CIT Vs. ESPN Software India P. Ltd. (2008) 301 ITR 368 (Del.); - CIT Vs. Hughes Escorts Communications Ltd. (2009) 311 ITR 253 (Del.); - CIT Vs. Whirlpool of India Ltd. (2009) 318 ITR 347 (Del.). - CIT v. Aspentech India (P) Ltd. (2010) 229 CTR (Del) 172. - Dy. CITVs. Hazira Gas (P) Ltd. (2011) 8 ITR (Trib-Ahd.) 630. 12.8. CIT(A) without adverting to the detailed submissions filed by the assessee, disallowed the expenditure by summarily holding that assessee failed to adduce any evidence to substantiate its claim that it has commenced the business and relied on Hon'ble Bombay High Court judgment in the case of Western India Vegetable Products Ltd. V. CIT 26 ITR 151. CIT(A) failed to consider plethora of evidence and case laws f....
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....ssment u/s 153A was also framed in that case. All the records including the bank statements of CSEZ were seized by the department and the assessing officer instead of verifying its own record, has erroneously held that the assessee did not produce the bank statement. 16. Ld. DR relied on the order of lower authorities. 17. We have heard rival contentions and perused the relevant material on record. We find merit in the arguments of ld. Counsel that CSEZ also being searched on the same date and the seized record being with the department, department could have verified the same from its record. The interest of justice will be served if the issue is remitted back to the file of assessing officer to verify from the seized record about the bank statement of CSEZ and decide the issue after giving the assessee fair and reasonable opportunity of being heard. The assessee may be allowed to submit necessary evidence in this behalf. This ground of the assessee is allowed for statistical purposes. 18. That leaves us with the issues for A.Y. 2007-08 i.e. disallowance of interest of Rs. 7,54,797/- paid on unsecured loans added u/s 68. 19. Ld. Counsel for the assessee contends that t....
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....s, the said M/s Alpcord Network also filed confirmation with the department. 24. Ld. Counsel for the assessee claims that the addition has been confirmed without referring to the statement of the director and confirmation filed by M/s Alpcord Network. Any addition made without referring to the record available with the department cannot be sustained. 25. Ld. DR supported the order of lower authorities. 26. We have heard rival contentions and perused the relevant material on record. The contention of the assessee that the confirmation and statement of Sri Govind Singh director of M/s Alpcord Network being on record, has not been denied by the department. The addition has been made on the basis that assessee could not produce necessary evidence. In our view, if the record is available with the department and assessee pointed out towards it, then as a principle of natural justice, lower authorities should verify that evidence and decide about the allowability. Ends of justice will be met if this issue also restored to the file of assessing officer to verify the claim of the assessee after proper opportunity of being heard. This ground is allowed for statistical purposes. 2....