TaxTMI 
TaxTMI 
2013 (11) TMI 525
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.... Mauritius Ltd. by the assessee on 24.1.1997 as its income by treating the said transaction as sham transaction in the assessment year under consideration. 3. Relevant facts are that the assessee is presently engaged in giving advisory services and traded in shares. Earlier assessee was a trader in SKO- Superior Kerosene Oil. It imported SKO and was selling the same in domestic market. During the course of assessment proceedings, the Assessing Officer observed from the balance-sheet as on 31.3.2007 that under the head "current liabilities" an amount of Rs. 3,04,38,400/- is reflected being advance against exports. On an inquiry, assessee stated that the said amount of Rs. 3,04,38,400/- was received as an advance against exports on 24.1.1997....
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....or the purpose other than for export to the entity from whom advance had been received. Therefore advance received was not for the purpose of any export and doubted the genuineness of the transaction. Besides above, the Assessing Officer has also stated that the assessee could not furnish balance-sheet from M/s. Amas Mauritius Ltd. to establish that liability still subsist. The Assessing Officer has also stated that M/s. Amas Mauritius Ltd. is a 40% shareholder in the assessee-company and it is more surprising that the assessee is unable to furnish the balance sheet of its majority shareholder i.e. M/s. Amas Mauritius Ltd. He has concluded that by not producing the balance-sheet the assessee has failed to discharge the onus of creditworthin....
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.... never established by the assessee in the Memorandum of Understanding and AOA. He has stated that the assessee has not been able to establish the very reason that it has received the money from and the origin of the money. Learned CIT(A) after considering the Regulation 16 of FEMA dated 3.5.2000, which we have already mentioned hereinabove, has concluded that the assessee has received a clear cut benefit by way of the said advance for a trading liability. This amount is not a notional receipt. The assessee has not been able to establish the trade it had undertaken or was being undertaken and that the liability exists. Learned CIT(A) has concluded that the Assessing Officer has rightly held that the transaction was a sham transaction and the....
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....arned CIT(A) and submitted that considering the fact that the advance was received in 1997 and the goods are yet to be exported, the said advance has to be treated as income of the assessee by efflux of time and amount is to be added u/s. 41(1) and/or 28(iv) of the Act. Learned AR in rejoinder submitted that similar issue had also been considered by ITAT, Mumbai Bench in the case of M/s. Jayram Holdings Pvt. Ltd. Vs. ITO (ITA No. 6914/Mum/2010 order dated 4.7.2012) and filed copy of the said order to substantiate his submission. 7. We have carefully considered the orders of the authorities below and submissions of the representative of the parties. We have also gone through the relevant pages of the paper book to which our attention was dr....
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....of liability for the purpose of section 41(1) of the Income Tax Act. In view of above, we agree with learned AR that learned CIT(A) and Assessing Officer are not justified to apply provisions of section 41(1) of the Act. We also observe that the Assessing Officer has doubted the genuineness of the transaction as well as creditworthiness of the lender/payee. We are of the considered view that since the said amount received by the assessee in January, 1997 and the same was appearing in the books of account of the assessee, genuineness of the transaction as well as creditworthiness of the party could not be considered in the assessment year under consideration for making the said addition u/s. 41(1) read with section 28(iv) of the Act. 8. Be ....