AI OCR 
TaxTMI 
TaxTMI 
TaxTMI 
2019 (4) TMI 198
X X X X Extracts X X X X
X X X X Extracts X X X X
.... For the sake of disposal of both the appeals, we proceed to decide ITA.No.5629/ Del./2013 for the assessment year 2008-2009 as under. ITA.No.5629/Del./2013 - A.Y. 2008-2009 : 4. The facts of the case are that the assessee is a Company filed return of income declaring loss of Rs. 13,72,942/-. The assessing officer on perusal of the return and details submitted found that during the year under consideration the assessee-company has received share application money of Rs. 7,92,19,406/- on 15th February 2008 from the Holding Company M/s. Palm Technologies (P) Ltd., Mauritius. Thus, assessee was asked to furnish complete details regarding share application money received and prove the creditworthiness of the Investor. In response thereto, the assessee submitted as under : "Evidence of credit worthiness of Palm Technology Ltd., The said company was incorporated in Mauritius on 31.10.2000 under the name of Y2K Ltd. (a) Certified copy of Certificate of Incorporation dated 16.11.2010 is enclosed. (b) Thereafter, the name of the company was changed into Palm Technologies Ltd., in terms of certificate issued by the Registrar of Companies effective 15th March. 2002. (Attested copies....
X X X X Extracts X X X X
X X X X Extracts X X X X
..... In this Reference, Government of Mauritius was requested to provide the following details : 'Enquiries to be conducted with regards to M/s Palm Technologies Ltd. Mauritius with following specific queries: - a) Source of funds in the remitter banks. b) Copy of account of M/s Palm Technologies Ltd. in the remitter banks from 1.4.2000 to 27.02.2007. c) Equity structure in M/s Palm Technologies Ltd. Mauritius. d) Beneficial owner of M/s Palm Technologies Ltd. Mauritius. e) Sources of funds in M/s Palm Technologies Ltd. Mauritius. f) Copy of all bank accounts of M/s Palm Technologies Ltd. Mauritius in for the period 1.4.2000 to 27.02.2007. g) Copy of Annual Accounts of M/s Palm Technologies Ltd. Mauritius filed before the Mauritian Tax Authorities, if any, starting from financial year 2000-01 till 2006-07. h) Photo copies of documentation filed before the Competent Authorities in Mauritius for bringing funds in Mauritius in the accounts of M/s Palm Technologies Ltd. Mauritius. i) Any other query which the Mauritian Tax Authority may deem fit in this regard" 4.3. The Government of Mauritius vide its letter dated 4th April 2008 provided the income statement and ba....
X X X X Extracts X X X X
X X X X Extracts X X X X
....Rs. 3,25,00,000/- 2007-08 Rs. 17,32,98,000/- Rs. 1,90,00,000/- 2008-09 Rs. 17,32,98,000/- Rs. 9,57,19,406/- 4.6. The assessing officer also noted that investment in the share capital of the assessee-company has been made through the borrowings from two entities controlled by Shri Suresh Nanda that are as under : UBS Trading FZC US $ 3,000,000 Y2K SIL US $ 431, 197 4.7. Thereafter, the assessing officer tried to make a point that as to how there was a close link of Shri Suresh Nanda with UBS Trading FZC and Y2KSIL which were noticed from the documents recovered during the course of search under section 132 of the Income Tax Act on 28th February 2007. The documents are described below :  Page no. 35 Annexure No. A-8 seized from the residence of Mr. Suresh nanda-4, Prithvi Raj Road New Delhi. This is draft of a letter issued by Mr. Suresh Nanda from Dubai to M/s Infotech Services Ltd., Jersey, Channel Islands where it has been written that shareholders of UBS Trading FZC are 1% - M/s ISL and 99% - Suresh Nanda. In this letter it is written that M/s UBS FZC will declare an interim dividend of USD 4.5 millions which will go toward capital contribution in UBS Ma....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ssing officer further noted from the above mentioned documents that it is evident that Mr.Suresh Nanda is the owner of M/s. UBS Trading FZC, Dubai. He has been making investments in Mauritius based company to hide the true source of money, till it is finally invested in India. The fact that investment in assessee-company is financed through the borrowings from M/s. UBS Trading FZC, Dubai and Mr.Suresh Nanda close association with the affairs of Claridges SEZ Pvt. Ltd., in India goes to show that it is Mr.Suresh Nanda's money that has been routed through M/s. Palm Technologies (P) Ltd., Mauritius into Indian Company. The assessing officer also noted that there is a close connection of Mr. Suresh Nanda with Y2KSIL which is evident from the document seized during the course of search operation under Income Tax Act conducted on the premises belonging to Mr. Suresh Nanda, details of the same are noted in the assessment order. Based on these facts, assessing officer held that assessee-company has been bringing unaccounted money after creating layers of intermediaries including M/s. Palm Technologies (P) Ltd., Mauritius due to less stringent exchange control norms there. The intermediarie....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ilarly, share application money was received from M/s. Palm Technologies (P) Ltd., Mauritius and Ld. CIT(A) deleted the addition following the decision in the case of M/s. Russian Technology Centre Pvt. Ltd., The Learned Counsel for the Assessee further submitted that the Department has filed appeal before ITAT, Delhi Bench against the order of Ld. CIT(A) for the assessment year 2004-2005 and assessee also filed cross-objection. The Tribunal has quashed the assessment order being barred by limitation vide order dated 28th September 2017. Learned Counsel for the Assessee submitted that if Mr.Suresh Nanda made the money available as per the contention of the Department, no addition could be made in the hands of the assessee. Learned Counsel for the Assessee referred to Para 2.5 of the assessment order, in which, the Government has made a reference to Government of Mauritius through Director General of Income Tax (Inv.) making inquiries against the Investor Company, on which, several details were asked for and the Government of Mauritius has filed a reply to the Government confirming the source of the funds and also confirmed the investment made by the Investor Company. He has, ther....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... Mr Suresh Nanda in ITA.Nos.2237 & 3718, 3431 & 4641/Del./2013 dated 11th April 2014, in which, similar addition has been deleted in the hands of Shri Suresh Nanda. Para-70 of the order is reproduced as under : "70. Ground No. 4 relates to addition made on protective basis. We find that Ld CIT(A) has clearly held that share capital was subscribed Palm Technologies Ltd. which is a separate entity. Ld. CIT(A) held by a clear finding that the capital did not belong to assessee but to a distinct entity whose existence is not denied. After giving such dear finding, he should not have given finding about addition on protective basis. Palm technologies Ltd. and assessee are held to be two different persons. The CIT(A) has held that ownership of Palm Technologies Ltd is known and appellant was not a shareholder in Palm Technologies which was owned by One Mrs. EA Half land. It is undisputed that both UBBS and PTL are duly incorporated companies under the laws of Sharjah and Mauritius respectively. The Ld CIT(A) has himself observed that this amount cannot be held as un-explained money/investment of appellant thereafter there is no justification in keeping a protective addition in this....
X X X X Extracts X X X X
X X X X Extracts X X X X
....nking channels from its principal and other related companies: it had submitted the FIPB Approval dated 10.12.2005 authorizing the assessee company to raise capita! unto '600crores. copy of certificates of incorporation of share holders, copy of bank statement copy of Form 2 filed before ROC, copies of Certificates of (i) Incorporation of RTCHL, (ii) Incumbency of RTCHL, (iii) Good Standing of RTCHL. (iv) Director Certificate of RTCHL as well as the Balance Sheet of RTCHL for the years 2004-05 and the confirmation given by the remitters towards remittance of share capita! etc. This was all that the assessee could have furnished in the circumstances. It could not be expected to prove the negative that the monies received by it were suspicious or not genuine infusion of capital etc. The assessee had discharged its burden of proof in terms of the settled dicta in Divine Leasing (supra). It is only logical to expect that if the AO was not convinced about the genuineness of the said documents, he would have inquired into their veracity from the banks) to ascertain the truth of the assessee's claims. Having not done so. he was not justified in disregarding the assessee's conten....
X X X X Extracts X X X X
X X X X Extracts X X X X
....of Mr Suresh Nanda and M/s. Russian Technologies Pvt. Ltd., (supra). Apart from the above, the Learned Counsel for the Assessee also relied upon the following decisions : 1. Commissioner vs. Orissa Corporation Ltd. reported in (1986) 159 ITR 78 (SC) 2. CIT vs. M/s Pondy Metal and Rolling Mill in ITA No. 788/2006 3. CIT vs. Diamond Products Ltd. [2009] 177 Taxman 331 (Delhi) 4. CIT vs. Flex Plastic & Packaging (P.) Ltd. [2007] 211 CTR 607 (Delhi) 5. PCIT vs. Paradise Inland Shipping (P.) Ltd. [2017] 84 taxmann.com 58 (Bom). 6. CIT vs. Lalit Kumar Poddar (2015) 231 taxman 819 (Delhi). 7. CIT Vs. Gangeshwari Metal (P.) Ltd., reported in 361 ITR 10 (2014). 8. Dolphin Canpack Ltd., reported in 2004 CTR 50. 9. CIT vs. Samir BioTech P. Ltd., [2010] 325 ITR 294 (Delhi), ITA No. 415/2008 (Delhi). 7.5. Learned Counsel for the Assessee also contended that since addition has been deleted in the hands of Mr. Suresh Nanda on substantive basis, which is confirmed by the Hon'ble Delhi High Court, then the findings of the assessing officer which are solely based on the presumption that it was the unaccounted money of Mr. Suresh Nanda routed through the intermediary compa....
X X X X Extracts X X X X
X X X X Extracts X X X X
....by Ld. D.R. as to how case of Revenue is different from earlier years. In assessment year under appeal, based on the same facts, the assessing officer made certain inquiries with regard to source of the money and sought information from the Government of Mauritius, who have supplied certified copies of the balance sheet and income statement for earlier years as well as for assessment year under appeal, in which, it is clarified that the Investor Company has made investment in assessee-company through its own sources. The assessee-company filed Tax Residence Certificate issued by the Tax Department of Government of Mauritius, Certificate issued by Registrar of Companies, Letter addressed to Reserve Bank of India and Form FC-GPR, Compliance Certificate issued by the Company Secretary and details issued by IDBI Bank. These documents supports the explanation of assessee-company that assessee-company received genuine share application money. The assessing officer instead of examining the documentary evidences and record in depth, has made an attempt to link Mr. Suresh Nanda, who was having interest in the Companies namely M/s. UBS Trading FCZ and Y2KSIL, who were the different entities,....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e source. We, rely upon the Judgment of the Hon'ble Gujarat High Court in the case of Rohini Builders 256 ITR 360 (Guj.), and Judgment of Hon'ble Delhi High Court in the case of Dwarakadheesh Investment Pvt. Ltd., 330 ITR 298 (Del.) and Judgment of Hon'ble Allahabad High Court in the case of Zafar Ahmed & Co., 30 taxmann.com 269 (Alld.). However, in the present case, the assessee-company has even explained the source of the source. The Hon'ble Madhya Pradesh High Court in the case of CIT vs. Peoples General Hospital Ltd., [2013] 356 ITR 65 (MP) has admitted the following substantial question of Law in one of the appeal : "(i) Whether the Income-tax Appellate Tribunal was correct in law in deleting the addition made by the Assessing Officer in respect of the non-resident Indian company, which admittedly has contributed share capital, even on the assumption that the assessee has failed to discharge the financial capacity of the non-resident Indian company ?" 8.2. The Hon'ble Madhya Pradesh High Court held as under : "Held dismissing the appeals, that if the assessee had received subscriptions to the public or rights issue through banking channels and furnished complete details ....