TaxTMI 
TaxTMI 
2019 (10) TMI 434
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.... the AO to lift the corporate veil is not in question without appreciating the fact that on lifting the corporate veil it is clear that Biometrix has been created as a mere camouflage or shell or sham company deliberately created by the persons exercising control over the same for the purpose of avoiding liability. (iii) The Ld. CIT(A) has erred on facts and in law in deleting the addition made u/s. 68 of the Income Tax Act, 1961 holding that Non submission of most crucial documents like Loan account of Biometrix and OCBC account of Biometrix is not necessary without appreciating that It clearly confirms the doubts raised by the AO regarding the nature and, genuineness of the transaction and thereby clearly attract the provisions of section 68 of the Act. (iv) The Ld. CIT(A) has erred on facts and in law, completely ignoring the fact that Biometrix is ultimately subsidiary of one of the Reliance group company. He has just taken a view that it's an independent company and following the laws of Singapore. However he has completely disregard the fact that it's an arrangement within Reliance group companies and Biometrix is just a conduit. (v) The Ld. CIT(A) has erred ....
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....ording to him, the nature and genuineness of the transaction of investment by BMPL in Preference Shares issued by the assessee was not established. This stand of the Assessing Officer was consistent with the stand of the assessing authority in other group concerns referred above. It is in this background, it was a common point between the parties that the facts and circumstances of the dispute in the instant case are similar to those in the case of M/s. Reliance Utilities Pvt. Ltd. (supra) and M/s. Reliance Ports and Terminals Ltd. (supra). 5. It is also notable that the CIT(A) has also considered the matter in the impugned order in the similar manner as in the case of other two group concerns. For the sake of brevity and avoiding repetition, the operative part of the CIT(A) order is reproduced hereunder: "8.31 As noted above, identical issue is involved in the other group companies of Reliance in this connection the Ld counsel has submitted the appellate orders in appeal No CIT(A)-8/IT-115/15-16 dated 30/10/2015 in the case of Reliance Utilities Pvt Ltd A.Y 2008-09 and appeal no CIT(A)-8/IT-118/15-16 dated 30/10/2015 in the case of M/s Reliance Ports & Terminals Ltd A.Y 2008-....
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....s conceded by both the sides, the facts are exactly identical as in the appeal of Reliance Ports & Terminals Ltd. in ITA No.223/M/2016 for the assessment year 2008-09, wherein this Bench has held as under:- "28. Now the transaction under question is an investment of Rs. 700 crores by Biometrix into the assessee Company in the form of Compulsory Convertible Preference Shares ("CCPS"). We are of the view that the assessee has shown the relevant materials on records for the AO to get satisfied on the nature, source and genuineness of the investment transaction. In our view it remains undisputed that it is Biometrix which had invested into the assessee in the form of CCPS. Admittedly assessee has placed on record the complete sequence of transaction including the transfer of funds from the bank account of Biometrix into the bank account of assessee and the corresponding allotment of CCPS by the assessee and finally furnishing and filing the statutory declarations and forms both with the Reserve Bank of India ("RBI") and the Registrar of Companies ("ROC"). The Revenue has not disputed this position at any point in time including before the Tribunal. These all documents relating to Bio....
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....and report also details out facts as under:- "4(A)(vii) The ICICI Bank secured the loan by (i) creating exclusive charge over all cash flows and assets excluding the CCPS and CCDs invested in from the proceeds of the loan; (ii)Non disposal undertaking on the shareholding of the borrower company in a form and manner acceptable to IC/CI Bank and (iii) assignment of Put Option with respect of sale/transfer of CCPS/CCDs. " (page 170 of the paper book) (emphasis supplied) We have also raised a query as to whether Biometrix had repaid the loan to ICICI Bank even though this question may not be relevant to decide the fate of the proceedings under section 68 of the Act. The Revenue conceded the fact that these loans have been repaid and this stands also proved independently through the findings rendered at various stages. Even the report of DDIT(lnv)-Unit 11(1), Mumbai records the following findings: "17 (ii) Subsequently, the CCPS held by Biometrix were purchased by three companies of the Mukesh Ambani group. The principal amount of loan from ICICI Bank was also repaid out of remittances from Mukesh Ambani group." (page 705 of the paper book) (emphasis supplied) We find that Co....
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....That Biometrix has repaid the loan to ICICI Bank out of remittance from Mukesh Ambani group; e) That the transaction in question can never be construed as bogus transaction; f) That complete financial flow commencing from ICICI Bank finding its way to the assessee disclose the nature source and genuineness of the transaction; g) That contemporaneous transactional documents also disclose the nature source and genuineness of the transaction; h) That Biometrix genuinely existed in Singapore and was not a shell/ conduit company; i) That Biometrix maintained adequate debt cover ratio and fulfilled the various covenants under the Facility Agreement; and j) That the assessee made all the filings with the relevant regulators viz., Registrar of Companies and Reserve Bank of India. 31. With this, we proceed to deal with the grounds of appeal raised by the Revenue. We will deal with the second and fourth ground of appeal first. The Revenue's ground is that Biometrix is a shell/conduit company. The ld. DR argued before us that Biometrix was incorporated just few months before this investment transaction and was liquidated in 2011 and therefore Biometrix is a shell entity. T....