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2022 (2) TMI 866
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....wapnesh Agarwal, Finance Controller of Soham Group, a Pen Drive was found and seized which contained an excel sheet in the name of 'LRPL TDR'. On analysis of the above excel sheet it was found that the sheet contained details of the payments made by M/s.Luxora Realtors Pvt., Ltd., to various parties for the purchase of Transfer Development Rights (TDR). It was also observed that there was another table in this excel sheet which contained details of certain payments received by Shri Chaitanya Parekh. Shri Swapnesh Agarwal was confronted with this sheet and he was asked to explain the contents of the same. In response Shri Swapnesh Agarwal stated with reference to Q.No.19 in his statement, for the sake of clarity it is reproduced below: "Q.19 One of the sheet obtained from the same pen drive contains a TDR statement which is made Annexure D to this statement. The said sheet contains two different tables. From table 1 It Is seen that LRPL has made a payment of Rs. 3 Crs to S R Realtors on 16.8.2013, Subsequently, S R Realtors has paid similar amount to Buildcube and Gautam enterprises on the very next day. Similar transactions have taken place with Jayant Thorat, Deepak C Kha....
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.... Company is engaged in the business of Builders and Developers. 3. The Return of Income for the Assessment Year under the Appeal was electronically filed on 13/09/2013 declaring Total loss of Rs. 2,27,16,946/-. A set of Computation of Income and Audited Accounts are enclosed herewith for Honour's ready and kind reference(Annexure) 4. The Income Tax assessment was completed u/s. 143(3) on 09/03/2017 determining total Income of Rs. 15,86.06,125/- and demand of Rs. 7,49,36,690/. A copy of order U/s 143(3) dated 09/03 2017 1s enclosed herewith for Honour's ready and kind reference [Annexure] 5. While passing the order U/S 143(3) dated 09/03/2017, the then assessing officer, made addition of share application and share premium received from M/S Aanya Properties (1) Ltd of Rs. 15,86,06,125/-, against which the Appellant preferred appeal with CIA (A) -24, which is pending. However, such addition made in the Assessment Order U/s 143(3) for the AY 2012-13 was deleted by Hon'ble CIT (A). 6. In the meantime a search action u/s 132 of Income Tax Act, 1961 was carried out in the case of the associate persons and group companies of the Appellant co....
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....he Central Government of India, etc. In addition to the above various other details pertaining to Identity, Capacity, Creditworthiness and Genuineness of Aanya Properties (J) Lid. were also filed during the course of Assessment proceedings for Assessment year 2012-2013 which were on records. Therefore the Appellant not only proved the identity capacity and genuineness of shareholders and the soirees of their funds but also proved the source of source which was more than the required details while verifying the identity capacity and genuineness of shareholders. 7. The then assessing office (Ld. A.C.I.T) proceeded in a pre-conceived and biased manner merely because the shareholding Company was Mauritius Company and mechanically followed the order of his predecessor in Assessment Year 2012-13 (although Hon. C.I.T. (Appeal) decided in favour of Appellant) because the department filed second appeal with Hon. I.T.A.T., Mumbai. The copy of written submission made by the Appellant before C1T(A)-24 for the Assessment Year 2012-13 and CIT (A) order dated 29/07/2016 for the Assessment Year 2012-13 in the case of Appellant are enclosed herewith for your Honor's kind and ready refe....
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.... capital investment in the humble view of the Appellant it is not necessary that the funds received are genuine if received only out of the profit booked and not out of the capital investment. 11. The Ld. D.C.I.T. should have appreciated the facts and the variety of evidence substantiating the identity capacity and genuineness of shareholders were furnished and the report received from Mauritius Revenue Authority was quite positive. 13. The Id. A.C.I.T. (the then assessing officer) did not accept any thing and treated the share Application Money as unexplained cash credit within the meaning of section 68 and held the same as unexplained income. The Appellant preferred appeal against said addition with Hon'ble CIT (A)-24, which is pending. 14. In the meantime, a search action u/s 132 of Income Tax Act, 1961 was carried out in the case of other associate persons and grow) companies of the Appellant company on 15/03/2015. Hence provisions of section 153C were attracted. The jurisdiction of the Appellant was transferred from the then Assessing Officer (i.e A.C.I.T. 15(2) (1), Mumbai) to DCIT- Central Circle 2 (4), Mumbai. Thereafter jurisdiction of the Ap....
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....) e. Copy of remittance certificates issued by bank (Annexure 7) f. Copy of returns of allotment (Annexure 8) g. Copy of bank statements of API reflecting the remittance of funds towards share capital (Annexure 9) h. Copy financial statements of API reflecting such investments made in LRPL (Annexure 10) i. Shareholding Pattern of API (Annexure 11). (Please note that the entire shareholding of API is with another Mauritius based company namely Aanya Holdings Ltd (AHL). j. List of, name and address of shareholders of AHL who. were the ultimate beneficiaries (Annexure 12) iv. You will kindly observe that primarily investments were made by non-residents in AHL and the funds were further invested by AHL into API and finally API made investment in the share capital of LRPL. v. In view of the above we respectfully submit that the identity, capacity, genuineness and creditworthiness of the API stands properly explained 3. Point 26 is explained herein below (for the sake of better connectivity point 26 is explained before point 25): i. As regards creditworthiness of the subscribers it may be kindly not....
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.... Appellant tried its level best to satisfy to the Ld. D.C.I.T. on Account of Identity, Capacity and genuineness of such investments made by Aanya Properties (1) Ltd. To summaries before your Honour, the Appellant submitted following documents/ evidence in support of its stand to prove and satisfy the Ld. D.C.I.T. i. Copy of certificate of incorporation of Aanya Properties (1) Ltd. (Annexure of this paper book) ii. Copy of Constitution Documents of Aanya Properties (1) Ltd. (Annexure of this paper book) iii. Bank statements of Aanya Properties (I) Ltd. reflecting such investments made (Annexure of this paper book) iv. Bank statement of the Appellant company reflecting the payment received from Aanya Properties (1) Ltd. (Annexure of this paper book) v. Foreign Inward remittance certificates in respect of remittance by Aanya Properties (1) Ltd. (Annexure of this paper book) vi. Financial statement of Aanya Properties (1) Ltd. reflecting such investments and source of funds (Annexure to of this paper book) vii. Shareholding list of the Appellant company (Annexure of this paper book) viii. Shareholding list of Aanya....
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....a Properties (I) Ltd. where such investments in the Appellant Company were duly reflected were produced. These financial statements also reflected the source of such investments. This financial statements were produced x. The basis of the premium amount in the form of a Certificates from a Chartered Accountant were also produced. 21. Ignoring the submissions made by the Appellant, the Ld. D.C.I.T. made addition of Rs. 15,86,06,125/- received from M/S.Aanya Properties (2) Ltd) in an arbitrarily manner, holding the same as unexplained cash credit within the meaning of section 68 without properly considering the supporting evidences furnished by the appellant to prove identity, creditworthiness and genuineness in respect of sources of funds of the shareholders. 22. While passing order u/s.143(3) r.w.s. u/s 153C , the Ld. D.C.I. T ignored the submission made by the Appellant & mechanically made addition of share application money received from M/S Aanya Properties (I) Ltd amounting to Rs. 15,86,06,125/- as unexplained cash credit within the meaning of section 68 based on order U/S 143(3) of her predecessor. 23. As regards to the order of Hon'ble ....
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.... v. Bank statement of the Appellant company reflecting the payment received from Aanya Properties (I) Ltd. (Annexure 8(xxxvi) of this paper book) vi. Bank statements of Aanya Holding Ltd reflecting payments made to Aanya Properties (I) Ltd. (Annexure 8(xiii) of this paper book) vii. Foreign Inward remittance certificates in respect of remittance by Aanya Properties (I) Ltd. {Annexure 8(xlvi) of this paper book) viii. Copy of FIPB approval for condonation of Delay in FDI and copy of compounding application to CEFA cell of Reserve Bank of India (Annexure 9(1) of this paper book) ix. The proof of basis of share premium amount in the Form of Certificates by a Chartered Accountant. (Annexure 3(xxxiv) of this paper book) x. Financial statement of Aanya Properties (I) Ltd. reflecting such investments and source of funds (Annexure 8(iii) to 8(xxxv) of this paper book) xi. Shareholding list of the Appellant company (Annexure 2(xviii) of this paper book) xii. Shareholding list of Aanya Properties (1) Ltd. (Annexure 8(ii) of this paper book) xiii. List of ultimate beneficiary owners of Aanya Holdings Ltd (Mauritius) (Anne....
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....application of mind is the sine qua non for forming the opinion. (iii) Phrase appearing in the section - "nature and sources of such credits" - should be understood in fight perspective, so that genuineness of the transaction can be decided on merits and not on prejudices. Courts are of the firm, view that the evidence produced by the assessee cannot be brushed aside in a castral manner. Assesses cannot be asked to prove the impossible. Explanation about 'source of source ' or 'origins of the origin' cannot and should not be called for while making inquiry under this section. (iv) In the matters related to section 68, burden of proof cannot be discharged to the hilt - such matters are decided on the particular facts of the case as well as on the basis of preponderance of probabilities. Credibility of the explanation, not the materiality of evidences, is the basis for deciding the cases falling under section 68. (v) Though confirmatory letters or account payee cheques do not prove that the amount in question is properly explained for the purpose of section 68 and assessee has to establish identity and creditworthiness of the creditor as wel....
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....reditors and prove, as a result, of such inquiry, that the money received by the Assessee, in the form of loan from the creditor; though routed through the sub-creditors, actually belongs to, or was oft the Assessee himself. In other words, while Section 68 gives the liberty to the Assessing Officer to enquire into the source/sources from where the creditor has received the money, Section 106 makes the Assessee liable to disclose only the source(s) from where he has himself received the credit and it is not the burden of the Assessee to show the source(s) of his creditor nor is it the burden of the Assessee to prove the creditworthiness of the source(s) of the sub-creditors. If Section 106 and Section 68 are to stand together, which they must, then, the Interpretation of Section 68 has to be in such a way that it does not make Section 106 redundant. Hence, the harmonious construction of Section 106 of the Evidence Act and Section 68 of the Income Tax Act will be that though apart from establishing the identity of the creditor, the Assessee must establish the genuineness of the transaction as well as the creditworthiness of his creditor, the burden of the Assessee to prove the genui....
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.... web concerned, it had discharged initial onus placed on it. In the event the revenue still had a doubt with regard to the genuineness of the transactions in issue, or as regards the creditworthiness of the creditors, it would have have to discharge the onus which had shifted on to it. A bald assertion by the A.O. that the credits were a circular route adopted by the Assessee to plough back its own undisclosed Income into Its accounts, can be of no avail. The revenue was required to prove this allegation. An allegation by itself which is based an assumption will not pass muster in law. The revenue would be required to bridge the gap between the suspicions and proof in order to bring home this allegation. The IT A T, in our view, without adverting to the aforementioned principle laid stress on the fact that despite opportunities, the Assessee and/or the creditors had not proved the genuineness of the transaction. Based on this the ITAT construed the intentions of the Assessee as being mala fide. In our view the I TAT ought to have analyzed the material rather than be burdened by the fact that some of the creditors had chosen not to make a personal appearance before the AC. If the AC....
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....observed as under: ''Recording of reasons in support of a decision on a disputed claim by a quasi-judicial authority ensures that the decision is reached according to law and is not the result of caprice, whim or fancy or reached on grounds of policy or expediency. A party to the dispute is ordinarily entitled to know the grounds on which the authority has rejected his claim. If the order is subject to appeal, the necessity to record reasons is greater, for without recorded reasons the appellate authority has no material on which it may determine whether the facts were properly ascertained, the relevant law was correctly applied and the decision was just." 2.4.9 On weighing the pros and cons. I am of the considered view that Ld. AO has given a go by to the known canons of jurisprudence by completely ignoring the evidence produced by the appellant. He has not even adverted to the fact that RBI had taken cognizance of the Form-FCGPR. I find that, though not required, the appellant has, in fact, given the source of source and hence, the addition made by the Ld. AO cannot stand the test of legal scrutiny. I am also fortified in my above view by the decision of....
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....e through three separate cheques, of which details were available. The assessee had also filed bank certificates submitted to the RBI presumably for the purpose of remittance of dividend to said 8. In the light of such evidence, the C1T(A) as also the Tribunal had come to a conclusion of fact that the assessee had discharged the burden which lay upon it 'for establishing the identity of the shareholders as well as the genuineness of the transactions. As such, the Tribunal confirmed the findings of the CIT(A) and deleted the addition which had been made by the AO. It is obvious that the findings returned by the CIT(A) as well as the Tribunal are pure findings of fact and no question of law arises on this issue." 2.4.12 In the case of CIT vs Peoples General Hospital ltd. [2013] 35 taxmann.com 444 (Madhya Pradesh), Hon'ble High Court confirmed the deletion of addition on the basis of the fact that the foreign company was not found to be a bogus company and that the money was transmitted through banking channels. In doing so, it was, inter alia, held as under: "In the case at C1T v. Lovely Exports (P.) Ltd. [Application No. 11993 of 2007, dated 11-1-2008], the....
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.... and 3 are allowed. 24. In addition to the above your Honour's kind attention is also drawn to c judgment of the Apex Court wherein Hon'ble Supreme Court in the case of CIT Vs Lovely Export 120081216 CTR 195 (SO upheld the order of the Delhi High Court that once the identity of the shareholder have been established even if there is a case of bogus share capital, if cannot be added in the hands of the Company unless any adverse evidence is not on record. 25. Hon'ble Gujarat High Court,in the case of Nemichaod Kothari Vs. CIT (2003) 264 ITR 254 (Gauh), wherein it was held that it is a settled law that the burden of the assessee to prove the genuineness of the transaction as well as the creditworthiness of the creditor must remain confined to the transactions which have taken place between the assessee and the creditor. It is not the business of the assessee, to find out the source of the money of his creditors. 26. Hon'ble ITAT, Mumbai in the case of AC IT Vs. Goldmohur Design And Apparel Park Ltd , it was a submission on behalf of the revenue that such large amount of share premium gives rise to suspicion on the genuineness ( identity ) of the ....
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....nd legal & Professional fee Rs. 42,77,037/- aggregating to Rs. 3,09,16,296/- which were not directly related to the project and therefore, as per the Accounting Standards issued by Institute of chartered Accountants, the Appellant claimed such expenses as revenue expenditure and debited to profit and loss account. 5. During the assessment proceedings, the Appellant submitted all the details called for. 6. The Ld. D.C.I.T. made addition of Rs. 1,09,16,296/- stating that the Appellant failed to justify the claim of the said expenses as revenue expenditure. Accordingly The Ld. D.C.I.T, the Ld. D.C.I.T. disallowed the said expenses as revenue expenditure and added to work in progress. 7. The assessment order U/S 143(3) of the year under consideration was passed on 09/03/20/ 7 and then assessing officer did not make any disallowance in relation of aforesaid expenses in said order. The copy of assessment order dated 09/03/2017 is enclosed hereinabove as annexure for your honour's kind and ready reference. The various courts held that in cases were assessment U/S 143(3) of the Income Tax Act, 1961 was completed, the scope of assessment under section 153A wou....
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....#39;s kind attention is also drawn to a decision of Hon'ble Delhi High court in the case of CIT Vs Kabul Chawla (2016) 380ITR 573 (Delhi) held that since no incriminating material was unearthed during the search, no additions could have been made to the income already assessed. The gist of the aforesaid judgement published on www. itatonline. org is enclosed herewith for your Honour's kind and ready reference Annexure. 11.. Without prejudice, presuming that the stand taken by the Ld. D.C.I.T. as correct, Ld. D.C.I.T. should have increased the work in progress by Rs. 3,09,16,296/-, same not done and the income earned out of surplus fund be reduced from work in progress. 12. The Appellant therefore prays before your Honour to kindly delete the addition made by Ld. D.C.I. T. on this ground. We hope Your Honour will find the above in order and shall thank you to kindly consider the above submissions before passing the order." 5. After considering the detailed submissions of the assessee Ld.CIT(A) disposed off the appeal filed by the assessee by adjudicating only Ground No. 2 raised by the assessee on the issue of incriminating material and other ground....
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.... that the Assessing Officer could not make addition without incriminating material and he failed to consider the fact that once the assessment is initiated u/s.153A or 153C of the Act, it is open for the Assessing Officer to make addition on any issue whether any incriminating material related is found in the course of search or not and further the Hon'ble Jurisdictional High Court decision in the case of CIT v. Continental Warehousing & All Cargo Global logistics [374 ITR 0645] which has not been accepted by the revenue and it is in appeal before on Hon'ble Apex court. 8. At the time of hearing, Ld. DR heavily relied on the order passed by the Assessing Officer and he relied on the case law submitted by him which are as below: - S. No. [A] On the issue of addition being made in Search Assessments even in the absence of Incriminating Material 1 CIT v. Raj Kumar Arora [2014] 52 taxmann.com 172 (Allahabad) 2 E.N. Gopakumar v. CIT[2016] 75 taxmann.com 215 (Kerala) 3. M/s. Canara Housing Development .v. Dy.CIT (Karnataka High Court) on 25 July, 2014 ITA No. 38/2014 [B] List of few cases wherein the SLP filed by the Revenue, against the orders of Hi....
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....ear 2013-14 regular assessment has been completed u/s 143(3) on 09/03/2017 i.e before initiation of proceedings u/s 153C on 16/11/2017. Thus addition made in absence of incriminating material in the assessment framed u/s 153C for Asstt. Year 2013-14 is bad in law. Hon'ble CIT(A) has rightly deleted addition made by A.O. Reliance on: i) (2017) 397 ITR 0344 (SC) CIT vs. Sinhgad Technical Education Society (P-2). ii) Hon'ble Bombay High Court, Bench at Nagpur in ITA No.50/2017 in the case of M/s. Marytime Suppliers Pvt. Ltd., Nagpur. (P-11 & 12) iii) Hon'ble Bombay High Court, Bench at Nagpur in ITA No.54/2017 in the case of Dnarampal Agrawal, Nagpur. (P-15) iv) (2015) 374 ITR 0645 (Bom.) CIT vs. Continental Warehousing Corporation (P-26)" 10. Considered the rival submissions and material placed on record, we observe that the original assessment u/s. 143(3) of the Act was completed on 09.03.2017 and the assessment was framed and business loss was determined at Rs..2,27,16,947/-, subsequent to search notice u/s. 153C of the Act was issued and served on the assessee. We observed from the notice u/s.153C of the Act that the issu....