TaxTMI 
TaxTMI 
2024 (12) TMI 1793
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....011-12 raising its sole and substantive grievance that the CIT(A) has erred in law and on facts in reversing the Assessing Officer's action making section 68 addition of Rs.55 crores, we note that the impugned lower appellate discussion to this effect reads as under: "4.6 I have considered the observation of the Assessing Officer made in the assessment order, submission filed by the appellant, remand report submitted by the AO on the additional evidence submitted by the appellant and the enquiries conducted by the Department through FT&TR, CBDT with Cyprus and Mauritius Income Tax Authorities. As discussed above, the appellant company was incorporated on 13.09.2010 in the name of Phalak Infrastructure Ltd. with a share capital of Rs.1,00,000/- by Ansal Group for carrying out real estate development. Subsequently, the appellant company entered into an agreement namely investment-cum collaboration agreement on 24.02.2011 with M/s New Dimension Holdings Ltd., Mauritius and Velford Ventures Ltd., Cyprus. As a result of this agreement, the name of the company was changed to Ansal Phalak Infrastructure Pvt. Ltd. w.e.f. 03.05.2011. The Article of Association and Memorandum of Ass....
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....ke equity participation as well as issue of compulsorily convertible debentures. These certificates are filed at page 170-171 of the paper book filed before me where the purpose of the remittance is clearly mentioned. The remittances were deposited in the Punjab National Bank wherein the account of the appellant company was maintained. The appellant company also filed audited financial statements for the year ended 31 December, 2010 of M/s Velford Ventures Ltd. and M/s New Dimension Holdings Ltd. before the Assessing Officer. Copies of these audited financial statements have been filed in the paper book at page 172A-220 of the paper book filed before me. The appellant also filed the copy of the master circular issued by Reserve Bank of India with reference to investment by the foreign. companies before the AO. A copy of the same is placed in the paper book filed before me from page 221-312. It is submitted by the appellant that the investment- cum-collaboration agreement alongwith the tax resident certificates issued by tax authorities of Cyprus and Mauritius, foreign inward remittance certificates issued by HSBC Bank with all the details, audited financial statements for the perio....
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....ore me, it is clearly mentioned at page 213 that said company has invested Rs.5,07,50,000/- in the equity shares of the appellant company and owned 25.90% shares of the appellant company. These details filed by the appellant before the Assessing Officer clearly prove the creditworthiness, capacity of the investor and genuineness of the transactions with the appellant company. In the assessment order the AO has relied upon certain observations made by the auditors of the investor companies which are discussed at page 17 and 18 of the assessment order by the AO. These observations were related to certain compliance issues of IAS 27 and 28 applicable in the International Accounting Standards, however, it is seen that these observations did not cast any aspersions on the genuineness and creditworthiness of the investor companies. Therefore, the reliance placed by the AO on those remarks was unwarranted and out of the context. In the assessment order, the AO has cast aspersions on the financial standing of M/s Velford Ventures Ltd. and M/s New Dimension Holdings Ltd. that they do not have any business activity to generate such a huge amount of investment and the source of funds....
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....borrowings. It is stated by the appellant that M/s Redfort Real Estate has invested through subsidiaries, associate companies to the extent of US Dollar $103207366. The balance sheet of the Redfort is filed at page 312-340. On page 15 of the financial statement, it is mentioned that M/s New Dimension Holdings Ltd. a company incorporated in Mauritius is associate company of the Redfort India Real Estate Fund II LLC and Mis Redfort India Real Estate Fund II holds 46.2% equity shares as on December 31, 2011 in the said company. As per para 4.1 of the financial statement which is filed at page 331 of the paper book, it is mentioned that Redfort India Real Estate Fund II LLC holds 46.2% shares of the votes at shareholdings meeting of New Dimension Holdings Ltd. M/s New Dimension Holdings Ltd. is an investor company which makes investment in real estate development companies in India and carries such investment at fair value. The investment at fair value is shown in US Dollars $55257311. At para 15 of the financial statement of Redfort India Real Estate Fund II LLC, it is mentioned that M/s New Dimension Holdings Ltd. is an associate and M/s Ansal Phalak Infrastructure Ltd. the appellant....
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....ment made by the foreign companies was more than 5 million dollars for construction of township and housing projects. The observation of the AO that Redfort India Real Estate Fund II LLC has not commenced business till December 2010 and the investor companies New Dimension Holdings Ltd. and Velford Ventures were not having capitalization within the limits specified by the RBI circular is out of the context. The commencement of the business has to be in the joint venture in which the funds were invested by the foreign companies and not in the case of investor companies. Therefore, the observations of the AO are irrelevant and not on the subject. In view of the factual positions discussed above, the source of the investments made by M/s New Dimension Holdings Ltd., Mauritius and M/s Velford Ventures Ltd., Cyprus in the appellant company to the extent of Rs.55 crores has been established and capacity of the investors, genuineness of the transactions and identity of the investor has been proved. Hence, the addition made by the AO u/s 68 of the I.T. Act is deleted. In support of my above decisions, reliance is placed on following judicial pronouncements: (a) ITO Vs. Ne....
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....com 37 (Copy Enclosed) (Pages 132/144). It was held Where Assessing Officer had failed to bring on record any relevant and credible material to neutralize documentary evidences filed by assessee, impugned addition was to be deleted" (h) CIT Vs. Fair finvest itd. [2014] 44 taxmann.com 356 (Delhi) High Court of Delhi. "Section 68 of the Income-tax Act, 1961-Cash credit - Assessment year 2002-03- Where assessee had filed documents including certified copies issued by Registrar of Companies in relation to share application and affidavits of directors, Assessing Officer could not make addition on account of share application money solely on basis of investigation report [in favour of assessee] Where assessee adduces evidence in support of share application monies, it is open to Assessing Officer to examine it and reject it on tenable grounds. In case he wishes to rely on report of investigation authorities, some meaningful enquiry ought to be conducted by him to establish a link between assessee and alleged hawala operators. Where assessee had filed documents including certified copies issued by Registrar of Companies in relation to share app....
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....uiries conducted by the Assessing officer with Mauritius and Cyprus tax authorities through FT&TR. Therefore, the addition made by the Assessing Officer of Rs. 55 crores received from above named two companies on the ground that identity. creditworthiness and genuineness of the transaction has not been proved is not sustainable and the same is deleted." 4. Learned CIT(DR) vehemently argues during the course of hearing that the Assessing Officer had rightly made the impugned addition as the assessee could not prove the genuineness/creditworthiness of the impugned share capital and unsecured loans, as the case may be, coming from the twin entities herein i.e. M/s. New Dimension Holdings Ltd. and M/s. Velford Ventures Ltd. She further quotes Sumati Dayal Vs. CIT (1995) 214 ITR 801 (SC), CIT Vs. Durga Prasad More (1971) 82 ITR 540 (SC) and PCIT Vs. NRA Iron & Steel Co. (2019) 412 ITR 161 (SC) to buttress the point that it was the assessee's bounden duty only to satisfy the foregoing twin clinching parameters so as to get out of the rigor of unexplained cash credits addition. 5. The assessee on the other hand has placed strong reliance on the CIT(A)'s foregoing detailed discussion....
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..... It is in these peculiar facts that we are of the considered view that the assessee could not be held to have not discharged it's onus of proving genuineness and creditworthiness of the share capital/share premium and unsecured loans (supra) coming from overseas entities. We further note that this Tribunal in ITA No. 1090 & 2569/Mum/2019 decided on 13.09.2019 has already rejected the Revenue's very stand involving no adverse report by the CBDT's prescribed authority, as follow: "5. We have heard rival submissions and perused the materials available on record. The primary facts stated hereinabove together with various documentary evidences placed on record before the lower authorities remain undisputed and hence, the same are not reiterated for the sake of brevity. We find from the perusal of the aforesaid narrated facts supported with documentary evidences that M/s. Rabna Holdings Ltd., a Mauritius based entity, a group company of Hinduja group had invested in share capital of the assessee company. M/s. Rabna Holdings Ltd. had received loan from M/s. Amas Ltd., a company incorporated in Bahamas. This loan was utilised by M/s. Rabna Holdings Ltd. to make investment in shar....
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.... proves the genuineness of the transactions carried out by the assessee. It is not in dispute that M/s.Rabna Holdings Ltd. had borrowed loan from M/s. Amas Ltd., a company incorporated in Bahamas, which fund has been used for making investments in shares in assessee company. This fact is duly confirmed by Mauritius tax authorities and FT & TR division of CBDT on which fact there is no dispute. This proves the creditworthiness of the share subscriber i.e., M/s. Rabna Holdings Ltd. Hence, it could be safely concluded that assessee had duly established the three necessary ingredients of Section 68 of the Act i.e., identity of the share subscriber, genuineness of the transaction and creditworthiness of the share subscriber. 5.1. We are unable to persuade ourselves to accept to the argument of the ld. DR that assessee had not furnished the copy of income tax return for the relevant year and the intimation, if any, issued by Mauritian tax authorities to M/s. Rabna Holdings Ltd. for the relevant year and hence, the source of funds and creditworthiness of M/s. Rabna Holdings Ltd. cannot be accepted. In this regard, we hold that merely because the investor had not filed its income ....
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....t the learned CIT(A) has rightly reversed the assessment findings making section 68 unexplained cash credits addition going by the assessee's overwhelming supportive evidence discharging its onus of genuineness/creditworthiness and reject his Revenue's instant sole substantive ground as well as its "lead" appeal ITA No. 5658/Del/2015 in very terms. 10. The Revenue's second appeal ITA No. 216/Del/2020 for assessment year 2014-15 raises the following substantive grounds: 1. The Ld. CIT(A) has erred in deleting the addition made by AO on the ground of disallowance of interest paid on debentures of Rs.1,56,13,962/- to M/s. Velford Ventures Ltd. without considering the fact that the CCB received from M/s. Velford Ventures Ltd. is still disputed before Hon'ble ITAT in A.Y. 2011-12. 2. The Ld. CIT(A) has erred in deleting the addition made by AO on the ground of disallowance of interest paid on debentures of Rs.71,12,469/- to M/s. Grainwell Ventures Ltd. without considering the fact that the issue based on which the CIT(A) has deleted the disallowance is disputed before Hon'ble ITAT. 3. The appellant craves leave, modify, add or forego any ground(s) of appeal....
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....2,469/- was claimed on actual payment basis. It is further submitted that the CCDs subscribed by M/s. Grainwell Ventures Ltd were accepted as genuine, still the A.O. has disallowed the interest of Rs. 71,12,469/-. 6.2 I have carefully examined the finding of the AO, submission of the Ld. AR and the documents placed before me. I have perused the assessment order by the AO for A.Y. 2013-14 dated 29.12.2016 and I find that the AO has not drawn any adverse inference about loan of Rs.65 Cr. by way of secured non-convertible debentures (NCDs) issued to M/s Grainwell Ventures Ltd. On considering the issue in totality, I find the genesis of disallowance of interest in the case of M/s Grainwell Ventures Ltd is emanating from the addition in the case of Velford Ventures Ltd and disallowance of interest for Velford Ventures Ltd is already deleted in above para. Therefore, following the same reason and since, no adverse inference has been drawn regarding money received from M/s Grainwell Ventures Ltd. by NCD, therefore, disallowance of interest paid on these NCD is deleted. These grounds of appeal are decided in favour of the appellant." 13. The Revenue vehemently argues during the....