HINDUJA REALTY VENTURES LIMITED, MUMBAI V. DCIT RANGE 7(1)(2), MUMBAI

ITA 1090/MUM/2019

• Counselvise Citation: [2019] 116 COUNSELVISE.COM (IT) 0525 (ITAT-MUMBAI)
• Duration Of Justice: 6 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-09-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: H
• Assessment Year: 2014-2015
• Appeal Filed On: 26-02-2019
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: B SRINIVAS
• Assessee Lawyers: J D MISTRI SHRI S K MUTSADDI; H Y GUJAR
• Keywords: Unexplained cash credit; Bogus Share capital; Residential status; Double taxation relief; Share purchase agreement; Earning of tax free income; Source of fund; Deemed to accrue or arise in india; Additional evidence; Fair market value; Corroborative evidences; Valuation report; Capital receipt; Onus to prove; Rule 8D
• Section: 14A; 115JB; 68; 69; 90

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL H , BENCH MUMBAI BEFORE SHRI MAHAVIR SINGH , JM & SHRI M.BALAGANESH, AM ITA NO. 1090 /MUM/201 9 ( ASSESSMENT YEAR : 2014 - 15 ) M/S. HINDUJA REALTY VENTURES LTD., 171, HINDUJA HOUSE, DR. ANNIE BESANT ROAD WORLI SOU TH, MUMBAI VS. DY. CIT, CIRCLE 7(1)(2) ROOM NO.126, 1 ST FLOOR AAYAKAR BHAVAN, M.K.ROAD, MUMBAI - 400020 PAN/GIR NO. AAACM4995M (APPELLANT ) .. (RESPONDENT ) ITA NO. 2569 /MUM/201 9 ( ASSESSMENT YEAR : 2014 - 15 ) DY. CIT, CIRCLE 7(1)(2) ROOM NO.126, 1 ST FLOOR AAYAKAR BHAVAN, M.K.ROAD, MUMBAI - 400020 VS. M/S. HINDUJA REALTY VENTURES LTD., 171, HINDUJA HOUSE, DR. ANNIE BESANT ROAD WORLI SOUTH, MUMBAI PAN/GIR NO. AAACM4995M (APPELLANT ) .. (RESPONDENT ) ASSESSEE BY SHRI J.D.MISTRI / SHRI S.K.MUTSADDI & SHRI H.Y. GUJAR REVENUE BY SHRI B. SRINIVAS DATE OF HEARING 23 / 07 /2019 DATE OF PRONOUNCEMENT 13 / 09 /2019 / O R D E R PER M. BALAGANESH (A.M) : THESE CROSS APPEAL S IN ITA NO. 1090/MUM/2019 & ITA NO.2569/MUM/2019 FOR A.Y. 2014 - 15 ARISE OUT OF THE ORDER BY THE LD. COMMISSIONER OF INCOME TAX (APPEALS) - 13, MUMBAI IN APPEAL NO. CIT(A) - ITA NO .1090/MUM/2019 & 2569/MUM/2019 M/S. HINDUJA REALTY VENTURES LTD., 2 13/DCIT - 7(1)(2)/126/2017 - 1 8 DATED 18/02/2019 (LD. CIT(A) IN SHORT) AGAINST THE ORDER OF ASSESSMENT PASSED U/S.143(3) OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS ACT) DATED 29/12/2017 BY THE LD. DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE - 7(1)(2), MUMBAI (HEREINAFTER REFERR ED TO AS LD. AO). 2. LET US TAKE UP THE ASSESSEES APPEAL FIRST IN ITA NO.1090/MUM/2019. 2.1. THE FIRST ISSUE TO BE DECIDED IN THIS APPEAL IS AS TO WHETHER THE LD. CIT(A) WAS JUSTIFIED IN CONFIRMING THE ADDITION MADE IN THE SUM OF RS.155 CRORES TOWARDS SHARE CAPITAL AND SHARE PREMIUM U/S.68 OF THE ACT IN THE FACTS AND CIRCUMSTANCES OF THE CASE. 2.2. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS IN THIS REGARD: - 1. UPHOLDING THE ADDITION OF RS.155 CRORES TO THE INCOME OF THE ASSESSEE COMPANY MADE U/S.68 OF THE INCOME TAX ACT. 2. UPHOLDING AN UNWARRANTED & LEGALLY UNTENABLE ADDITION OF RS.155 CRORES U/S.68 OF THE INCOME TAX ACT, WITHOUT CONSIDERING THE FACT THAT GENUINENESS OF THE TRANSACTION, CREDITWORTHINESS & IDENTITY OF THE CREDITORS WERE E STABLISHED IN ADEQUATE & APPROPRIATE MANNER. THE ASSESSEE HAD DISCHARGED THE ONUS CAST ON IT TO ESTABLISH THE BONAFIDES OF THE TRANSACTION. 3. HOLDING THAT THE ASSESSEE COMPANY HAS NOT DISCHARGED THE BURDEN CAST UPON IT U/S.68 OF THE INCOME TAX ACT WI THOUT APPRECIATING THAT THE AMENDED PROVISIONS OF SECTION 68 IN RESPECT OF EXAMINING THE SOURCE OF THE SOURCE FOR SUBSCRIPTION OF SHARE CAPITAL AND SHARE PREMIUM ARE NOT APPLICABLE TO NON - RESIDENTS AND IN THE CASE OF ASSESSEES COMPANY THE SHARE CAPITAL AND THE PREMIUM AGGREGATING TO RS.155 CRORES WAS RECEIVED BY THE ASSESSEE FROM RABANA HOLDINGS LTD., MAURITIUS, A NON - RESIDENT ENTITY. 4. UPHOLDING THE ADDITION U/S.68 OF THE ACT: I) ON FACTUALLY INCORRECT BASIS THAT THE ASSESSEE COMPANY HAD NO T PROVIDED DETAILS REGARDING THE SOURCE OF SOURCE OF FUNDS. ITA NO .1090/MUM/2019 & 2569/MUM/2019 M/S. HINDUJA REALTY VENTURES LTD., 3 II) ON THE ERRONEOUS BASIS THE ASSESSEE COMPANY HAD FAILED TO PROVIDE JUSTIFICATION FOR THE PREMIUM. III) ON THE UNSUSTAINABLE BASIS THAT THE CREDITWORTHINESS OF THE SUBSCRIBER OF S HARES HAD NOT BEEN ESTABLISHED. IV) THAT THE BINDING JUDICIAL PRECEDENCE CITED BEFORE HIM DID NOT APPLY TO THE CASE OF THE ASSESSEE COMPANY. V) BY DISREGARDING THE EVIDENCE PRODUCED BY THE ASSESSEE COMPANY. 3. THE BRIEF FACTS OF THIS ISSUE ARE THAT THE ASSESSEE IS IN THE BUSINESS OF REAL ESTATE DEVELOPMENT AND MANAGEMENT OF PROPERTIES. THE LD. AO OBSERVED THAT DURING THE YEAR UNDER CONSIDERATION , THE ASSESSEE HAS ISSUED 310000 EQUITY SHARES OF FACE VALUE OF RS.10/ - PER SHARE W ITH A PREMIUM OF RS.4990/ - PER SHARE TO M/S.RABNA HOLDINGS LTD., A COMPANY INCORPORATED IN MAURITIUS. THE ASSESSEE WAS ASKED TO ESTABLISH THE GENUINENESS OF THE TRANSACTION ALO NG WI T H THE IDENTITY AND CREDITWORTHINESS OF SUBSCRIBER OF SHARE CAPITAL TOGETHE R WITH THE GENUINENESS OF THE TRANSACTIONS IN THE COURSE OF ASSESSMENT PROCEEDINGS. THE ASSESSEE RESPONDED BEFORE THE LD. AO BY STATING THAT M/S.RABNA HOLDINGS LTD., IS A COMPANY INCORPORATED IN MA U RITIUS HAVING TAX RESIDENCY CERTIFICATE NO. IN/2990 AND A SSESSED TO INCOME TAX AT MAURITIUS UNDER TAX ACCOUNT NUMBER 27186403. THE SAID COMPANY HAD SUBSCRIBED TO 310000 EQUITY SHARES OF FACE VALUE OF RS.10/ - EACH AT A PREMIUM OF RS.4990/ - PER SHARE IN TH E ASSESSEE COMPANY UNDER FOREIGN DIRECT INVESTMENT (FDI) RO UTE. THE DETAILS OF THE SHARES ALLOTTED BY THE ASSESSEE COMPANY TO M/S.RABNA HOLDINGS LTD., ARE AS UNDER: - SR. NO. DATE OF ALLOTMENT NO.OF EQUITY SHARES VALUE FACE VALUE PREMIUM 1 08/10/2013 89,998 10 4990/ - 2 10/10/2013 1,00,111 10 4990/ 3 14/10 /2013 80,000 10 4990/ 4 17/10/2013 39,999 10 4990/ ITA NO .1090/MUM/2019 & 2569/MUM/2019 M/S. HINDUJA REALTY VENTURES LTD., 4 3.1. THE ASSESSEE FURTHER SUBMITTED THAT M/S.RABNA HOLDINGS LTD., HAD MADE REMITTANCE FROM THEIR BANK ACCOUNT WITH HINDUJA BANK TO ASSESSEE - COMPANY BANK ACCOUNT MAINTAINED WITH INDUS I ND BANK LTD., ON THE FOLLOWING DATES: - DATE OF REMITTANCE AMOUNT IN USD 07/10/2013 7283311.19 09/10/2013 8100103.40 11/10/2013 6554039.07 16/10/2013 3234142.65 TOTAL 25171596.31 3.2. THE ASSESSEE SUBMITTED THE FOREIGN INWARD REMITTANCE CERTIFICATE(FIRC). THE TAX RESIDENCY CERTIFICATE ISSUED BY MAURITIAN AUTHORITIES ; FCG P R RETURN FILED WITH RBI IN THE CONTEXT OF ALLOTMENT OF SHARES UNDER FDI ROUTE, COPY OF BOARD RESOLUTION INDICATING THE SHARES OFFERED, SHARE PRICE PREMIUM, BOARD RESOLUTION FOR ALLOTMENT OF SHARE S TO M/S.RABNA HOLDINGS LTD. ALONG WITH COPY OF RETURN FILED WITH REGISTRAR OF COMPANIES IN THAT REGARD. THE ASSESSEE ALSO STATED THAT THE ENTIRE TRANSACTIONS OF RECEIPT OF SHARE CAPITAL AND SHARE PREMIUM UNDER F DI ROUTE HAD BEEN DULY APPROVED BY THE RESER VE BANK OF INDIA. THE LD. AO HOWEVER, SOUGHT TO EXAMINE THE VERACITY OF THE DOCUMENTS FILED BY THE ASSESSEE BY MAKING REFERENCE TO FOREIGN TAX DIVISION OF CENTRAL BOARD OF DIRECT TAX (FT & TR DIVISION) U/S.90 OF THE ACT READ WITH ARTICLE 26 OF DOUBLE TAX A VOIDANCE AGREEMENT WITH MAURITIUS PERTAINING TO EXCHANGE ITA NO .1090/MUM/2019 & 2569/MUM/2019 M/S. HINDUJA REALTY VENTURES LTD., 5 OF INFORMATION OR DOCUMENTS AND RECEIVE D REPLIES THEREON. FROM THE REPORT RECEIVED FROM FT & TR DIVISION AFTER MAKING ENQUIRIES WITH MAURITIAN TAX AUTHORITIES, INFORMATION PERTAINING TO THE DIRECT ORS OF M/S.RABNA HOLDINGS LTD., ITS SHAREHOLDERS, ITS SOURCE OF FUNDS FOR MAKING INVESTMENTS IN INDIA WERE PLACED ON RECORD. THE LD. AO MADE THE FOLLOWING OBSERVATIONS ON FACTS IN HIS ASSESSMENT ORDER: - (A) A REFERENCE WAS MADE BY HIM TO FT & TR DIVISION FOR MAKING ENQUIRIES WITH MAURITIUS TAX AUTHORITIES AND OBTAIN ED INFORMATION IN ACCORDANCE WITH SECTION 90 OF THE ACT AND ARTICLE 26 OF DTAA WITH MAURITIUS . (B) REPLY WAS RECEIVED FROM FT & TR DIVISION WHEREIN DETAILS OF INVESTMENTS MADE BY M/S.RABNA HOLDINGS LTD. IN HINDUJA REALTY VENTURES LTD. (I.E THE ASSESSEE HEREIN) DURING THE PERIOD 07/10/2013 TO 16/10/2013 ; SOURCE OF FUNDS FOR M/S.RABNA HOLDINGS LTD. IN RESPECT OF ABOVE INVESTMENTS ; COPIES OF BANK STATEMENTS OF M/S.RABNA HOLDINGS LTD. FROM WHERE FUNDS WERE REMITTED ; COPIES OF SUPPORTING EVIDENCES (FUND TRANSFER INSTRUCTIONS ISSUED BY M/S.RABNA HOLDINGS LTD. TO ITS BANK) SHOWING THE FUND TRANSFER IN RESPECT OF ABOVE TRANSACTIONS WERE PROVIDED BY MAURITIUS TAX AUTHORITIES. (C) THE FUNDS WERE RECEIVED BY M /S.RABNA HOLDINGS LTD. FROM ANOTHER HINDUJA GROUP COMPANY I.E. M/S. AMAS LTD. (D) THE ADDRESS AND TAX JURISDICTION OF M/S. AMAS LTD., WAS FURNISHED BY MAURITIAN TAX AUTHORITIES . ITA NO .1090/MUM/2019 & 2569/MUM/2019 M/S. HINDUJA REALTY VENTURES LTD., 6 (E) COPY OF FINANCIAL STATEMENTS OF M/S.RABNA HOLDINGS LTD. AS ON 31/03/2014 A ND COPY OF AGREEMENT ENTERED INTO BETWEEN M/S.RABNA HOLDINGS LTD. AND ASSESSEE COMPANY WERE PROVIDED BY MAURITIAN TAX AUTHORITIES. (F) M/S. AMAS LTD., IS INCORPORATED IN BAHAMAS (G) SHRI PRAKASH P HINDUJA, BROTHER OF SHRI ASHOK P HINDUJA (MAIN PROMOTER OF THE ENTITY BEING SHAREHOLDER OF ASSESSEE COMPANY) IS ONE OF THE DIRECTORS OF M/S.RABNA HOLDINGS LTD. (H) HINDU JA GROUP IS A MULTINATIONAL CONGLOMERATE, HEADQUARTER ED IN LONDON AND IS HEADED BY SHRI SRICHAND P HINDUJA ALONG WITH OTHER BROTHERS SHRI GOPICHAN D P HINDUJA AND SHRI PRAKASH P HINDUJA AND SHRI ASHOK P HINDUJA . (I) FOR VALUATION OF RECEIPT OF EQUITY FROM A GROUP COMPANY, AN ENTERPRISE VALUATION WAS MADE FOR THE ASSESSEE COMPANY AND THE SAME WAS FURNISHED DURING THE COURSE OF ASSESSMENT PROCEEDINGS. (J) IT IS SEEN FROM THE FINANCIAL STATEMENTS OF M/S.RABNA HOLDINGS LTD. THAT THEY HAD RECEIVED LOAN FROM M/S. AMAS LTD., WHICH IS ALSO A HINDUJA GROUP COMPANY AND THAT THE SAME FUNDS WERE UTILISED FOR MAKING INVESTMENT IN SHARE CAPITAL AND SHARE PREMIUM IN ASSESSEE COMPANY. THIS GOES TO PROVE THAT M/S.RABNA HOLDINGS LTD. AND M/S. AMAS LTD., ARE PART OF THE SAME GROUP. ITA NO .1090/MUM/2019 & 2569/MUM/2019 M/S. HINDUJA REALTY VENTURES LTD., 7 3.3. THE LD. AO LATER OBSERVED IN HIS ORDER THAT M/S. AMAS LTD., IS INCORPORATED IN BAHAMAS AND THAT ON PERUSAL OF OFFSHORE LEAKS DATA BASE OF INTERNATIONAL CONSORTIUM OF INVESTIGATIVE JOURNALISTS (ICIJ) SHOWS ONE ENTITY BY NAME M/S.AMAS LTD., IN THE BAHAMAS LEAKS. THE LD. AO CONCLUDED THAT SOURCE OF MONEY THAT HAD EMANATED FROM BAHAMAS (WHICH IS TAX HAVEN) THROUGH M/S. AMAS LTD., CANNOT BE ACCEPTED AS A GENUINE TRANSACTION. THE LD. AO CONCLUDED THAT RECEIPT OF FUNDS IN THE FORM OF SHARE CAPITAL AND SHARE PREMIUM HAS BEEN STRUCTURED BY THE ASSESSEE COMPANY FROM ITS GROUP ENTITIES BASED IN MAURITIUS AND OTHER TAX HAVENS SUCH AS BAHAMAS. HE ALS O OBSERVED THAT SINCE M/S. AMAS LTD., FEATURES IN THE LIST OF ENTITIES DISCOVERED AS A RESULT OF INVESTIGATION CARR IED OUT BY ICIJ IN BAHAMAS LEAK S AND THEREFORE THE ULTIMATE SOURCE OF THE FUNDS USED FOR MAKING INVESTMENTS INTO THE ASSESSEE COMPANY REMAIN SUSPECT. HE CONCLUDED THAT NO ATTEMPT HAD BEEN MADE WHATSOEVER BY THE ASSESSEE COMPANY TO PROVIDE NECESSARY DOCUMENTARY EVIDENCES TO ESTABLISH THE CREDITWORTHINESS OF THE SUBSCRIBER OF SHARES ALONG WITH NATURE OF THE TRANSACTION ESPECIALLY IN VIEW OF THE F ACT THAT FOREIGN ENTITIES INVOLVED ARE GROUP COMPANIES AND SPECIFIC OBSERVATIONS HAVE BEEN MADE WITH REGARD TO SUSPECT NATURE OF FUNDS ORIGINATING IN TAX HAVEN BEING USED FOR MAKING SAID INVESTMENTS IN THE ASSESSEE COMPANY. ACCORDINGLY, HE OBSERVED THAT AS SESSEE HAD NOT CLEARLY DISCHARGED ITS ONUS TO PROVE THREE NECESSARY INGREDIENTS CUMULATIVELY I.E. IDENTITY OF THE SHARE SUBSCRIBERS, GENUINENESS OF TRANSACTIONS AND CREDITWORTHINESS OF THE SHARE SUBSCRIBERS WITHIN THE MEANING OF SECTION 68 OF ITA NO .1090/MUM/2019 & 2569/MUM/2019 M/S. HINDUJA REALTY VENTURES LTD., 8 THE ACT. WITH THESE OBSERVATIONS, THE LD. AO BROUGHT TO TAX THE SUM OF RS.155 CRORES AS UNEXPLAINED CASH CREDIT U/S.68 OF THE ACT IN THE ASSESSMENT. 3.4. THE ASSESSEE PLEADED BEFORE THE LD. CIT(A) AS UNDER: - A) THE HINDUJA BROTHERS PRIMARILY CONSISTS OF MR, S. P. HIND UJA, MR. G. P. HINDUJA, MR, PRAKASH P. HINDUJA & MR. ASHOK P. HINDUJA. MR. S. P. HINDUJA & MR. G. P. HINDUJA ARE CITIZENS OF UK AND NON - RESIDENTS OF INDIA FOR SEVERAL DECADES. THEY ARE JOINTLY RANKED BY THE FORBES LIST IN MARCH, 2016 AS THE WORLD'S 58 TFL R ICHEST BILLIONAIRES WITH AN ESTIMATED WEALTH OF USD 15.2 BILLIONS. MR. PRAKASH P. HINDUJA IS A CITIZEN OF SWITZERLAND AND NON RESIDENT OF INDIA FOR A SEVERAL DECADES WHOSE NET WORTH AS PER BLOOMBERG BIILIONAIRS INDEX IS AT USD 4.52 BILLIONS. THE 3 BILLIONA IRES CONTROL BUSINESSES IN UK, SWITZERLAND, LUXEMBURG, US, MAURITIUS, CHINA, HONGKONG, BAHAMAS, FRANCE AND MANY OTHER COUNTRIES. MR. ASHOK P. HINDUJA IS A CITIZEN AND RESIDENT OF INDIA, HE IS THE MAIN PROMOTER OF HINDUJA GROUP LIMITED AND ITS SUBSIDIARIES IN INDIA. THE AO THEREFORE, SHOULD HAVE OBJECTIVELY CONSIDERED THE FINANCIAL CAPACITY AND THE BACKGROUND OF THE INVESTOR MAKING FDI. CONSIDERING THE RECORDS PRODUCED BEFORE HIM COUPLED WITH THE INFORMATION AUTHENTICALLY AVAILABLE IN THE PUBLIC DOMAIN, THE AO'S OBSERVATION REGARDING 'GROUP' ETC, ARE TOTALLY IRRELEVANT AND IMPORTANT TO THE ISSUE FOR CONSIDERATION. IT IS COMMON BUSINESS SENSE THAT FOR SUCH LARGE QUANTUM FDI COMES FROM KNOWN AND RELIABLE SOURCES FOR WHICH 'GROUP' IS AN ASSURANCE. THE ASSESSMENT CANNOT BE MADE WITH SUSPICION AND SURMISES IGNORING CONCRETE EVIDENCE. B) RABNA HOLDINGS LTD., MAURITIUS IS A CORPORATE ENTITY CONTROLLED BY MR. PRAKASH P, HINDUJA, A NON - RESIDENT FOR MANY DECADES, WHO IS A MULTI - BILLIONAIRE HIMSELF. THE THEORY OF LD. AO OF THE PRESUMPTION U/S.68 OF THE INCOME TAX ACT CANNOT BE APPLICABLE TO THE ASSESSEE'S CASE. FIRSTLY THE ORIGIN OF THE SOURCE IS NOT LOCATED IN INDIA. SECONDLY, RABNA HOLDINGS LTD. IS A TAX RESIDENT OF MAURITIUS HOLDING A VALID TAX RESIDENCY - CERTIFICA TE OF MAURITIUS. THIRDLY, IT IS NOT A 'RELATED PARTY' OF THE ASSESSEE COMPANY. FOURTHLY, THE SOURCE OF INVESTMENT BY RABNA HOLDINGS 14X1. I.E. SOURCE OF SOURCE IS ALSO PROVED BY THE DOCUMENT AVAILABLE ON RECORD AND THAT ONLY AMAS LTD. IS FROM BAHAMAS BY IT SELF CANNOT BE HELD AGAINST THE ASSESSEE, ESPECIALLY, WHEN THERE HAS NEVER BEEN ANY REMITTANCE FROM INDIA FROM AT ANY GIVEN POINT OF TIME. THIS IS CONTRARY TO BASIC TENANTS OF JUSTICE THAT UNLESS OTHERWISE PROVED PERSON IS NON - GUILTY. HERE THE ASSESSEE COM PANY HAS GIVEN ALL THE DIRECT ITA NO .1090/MUM/2019 & 2569/MUM/2019 M/S. HINDUJA REALTY VENTURES LTD., 9 EVIDENCE AND COUPLED WITH CIRCUMSTANTIAL EVIDENCE EVEN THE 'NON - GUILTY' STATUS IS ALSO FULLY ESTABLISHED. C) IT MAY NOT BE OUT OF CONTEXT TO MENTION THAT ONCE AN ASSESSEE HAS A TAX RESIDENCY CERTIFICATE, IT IS AN EVIDENCE NOT JUST A RESIDENCE OF A TAX PAYER BUT ALSO G BENEFICIAL OWNER OF INCOME. IN THIS CONTEXT, RELIANCE IS PLACED ON OF THE BOMBAY HIGH COURT DECISION RENDERED IN THE MATTER OF DCIT V. UNIVERSAL INTERNATIONAL MUSIC BV - 31 TAXMANN.COM 223 AND MUMBAL TRIBUNA L IN THE MATTER OF HSBC BANK MAURITIUS LTD. V. DCIT (INT'L TAXATION - 2 (2)12), MUMBAI. - ITA NO.I708/MUM/2016 READ WITH MA NO,: 221/MUM/2017. D) THE ASSESSEE COMPANY VIDE COMMUNICATION DID, 16.11.2016 & COMMUNICATION DTD.05,07.2016, HAS PLACED ON RECO RDS F1RC CERTIFICATE, IT'S OWN BANK STATEMENT, FCGPR RETURN FILED BY THE ASSESSEE WITH THE RBI IN THE CONTEXT OF THE ALLOTMENT OF SHARES TO RABNA HOLDINGS LTD. UNDER THE FDI ROUTE. THUS, THE ASSESSE COMPANY DISCHARGED THE ENTIRE ONUS CAST UPON IT U/S.68 OF THE INCOME TAX ACT AND IT IS NOT FIT TO MAKE AN ADDITION U/S.68 OF THE INCOME TAX ACT. IN THE ABOVE CONTEXT, RELIANCE IS PLACED ON TWO BOMBAY HIGH COURT IN THE CASE OF CIT VS. ORCHID INDUSTRIES PVT. LTD. (2017) 397 ITR 136 (BORN.), WHICH HAS CONSIDERED TH E DECISION OF DIVISION BENCH OF BOMBAY HIGH COURT IN THE CASE OF CIT V. GAGANDEEP INFRASTRUCTURE P. LTD (2017) 394 ITR 680 (BOM) & HON B LE SUPREME COURT IN THE CASE OF CIT VS. LOVELY EXPORTS (P) LTD (2008) 216 CTR (SC) AND HELD AT PARA 5 OF THE ORDER AS U NDER: - 5. THE ASSESSING OFFICER ADDED RS. 95 LAKHS AS INCOME UNDER SECTION 68 OF THE INCOME TAX ACT ONLY ON THE GROUND THAT THE PARTIES TO WHOM THE SHARE CERTIFICATES WERE ISSUED AND WHO HAD PAID THE SHARE MONEY HAD NOT APPEARED BEFORE THE ASSESSING OFF ICER AND THE SUMMONS COULD NOT BE SERVED ON THE ADDRESSES GIVEN AS THEY WERE NOT TRACED AND IN RESPECT OF SOME OF THE PARTIES WHO HAD APPEARED, IT WAS OBSERVED THAT JUST BEFORE ISSUANCE OF CHEQUES, THE AMOUNT WAS DEPOSITED IN THEIR ACCOUNT. 6. THE TRIBUNAL HAS CONSIDERED THAT THE ASSESSEE HAS PRODUCED ON RECORD THE DOCUMENTS TO ESTABLISH THE GENUINENESS OF THE PARTY SUCH AS PAN OF ALL THE CREDITORS ALONG WITH THE CONFIRMATION, THEIR BANK STATEMENTS SHOWING PAYMENT OF SHARE APPLICATION MONEY, IT WAS ALSO OBS ERVED BY THE TRIBUNAL THAT THE ASSESSEE HAS ALSO PRODUCED THE ENTIRE RECORD, REGARDING ISSUANCE OF SHARES I.E. ALLOTMENT OF SHARES TO THESE PARTIES, THEIR SHARE APPLICATION FORMS, ALLOTMENT LETTERS AND SHARE CERTIFICATES, SO ALSO THE BOOKS OF ACCOUNT. THE BALANCE SHEET AND PROFIT AND LOSS ACCOUNT OF THESE PERSONS DISCLOSES THAT THESE PERSONS HAD SUFFICIENT FUNDS IN THEIR ACCOUNTS FOR INVESTING IN THE SHARES OF THE ASSESSEE. IN VIEW OF THESE VOLUMINOUS DOCUMENTARY EVIDENCE, ONLY BECAUSE THOSE PERSONS HAD NOT APPEARED BEFORE THE ASSESSING OFFICER WOULD NOT NEGATE THE CASE OF THE ASSESSEE THE JUDGMENT IN CASE OF ITA NO .1090/MUM/2019 & 2569/MUM/2019 M/S. HINDUJA REALTY VENTURES LTD., 10 GAGANDEEP INFRASTRUCTURE (P.) LTD. (SUPRA) WOULD BE APPLICABLE IN THE FACTS AND CIRCUMSTANCES OF THE PRESENT CASE.' E) MUMBAI TRIBUNAL IN ITA NO.: 32 12/MUM/2014 (SUNSHINE METALS & ALLOYS) PET THEIR ORDER DTD.12.10.2018 HAS DELETED AN ADDITION MADE U/S.68 OF THE INCOME TAX ACT IN RESPECT OF BOGUS SHARE CAPITAL & SHARE PREMIUM BY HOLDING THAT IF (A) THE ASSESSEE HAS FURNISHED THE NAME, ADDRESS AND PAN AN D SHARE APPLICATION FORMS TO PROVE THAT THE SHARES WERE ALLOTTED TO THE APPLICANT AND (B) THE BANK STATEMENTS SHOW THAT MONEY WAS RECEIVED THROUGH BANKING CHANNELS, THERE WERE NO IMMEDIATE WITHDRAWALS TO SUGGEST THAT THE SHARE APPLICATION AMOUNTS HAVE BEEN RETURNED BACK TO THESE PARTIES IN CASH, IT MEANS THAT THE ASSESSEE HAS DISCHARGED THE PRIMARY ONUS CAST UPON IT TO PROVE THE IDENTITY, CAPACITY AND GENUINENESS OF THE TRANSACTION, THEREBY DELETING THE ADDITION MADE U/S,68 OF THE INCOME TAX ACT. F) AS STA TED BY THE AO AT PARA 4.3.2 & 4.3.3 OF THE ASSESSMENT ORDER, THE FT&TR HAS EXPLAINED THAT THE INVESTMENT MADE BY RABNA HOLDINGS LTD. IS FUNDED OUT OF LOAN FROM AMAS LTD. BAHAMAS, THIS FURTHER STANDS CONFIRMED BY THE CONFIRMATION STATEMENT GIVEN BY AMAS LTD . BAHAMAS IN ITS COMMUNICATION DTD.28.02.2018 TO RABNA HOLDINGS LTD., MAURITIUS THAT FOR INVESTING IN THE SHARES OF HRVL (THE ASSESSEE), THE SAID AMAS LTD. HAD GIVEN A LOAN TO RABNA HOLDINGS LTD. IN THE F.Y. 2013 - 14, THE ABOVE CONFIRMATIONS AS RECEIVED FRO M RABNA HOLDINGS LTD, ARE ENCLOSED SEPARATELY AT PAGES 65 TO 66 OF THE COMPILATION. THIS IS NOT ADDITIONAL EVIDENCE AS THE ABOVE FACT STANDS CONFIRMED BY THE FT&TR AND AS STATED BY THE AO AT PARA 4.3.3 OF THE ASSESSMENT ORDER. (G) THE DELHI HIGH COURT IN CIT V. RUSSIAN TECHNOLOGY CENTRE PVT. LTD. - XTA NOS.547, 549 & 555 OF 2013 PER THEIR ORDER DTD.15,12,2016, WHILE DISMISSING THE APPEAL FILED BY THE DEPARTMENT UPHELD THE ITAT ORDER IN 37 TAXMAN.COM 400 THAT IF THE IDENTITY OF NON - RESIDENT REMITTER IS EST ABLISHED AND MONEY HAS COME IN THROUGH BANKING CHANNEL, IT CANNOT BE TREATED AS DEEMED INCOME U/S.68 OR 69 OF THE INCOME TAX ACT. IN THE DECISION WHILE GRANTING RELIEF, THE ITAT HAD RELIED ON THE CBDT CIRCULAR NO,5 OF 2 0 . 0 2.1969 AND THE DECISION OF FINLAY CORPORATION L TD. - 86 ITD 626 AND SARASWATI HOLDINGS CORPORATION INC - 16 SOT 535. THE TRIBUNAL IN RUSSIAN TECHNOLOGIES FURTHER NOTED THAT: - '8.1. THE FIPB FURTHER AUTHORIZED THE ASSESSEE COMPANY TO RAISE CAPITAL UPTO RS. 600 CRORES WITHOUT APPROACHIN G IT FOR FURTHER APPROVALS. THIS WAS GIVEN VIDE LETTER DATED 20.J2.2005. THE ASSESSEE ALSO, ED THE CERTIFICATE OF INCORPORATION OF RTCHL AND A DETAILED CONFIRRNATION BY RTCHL AND M/S PROTEX TRADING COMPANY LTD CONFIRMING T HE REMITTANCE OF RS.54,44,000/ - TOWARDS ITA NO .1090/MUM/2019 & 2569/MUM/2019 M/S. HINDUJA REALTY VENTURES LTD., 11 SHARE CAPITAL OF ASSESSEE COMPANY. THE ASSESSEE CONTENDED THAT THE MONEY CAME THROUGH BANKING CHANNELS AND A COPY OF THE FOREIGN INWARD REMITTANCE CERTIFICATE WAS ALSO FILED WHEREIN IT WAS SPECIFICALLY STATED THAT TH E MONEY'S HAVE COME IN TOWARDS SHARE CAPITAL IN THE ASSESSES COMPANY AND THE SAME HAD BEEN REMITTED BY RTCHL, THE NAME OF THE BANKS INVOLVED WAS ALSO GIVEN IN THE CERTIFICATE. THE ASSESSES COMPANY FILED DOCUMENTARY EVIDENCE TO SHOW THAT THE INCREASE IN SHA RE CAPITAL WAS INTIMATED TO THE REGISTRAR OF COMPANIES IN THE REQUISITE FORM. 8.2 - THIS WAS SOUGHT TO BE EXPLAINED BY THE ASSESSEE BY SUBMITTING FOLLOWING DOCUMENTS BEFORE THE ASSESSING OFFICER: (I) FIPB APPROVAL DT 16 SEPTEMBER 7998 AUTHORISIN G THE COMPANY TO RAISE SHARE CAPITAL UPTO USD 3 LAKHS. (II) AMENDMENT TO FIPB APPROVAL DT 09 - 06 - 2004 (III) FIPB APPROVAL DID 20 - 12 - 2005 RECEIVED BY THE COMPANY AUTHORIZING TO RAISE SHARE CAPITAL UPTO RS. 6 00 CRORES (IV) COPY OF CERTIFICATES OF INCORPORATION OF SHAREHOLDERS (V) CONFIRMATION GIVEN BY REMITTER TOWARDS REMITTANCE FOR SHARE CAPITAL (VI) COPY OF FIRC (VII) COPY OF BANK STATEMENTS (VIII) COPY OF FORM 2 FILED WITH ROC 8. THE TRIBUNAL CONSIDERED THE CONTENTIONS OF THE ASSESSEE THAT: - (II) THE ASSESSING OFFICER HAS FAILED TO CONSIDER THE HONBLE SUPREME COURT JUDGMENT IN THE CASE OF LOVELY EXPORTS AND VARIOUS OTHER JUDGMENTS WHICH DESCRIBE THE PRIMARY BURDEN CAST ON THE ASSESSEE WHILE PROVING THE SHARE APPLICATION MONEY. IGNORING VARI OUS DOCUMENTS PROCURED FROM FIPB CONFIRMATIONS, ROC RECORDS, VEHEMENT INSISTENCE HAS BEEN MADE ONLY ON THE BANK STATEMENTS OF THE SHAREHOLDERS. ACCORDING TO ID. COUNSEL WHEN THE BURDEN OF THE ASSESSEE CAN BE AMPLY PROVED FROM THE DOCUMENTS FILED BY IT, CAS H CREDIT/SHARE APPLICATION MONEY CANNOT BE HELD TO BE NON - GENUINE WITHOUT ADJUDICATING THEM AND PICKING UP THE NON - FILING OF BANK STATEMENTS OF SHAREHOLDERS. THE ASSESSING OFFICER HAS A QUASI JUDICIAL DUTY TO WEIGH THE QUALITY OF EVIDENCE PRODUCED BEFORE I T AND IF IT IS SUFFICIENT TO DISCHARGE THE BURDEN OF ASSESSEE, THE SAME CANNOT BE CRYPTICALLY DISREGARDED IN THE PRETEXT OF DOCUMENT WHICH WAS NOT FILED BY THE ASSESSEE.' 9. IT THEN CONCLUDED THAT - 11.7. TAKING INTO CONSIDERATION OF ALL THE ABOVE, WE FIND MERIT IN THE DOCUMENT OF THE ID. COUNSEL FOR THE ASSESSEE .THAT THE PRIMARY BURDEN I THE ASSESSEE WAS DULY DISCHARGED. THE ISSUE OF PRIMARY ONUS IS TO BE WEIGHED ON THE SCALE OF EVIDENCE AVAILABLE ON THE RECORD AND THE DISCHARGE OF BURDEN BY THE ASSESSEE I S ALSO TO BE DECIDED ON THE BASIS OF DOCUMENTS FILED BY THE ASSESSEE AND FACTS AND CIRCUMSTANCES OF EACH ITA NO .1090/MUM/2019 & 2569/MUM/2019 M/S. HINDUJA REALTY VENTURES LTD., 12 CASE AND ON THAT BASIS A REASONABLE VIEW IS TO BE TAKEN AS TO WHETHER THE ASSESSEE HAS DISCHARGED THE PRIMARY ONUS OF ESTABLISHING THE IDENTITY OF SHAR E APPLICANT, ITS CREDITWORTHINESS AND GENUINENESS OF THE TRANSACTION. FROM THE DOCUMENTS FILED DURING THE COURSE OF ASSESSMENT AND BEFORE CITA), THE INDEPENDENT EXISTENCE OF THE SHARE APPLICANTS IN RUSSIA IS CLEARLY ESTABLISHED. THE ASSESSEE'S APPLICATION TO FIPB FOR RAISING THE CAPITAL CONTAINS ALL THE RELEVANT DETAILS WHICH IS FAVOURABLY ACCEPTED BY THE BOARD, PARTICULARLY BY ALLOWING THE ASSESSEE TO RAISE FURTHER THE CAPITA! WITHOUT APPROACHING THE PIPE. THE TRANSACTIONS ARE THROUGH BANKING CHANNELS. THU S THE GAMUT OF EVIDENCE DOES NOT LEAVE ANY DOUBT IN THE DISCHARGE OF PRIMARY BURDEN OF THE ASSESSEE. ON THE ISSUE CBDT CIRCULAR AND FINLAY CORPORATION JUDGMENT (SUPRA) ALSO WE ARE IN AGREEMENT WITH THE ID. COUNSEL FOR THE ASSESSEE THAT IN THESE CIRCUMSTANC ES OF THE CASE MONEYS REMITTED BY NON - RESIDENTS THROUGH BANKING CHANNEL OUTSIDE INDIA HAS TO BE HELD AS CAPITAL RECEIPTS, NOT EXIGIBLE TO TAX AND CANNOT BE TREATED AS DEEMED INCOME ON THE FICTIONS CREATED BY SECTIONS 68 AND 69 OF THE ACT. IN CONSIDERATION OF ALL THESE OBSERVATIONS, WE ARE INCLINED TO HOLD THAT THE SHARE APPLICATION MONEY AS RAISED IN THE GROUNDS OF APPEAL CANNOT BE HELD AS NON - GENUINE AND ADDED AS INCOME OF THE ASSESSEE U/S 68 OF THE ACT CONSEQUENTLY, ADDITIONS MADE ON THIS COUNT, AS RAISED M. GROUNDS OF APPEAL, ARE DELETED. ASSESSEE'S GROUNDS OF APPEAL ON THIS ISSUE ARE ALLOWED. H) IN RUSSIAN TECHNOLOGIES REFERRED TO SUPRA, NOT ONLY THE DELHI HIGH COURT APPROVED THE PRINCIPLES AS LAID DOWN BY (CBDT CIRCULAR KO.S DTD.20. 0 2.I969 THAT IF MONEY HAS COME FROM NON - RESIDENTS THROUGH BANKING CHANNEL, SOURCE OF SOURCE CANNOT BE QUESTIONED) AND THE ITAT DECISION OF FINLAY AND SARASWATI BUT ALSO RELIED ON THE DELHI HIGH COURT DECISION IN DIVINE LEASING & FINANCE LTD. - 299 ZTR 268, WHERE THE HIGH COURT HAD HELD AS FOLLOWS; '13. THERE CANNOT BE TWO OPINIONS ON THE ASPECT THAT THE PERNICIOUS PRACTICE OF CONVERSION OF UNACCOUNTED MONEY THROUGH THE MASQUERADE OR CHANNEL OF INVESTMENT IN THE SHARE CAPITAL OF A COMPANY MUST BE FIRMLY EXCORIATED BY THE R EVENUE. EQUALLY, WHERE THE PREPONDERANCE OF EVIDENCE INDICATES ABSENCE OF CULPABILITY AND COMPLEXITY OF THE ASSESSEE IT SHOULD NOT BE HARASSED BY THE REVENUE'S INSISTENCE THAT IT SHOULD PROVE THE NEGATIVE. IN THE CASE OF A PUBLIC ISSUE, THE COMPANY CONCERN ED CANNOT BE EXPECTED TO KNOW EVERY DETAIL PERTAINING TO THE IDENTITY AS WELL AS FINANCIAL WORTH OF EACH OF ITS SUBSCRIBERS. THE COMPANY MUST, HOWEVER, MAINTAIN AND MAKE AVAILABLE TO THE ASSESSING OFFICER FOR HIS PERUSAL, ALL THE INFORMATION CONTAINED IN T HE STATUTORY SHARE APPLICATION DOCUMENTS. THE CASE OF PRIVATE PLACEMENT THE LEGAL REGIME WOULD NOT BE THE SAME, A DELICATE BALANCE MUST BE MAINTAINED WHILE WALKING THE TIGHTROPE OF SECTIONS 58 AND 69 OF THE IT ACT. THE BURDEN OF PROOF CAN SELDOM BE DISCHAR GED TO THE HILT BY THE ASSESSEE: IF THE ASSESSING OFFICER HARBOURS DOUBTS OF THE LEGITIMACY OF ITA NO .1090/MUM/2019 & 2569/MUM/2019 M/S. HINDUJA REALTY VENTURES LTD., 13 ANY SUBSCRIPTION HE IS EMPOWERED, NAY DUTY - BOUND, TO CARRY OUT THOROUGH INVESTIGATIONS. BUT IF THE ASSESSING OFFICER FAILS TO UNEARTH ANY WRONG OR ILLEGAL DEALIN GS, HE CANNOT OBDURATELY ADHERE TO HIS SUSPICIONS AND TREAT THE SUBSCRIBED CAPITAL AS THE UNDISCLOSED INCOME OF THE COMPANY. XXXX XXXX XXXX XXJCX 16. IN THIS ANALYSIS, A DISTILLATION OF THE PRECEDENTS YIELDS THE FOLLOWING PROPOSITIONS OF LAW IN THE CONTE XT OF SECTION 68 OF THE INCOME TAX ACT. THE ASSESSEE HAS TO PRI MA FACIE PROVE 11} THE IDENTITY OF THE CREDITOR/SUBSCRIBER; {'2) THE GENUINENESS OF THE TRANSACTION, NAMELY: WHETHER IT HAS BEEN TRANSMITTED THROUGH BANKING OR OTHER INDISPUTABLE CHANNELS: (3) THE CREDITWORTH IN ESS OR FINANCIAL STRENGTH OF THE CREDITOR/SUBSCRIBER: {4} IF RELEVANT DETAILS OF THE ADDRESS OR PAN IDENTITY OF THE CREDITOR/SUBSCRIBER ARE FURNISHED TO THE DEPARTMENT ALONG WITH COPIES OF THE SHAREHOLDERS REGISTER, SHARE APPLICATION FORMS , SHARE TRANSFER REGISTER ETC. IT WOULD CONSTITUTE ACCEPTABLE PROOF OR ACCEPTABLE EXPLANATION BY THE ASSESSEE. (5) THE DEPARTMENT WOULD NOT BE JUSTIFIED IN DRAWING AN ADVERSE INFERENCE ONLY BECAUSE THE CREDITOR/SUBSCRIBER FAILS OR NEGLECTS TO RESPOND TO IT S NOTICES: (6) THE ONUS WOULD NOT STAND DISCHARGED IF THE CREDITOR/SUBSCRIBER DENIES OR REPUDIATES THE TRANSACTION SET UP BY THE ASSESSEE NOR SHOULD THE ASSESSING OFFICER TAKE SUCH REPUDIATION AT FACE VALUE AND CONSTRUE IT, WITHOUT MORE, AGAINST THE ASSESS EE. (7) THE ASSESSING OFFICER IS DUTY BOUND TO INVESTIGATE THE CREDITWORTHINESS OF THE CREDITOR/SUBSCRIBER THE GENUINENESS OF THE TRANSACTION AND THE VERACITY OF THE REPUDIATION' I ) THE DELHI HIGH COURT IN POND I METAL & ROLLING MILLS, ITA NO. 788/2006 AS REPORTED IN TMI 652/2007 HAS HELD THAT ONCE IT IS PROVED THAT MONEY IS RECEIVED BY AN ASSESSEE FROM A CORPORATE SHAREHOLDER, INCORPORATED IN MAURITIUS, NO ADDITION IS POSSIBLE IN THE HANDS OF THE ASSESSEE. AT BEST, THE ADDITION / INVESTMENT CAN BE EXAMINED IN THE HANDS OF THE MAURITIUS COMPANY. THE SUPREME COURT HAS DISMISSED SLP HELD BY THE DEPARTMENT AGAINST THIS ORDER, THEREBY CONFIRMING DELHI HIGH COURT DECISION. J) THE MUMBAI ITAT IN ITS DECISION DTD. 1 0TH L NOV. 2O17 PASSED IN THE CASE OF MAN JARI STUD FARM PVT LTD. ITA NO. 3842/MUM/2017 AND ITA NO. 4329/MUM/2012. THE RELEVANT CONCLUSION OF THE CASE IS GIVEN BELOW: GENUINENESS OF THE SHARE CAPITAL CONTRIBUTION; NOTES THAT SUBSEQUENT COMMUNICATION FROM MAURITIUS REVENUE AUTHORITIES WHICH WAS RE CEIVED THROUGH FT & TR DIVISION CONTAINED INFORMATION LIKE RETURN FILED BY THE MAURITIAN COMPANY, NAME, ADDRESS AND CITIZENSHIP OF DIRECTORS, COPY OF SHARE CERTIFICATE ISSUED BY THE ASSESSEE, BANK STATEMENTS AND FINANCIAL STATEMENTS OF THE MAURITIAN COMPAN Y, THUS, ITA NO .1090/MUM/2019 & 2569/MUM/2019 M/S. HINDUJA REALTY VENTURES LTD., 14 HOLDS THAT THE COMMUNICATION BY MAURITIAN AUTHORITIES CLEARLY PROVED THAT THE ASSESSEE HAD RECEIVED FUNDS FROM SUCH ENTITY; TTAT FURTHER REJECTS REVENUE'S CLAIM FOR THE NEED OF FURTHER ENQUIRY WITH REGARD TO THE GENUINENESS OF TRANSACTIONS AND CRE DITWORTHINESS OF THE PARTIES, OPINES THAT **ONCE COMMUNICATION RECEIVED FROM THE DESIGNATED AUTHORITY THROUGH FT & T R WHICH IS THE AUTHORISED AGENCY FOR EXCHANGING INFORMATION BETWEEN TWO COUNTRIES U/S 90 AND SUCH INFORMATION HAS BEEN RECEIVED THROUGH PROP ER CHANNEL, THEN THERE IS NO SCOPE FOR THE AO TO CONDUCT FURTHER ENQUIRIES WITH REGARD TO THE CREDITWORTHINESS OF THE PARTIES . K) THE ENTIRE CASE OF THE AO IS BASED ON HIS CONTENTIONS THAT SINCE THE COMPANY GIVING LOAN TO THE SOURCE OF ASSESSEE COMPANY' S FDI INVESTOR IS IN 'BAHAMAS', IT IS A TAINTED TRANSACTION. THERE CANNOT BE A MORE BASELESS ADDITION. ONE CANNOT COME TO A CONCLUSION THAT ALL COMPANIES IN 'BAHAMAS' ARE WITH TAINTED MONEY, THERE HAS TO BE AT LEAST SOME EVIDENCE TO ESTABLISH THE CONCLUSIO N BY THE AO. IN THIS CASE, NOT ONLY HE DOES NOT HAVE ANY EVIDENCE, BUT ALSO THE ASSESSEE COMPANY HAS PRODUCED CONTRARY EVIDENCE TO ESTABLISH ITS MERITS AND HENCE SUCH SURMISES ARE UTTER MISCARRIAGE OF JUSTICE. THERE IS NO REBUTTAL OF ANY OF THE CONTENTIONS OF THE ASSESSEE MADE BY THE AO WITH ANY SUPPORTING EVIDENCE. L ) THE ISSUE OF SHARES WAS CONSIDERED AT FAIR MARKET VALUE BASED UPON INDEPENDENT VALUATION REPORTS AND HENCE IT IS UNDISPUTED FACT THAT THE TRANSACTION IS AT ARMS LENGTH . 3.5. THE LD. CIT(A ) OBSERVED THAT M/S. AMAS LTD., NAME WAS REFLECTED IN THE LIST OF TAINTE D ENTITIES IN BAHAMAS LEAKS . SINCE THE ASSESSEE REFUSED TO PROVIDE DETAILS REGARDING SOURCE OF FUNDS WITH M/S AMAS LTD AND IT ALSO FAILED TO PROVIDE ANY JUSTIFICATION FOR CHARGING SU CH A HUGE PREMIUM AND IMMEDIATE SOURCE OF FUNDS IN THE CASE OF M/S RABNA HOLDINGS LTD WAS FUNDS FROM A TAINTED RELATED COMPANY, THE LD AO CONCLUDED THAT THE ASSESSEE HAS FAILED TO DISCHARGE ITS BURDEN OF ESTABLISHING THE CREDITWORTHINESS OF THE SUBSCRIBER COMPANY. ACCORDINGLY, AMOUNT OF RS. 155, 00,00,000 / - FOUND CREDITED IN THE BOOKS OF ACCOUNT MAINTAINED BY THE ITA NO .1090/MUM/2019 & 2569/MUM/2019 M/S. HINDUJA REALTY VENTURES LTD., 15 ASSESSEE WAS HELD AS UNEXPLAINED AND WAS TAXED IN THE HANDS OF THE ASSESSEE U/S 68 OF THE IT ACT. 3.6. THE LD. CIT(A) PROVIDED ANOTHER OPPORTUNITY TO FURNISH EVIDENCE TO PROVE THE SOURCE OF FUNDS AND CREDITWORTHINESS OF M/S. RABNA HOLDINGS LTD.. IN RESPONSE, THE ASSESSEE VIDE SUBMISSION DATED 12/12/2018 SUBMITTED TWO LETTERS CLAIMED TO HAVE BEEN RECEIVED FROM M/S.RABNA HOLDINGS LTD. AND M/S. AMAS LT D., CONFIRMING THE LOAN TRANSACTIONS BETWEEN THEM AND ALSO CONFIRMING THE SUBSCRIPTION OF EQUITY SHARES IN THE ASSESSEE COMPANY. THE LD. CIT(A) ON PERUSAL OF THOSE TWO LETTERS OBSERVED THAT THEY HAVE BEEN PRINTED ON PLAIN PAPER AND NOT ON THE LETTERHEAD OF THE RESPECTIVE COMPANIES. NO ADDRESS OF THE ENTITIES WERE MENTIONED IN THOSE LETTERS, THE NAME AND DESIGNATION OF THE PERSON SIGNING THOSE LETTERS WERE NOT MENTIONED. THOSE LETTERS WERE NOT A RIZED IN INDIA. THE LD. CIT(A) OBSERVED THAT HOW THE LETTERS SIGN ED ON BEHALF OF THE ENTITIES REGISTERED IN MAURITIUS AND BAHAMAS WERE NOT A RIZED IN INDIA. SINCE THOSE LETTERS CONTAINED CERTAIN DEFICIENCIES AS LISTED ABOVE, THE LD. CIT(A) OBSERVED THAT THEY DO NOT HAVE ANY EVIDENTIARY VALUE. ACCORDINGLY, THE LD. CIT(A) CONCLUDED THAT ASSESSEE HAD FAILED TO PROVIDE DETAILS REGARDING SOURCE OF FUNDS AND FINANCIALS OF M/S. AMAS LTD D ESPITE THE FACT THAT IT IS CLAIMED TO BE RELATED PARTY OF THE SHAREHOLDER OF THE ASSESSEE COMPANY. THE LD. CIT(A) OBSERVED WITH REGARD TO RELIA NCE PLACED BY THE ASSESSEE ON ITA NO .1090/MUM/2019 & 2569/MUM/2019 M/S. HINDUJA REALTY VENTURES LTD., 16 CIRCULAR NO.5/1969 DATED 20/02/1969 THAT ON EXAMINATION OF THE CONTENTS OF THE CIRCULAR IT IS EVIDENT THAT THE SAME WAS ISSUED IN ALTOGETHER DIFFERENT CONTEXT WHICH IS ENTIRELY DIFFERENT FROM THE FACTS OF THE CASE OF THE ASSES SEE. THE LD. CIT(A) FURTHER OBSERVED AS UNDER: - MOREOVER, PROVISIONS OF SECTION 68 OF THE IT ACT EMPOWER THE AO TO EXAMINE THE IDENTITY OF THE PARTY, THE GENUINENESS OF THE TRANSACTION AND THE CREDITWORTHINESS OF THE PARTY IN WHOSE NAME ANY SUM IS FOUND C REDITED IN THE BOOKS OF ACCOUNT OF THE ASSESSEE. IN THE MODERN TIMES, WHERE THE MONEY - LAUNDERING HAS BECOME A SOPHISTICATED ACTIVITY AND LAYERING IS USED TO HIDE THE ACTUAL NATURE OF THE TRANSACTION, AO CANNOT BE SAID TO BE EXCEEDING HIS JURISDICTION IF HE IS TRYING TO EXAMINE THE SOURCE OF MONEY WHICH IS RECEIVED BY THE APPELLANT FROM AN ENTITY WHICH IS USED AS A PASS - THROUGH ENTITY AND WHICH DOES NOT HAVE THE CAPACITY TO ADVANCE THE MONEY IN ITS OWN RIGHT. THERE CANNOT BE ANY PRESUMPTION THAT ANY NON - RE SIDENT ADVANCING THE MONEY TO A RESIDENT ASSESSEE HAS EARNED THE SAME OUTSIDE INDIA ONLY. SIMILARLY, THE CLAIM OF THE APPELLANT THAT SINCE THE MONEY IS COMING FROM A GROUP ENTITY OF BILLIONAIRES, THEREFORE, CREDITWORTHINESS OF THE INVESTOR CANNOT BE DOUBTE D IS ALSO NOT ACCEPTABLE. THE FACTS ARE REQUIRED TO BE PROVED BY FURNISHING NECESSARY DOCUMENTS IN THE ASSESSMENT PROCEEDINGS, THERE IS NO SCOPE FOR ANY PRESUMPTIONS IN THE ASSESSMENT PROCEEDINGS. LAUNDERING THE MONEY ABROAD AND RE - ROUTING DIE SAME THROUGH PAPER ENTITIES REGISTERED ABROAD IS NOT AN UNKNOWN PHENOMENON. IN THE CASE OF THE APPELLANT, THE SHAREHOLDER WHO HAD SUBSCRIBED TO THE SHARES AT A PREMIUM IN THE APPELLANT COMPANY DID NOT HAVE CAPACITY ON ITS OWN FOR MAKING THE REQUIRED INVESTMENT RATHER IT WAS USED AS INVESTMENT VEHICLE BY THE GROUP, THEREFORE, THE AO WAS JUSTIFIED IN ASKING FOR THE SOURCE OF FUNDS RECEIVED BY M/S RABNA HOLDINGS LTD. MOREOVER, SECTION 68 OF THE IT ACT NOWHERE SAYS THAT IT APPLIES TO THE RESIDENTS ONLY. M/S RABNA HOLDIN G S LTD HAS ONLY BEEN USED AS PASS THROUGH ENTITY FOR MAKING INVESTMENT IN SHARES OF THE APPELLANT AT A HUGE PREMIUM WHICH HAS NOT BEEN JUSTIFIED BY THE APPELLANT, THEREFORE, I'M OF THE OPINION THAT THE APPELLANT HAS FAILED TO ESTABLISH THE IDENTITY OF THE RE AL SUBSCRIBER, GENUINENESS OF THE TRANSACTION AS WELL AS CREDITWORTHINESS OF M/S RABNA HOLDIN G S LTD, THE APPARENT SUBSCRIBER COMPANY. EVEN IF IT IS PRESUMED THAT THE APPARENT IS REAL AND THE IDENTITY OF THE SUBSCRIBER AS WELL AS THE GENUINENESS OF THE TRAN SACTION IS ESTABLISHED, THE CREDITWORTHINESS OF THE SUBSCRIBER M/S RABNA HOLDIN G S LTD IS NOT ESTABLISHED, THEREFORE, PROVISIONS OF SECTION 68 HAVE BEEN RIGHTLY APPLIED BY THE AO IN RESPECT OF SUBSCRIPTION AMOUNT ITA NO .1090/MUM/2019 & 2569/MUM/2019 M/S. HINDUJA REALTY VENTURES LTD., 17 RECEIVED FROM THIS COMPANY. RELIANCE IN THIS REGARD IS PLACED ON THE DECISION OF HONOURABLE BOMBAY HIGH COURT IN THE CASE OF MAJOR METALS LTD. VS. UNION OF INDIA AND ORS (2013) 359 ITR 0450 (BOM) AND THE DECISION OF HONOURABLE DELHI HIGH COURT IN THE CASES OF COMMISSIONER OF INCOME TAX VS. NOVA PROM OTERS & FINLEASE (P) LTD (2012) 342 ITR 0169 AND CIT VS N.R, PORTFOLIO (P.) LTD. [2014] 42 TAXMANN.COM 339 (DELHI). IN VIEW OF THESE FACTS, THE ADDITION OF RS. 155,00,00,000/ - MADE BY THE AO U/S 68 OF THE IT ACT IS UPHELD AND THESE GROUNDS OF APPEAL ARE D ISMISSED. 4. AGGRIEVED, THE ASSESSEE IS IN APPEAL BEFORE US. 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 LOW ER 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 C OMPANY 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 SHARE C APITAL OF THE ASSESSEE COMPANY. HENCE, THE SOURCE OF FUNDS FOR THE ASSESSEE COMPANY IS ESTABLISHED BEYOND DOU B T. THE ASSESSEE IS REQUIRED TO EXPLAIN THE NATURE AND SOURCE OF CREDIT APPEARING IN ITS BOOKS IN THE FORM OF SHARE CAPITAL AND SHARE PREMIUM IN TH E LIGHT OF ITA NO .1090/MUM/2019 & 2569/MUM/2019 M/S. HINDUJA REALTY VENTURES LTD., 18 PROVISIONS OF SECTION 68 OF THE ACT. THE NATURE OF CREDIT IS IN THE FORM OF SHARE CAPITAL AND SHARE PREMIUM. THE SOURCE OF CREDIT IS MONEY RECEIVED FROM M/S.RABNA HOLDINGS LTD., A MAURITIUS BASED ENTITY. IN THE INSTANT CASE, THE ASSESSEE HAS ALS O PROVED THE SOURCE OF SOURCE I.E., SOURCE OF FUNDS FOR M/S.RABNA HOLDINGS LTD. BEING LOAN RECEIVED FROM M/S. AMAS LTD., HENCE, THE SOURCE OF SOURCE IS ALSO PROVED IN THE INSTANT CASE BY THE ASSESSEE. WE FIND THAT THE LD CITA HAD UPHELD THE ADDITION ON THE GROUND THAT THE ASSESSEE HAD NOT PROVED THE SOURCE FOR AMAS LTD I.E SOURCE OF SOURCE OF SOURCE, WHICH IS NOT REQUIRED TO BE PROVED BY THE ASSESSEE COMPANY HEREIN , AS PER LAW . IT IS VERY PERTINENT TO NOTE THAT ALL THESE DOCUMENTS WERE COLLECTED BY FT & TR DIVISION OF CBDT FROM MAURITIUS TAX AUTHORITIES UNDER EXCHANGE OF INFORMATION IN TERMS OF SECTION 90 OF THE ACT AND RELEVANT DTAA PROVISIONS. IT IS NOT IN DISPUTE THAT FT & TR DIVISION HAD INDEED SUBMITTED A REPORT WHEREIN ALL THESE DOCUMENTARY EVIDENCES WERE FORWARDED TO THE LD AO . THE IDENTITY OF THE SHARE SUBSCRIBER IS PROVED BY THE ASSESSEE AS THE AMOUNT RECEIVED FROM M/S.RABNA HOLDINGS LTD. WHICH IS ALSO CONFIRMED BY FT & TR DIVISION IN THEIR REPORT AND ALSO BY MAURITIUS TAX AUTHORITIES. FROM THE FINA NCIALS OF M/S.RABNA HOLDINGS LTD. AS ON 31/03/2014, AS CONFIRMED BY MAURITIUS TAX AUTHORITIES AND FT & TR DIVISION OF CBDT, THE INVESTMENT MADE BY M/S.RABNA HOLDINGS LTD. IN THE SHARES OF ASSESSEE COMPANY ARE DULY REFLECTED IN THEIR BALANCE SHEET. THE MONI ES HAD BEEN RECEIVED BY THE ITA NO .1090/MUM/2019 & 2569/MUM/2019 M/S. HINDUJA REALTY VENTURES LTD., 19 ASSESSEE COMPANY FROM M/S.RABNA HOLDINGS LTD. THROUGH NORMAL BANKING CHANNELS UNDER F D I ROUTE AFTER OBTAINING PROPER APPROVALS FROM FIPB & RBI. THE RELEVANT STATUTORY FORMS IN THIS REGARD HAVE BEEN DULY FILED BY THE ASSESSEE WIT H FIPB AND RBI, ON WHICH THERE IS ABSOLUTELY NO DISPUTE. HENCE, IT COULD BE SAFELY CONCLUDED THAT THE RECEIPT OF MONIES IN THE FORM OF SHARE CAPITAL AND SHARE PREMIUM BY THE ASSESSEE FROM M/S.RABNA HOLDINGS LTD., MAURITIUS BASED ENTITY HAD GOT THE BLESSING S OF FIPB AND RBI AND MORE SO THE MONIES WERE RECEIVED THROUGH NORMAL BANKING CHANNELS. THIS 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 CREDITW ORTHINESS 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 TRANS ACTION 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 ITA NO .1090/MUM/2019 & 2569/MUM/2019 M/S. HINDUJA REALTY VENTURES LTD., 20 OF M/S.RABNA HOLDINGS LTD. FOR THE RELEVANT YEAR AND THE IN TIMATION, IF ANY , ISSUE D 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 INVEST OR HA D NOT FILED ITS INCOME TAX RETURNS, IT DOES NOT MAKE THE ENTIRE TRANSACTIONS BOGUS OR THE SAID INVESTOR NON - EXISTENT. IF AN INVESTOR COMPANY IN MAURITIUS HAD NOT FILED ITS INCOME TAX RETURN, THEN IT IS FOR THE MAURITIAN TAX AUTHORITIES TO TAKE NECESSA RY ACTION AGAINST THE SAID COMPANY AND ASSESSEE CANNOT BE FAULTED FOR THE SAME. WITH REGARD TO ANOTHER OBSERVATION MADE BY THE LD. CIT(A) THAT THE LETTERS FILED IN PAGE 65 & 66 OF THE PAPER BOOK BY M/S.RABNA HOLDINGS LTD. AND M/S. AMAS LTD., DULY CONFIRMIN G THE ENTIRE LOAN TRANSACTIONS AND INVESTMENT IN SHARE TRANSACTIONS HAD SOME DEFICIENCIES IN THE FORM OF NOT SUBMITTING THE SAME IN LETTERHEAD, NOT HAVING THE ADDRESS, NOT MENTIONING THE NAME OF THE PERSON WHO HAD SIGNED THE SAID LETTER ETC., WE FIND THAT CONTENTS IN THE SAID LETTER HAVE BEEN OTHERWISE DULY CONFIRMED BY BOTH MAURITIAN TAX AUTHORITIES AS WELL AS BY FT & TR DIVISION OF CBDT. IT IS NOT IN DISPUTE THAT MAURITIAN TAX AUTHORITIES HAD INDEED CONFIRMED THE FACT THAT M/S. AMAS LTD., HAD GIVEN LOAN T O M/S.RABNA HOLDINGS LTD. AND M/S.RABNA HOLDINGS LTD. HAD USED THE SAME FOR MAKING INVESTMENT IN SHARES IN ASSESSEE COMPANY. THE SAME FACT IS ALSO CONFIRMED BY FT & TR DIVISION OF CBDT. WHEN THESE FACTS ARE STARING ON US, WE ARE NOT INCLINED TO ACCEPT TO T HE ITA NO .1090/MUM/2019 & 2569/MUM/2019 M/S. HINDUJA REALTY VENTURES LTD., 21 FINDING OF THE LD. CIT(A) WITH M/S.RABNA HOLDINGS LTD. IS ONLY A MERE PASS THROUGH ENTITY AND M/S. AMAS LTD., BEING INCORPORATED IN BAHAMAS IS FOUND TO BE A TAINTED ENTITY. ALL THESE OBSERVATIONS OF THE LD. CIT(A) ARE PURELY WITHOUT ANY BASIS AND NOT SU PPORTED BY ANY MATERIAL EVIDENCES BROUGHT ON RECORD. THIS IS A CLASSIC CASE OF THE LD. CIT(A) DISBELIEVING THE INFORMATION OBTAINED BY CBDT, FT & TR DIVISION FROM MAURITIAN TAX AUTHORITIES UNDER EXCHANGE OF INFORMATION IN TERMS OF SECTION 90 OF THE ACT AND RELEVANT DTAA ARTICLE. THE LD. AR PLACED ON RECORD VARIOUS CASE LAWS IN SUPPORT OF ITS CONTENTIONS . SINCE THIS IS PURELY A FACTUAL MATTER, WE DO NOT FIND IT NECESSARY TO LOOK INTO THOSE CASE LAWS AS IN OUR CONSIDERED OPINION, ASSESSEE HAD DULY ESTABLISHED THREE NECESSARY INGREDIENTS OF SECTION 68 OF THE ACT OF FACTS AND ON MERITS DULY SUPPORTED BY ALL DOCUMENTARY EVIDENCES. IN VIEW OF THE AFORESAID OBSERVATIONS, WE DIRECT THE LD. AO TO DELETE THE ADDITION MADE IN THE SUM OF RS.155 CRORES U/S.68 OF THE ACT. ACCORDINGLY, THE GROUND NOS.1 TO 4 RAISED BY ASSESSEE ARE ALLOWED. 6. THE NEXT GROUND RAISED BY THE ASSESSEE IS WITH REGARD TO THE ADDITION MADE UNDER THE HEAD INCOME FROM HOUSE PROPERTY IN RESPECT OF UNIT NO.701 IN THE BUILDING MARVELLA. 6.1. THE BRIEF FACTS OF THIS ISSUE ARE THAT THE ASSESSEE WAS ASKED TO SUBMIT DETAILS AND WORKINGS OF HOUSE PROPERTY INCOME OFFERED TO TAX WITH COGENT SUPPORTING DOCUMENTS DURING THE COURSE OF ASSESSMENT ITA NO .1090/MUM/2019 & 2569/MUM/2019 M/S. HINDUJA REALTY VENTURES LTD., 22 PROCEEDINGS. THE ASSESSEE REPLIED THAT IN RESPECT OF VACANT PREMISE S IN THE BUILDING MARVELA AGGREGATING TO THE CARPET AREA OF 13272 SQ.FT IN RESPECT OF UNIT NO.701 , ANNUAL LETTING VALUE (ALV) WAS CONSIDERED AT RS.NIL AS THE SAID PREMISES REMAIN VACANT THROUGHOUT THE YEAR. THE ASSESSEE ALSO SUBMITTED THAT THE BUILDING IN WHICH THE ABOVE VACANT PREMISES ARE SITUATED WAS OCCUPIED MAJORLY BY HINDUJA HEALTHCARE LTD WHICH RUNS THE HOSPITAL IN THE SAID PREMISES. HENCE, NO OTHER TENANT WAS WILLING TO OCCUPY THE VACANT PREMISES I.E. UNIT NO.701. ACCORDINGLY, THE ASSESSEE WAS FORCE D TO OFFER THE VACANT PREMISES TO HINDUJA HEALTHCARE LTD., AND AFTER MAKING S O ME STRUCTURAL CORRECTIONS TO S UIT THE REQUIREMENTS OF HINDUJA HEALTHCARE LTD. THE S TRUCTURAL CORRECTIONS CARRIED OUT BY THE ASSESSEE TOOK CONSIDERABLE TIME AND HENCE TILL SUCH TI ME, THE SAID PROPERTY WAS REMAINING VACANT. THE ASSESSEE IN THESE PECULIAR FACTS AND CIRCUMSTANCES TREATED THE ALV OF THE SAID PROPERTY I.E., UNIT NO.701 AT RS. NIL U/S. 23(1)(C) OF THE ACT. THE ASSESSEE ALSO PLACED RELIANCE ON CERTAIN CO - ORDINATE BENCH DE CISIONS OF THIS TRIBUNAL ALONG WITH BANGALORE TRIBUNAL AND LUCKNOW TRIBUNAL IN SUPPORT OF ITS CONTENTIONS. THE LD. AO APPLIED THE PROVISIONS OF SECTION 23(4)(B) OF THE ACT AND APPLIED FAIR MARKET VALUE OF THE SAID PROPERTY AND ARRIVED AT THE RATE PER SQ.FT OF RS.900 THEREOF. THE LD. AO OBSERVED THAT SIMILAR PROPERTY IN THE SAME BUILDING HAD FETCHED THE RENT OF RS.2,06,00,000/ - FOR A CARPET AREA OF 22,852/ - SQ.FT. HENCE, PROPORTI ONATELY FOR THE CARPET AREA OF 13272 SQ.FT ITA NO .1090/MUM/2019 & 2569/MUM/2019 M/S. HINDUJA REALTY VENTURES LTD., 23 OF THE ASSESSEE, THE DEEMED ALV WAS W ORKED OUT TO RS.1,19,44,800/ - . THE LD. AO GRANTED DEDUCTION TOWARDS MUNICIPAL TAXES OF RS.3,01,388/ - AND INTEREST EXPENDITURE OF RS.45,68,737/ - TOGETHER WITH STANDARD DEDUCTION OF 30% AND THEN DETERMINED THE TAXABLE INCOME FROM HOUSE PROPERTY AT RS.49,52,2 73/ - . IN THIS ENTIRE PROCESS, THE LD. AO DID NOT MENTION ANYTHING ABOUT THE CLAIM MADE BY THE ASSESSEE U/S. 23(1)(C) OF THE ACT. BEFORE THE LD. CIT(A), THE ASSESSEE MADE SPECIFIC OBJECTION THAT THE UNIT NO.701 WAS MEASURING ONLY 1365 SQ.FT AND HENCE IN ANY CASE, EVEN IF RENTAL INCOME IS TO BE BROUGHT TO TAX, IT COULD BE TAXED ONLY IN RESPECT OF 1365 SQ.FT AND NOT 13272 SQ.FT WHICH ADMITTEDLY INCLUDED CORR IDOR AREA AND OTHER COMMON AREAS WHICH WAS AVAILABLE FOR ALL TENANTS PUT TOGETHER. THIS FACT WAS ACCEPTE D BY THE LD. CIT(A). THE BREAK UP OF THIS 1365 SQ.FT WAS EXPLAINED BY THE ASSESSEE AS UNDER: - THE PROPERTY AT MARVELLA ADMEASURES 36,124 SQ.FT., OUT OF WHICH 29,525 SQ.FT. WERE LET OUT DURING THE YEAR. THUS, OUT OF THE ABOVE, A BALANCE 6,599 SQ.FT. (36,12 4 - 29,525) IS LEFT. OUT OF THIS BALANCE AREA OF 6,599 SQ.FT., A TOTAL AREA OF 5,234 SQ.FT. BEING STILT & GROUND FLOOR COULD NOT BE LET OUT, THUS, THE ONLY AREA FIT FOR LETTING OUT IS OF 1,365 SQ.FT. BEING UNIT NO.701. 6.2. THE ASSESSEE ALSO PLEADED BEFO RE THE LD. CIT(A) THAT THE SAID UNIT NO.701 REMAINED VACANT AS NO ONE WAS WILLING TO OCCUPY THE SAME ON THE GROUNDS, THAT A HOSPITAL WAS BEING RUN OUT OF THE 29,525 SQ.FT. OF AREA IN THE BUILDING MARVELA. THE OTHER PORTION OF THE BUILDING WAS BEING OCCUPIE D BY THE NURSES AND LETTING OUT TO A THIRD PARTY WAS NOT POSSIBLE. ITA NO .1090/MUM/2019 & 2569/MUM/2019 M/S. HINDUJA REALTY VENTURES LTD., 24 UNIT NO, 701 WAS LET OUT ON 01. 01.2015 AFTER MAKING IT FIT FOR NURSES OF THE HOSPITAL. HENCE FOR REASONS STATED ABOVE, UNIT NO . 701 REMAINED VACANT IN THE F.Y. 2013 - 14. THE LD. CIT(A) DIRE CTED THE LD. AO TO WORK OUT THE RENTAL INCOME ONLY IN RESPECT OF 1365 SQ. FT AS AGAINST 13,272 SQ. FT . IN THIS ENTIRE CIT(A)S ORDER, THERE WAS NO MENTION ABOUT THE CLAIM MADE BY THE ASSESSEE REGARDING SECTION 23(1)(C) OF THE ACT . 7. AGGRIEVED THE ASSES SEE IS IN APPEAL BEFORE US. 8. WE HAVE HEARD RIVAL SUBMISSIONS. IT IS PERTINENT TO UNDERSTAND THE PROVISIONS OF SECTION 23 OF THE ACT WHICH READS AS UNDER: - ACT 23: 23. (1) FOR THE PURPOSES OF SECTION 22 , THE ANNUAL VALUE OF ANY PROPERTY SHALL BE DEEMED TO BE (A) THE SUM FOR WHICH THE PROPERTY MIGHT REASONABLY BE EXPECTED TO LET FROM YEAR TO YEAR; OR (B) WHERE THE PROPERTY OR ANY PART OF THE PROPERTY IS LET AND THE ACTUAL RENT RECEIVED OR RECEIVABLE BY THE OWNER IN RESPECT THEREOF IS IN EXCESS OF THE SUM REFERRED TO IN CLAUSE (A), THE AMOUNT SO RECEIVED OR RECEIVABLE; OR (C) WHERE THE PROPERTY OR ANY PART OF THE PROPERTY IS LET AND WAS VACANT DURING THE WHOLE OR ANY PART OF THE PREVIOUS YEAR AND OWING TO SUCH VACANCY THE ACTUAL RENT RECEIVED OR RECEIVABLE BY THE OWNER IN RESPECT THEREOF IS LESS THAN THE SUM REFERRED TO IN CLAUSE (A), THE AMOUNT SO RECEIVED OR RECEIVABLE : (EMPHASIS SUPPLIED BY US) PROVIDED THAT THE T AXES LEVIED BY ANY LOCAL AUTHORITY IN RESPECT OF THE PROPERTY SHALL BE DEDUCTED (IRRESPECTIVE OF THE PREVIOUS YEAR IN WHICH THE LIABILITY TO PAY SUCH TAXES WAS INCURRED BY THE OWNER ACCORDING TO THE METHOD OF ACCOUNTING REGULARLY EMPLOYED BY HIM) IN DETERM INING THE ANNUAL VALUE OF THE PROPERTY OF THAT PREVIOUS YEAR IN WHICH SUCH TAXES ARE ACTUALLY PAID BY HIM. 8.1. FROM THE AFORESAID PROVISIONS MORE PARTICULARLY THE CLAUSE C OF SECTION 23(1) OF THE ACT, IT COULD BE SEEN THAT WHERE THE PROPERTY WAS NOT ITA NO .1090/MUM/2019 & 2569/MUM/2019 M/S. HINDUJA REALTY VENTURES LTD., 25 LET OUT DURING THE YEAR , THE ANNUAL LETTING VALUE SHOULD BE CONSIDERED AS NIL. THE LD. DR BEFORE US VEHEMENTLY PLACED RELIANCE ON PARA 5.5 AND PARA 5.6 OF THE ASSESSMENT ORDER WHEREIN THE PROVISIONS OF SECTION 23( 4 )(B) OF THE ACT AND VARIOUS CASE LAWS WERE DIS CUSSED. WE FIND THAT ALL THOSE CASE LAWS AND THE PROVISIONS OF SECTION 23(4)(B) WERE TO BE APPLIED PRIOR TO INTRODUCTION OF SECTI ON 23(1)(C) OF THE ACT. ONCE THERE IS SPECIFIC PROVISION INTRODUCED IN SECTION 23(1)(C ) OF THE ACT , IT WOULD PREVAIL OVER OT HER SECTIONS, BECAUSE IT CONTAINS SPECIFIC CLAUSE FOR VACANCY ALLOWANCE TO THE ASSESSEE. THE LD. AR ALSO PLACED RELIANCE ON THE CO - ORDINATE BENCH DECISION OF THIS TRIBUNAL IN THE CASE OF PREMSUDHA EXPORTS (P) LTD., VS. ACIT REPORTED IN 110 ITD 158(MUM) IN SUPPORT OF ITS CONTENTIONS WHEREIN THE HEAD NOTES ARE AS UNDER: - SECTION 23 OF THE INCOME - TAX ACT, 1961 - INCOME FROM HOUSE PROPERTY - ANNUAL VALUE - ASSESSMENT YEAR 2003 - 04 - WHETHER WORDS, 'PROPERTY IS LET' AS APPEARING IN SECTION 23(L)(C) MEAN ACTUAL L ETTING OUT OF PROPERTY - HELD, NO - WHETHER IF A PROPERTY IS HELD WITH AN INTENTION TO LET OUT COUPLED WITH EFFORTS MADE FOR LETTING IT OUT, IT COULD BE SAID THAT, SUCH A PROPERTY IS A LET OUT PROPERTY AND, THEREFORE, ITS ANNUAL LETTING VALUE WOULD BE WORK ED OUT AS PER CLAUSE (C) OF SECTION 23(1) - HELD, YES WORDS AND PHRASES : WORDS 'PROPERTY IS LET' AS APPEARING IN SECTION 23(L)(C) OF THE INCOME - TAX ACT, 1961 8.2. FROM THE AFORESAID NARRATION OF FACTS , IT COULD BE SAFELY CONCLUDED THAT ASSESSEE HAD GENUINE IN TENTION TO LET OUT UNIT NO.701 ALONG WITH OTHER UNITS IN THE SAME PREMISES AND DERIVE RENTAL INCOME THEREON. BUT DUE TO CIRCUMSTANCES BEYOND ITS CONTROL, IT COULD NOT DO SO TILL 31/12/2014 ITA NO .1090/MUM/2019 & 2569/MUM/2019 M/S. HINDUJA REALTY VENTURES LTD., 26 IN RESPECT OF UNIT NO. 701 ALONE AND ULTIMATELY THE SAID UNIT AFTER MAKING CERTAIN STRUCTURAL CORRECTIONS HAD BEEN LET OUT TO HINDUJA HEALTHCARE LTD., FROM 01/01/2015 ONWARDS AND RENTAL INCOME DERIVED THEREON. HENCE, FOR A.Y.2014 - 15, THIS PROPERTY WAS NOT LET OUT AS IT WAS REMAINING VACANT AND HENCE, THE ANNUAL LETTING VALUE IN TERMS OF SECTION 23(1)(C) OF THE ACT SHOULD HAVE TO BE DETERMINED AT RS.NIL. IN VIEW OF THE AFORESAID OBSERVATIONS AND RESPECTFULLY FOLLOWING THE JUDICIAL PRECEDENTS HEREINABOVE, WE DIRECT THE LD. AO TO DETERMINE THE ANNUAL LETTING VALUE (ALV) OF UNIT NO.701 AT RS.NIL AND DELETE THE ADDITION MADE THEREON. ACCORDINGLY, THE GROUND NO.5 RAISED BY THE ASSESSEE IS ALLOWED. 9. THE GROUND NO.6 WITH REGARD TO DISALLOWANCE MADE U/S.14A OF THE ACT UNDER NORMAL PROVISIONS OF THE ACT. THE GROUND NO.7 IS WITH REGARD TO DISALLOWANCE U/S.14A OF THE ACT VIS - - VIS COMPUTATION OF BOOK PROFIT U/S.115JB OF THE ACT. 9.1. THE BRIEF FACTS OF THIS ISSUE ARE THAT THE ASSESSEE DERIVED TAX FREE INCOME OF RS.22,93,75,890/ - BY VIRTUE OF SHARE IN PARTNERSHIP FIRM. THE ASSESSEE MADE SUO MOTO DISALLOWANCE IN THE RETURN INCOME U/S.14A OF THE ACT R.W.R.8D OF THE RULES IN THE SUM OF RS.3,09,60,385/ - . THE SAID DISALLOWANCE ADMITTEDLY INCLUDED THE DISALLOWANCE MADE TOWARDS INTEREST WITHOUT CONSIDERING THE DECISION OF HONBLE J URISDICTIONAL HIGH COURT IN THE CASE OF HDFC BANK REPORTED IN 383 ITR 529. THE LD. AO PROCEEDED TO MAKE COMPUTATION UNDER RULE 8D (2) OF THE RULES AS UNDER: - ITA NO .1090/MUM/2019 & 2569/MUM/2019 M/S. HINDUJA REALTY VENTURES LTD., 27 UNDER RULE 8D(2)(I) - RS. 2,056/ - UNDER RULE 8D(2)(II) - RS.2,94,01,007/ - UNDER RULE 8D( 2)(III) - RS.1,24,75,692/ - TOTAL RS.4,18,78,755/ - LESS - DISALLOWANCE MADE BY THE ASSESSEE IN THE RETURN - RS.3,09,62,441/ - ------------------- BALANCE DISALLOWANCE U/S.14A R.W.R.8D UNDER NORMAL PROVISIONS OF THE ACT RS.1,09,16,314 === ======= THIS SUM OF RS.1 , 09 , 16 , 314/ - WAS DISALLOWED BY THE LD. AO UNDER NORMAL PROVISIONS OF THE ACT. 9.2. THE ASSESSEE DID NOT MAKE ANY DISALLOWANCE U/S.14A OF THE ACT IN THE RETURN OF INCOME WHILE COMPUTING BOOK PROFITS U/S.115JB OF THE ACT. THE LD. A O ADOPTED RULE 8D OF THE RULES AS WORKED OUT ABOVE AND DISALLOWED RS.4,18,76,669/ - U/S.115JB OF THE ACT. 9.3. THE LD. CIT(A) ACCEPTED THE WORKINGS OF THE ASSESSEE FOR DISALLOWANCE U/S.14A OF THE ACT R. W.R.8D OF THE RULES WHEREIN THE ASSESSEE HAD CONSIDER ED THE NET INTEREST I.E. INTEREST PAID LESS INTEREST RECEIVED FOR THE PURPOSE OF COMPUTING DISALLOWANCE UNDER SECOND LIMB OF RULE 8D(2) OF THE RULES. ACCORDINGLY, HE GAVE RELIEF TO THE ASSESSEE IN THIS REGARD UNDER NORMAL PROVISIONS OF THE ACT. THE LD. CIT (A) HELD THAT AS FAR AS THE COMPUTATION OF BOOK PROFITS U/S.115JB OF THE ACT IS CONCERNED, NO DISALLOWANCE U/S.14A OF THE ACT COULD BE MADE AS PER THE COMPUTATION MECHANISM PROVIDED IN RULE 8D OF THE RULES IN VIEW OF THE DECISION OF SPECIAL BENCH OF DELHI TRIBUNAL IN THE CASE OF ACIT VS. VIREET INVESTMENTS PVT LTD., REPORTED IN 165 ITD 27. HOWEVER, THE LD. CIT(A) PLACED RELIANCE ON THE CO - ORDINATE BENCH OF MUMBAI TRIBUNAL IN THE CASE OF DCIT VS. ITA NO .1090/MUM/2019 & 2569/MUM/2019 M/S. HINDUJA REALTY VENTURES LTD., 28 RELIANCE NATURAL RESOURCES LTD., DATED 11/08/2017 WHEREIN 10% OF EXEMPT INCOME WAS SOUGHT TO BE DISALLOWED WHILE COMPUTING B OOK PROFIT U/S.115JB OF THE ACT. THE LD. CIT(A) FOLLOWED THE SAID DECISION AND DIRECTED THE LD. AO TO DISALLOW RS.2,29,37,589/ - UNDER CLAUSE F OF EXPLANATION 1 TO SECTION 1 15JB(2) OF THE ACT. 1 0. AGGRIEVED, THE ASSESSEE IS IN APPEAL BEFORE US VIDE GROUND 6 & 7. 11. WE HAVE HEARD RIVAL SUBMISSIONS. WE FIND THAT ASSESSEE HAS ALSO RAISED ADDITIONAL GROUND ON THE ISSUE OF DISALLOWANCE U/S.14A OF THE ACT. GROUNDS OF APPEAL - 14A 1. ON THE FACTS AN D CIRCUMSTANCES OF THE CASE AND IN LAW THE LEARNED ASSESSING OFFICER (AO) OUGHT TO HAVE HAD THAT THE UNDER 14A OF THE ACT (IF ANY) SHOULD BE COMPUTED: I)BY EXCLUDING THOSE INVESTMENTS ON WHICH NO TAX FREE INCOME HAS ACCRUED / BEEN RECEIVED DURING THE YEAR IN ACCORDANCE WITH INTER ALIA THE DECISION OF THE SPECIAL BENCH OF THE ITAT IS VIREET INVESTMENT PVT. LTD. - 165 ITD 27 (DELHI) AND BOMBAY HIGH COURT IN BALLARPUR INDUSTRIES LTD., INCOME TAX APPEAL NO.51 OF 2016. II) BY APPLYING THE PRINCIPLE THAT WHEN THE ASSESSEE HAS SUFFICIENT INTEREST FREE FUNDS AVAILABLE, THIS IS A PRESUMPTION THAT THE SAME HAS BEEN UTILIZED IN MAKING INVESTMENTS, AND ANY DISALLOWANCE OF INTEREST OUGHT TO BE COMPUTED TAKING THE SAME INTO ACCOUNT - HDFC BANK LTD. (BOM) - 383 ITR 529 AND SINTEX INDUSTRIES LTD. - 93 TAXMAN.COM (SC). 2. THE LEARNED AO & CIT(A) OUGHT TO HAVE HELD THAT NOTWITHSTANDING THE FACTS THAT THE ASSESSEE HAD COMPUTED A DISALLOWANCE U/S.!4A OF ACT, THE SAME OUGHT TO HAVE BEEN BASED ON THE WELL SETTLED AND BINDI NG LAW LAID DOWN BY THE COURTS AND TRIBUNAL. 11.1. WE FIND THAT THESE ADDITIONAL GROUNDS GO TO THE ROOT OF THE MATTER AND DOES NOT REQUIRE ANY VERIFICATION OF FACTS AND HENCE, THE SAME ARE ADMITTED AND TAKEN UP FOR ADJUDICATION. ITA NO .1090/MUM/2019 & 2569/MUM/2019 M/S. HINDUJA REALTY VENTURES LTD., 29 11.2. WE FIND AT THE O UTSET THAT THE DISALLOWANCE MADE BY THE ASSESSEE SUO MOTO IN THE SUM OF RS.3,09,60,385/ - WAS MADE AS PER COMPUTATION MECHANISM PROVIDED IN RULE 8D(2) OF THE RULES BY CONSIDERING THE NET INTEREST I.E., INTEREST PAID LESS INTEREST RECEIVED UNDER SECOND LIMB OF RULE 8D(2) OF THE RULES. FROM THE PER USAL OF THE BALANCE SHEET, WE FIND THAT ASSESSEE HAD GOT SUFFICIENT OWN FUNDS IN ITS KITTY AND HENCE, THERE IS NO NEED TO MAKE ANY DISALLOWANCE OF INTEREST UNDER SECOND LIMB OF RULE 8D(2) OF THE RULES. ACCORDINGLY, B Y PLACING RELIANCE ON THE DECISION OF HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF HDFC BANK REPORTED IN 383 ITR 529 AND RELIANCE UTILITIES AND POWER PVT. LTD., 313 ITR 340, WE DIRECT THE LD. AO TO DELETE THE DISALLOWANCE MADE UNDER SECOND LIMB OF RULE 8D(2) OF THE RULES. 11.3. WITH REGARD TO THE THIRD LIMB, WE HOLD THAT ONLY INVESTMENTS THAT HAD YIELDED EXEMPT INCOME SHOULD BE CONSIDERED AND THE LD. AO IS DIRECTED TO RECOMPUTE THE DISALLOWANCE UNDER THIRD LIMB OF RULE 8D(2) OF THE RULES ACCORDINGLY. TH E DISALLOWANCE MADE UNDER FIRST LIMB OF RULE 8D(2) WILL REMAIN. ACCORDINGLY, THE GROUND NO.6 AND ADDITIONAL GROUNDS RAISED BY THE ASSESSEE ARE PARTLY ALLOWED. 11.4. WITH REGARD TO DISALLOWANCE U/S.14A OF THE ACT R.W.R.8D OF THE RULES WHILE COMPUTING BOOK P ROFITS U/S.115JB OF THE ACT, WE FIND THAT THE SPECIAL BENCH OF DELHI TRIBUNAL IN THE CASE OF VIREET INVESTMENTS HAD HELD THAT THE COMPUTATION MECHANISM PROVIDED IN RULE 8D(2) OF THE RULES ITA NO .1090/MUM/2019 & 2569/MUM/2019 M/S. HINDUJA REALTY VENTURES LTD., 30 CANNOT BE IMPORTED INTO CLAUSE F OF EXPLANATION - 1 TO SECTION 115JB ( 2) OF THE ACT. THE SPECIAL BENCH FURTHER HELD THAT THE DISALLOWANCE OF EXPENSES UNDER CLAUSE F NEED TO BE MADE BASED ON ACTUAL EXPENDITURE DEBITED TO PROFIT AND LOSS ACCOUNT BY THE ASSESSEE BY CLEARLY IDENTIFYING THE SAME FOR THE PURPOSE OF EARNING EXEMPT INCOME. HENCE, WE DEEM IT FIT AND PROPER TO REMAND THIS ISSUE TO THE FILE OF THE LD. AO FOR DENOVO ADJUDICATION TO DECIDE IN THE LIGHT OF THE DECISION OF SPECIAL BENCH SUPRA. ACCORDINGLY, THE GROUND NO.7 RAISED BY THE ASSESSEE IS ALLOWED FOR STATISTICAL PU RPOSES. 12. THE GROUND NO.8 RAISED BY THE ASSESSEE IS WITH REGARD TO LEVYING OF INTEREST U/S.234A OF THE ACT WAS NOT PRESSED BY THE LD. AR AT THE TIME OF HEARING. THE SAME IS RECKONED AS STATEMENT MADE FROM THE BAR AND ACCORDINGLY, GROUND NO.8 IS DISMISSED AS NOT PRESSED. 13. IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. 14. LET US TAKE UP THE REVENUE APPEAL IN ITA NO.2569/MUM/2019. 15. WE HAVE HEARD RIVAL SUBMISSIONS. WE FIND THAT ONLY ISSUE RAISED BY THE REVENUE IN ITS APPEAL IS WITH REGARD TO NETTING OFF INTEREST UNDER SECOND LIMB OF RULE 8D(2) OF THE RULES O N THE ASPECT OF DISALLOWANCE U/S.14A OF THE ACT . WE HAVE ALREADY DECIDED THIS ISSUE IN FAVOUR OF THE ASSESSEE VIDE GROUND NO.6 ABOVE. ACCORDINGLY, THE GROUND RAISED BY THE REVENUE IS DISMISSED. TO SUM UP: - ITA NO .1090/MUM/2019 & 2569/MUM/2019 M/S. HINDUJA REALTY VENTURES LTD., 31 16. THE APPEAL FILED BY THE ASSESSEE IS PARTLY A LLOWED FOR STATISTICAL PURPOSES AND THE APPEAL FILED BY THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 13 / 09 /201 9 SD/ - ( MA HAVIR SINGH ) SD/ - (M.BALAGANESH) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; DATED 13 / 09 / 2019 KARUNA , SR.PS COPY OF THE ORDER FORWARDED TO : BY ORDER, ( ASSTT. REGISTRAR) ITAT, MUMBAI 1. THE APPELLANT 2. THE RESPONDENT. 3. THE CIT( A), MUMBAI. 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. //TRUE COPY//