Appeal details
Counselvise Citation
148222514 RSA 2014
Assessee PAN
Bench
Appeal Number
Duration Of Justice
6 month(s) 1 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
18-03-2015
Appeal Filed By
Department
Order Result
Dismissed
Bench Allotted
A
Next Hearing Date
18-02-2015
Assessment Year
2011-2012
Appeal Filed On
16-09-2014
Judgement Text
IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCHES A, HYDERABAD BEFORE SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER AND SMT. ASHA VIJAYARAGHAVAN, JUDICIAL MEMBER I.T.A. NO. 1482/HYD/2014 ASSESSMENT YEAR: 2011-12 THE DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE-16(1), HYDERABAD VS SRI MADHUSUDAN RAO LAGADAPATI, CHAIRMAN, M/S.LANCO INFRATECH LTD., MADHAPUR, HYDERABAD [PAN: AAFCM1756R] (APPELLANT) (RESPONDENT) FOR REVENUE : SMT. G.APARNA RAO, DR FOR ASSESSEE : SHRI P. MURALI MOHAN RAO, AR DATE OF HEARING : 18-02-2015 DATE OF PRONOUNCEMENT : 18-03-2015 O R D E R PER B. RAMAKOTAIAH, A.M. : THIS IS A REVENUE'S APPEAL FILED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX(APPEALS)-V, HYDERABAD DA TED 30-05-2014. 2. THE ONLY ISSUE IN THIS APPEAL IS WITH REGARD TO ADDITION OF RS.78,04,58,374/- MADE U/S.68 / 69 / 69A / 69C OF T HE INCOME TAX ACT (ACT) IN THE ASSESSMENT COMPLETED U/S.143(3) ON 28- 03-2014 BY DY. DIRECTOR OF INCOME TAX-I, INTERNATIONAL TAXATION, H YDERABAD. ON THE I.T.A. NO. 1482/HYD/2014 SRI MADHUSUDAN RAO LAGADAPATI, CHAIRMAN, M/S.LANCO INFRATECH LTD., :- 2 -: BASIS OF THE ENQUIRIES DONE BY CIT(A) AND CONSIDERI NG THE SUBMISSIONS OF ASSESSEE, ENTIRE ADDITION WAS DELETED BY CIT(A), ON WHICH REVENUE IS AGGRIEVED. 3. THE FACTS OF THE CASE ARE THAT, ASSESSEE IS A NO N-RESIDENT INDIAN, GENERALLY RESIDENT OF DUBAI. HE HAS VARIOUS INVEST MENTS IN INDIA AND HAS FILED HIS RETURN OF INCOME MAINLY DISCLOSING SA LARY INCOME IN THE CAPACITY AS CHAIRMAN OF M/S.LANCO INFRATECH LIMITED , HYDERABAD AND CLAIMING THE STATUS AS NON-RESIDENT. TOTAL INCOME DECLARED BY ASSESSEE WAS TO THE TUNE OF RS.3,84,87,850/-. ASSESSING OFF ICER NOTICED FROM THE CAPITAL ACCOUNT THAT ASSESSEE HAS SHOWN AN AMOUNT O F RS.78,04,58,374/- AS CREDIT TO THE CAPITAL ACCOUNT UNDER THE HEAD 'NRI A/C'. HE HAS MADE ENQUIRIES AS THERE IS INCREASE I N THE LIABILITIES SIDE TO THE SAME EXTENT. ASSESSING OFFICER NOTED THAT ASSE SSEE APPLIED THE FUNDS AS UNDER: I. INVESTMENT OF SHARES OF M/S. LANCO INFRATECH LIMITE D, M/S. LANCO GROUP SERVICES LIMITED TO THE TUNE OF RS.44 C RORES (APPROXIMATELY); II. GIFTS TO RELATIVES TO THE TUNE OF RS.21 CRORES (APP ROXIMATELY); III. CASH IN BANK IS ABOUT RS.9 CRORES (APPROXIMATELY); AND IV. PERSONAL EXPENSES TO THE TUNE OF RS.4 CRORES (APPRO XIMATELY) 4. ASSESSING OFFICER ASKED FOR THE SOURCE OF THE AB OVE CREDIT. ASSESSEE EXPLAINED AND ALSO ACCEPTED BY THE ASSESSI NG OFFICER THAT ASSESSEE HAS RECEIVED US $1,74,00,000 VALUED AT RS. 78,04,58,374/- AS A CREDIT INTO HIS NRI A/C. ASSESSEE PROVIDED BANK TR ANSCRIPTS FROM INDUS IND BANK, SECUNDERABAD AS WELL AS AXIS BANK, HYDERA BAD EXPLAINING THE FOREIGN INWARD REMITTANCE. THESE REMITTANCES WERE UNDER THE HEADS FAMILY MAINTENANCE, PERSONAL USE/SAVINGS. ASSESSIN G OFFICER ADMITS I.T.A. NO. 1482/HYD/2014 SRI MADHUSUDAN RAO LAGADAPATI, CHAIRMAN, M/S.LANCO INFRATECH LTD., :- 3 -: THAT SUCH TRANSCRIPTS INDICATE THAT THE REMITTAL WA S BY ASSESSEE HIMSELF. ASSESSING OFFICER ISSUED A SHOW CAUSE NOTICE CALLIN G FOR DETAILS OF VARIOUS REMITTANCES AND SOURCES THEREOF. ASSESSEE HAS EXPLA INED THAT THE MONEIS REMITTED INTO THE ABOVE BANKS WERE HIS OWN FUNDS FR OM ABROAD. HE FURTHER SUBMITTED THAT THE SOURCE OF THE ABOVE FUND S ABROAD WERE FROM M/S.VITRUAL INTERNATIONAL LTD., MAURITIUS WHO HAS P ROVIDED LOAN OF US $1,74,00,000 AND A CERTIFICATE FROM THE ABOVE COMPA NY WAS FILED IN SUPPORT OF THE CLAIM THAT THE SAID COMPANY HAS PROV IDED THE ABOVE SUM DURING THE PERIOD 01-04-2010 TO 31-03-2011 AS A LOA N TO ASSESSEE. ASSESSING OFFICER DID NOT ACCEPT THE SAME ON THE RE ASON THAT IT IS NOT AN ORIGINAL CERTIFICATE, NO MENTION OF TAX RESIDENCY, NO SEAL OF COMPANY AND NO DATE ON THE CERTIFICATE NOR OTHER DETAILS. EVEN THOUGH HE DOUBTED THE EXISTENCE OF THE ABOVE COMPANY, SUBSEQUENTLY, ASSE SSING OFFICER VERIFIED THE INTERNET AND FOUND OUT THAT THE ABOVE SAID COMP ANY WAS REGISTERED IN MAURITIUS AND ASSESSEE IS A SINGLE SHAREHOLDER. AS PER THE ANNUAL FINANCIAL STATEMENTS PUBLISHED BY M/S. LANCO INFRAT ECH LIMITED, THIS COMPANY M/S.VITRUAL INTERNATIONAL LTD., WAS SHOWN A S PERSONS CONSTITUTING GROUP AS DEFINED UNDER MRTP ACT, 1969 AS ON 31-03-2011. ASSESSING OFFICER ALSO VERIFIED THE WEBSITE OF SEBI AND NOTED THAT IN THE RED HERRING PROSPECTUS OF M/S. LANCO INFRATECH LI MITED, THE ABOVE SAID COMPANY WAS SHOWN AS A SINGLE PERSON COMPANY IN WHI CH ASSESSEE IS THE SOLE SHAREHOLDER OF SINGLE SHARE AVAILABLE AS O N 29-07-2006. BASED ON THE ABOVE, ASSESSING OFFICER CAME TO THE CONCLUS ION THAT THE ABOVE SAID COMPANY IS NOTHING BUT AN ALTER EGO OF ASSESSE E AND THEREFORE FUNDS, IF AT ALL PROVED TO BE TRANSFERRED FROM M/S. VITRUAL INTERNATIONAL LTD., MAURITIUS TO THE BANK ACCOUNT OF ASSESSEE IN MAURITIUS, STILL DO NOT EXPLAIN THE SOURCE OF FUNDS IN THE HANDS OF ASSESSE E. CONSIDERING THE ABOVE AND ALSO THE LEGAL POSITION AS DISCUSSED BY H IM IN PARA 6 OF THE ASSESSMENT ORDER, HE CAME TO THE CONCLUSION VIDE PA RA 8 OF THE ASSESSMENT ORDER AS UNDER: I.T.A. NO. 1482/HYD/2014 SRI MADHUSUDAN RAO LAGADAPATI, CHAIRMAN, M/S.LANCO INFRATECH LTD., :- 4 -: '8. THE ASSESSEE WHO IS A HIGH NET WORTH INDIVIDUA L AND WHO HAS SIGNIFICANT BUSINESS INTEREST IN INDIA, AS CAN BE SEEN FROM THE STATEMENT OF AFFAIRS, HAS FAILED TO FURNISH SUFFIC IENT EVIDENCE WITH REGARD TO NATURE AND SOURCE OF RS.78,04,58,374/- C REDITED IN THE NRI LEDGER. THE ASSESSEE HAS MERELY RELIED ON A C OPY OF A CERTIFICATE OF LOAN FROM A COMPANY IN MAURITIUS IN WHICH ASSESSEE HAS 100% OWNERSHIP AND CLAIMED THAT TO BE SUFFICIE NT EXPLANATION FOR THE PURPOSE OF SEC.68 / 69 / 69A /AND SEC.5(2) (B) OF THE I.T.ACT, 1961. IN SUCH CIRCUMSTANCES, A FAIR ANALYSIS OF F ACTUAL EVIDENCES AND LEGAL POSITION WAS DONE BY THE UNDERSIGNED AND ACCORDINGLY, I AM OF THE CONSIDERED VIEW THAT RS.78,04,58,374/- C REDITED IN THE NRI LEDGER ACCOUNT OF THE ASSESSEE SHALL BE TREATE D AS THE INCOME OF THE ASSESSEE FOR AY.2011-12 AS PER SEC.68 / 69 / 69A / 69C OF THE I.T.ACT, 1961.' 5. BEFORE THE LD.CIT(A), ASSESSEE HAD FILED DETAIL ED SUBMISSIONS AND CONTENDED POINT-WISE OBSERVATIONS OF ASSESSING OFFI CER WHICH WAS EXTRACTED BY THE CIT(A) IN THE ORDER. LD.CIT(A) AL SO DIRECTED ASSESSEE TO FURNISH FURTHER EVIDENCE WITH REFERENCE TO THE CRED ITWORTHINESS OF THE SAID COMPANY AND ON EXAMINATION, CAME TO THE CONCLU SION THAT ACTION OF ASSESSING OFFICER IN TREATING THE AMOUNT AS INCOME OF ASSESSEE IS NOT CORRECT, NOT ONLY ON FACTS BUT ALSO ON LEGAL PRINCI PLES. VIDE PARA 5.2 OF THE CIT(A)'S ORDER, HE HAS RECORDED THAT HE HAS DIR ECTED THE AR TO SUBMIT THE FINANCIAL STATEMENTS OF M/S.VITRUAL INTERNATION AL LTD., IN ORDER TO VERIFY THE CREDITWORTHINESS AND NATURE OF BUSINESS ACTIVITIES AND THE WRITTEN SUBMISSIONS WERE EXTRACTED THEREIN. THEREA FTER, VIDE PARA 6 TO 12 OF THE ORDER AS DISCUSSED VARIOUS FACTUAL AS WEL L AS LEGAL PRINCIPLES TO HOLD THAT THE AMOUNT OF RS.78,04,58,374/- DOES NOT BECOME AN INCOME UNDER THE SECTIONS STATED BY ASSESSING OFFICER. HE ACCORDINGLY, DELETED THE SAME. HIS DETAILED ORDER FROM PARA 6 TO 12 IS AS UNDER: '6. I HAVE CAREFULLY GONE THROUGH THE ABOVE SUBMISSIONS OF THE APPELLANT. AS NOTED IN PARA NO.5 ABOVE, THE AO HAS MADE THE ADDITION OF RS.78,04,58,374/- U/S.68/69/69A/69C OF THE ACT BY OBSERVING THAT THE ASSESSEE HAS NOT DISCHARGED THE BURDEN OF SATISFACTORILY EXPLAINING THE SOURCE OF RS.78,0 4,58,374/- CREDITED IN HIS NRI LEDGER ACCOUNT. ON THE OTHER H AND, THE I.T.A. NO. 1482/HYD/2014 SRI MADHUSUDAN RAO LAGADAPATI, CHAIRMAN, M/S.LANCO INFRATECH LTD., :- 5 -: APPELLANT EXPLAINS THAT THE AMOUNT OF RS.78,04,58, 374/- HAS BEEN RECEIVED FROM BARCLAYS BANK, MAURITIUS INTO N RI A/E. HELD IN AXIS BANK, HYDERABAD AND INDUSIND BANK, HYDERAB AD. THE APPELLANT HAS FURTHER EXPLAINED THAT THE AMOUNT OF RS.78,04,58,374/- HAS BEEN RECEIVED IN BARCLAYS BA NK, MAURITIUS FROM THE AMOUNT OF LOAN OBTAINED FROM M/ S.VITRUAL INTERNATIONAL LIMITED, MAURITIUS IN SUPPORT OF WHI CH, HE HAS FILED BEFORE THE ASSESSING OFFICER, A COPY OF THE CONFI RMATION LETTER FROM M/S.VITRUAL INTERNATIONAL LIMITED, MAURITIUS. 6.1 IN ORDER TO EXAMINE THE CORRECTNESS OR OTHERWISE OF THE ASSESSEE'S CLAIM, I HAVE CALLED FOR THE BALANCE SH EET AND OTHER DETAILS OF M/S.VITRUAL INTERNATIONAL LIMITED, MAUR ITIUS, IN RESPONSE TO WHICH THE APPELLANT HAS FILED BEFORE M E, COPIES OF THE FOLLOWING DOCUMENTS SO AS TO PROVE THE IDENTIT Y, CREDIT WORTHINESS AND QENUINENESS OF THE CREDITOR-COMPANY (M/S.VITRUAL INTERNATIONAL LIMITED, MAURITIUS) (A) CERTIFICATE OF INCORPORATION OF MLS VITRUAL IN TERNATIONAL LIMITED, MAURITIUS. (B) ANNUAL REPORT OF M/S.LANCO INFRATECH L TD FOR THE FINANCIAL YEAR 2009-10. (C) LOAN CONFIRMATION FROM VITRUAL INTERNATIONAL LI MITED, MAURITIUS. (D) COPY OF AUDITED FINANCIAL STATEMENTS FOR YEAR ENDED 31-3- 2011 OF M/S. VITRUAL INTERNATIONAL LIMITED, MAURITIUS, (E) COPIES OF DOCUMENTS IN SUPPORT OF SUBST ANTIAL SHARE HOLDING OF THE CREDITOR COMPANY VIZ, M/S VITRUAL INTERNATIONAL LIMITED IN M/S LANCO INFRATECH LIR1ITED (LITL). 6.2 ON EXAMINATION OF THE ABOVE DOCUMENTS, I FIND THAT THE IDENTITY OF THE CREDITOR COMPANY, VIZ., VITRUAL I NTERNATIONAL LIMITED, MAURITIUS IS PROVED. 6.3 IT IS CLEAR FROM THE ABOVE DOCUMENTS THAT THE LOAN GIVEN TO THE APPELLANT FOR USD 1,74,00,000 (RS.78,04,58,374) IS SHOWN UNDER THE HEAD 'NON CURRENT ASSETS' IN THE S TATEMENT OF FINANCIAL POSITION OF M/S.VITRUAL INTERNATIONAL LIMITED, MAURITIUS AS AT 31.3.2011 WHERE IN THE CAPITAL AND RESERVE AMOUNT TO USD 2,37,33,247 AND THE CURRENT LIABILITIES AMOUNT TO USD 59,50,478. HENCE, CREDITWORTHINESS OF THE CREDITOR-COMPANY IS ALSO P ROVED IN THE I.T.A. NO. 1482/HYD/2014 SRI MADHUSUDAN RAO LAGADAPATI, CHAIRMAN, M/S.LANCO INFRATECH LTD., :- 6 -: APPELLANT'S CASE. 6.4 AFTER THE EXAMINATION OF THE ABOVE MENTIONED DOCUMENTS, I AM OF THE CONSIDERED VIEW THAT THE WHOLE TRANSAC TION IS A GENUINE TRANSACTION. SINCE THESE DOCUMENTS WERE N OT FURNISHED BEFORE THE AO, HE HAD NO ALTERNATIVE EXC EPT TO DENY THE ASSESSEE'S CLAIM IN THIS REGARD. HOWEVER, I ALSO AGREE THAT THE APPELLANT HAS SATISFACTORILV EXPLAINED AS TO H OW THE AMOUNT OF RS.78,04,58,374/- HAS REACHED HIS HANDS. SINCE THE APPELLANT HAS PROVED THE IDENTITY, CREDITWORTHINESS OF THE C REDITOR AND THE GENUINENESS OF THE TRANSACTION, THE ADDITION MADE U/S. 68/69/69A/69C OF THE ACT FOR RS.78,04,58,374/- IS NOT WARRANTED. 7. WITH REGARD TO THE OBSERVATIONS AND INFERENCE D RAWN BY THE AO IN PARA NOS. 4.4 AND 4.5 OF THE ASSESSMENT ORDE R, I FOUND THEM AS BASELESS BECAUSE OF THE FACT THAT THE APPE LLANT HAS EXPLAINED THE SOURCE OF THE IMPUGNED CREDIT SATISF ACTORILY. 7.1 THE OBSERVATION OF THE AO AT PARA 4 OF THE AS SESSMENT ORDER THAT THE AMOUNT SHOULD HAVE BEEN DISCLOSED A S LIABILITY/LOAN IN THE STATEMENT OF AFFAIRS IS NOT CORRECT BECAUSE THE ASSESSEE HAS NOT RECEIVED ANY LOAN IN INDIA; H E HAS RECEIVED HIS OWN MONEY FROM THE BANK ACCOUNT OUTSIDE INDIA AND THE SAME IS CREDITED TO THE CAPITAL ACCOUNT OF THE ASS ESSEE FOR THE YEAR UNDER CONSIDERATION WHICH IS FOUND TO BE CORR ECT. SINCE THE ASSESSEE HAS EXPLAINED THE SOURCE OF RS.78,04,58,3 74/-, THE OBSERVATION OF THE AO THAT IT IS UNREASONABLE TO P RESUME THAT SUCH INCOME NECESSARILY COMES/ARISES OUTSIDE INDIA IN VIEW OF THE DECISIONS OF SETH KALE KHAN MD. HANIF VS. CIT( 1958) 34 ITR 669,673,674(MP), AFFIRMED IN 50 ITR 1 (SC) AND CIT V. KRISHNA MINING CO. (1972) 83 ITR 860 (AP) IS NOT CORRECT. I ALSO AGREE WITH THE APPELLANT'S CONTENTION THAT THE AO'S OBSE RVATION AT PARA NO.4.7 OF THE ASSESSMENT ORDER RELYING ON THE SUPR EME COURT'S DECISION IN THE CASE OF VODAFONE INTERNATIONAL HOL DINGS B.V VS. UNION OF INDIA [341 ITR I (SC)] HAS NO RELEVANCE T O THE FACTS OF THE APPELLANT'S CASE. I AGREE WITH THE CONTENTION OF THE APPELLANT THAT THERE IS NO 'ROUND-TRIPPING' IN RESPECT OF TH E SOURCE OF FUNDS OF M/S. VITRUAL INTERNATIONAL LIMITED, MAURI TIUS. FURTHER, THE ASSESSING OFFICER'S OBSERVATION THAT THE PURPO SE OF THE REMITTANCE AS PER FIRC IS FAMILY MAINTENANCE / PER SONAL USE / SAVINGS AND THE REMITTER IS ASSESSEE HIMSELF, HAS NO RELEVANCE WHEN ONCE THE SAME IS EXPLAINED. ALSO, THE AO'S OB SERVATIONS THAT THE CONFIRMATION LETTER IS NOT AN ORIGINAL CE RTIFICATE, THAT THE RELATIONSHIP BETWEEN THE ASSESSEE AND THE COMPANY IS NOT I.T.A. NO. 1482/HYD/2014 SRI MADHUSUDAN RAO LAGADAPATI, CHAIRMAN, M/S.LANCO INFRATECH LTD., :- 7 -: STATED THEREIN, THAT THERE IS NO MENTION OF TAX RE SIDENCY OF THE COMPANY, THAT THERE IS NO SEAL OF THE COMPANY ON THE COPY OF CERTIFICATE SUBMITTED, THAT THERE IS NO DATE ON THE CERTIFICATE AND THAT THERE ARE NO CONTACT DETAILS ON THE CERTIFIC ATE EXCEPT FOR THE POSTAL ADDRESS HAVE NO MERIT IN VIEW OF THE AB OVE MENTIONED EVIDENCE. SINCE THE APPELLANT HAS SATISF ACTORILY EXPLAINED THE SOURCE FOR THE AMOUNT OF RS.78,04,58 ,374/-, NO SEPARATE EXPLANATION FOR THE INVESTMENT IN SHARES, MONIES IN THE BANK ACCOUNT AND EXPENSES INCURRED IS NEEDED. 8. FURTHER, I FIND THAT THE CREDIT APPEARING IN THE CA PITAL ACCOUNT OF THE APPELLANT IS THE AMOUNT OF RS.78,04 ,58,374/- RECEIVED INTO THE NRI A/C HELD IN AXIS BANK AND IN DUSIND BANK FROM THE BARCLAYS BANK ACCOUNT NO.7404418 HELD BY HIM AT MAURIT US. THE FACT OF R ECEIPT OF THE ABOVE SAID AMOUNT IS SUPPORTED BY THE .NWARD REMIT TANCES CERTIFICATES, BANK STATEMENTS AND THE CERTIFICATE FROM THE ACCOUNTANT FROM MAURITIUS [QUIYOOM DUSTOGHEER, FCC A, MIPA(M)]. I, THEREFORE, AGREE WITH THE EXPLANATION OF THE ASSESSEE THAT THE AMOUNT OF RS.78,04,58,374/- IS R ECEIVED BY THE ASSESSEE FROM HIS OWN BANK ACCOUNT MAINTAINED OUTSIDE INDIA. 9. SINCE THE APPELLANT IS A NON-RESIDENT, SECTION 5(2) OF THE I.T.ACT AND BOARD CIRCULAR NO.5 DATED 20-2-1969 DE AL WITH THE ISSUE ON HAND. THE PROVISIONS OF SUB SECTION(2) O F SECTION 5 OF THE ACT ARE EXTRACTED AS UNDER: 'SEC.5(2): SUBJECT TO THE PROVISIONS OF THIS ACT THE TOTAL INCOME OF ANY PREVIOUS YEAR OF A PERSON WHO IS A NON-RESID ENT INCLUDES ALL INCOME FROM WHATEVER SOURCE DERIVED WHICH- (A) IS RECEIVED OR IS DEEMED TO BE RECEIVED IN INDIA IN SUCH YEAR BY OR ON BEHALF OF SUCH PERSON; OR (B) ACCRUES OR ARISES DEEMED TO ACCRUE IS ARISE TO HIM IN INDIA DURING SUCH YEAR. EXPLANATION 1. -INCOME ACCRUING OR ARISING OUTSIDE INDIA SHALL NOT BE DEEMED TO BE RECEIVED IN LR'DIA WITHIN THE MEANING OF THIS SECTION BY REASON ONLY OF THE FACT THAT IT IS TAKEN INTO ACCO UNT IN A BALANCE SHEET PREPARED IN INDIA. EXPLANATION 2. -FOR THE REMOVAL OF DOUBTS/ IT IS H EREBY DECLARED THAT INCOME WHICH HAS BEEN INCLUDED IN THE TOTAL INCOME OF A PERSON ON THE BASIS THAT IT HAS ACCRUED OR ARISEN OR IS DEEMED TO HAVE I.T.A. NO. 1482/HYD/2014 SRI MADHUSUDAN RAO LAGADAPATI, CHAIRMAN, M/S.LANCO INFRATECH LTD., :- 8 -: ACCRUED OR ARISEN TO HIM SHALL NOT AGAIN BE SO INC LUDED ON THE BASIS THAT IT IS RECEIVED OR DEEMED TO BE RECEIVED BY IN INDIA. BOARD CIRCULAR NO.5 IN F.NO.73/A/2/69-IT(A-II), IS EXTRACTED AS UNDER: '475, PERSONS MIGRATING FROM WEST/EAST PAKISTAN. B URMA, EAST AFRICAN COUNTRIES, NAMELY. MOZAMBIQUE, ZANZIBAR, K ENYA, TANZANIA AND UGANDA - CLAIMS AS TO ORIGIN OF MONEY/ASSETS B ROUGHT INTO INDIA TO BE FREELY ADMITTED UP TO LIMIT OF RS. 50, 000 SUBJECT TO CERTAIN CONDITIONS 1. IT HAS BEEN REPRESENTED TO THE BOARD THAT PERSONS OF INDIAN ORIGIN RESIDING ABROAD BUT INTENDING TO RETURN TO INDIA AND SETTLE HERE PERMANENTLY APPREHEND THAT THE MONEY BROUGHT IN OR REMITTED FROM ABROAD BY SUCH PERSONS MIGHT BE SUBJECTED TO INCOME-TAX IN INDIA, THE APPREHENSION APPEARS TO BE DUE TO LACK OF INFORMATION REGARDING THE CORRECT LEGAL POSITION ABOUT THE TAXABILITY OF THE REMITTANCES OF MONEY FROM ABROAD, T HE GENERAL POSITION, IN THIS REGARD IS CLARIFIED BELOW. 2. MONEY BROUGHT INTO INDIA BY NON-RESIDENTS FOR I NVESTMENT OR OTHER PURPOSES IS NOT LIABLE TO INDIAN INCOME-LAX. T HEREFORE, THERE IS NO QUESTION OF A REMITTANCE INTO THE COUNTRY BEING SU BJECTED TO INCOME- TAX IN INDIA. THE QUEST ION OF ASSESSMENT TO TAX ARISES ONLY WHEN THERE IS NO EVIDENCE TO SHOW THAT THE AMOUNT, IN QUESTION, I N FACT REPRESENTS SUCH REMITTANCE. IN OTHER WORDS, IN THE ABSENCE OF PROPER SUPPORTING EVIDENCE. THE TAXPAYERS' STORY THAT THE MONEY HAS BEEN BROUGHT INTO INDIA FROM OUTSIDE MAY BE DISBELIEVED BY THE INCOME-TAX OFFICER WHO MAY THEN PROCEED TO HOLD THAT THE MONE Y HAD IN FACT BEEN EARNED IN INDIA. 3. IF THE MONEY HAS BEEN BROUGHT INTO INDIA THROUGH BA NKING CHANNELS OR IN THE FORM OF ASSETS LIKE PLANT AND MACHINERY OR STOCK-IN-TRADE, FOR WHICH THE NECESSARY IMPORT PERMITS HAD BEEN OBTAINED, NO QUESTIONS AT ALL ARE ASKED BY THE INCOME-TAX OFFICERS AS TO THE ORIGIN OF THE MONEY OR ASSETS BROUGHT IN. IT IS ONLY IN CASE WHERE THE MONEY IS CLAIMED TO HAVE BEEN BROUGHT FROM OUTSIDE OTHERWISE THAN THROUGH BANKIN G CHANNELS AND THERE IS NO EVIDENCE REGARDING THE TRANSFER OF THE MONEY , THAT THE DEPARTMENT HAS TO MAKE ENQUIRIES ABOUT THE SOURCE THEREOF. EVEN IN THESE CASES, HAVING REGARD TO THE DIFFICULTIES EXPERIENCED PERSO NS MIGRATING FROM PAKISTAN, BURMA AND EAST AFRICAN COUNTRIES, INSTRU CTIONS HAVE BEEN ISSUED TO THE LNCOME-TAX OFFICERS THAT SUCH CLAIMS SHOULD BE FREELY ADMITTED UP TO THE LIMIT OF RS 50,000 IN EACH CASE PROVIDED THE FOLLOWING CONDITIONS ARE SATISFIED: I.T.A. NO. 1482/HYD/2014 SRI MADHUSUDAN RAO LAGADAPATI, CHAIRMAN, M/S.LANCO INFRATECH LTD., :- 9 -: 1.. THE ASSESSEE MIGRATED TO INDIA ON OR ALTER THE DATE S MENTIONED BELOW FROM THE COUNTRIES SHOWN AGAINST EACH AND HAD NO SO URCE OF INCOME IN INDIA: A. 30-7- MOZAMBIQUE [VIDE MINISTRY OF FINANCE PRESS NOTE. DATED 1962 22-05-1967 (CIRCULAR NO. 8, DATED 22-5-1967 PRINTED AS ANNEX I ) B. 1-1- ZANZIBAR KENYA, TANZANIA AND UGANDA [VIDE MINISTRY OF 1963 FINANCE PRESS NOTE. DATED 22-5-1967 (CIRCULAR NO. 8, DATED 22-5-1967 PRINTED AS ANNEX I)] C. 1-1- EAST PAKISTAN AND BURMA [VIDE MINISTRY OF FINANCE PRESS 1964 NOTE DATED 15-6-1964/22-5-1965 (CIRCULAR NOS. 16D DATED 15-6-1964 AND 11 DATED 22-5-1965 PRINTED AS ANNEX 11 AND ANNEX III RESPECTIVELY.. D. 1-10- WEST PAKISTAN [VIDE MINISTRY OF FINANCE PRESS NOTE, DATED 1965 3-2-1969. 2. HE HAD SUFFICIENT RESOURCES IN THE FOREIGN COUN TRY. 3. HE HAD NO SOURCE OF INCOME EITHER IN INDIA OR I N ANY FOREIGN COUNTRY OTHER THAN THE COUNTRY FROM WHICH HE MIGRATED, PR IOR TO MIGRATION AND HE WAS NOT ASSESSED AS 'RESIDENT' IN INDIA EITHER FOR THE ASSESSMENT YEAR PRECEDING THE YEAR IN WHICH HE MIGRATED OR FOR EAR LIER YEARS. 4. THE AMOUNT BROUGHT IN HAS BEEN DULY INTRODUCED IN THE BOOKS REGULARLY MAINTAINED IN INDIA AND ILL INTIMATION OF SUCH INT RODUCTION IS GIVEN TO THE INCOME-TAX OFFICER WITHIN TWO MONTHS OF THE MIGRAN T'S ARRIVAL. 4. CASES NOT COVERED BY PRECEDING PARAGRAPH, NAMEL Y : A. WHERE THE MONEY (IN THE CASE OF MOZAMBIQUE, ZANZIBA R, KENYA. TANZANIA, UGANDA, EAST PAKISTAN AND BURMA) AND MON EY AND/OR THE PERSONAL JEWELLERY IN THE CASE OF WEST PAKISTAN CL AIMED TO HAVE BEEN BROUGHT EXCEEDS RS.50,000/- OR B. WHERE THE ASSESSEE HAD SOME SOURCES OF INCOME EITHER IN INDIA OR IN ANY FOREIGN COUNTRY, OTHER THAN THE ONE FROM WHICH HE HAD MIGRATED PRIOR TO MIGRATION: OR I.T.A. NO. 1482/HYD/2014 SRI MADHUSUDAN RAO LAGADAPATI, CHAIRMAN, M/S.LANCO INFRATECH LTD., :- 10 - : C. WHERE THE ASSESSEE WAS ASSESSED AS RESIDENT IN INDI A EITHER FOR THE ASSESSMENT YEAR PRECEDING THE YEAR OF HIS/HER MIGR ATION OR IN THE EARLIER YEARS, WILL NOT BE ENTITLED TO ANY SPECIAL CONCESSION. THUS, ANY CLAIM BY SUCH MIGRANTS THAT THE FUNDS OR THE JEWELLERY HAV E BEEN BROUGHT FROM THE ABOVE MENTIONED COUNTRIES WILL BE ACCEPT ED ONLY IF THE PERSON CONCERNED PRODUCE ADEQUATE EVI DENCE TO SHOW THAT THEY HAD SUFFICIENT FUNDS/ WEALTH IN THOSE COUNTRIES AND THAT THE TRANSFER OF THE CASH/JEWELLERY TO INDIA CAN DIRECTLY BE LI NKED WITH THE SAID FUNDS OR WEALTH. IN OTHER WORDS, THESE MIGRANTS WILL H AVE TO LEAD PROPER EVIDENCE LIKE ANY OTHER ASSESSEES, ABOUT THE SOUR CE OF THE CASH/JEWELLERY ALLEGED TO HAVE BEEN BROUGHT BY TH EM FROM THESE COUNTRIES. IN SUPPORT OF THE CLAIM THAT THEY HAD SUFFICIENT FUNDS IN THOSE COUNTRIES. THEY MIGHT PRODUCE BEFORE THE INCOME-T AX AUTHORITIES IN INDIA THEIR BANK ACCOUNTS IN THOSE COUNTRIES AS A LSO COPIES OF THE ASSESSMENT ORDERS PASSED IN THEIR CASES BY THE INCOME-T AX AUTHORITIES OF THOSE COUNTRIES. THE MIGRANTS WOULD ALSO THEN BE REQUIRED TO PROVE THAT THE AMOUNTS BROUGHT INTO INDIA CAN DIRECTLY BE LINKED WITH THE FUNDS WHICH THEY HAD POSSESSED IN THOSE COUNTRIES.'. 9.1 A COMBINED READING OF SECTION 5(2) OF THE ACT AND BOARD CIRCULAR NO.5 DATED 20-2-1969 MAKES IT CLEAR THAT IN A CASE OF NON-RESIDENT, REMITTANCES FROM ABOARD INTO INDIA THROUQH NORMAL BANKING CHANNELS ARE NOT LIABLE TO INDIAN INCOME TAX, UNLESS IT IS PROVED THAT THEY HAVE ACC RUED OR ARISEN OR RECEIVED IN INDIA IN THE PRESENT CASE, IT IS FO UND THAT THE AMOUNT OF RS.78,04,58,324/- HAS BEEN REMITTED INT O INDIA FROM ABOARD THROUGH NORMAL BANKING CHANNELS FROM THE APPELLANT'S OWN BANK ACCOUNT AT MAURITIUS. 10 . FURTHER, I AGREE WITH THE SUBMISSIONS OF THE APPELLANT THAT THE AMOUNT OF RS.78,04,58,324/- HA VL IQ BEEN RECEIVED IN INDIA BY THE APPELLANT FROM MAURITIUS THROUGH NORMAL BANKING CHANNELS IS NOT TO BE INCLUDED IN THE TOTAL INCOME OF THE ASSESSEE AS PER THE PROVISIONS OF SE CTION 5(2) OF THE LT. ACT, 1961. BOARD CIRCULAR NO.5 DATED 20/2 /1969 ALSO SUPPORTS THE VIEW THAT THE SAME IS NOT LIABLE TO INDIAN INCOME TAX. MERE BRINGING OF OWN MONEY INTO INDIA FROM OUTSIDE INDIA BY A NON-RESIDENT INDIAN CANNOT BE CHARGED TO TAX IN INDIA. HENCE, THE RECEIPT OF RS.78,04,58,3 74/- SHALL NOT BE INCLUDED IN THE TOTAL INCOME OF THE NON-RESIDE NT AS PER THE PROVISIONS CONTAINED IN THE SECTION 5(2)(B) OF THE ACT. I.T.A. NO. 1482/HYD/2014 SRI MADHUSUDAN RAO LAGADAPATI, CHAIRMAN, M/S.LANCO INFRATECH LTD., :- 11 - : 11. I DO NOT AGREE WITH THE ASSESSING OFFICER'S V IEW THAT THE PROVISIONS OF SEC 68 OR 69 OF THE I.T.ACT PREV AIL OVER THE PROVISIONS OF SEC 5(2)(B) OF THE ACT. AS CLAIMED B Y THE APPELLANT, THIS ISSUE IS SQUARELY COVERED BY THE DECISIONS OF INCOME TAX APPELLATE TRIBUNAL IN THE CASE OF DCIT VS. FINLAY CORPORATION LTD[2003] 86 ITD 626 (DELHI ITAT) AND SMT. SUSHILA RAMASAMY VS. ACIT, CENTRAL CIRCLE-II(2), CHENNAI [2011] 008 ITR (TRIB) 18 (CHENNAI). IN THIS REGARD, I DON'T AGREE WITH THE OBSERVATION OF THE ASSESSING OFFICER IN THE ASSESSMENT ORDER THAT THE FINDINGS IN THESE CASE LAWS ARE ERRONEOUS AND THEY SUFFER FROM THE INFIRMITY OF DISREGARDING THE R ATIO LAID OUT BY THE APEX COURT IN THE CASE OF KALE KHAN MOHAMMAD VS. CIT (1963) 50 I TR L (S.C) AS THE FACTS OF THAT CASE ARE DISTINGUISHABLE FROM THE FACTS OF THE CASE OF THE APPELLANT. IN VIEW OF THIS, I HOL D THAT WHAT IS NOT TAXABLE UNDER SECTION 5(2) OF THE ACT CANNOT B E TAXED UNDER SECTION 68 OR 69 OF THE ACT. 12. TO SUM UP, I HAVE ALREADY HELD AT PARA NO.10 OF THI S ORDER THAT BRINGING OF HIS OWN MONEY BY THE NON-RE SIDENT INTO INDIA FROM OUTSIDE INDIA CANNOT BE CHARGED TO TAX IN INDIA AND THE PROVISIONS CONTAINED IN SECTION 5(2)(B) OF THE ACT ARE VERY CLEAR IN THIS REGARD. I HAVE ALSO HELD AT PARA NO. 11 OF THIS ORDER THAT THE PROVISIONS OF SECTION 68 OR 69 OF THE ACT CANNOT PREVAIL OVER SECTION 5(2)(B) OF THE ACT AS THE ASSESSEE IS A NON-RESIDENT INDIAN AND INCOME OTHER THAN INDIAN INCOME CANNOT BE TAXABLE IN INDIA. IN VIEW OF THIS, SECTION 68/69/69A/69C O F THE ACT CANNOT BE APPLIED. SINCE THE IDENTITY OF THE CREDI TOR COMPANY VIZ., M/S.VIRTUAL INTERNATIONAL LIMITED, MAURITIUS , CREDIT- WORTHINESS OF THE CREDITOR COMPANY AND THE GENUINE NESS OF THE IMPUGNED TRANSACTIONS ARE PROVED AND IN VIEW O F THE PROVISIONS OF SECTION 5(2)(B) R.W. BOARD CIRCULAR NO.5 DATED 20.02.1969, THE ADDITION MADE BY THE AO FOR THE YE AR UNDER CONSIDERATION U/S.68/69/69A/69C OF THE ACT FOR RS.78,04,58,374/- IS NOT IN ORDER. THE AO IS, THER EFORE, DIRECTED TO DELETE THE ADDITION. THE APPELLANT GE TS RELIEF OF RS.78,04,58,374/- FOR THE YEAR UNDER.' 6. AGGRIEVED, REVENUE HAS RAISED THE FOLLOWING GROU NDS: (I) THE ORDER OF THE LD. CIT(A) IS ERRONEOUS ON FACTS AND IN LAW (II) THE LD. CIT(A) ERRED IN DELETING THE ADDITION OF RS.78,04,58,374/- MADE IN THE ASSESSMENT ORDER U/S. 68 OF THE I.T. ACT AS WELL AS U/S.69, 69A AND 69C OF THE I.T. ACT. I.T.A. NO. 1482/HYD/2014 SRI MADHUSUDAN RAO LAGADAPATI, CHAIRMAN, M/S.LANCO INFRATECH LTD., :- 12 - : (III) THE LD. CIT(A) ERRED IN ADMITTINQ ADDITIO NAL EVIDENCES FURNISHED BY THE ASSESSEE DURING THE APPELLATE PROC EEDINGS THOUGH THE CONDITIONS PRESCRIBED FOR SUCH ADMISSION IN RULE 46A(1) ARE NOT SATISFIED AND WITHOUT RECORDING HIS REASONS FOR ADMISSION AS REQUIRED UNDER RULE 46A(2) OF THE I.T. RULES. (IV) THE LD. CIT(A) ERRED IN CONSIDERING THE ADDITI ONAL EVIDENCES FURNISHED BY THE ASSESSEE DURINQ THE APPELLATE PROC EEDINGS WITHOUT AFFORDING AN OPPORTUNITY TO THE ASSESSING O FFICER TO EXAMINE SUCH EVIDENCES AND FURNISH HIS REBUTTAL AS MANDATED UNDER RULE 46A(3) OF THE I.T. RULES. (V) THE LD. CIT(A) ERRED IN ACCEPTING THE VERACITY O F THE COPY OF CERTIFICATE OF INCORPORATION OF M/S.VITRUAL INTERNA TIONAL LTD., MAURITIUS AND THE COPIES OF THE AUDITED FINANCIAL S TATEMENTS OF THE SAID COMPANY FURNISHED BY THE ASSESSEE AS AD DITIONAL EVIDENCES WITHOUT CAUSING VERIFICATION OF THEIR GENUINENESS FROM THE TAX AUTHORITIES IN MAURITIUS. (VI) THE LD. CIT(A) OUGHT TO HAVE NOTICED THAT THE AUDITED FINANCIAL STATEMENTS OF M/S.VITRUAL INTERNATIORAL L TD. FOR THE F.Y.2010-11 FURNISHED AS ADDITIONAL EVIDENCE BY THE ASSESSEE ARE DATED 02/05/2014, WHICH IS SUBSEQUENT TO THE DATE OF COMPLETION OF THE ASSESSMENT I.E., 28/03/20 14 AND THAT THIS FACT RAISES A SERIOUS DOUBT REGARDING THE GENUINENESS OF THE SAID ADDITIONAL EVIDENCE. (VII) THE LD. CIT(A) ERRED IN HOLDING THAT THE IDENTITY O F THE CREDITOR COMPANY M/S. VITRUAL INTERNATIONAL LTD. IS CONSIDER ED TO BE PROVED WITHOUT CITING ANY SUPPORTING REASONS AND DISREGARDING THE FACT THAT THE ASSESSEE FAILED TO F URNISH THE TAX RESIDENCY CERTIFICATE AND COPIES OF THE INCOME TAX RETURNS FILED IN MAURITIUS BY THE SAID COMPANY TO PROVE ITS IDENTITY EITHER DURING THE ASSESSMENT PROCEEDINGS OR THE APP ELLATE PROCEEDINGS. I.T.A. NO. 1482/HYD/2014 SRI MADHUSUDAN RAO LAGADAPATI, CHAIRMAN, M/S.LANCO INFRATECH LTD., :- 13 - : (VIII) THE LD. CIT(A) ERRED IN HOLDING THAT THE GENUINENES S OF THE LOAN PURPORTED TO HAVE BEEN ADVANCED BY M/S VITRUAL INTERNATIONAL LTD. TO THE ASSESSEE IS CONSIDERED TO BE PROVED WITHOUT CITING ANY SUPPORTING REASONS AND DISREGARD ING THE FACT THAT THE ASSESSEE FAILED TO FURNISH COPIES OF THE BANK ACCOUNTS OF THE CREDITOR COMPANY AND THE ASSESSEE I N MAURITIUS EITHER DURING THE ASSESSMENT PROCEEDINGS OR THE APPELLATE PROCEEDINGS IN ORDER TO PROVE THAT THE LO AN FUNDS WERE TRANSFERRED FROM THE BANK ACCOUNT OF THE CREDI TOR COMPANY TO THE BANK ACCOUNT OF THE ASSESSEE IN MAUR ITIUS. (IX) T HE LD. CIT(A) ERRED IN HOLDING THAT THE CREDITWORTH INESS OF M/S. VITRUAL INTERNATIONAL LTD. IS CONSIDERED TO BE PROVED ON THE BASIS OF THE CAPITAL, RESERVES AND CURRENT LIAB ILITIES SHOWN IN THE STATEMENT OF FINANCIAL POSITION OF THE SAID COMPANY AS ON 31/03/2011 DISREGARDING THE FACT THAT FRESH CAPITAL OF US$ 64 LACKS IS SHOWN TO HAVE BEEN CONTRIBUTED BY THE ASSESSEE HIMSELF TO THE SAID COM PANV DURING THE RELEVANT YEAR IN HIS CAPACITY AS THE SOL E SHAREHOLDER IN THE STATEMENT OF CASH FLOWS AND THE NOTE-14 TO FINANCIAL STATEMENTS. (X) THE LD. CIT(A), WHILE CONSIDERING THE CREDITWOR THINESS OF M/S.VITRUAL INTERNATIONAL LTD., ALSO ERRED IN DISRE GARDING THE FACT THAT A FRESH BORROWING OF US$ 52,95,478 BY THE SAID COMPANY IS SHOWN TO HAVE BEEN TAKEN DURING THE YEAR IN THE STATEMENT OF CASH FLOWS WHICH FORMED ONE OF THE SOURCES FOR THE LOAN ADVANCED TO THE ASSESSEE AND T HAT THE GENUINENESS OF THE SAME REQUIRES VERIFICATION AS TH E CREDITOR COMPANY IS A SINGLE SHAREHOLDER COMPANY WI TH ASSESSEE AS THE SOLE SHAREHOLDER. (XI) THE LD. CIT(A) ERRED IN HOLDING THAT THE AMOUNT OF RS.78,04,58,374/- REMITTED BY THE ASSESSEE TO INDIA FROM HIS BANK ACCOUNT IN MAURITIUS STATED TO HAVE BEEN S OURCED OL T OF LOAN BORROWED FROM M/S. VITRUAL INTERNATIONAL LTD. IS CORRECTLY DEPICTED AS A CREDIT IN THE CAPITAL ACCOU NT OF THE STATEMENT OF AFFAIRS OF THE ASSESSEE. THE LD. CIT(A ) OUGHT TO HAVE APPRECIATED THAT THE SAME SHOULD HAVE BEEN SHO WN AS A LOAN IN THE STATEMENT OF AFFAIRS IRRESPECTIVE OF WHETHER IT WAS RECEIVED OUTSIDE INDIA OR IN INDIA, IF THE C LAIM OF THE ASSESSEE THAT THE SAID AMOUNT WAS SOURCED OUT OF LO AN I.T.A. NO. 1482/HYD/2014 SRI MADHUSUDAN RAO LAGADAPATI, CHAIRMAN, M/S.LANCO INFRATECH LTD., :- 14 - : TAKEN IN MAURITIUS WAS TRUE. (XII) THE LD. CIT(A) ERRED IN HOLDING THAT THERE IS NO ROUND TRIPPING OF FUNDS WITHOUT CITING ANY SUPPORTING REA SONS AND DISREGARDING THE FACT THAT FRESH CAPITAL OF US$ 64 LACKS WAS INTRODUCED INTO THE CREDITOR COMPANY IN MAURITIUS B Y THE ASSESSEE HIMSELF DURING THE YEAR AS ITS SOLE SHAREH OLDER TO ENABLE IT TO ADVANCE THE LOAN TO THE ASSESSEE. (XIII) THE LD. CIT(A) ERRED IN HOLDING THAT THE DECISION O F THE HON'BLE SUPREME COURT IN THE CASE OF SETH KALEKHAN MAHOMED HANIF (34 ITR 669) DOES NOT COME TO THE AID OF THE AO IN CONCLUDING THAT IT CANNOT BE PRESUMED THAT TH E INCOME REPRESENTED BY THE UNSUBSTANTIATED LOAN HAS ACCRUED OR ARISEN OUTSIDE INDIA TO THE ASSESSEE SO AS TO TAKE IT OUTSIDE THE AMBIT OF INCOME CHARGEABLE TO T AX IN THE HANDS OF A NON-RESIDENT U/S.5(2)(B) OF THE I.T. ACT . (XIV) THE LD. CIT(A) ERRED IN HOLDING THAT THE OBSERVATIO N OF THE HON'BLE SUPREME COURT IN THE CASE OF VODAFONE INTERNATIONAL HOLDING (341 ITR 1) THAT IN THE CASE OF A ONE MAN COMPANY THE CONTROL OVER THE COMPANY MAY BE SO COMPLETE THAT IT IS HIS ALTER EGO IS NOT RELEVANT T O THE FACTS OF THE ASSESSEE'S CASE. THE LD. CIT(A) OUGHT TO HAVE APPRECIATED THAT M/S. VITRUAL INTERNATIONAL LTD. BE ING A ONE MAN COMPANY OF THE ASSESSEE REPRESENTS HIS ALTER EG O AS PER THE SAID DECISION OF THE HON'BLE SUPREME COURT AND CONSEQUENTLY, THE TRANSFER OF FUNDS FROM THE SAID C OMPANY TO THE ASSESSEE DOES NOT EXPLAIN THE SOURCE OF FUND S IN THE HANDS OF THE ASSESSEE. (XV) THE LD. CIT(A) ERRED N PLACING RELIANCE ON BOARD'S CIRCULAR NO.5, DATED 20/02/1969 IN HOLDING THAT THE REMITTAN CES MADE FROM THE ASSESSEE'S OWN BANK ACCOUNT IN MAURIT IUS TO HIS BANK ACCOUNTS IN INDIA THROUGH NORMAL BANKING CHANNELS CANNOT BE SUBJECTED TO TAX IN INDIA. THE L D. CIT(A) OUGHT TO HAVE SEEN THAT THE BENEFIT OF THE CIRCULAR WILL BE APPLICABLE ONLY WHEN SUCH REMITTANCES ARE SOURCED O UT OF INCOME WHICH ACCRUED TO THE NON-RESIDENT OUTSIDE INDIA WHICH IS NOT TAXABLE IN INDIA AS PER SECTION 5(2)(B ) OF THE ACT AND IT WILL NOT BE APPLICABLE TO THE ASSESSEE AS THE I.T.A. NO. 1482/HYD/2014 SRI MADHUSUDAN RAO LAGADAPATI, CHAIRMAN, M/S.LANCO INFRATECH LTD., :- 15 - : REMITTANCE WAS MADE OUT OF A LOAN PURPORTED TO HAVE BEEN BORROWED OUTSIDE INDIA FROM A COMPANY IN WHICH THE ASSESSEE HIMSELF IS THE SOLE SHAREHOLDER. (XVI) THE LD. CIT(A) ERRED IN RELYINQ ON THE DECISIONS OF ITAT, DELHI IN THE CASE OF FINLAY CORPORATION LTD. (84 TTJ 788) AND ITAT, CHENNAI IN THE CASE SUSILA RAMASAMY (130 TTJ 363) TO HOLD THAT THE PROVISIONS OF SECTION 68/69 OF THE I.T. ACT DO NOT PREVAIL OVER THE PROVISIONS OF SECTION 5(2)( B) OF THE ACT. THE LD. CIT(A) OUGHT TO HAVE SEEN THAT THE PRO VISIONS OF SECTION 5 ARE SUBJECT TO OTHER PROVISIONS OF THE AC T INCLUDING SECTION 68/69 IN VIEW OF THE PRESENCE OF THE SPECIF IC PHRASE 'SUBJECT TO PROVISIONS OF THE ACT' IN SECTION 5 OF THE I.T. ACT. (XVII) THE LD. CIT(A) OUGHT TO HAVE APPRECIATED THAT THE A BOVE MENTIONED DECISIONS OF ITAT, DELHI AND ITAT, CHENNA I, HAVE BEEN RENDERED WITHOUT CONSIDERING THE RATIO LA ID DOWN BY THE HON'BLE SUPREME COURT IN THE CASE OF KALE KHAN MOHAMMAD HAMF (50 ITR 1) THAT THE ONUS OF PROVING THE SOURCE OF A SUM OF MONEY RECEIVED BY THE ASSESSEE IS ON TH E ASSESSEE ONLY AND IF HE DISPUTES HIS LIABILITY FOR TAX, IT IS FOR HIM TO SHOW EITHER THAT THE RECEIPT WAS NOT INCOME OR THAT IF IT IS INCOME, IT IS EXEMPT FROM TAXATION UNDER THE PROVISIONS OF THE ACT. THE LD. CIT(A) OUGHT TO HAVE SEEN THAT IN VIEW OF THIS RATIO, MERELY ESTABLISHING THAT THE MONEY WAS RECEIVED OUTSIDE INDIA AND WAS REMITTED TO INDIA THROUGH REG ULAR BANKING CHANNELS CANNOT BE CONSIDERED AS AMOUNTING TO DISCHARGING THE ONUS CAST ON THE ASSESSEE U/S.68/69 OF THE ACT. 7. AS CAN BE SEEN FROM THE ABOVE, GROUND NO.2 TO 5 PERTAIN TO ISSUE OF ADDITIONAL EVIDENCE UNDER RULE 46A(1) AND GROUND NO.6 TO 10 PERTAIN TO IDENTITY AND CREDITWORTHINESS OF M/S. VITRUAL IN TERNATIONAL LTD. GROUND NO.11 & 12 PERTAINS TO FINDINGS OF CIT ON TH E GENUINENESS OF THE AMOUNT REMITTED. GROUND NO.13 TO 18 PERTAIN TO VAR IOUS PRINCIPLES RELIED ON BY THE REVENUE ON THE BASIS OF THE JUDGME NTS IN VARIOUS CASES AND BOARD'S CIRCULAR. I.T.A. NO. 1482/HYD/2014 SRI MADHUSUDAN RAO LAGADAPATI, CHAIRMAN, M/S.LANCO INFRATECH LTD., :- 16 - : 8. LD.DR RELIED ON THE DETAILED ORDERS OF ASSESSING OFFICER TO SUBMIT THAT ASSESSEE HAS NOT FURNISHED NECESSARY EVIDENCES IN SUPPORT OF THE CREDITWORTHINESS OF THE ABOVE AMOUNTS AND HIS FURNI SHING FINANCIAL STATEMENTS BEFORE THE CIT(A) VIOLATES RULE 46A AND DECISION OF CIT(A) BASED ON ADDITIONAL EVIDENCE IS NOT CORRECT. 9. LD.COUNSEL, HOWEVER, SUBMITTED THAT ASSESSEE HAS TRANSFERRED HIS OWN FUNDS FROM MAURITIUS TO INDIA AND THIS FACT WAS ADMITTED BY ASSESSING OFFICER. NOT ONLY THAT IT WAS SUBMITTED THAT THE REMITTANCE WAS WITH THE PERMISSION OF THE RBI AND FUNDS WERE U TILIZED FOR VARIOUS INVESTMENTS IN THE GROUP COMPANIES, GIFTS AND LOANS TO OTHERS INCLUDING PERSONAL EXPENDITURE. THEREFORE, ASSESSING OFFICER' S OBSERVATION THAT REMITTANCES HAVE COME UNDER THREE HEADINGS DO NOT ESTABLISH THE AMOUNT AS UNEXPLAINED. IT WAS FURTHER CONTENDED TH AT ASSESSEE IS A NON-RESIDENT AND ASSESSING OFFICER HAS JURISDICTION ONLY TO THE EXTENT OF TAXING THE INCOMES ARISING IN INDIA. THE MONEYS OB TAINED BY ASSESSEE ABROAD AND TRANSMITTED TO INDIA CANNOT BE CONSIDERE D AS INCOME IN INDIA. IT WAS FURTHER SUBMITTED THAT EXISTENCE OF M/S.VITRUAL INTERNATIONAL LTD., HAS BEEN ACCEPTED BY THE OTHER AUTHORITIES LIKE SEBI AND FIPB AND ALSO THE INVESTMENTS ARE THROUGH PROPE R REGULATORY CHANNELS. IT WAS FURTHER SUBMITTED THAT ASSESSEE B EING CHAIRMAN OF THE COMPANY AND ALSO PROMOTER OF THE GROUP COMPANIES HA S BEEN INVESTING FUNDS IN VARIOUS YEARS AND NO SUCH PROBLEM AROSE IN ANY OF THE YEARS. IT WAS FURTHER SUBMITTED THAT THE SECTIONS UNDER WHICH ASSESSING OFFICER TRIED TO CONSIDER ASSESSEE'S OWN FUNDS AS INCOME OF ASSESSEE ARE NOT LEGALLY CORRECT. HE HAS GIVEN DETAILED WRITTEN SUB MISSIONS COUNTERING THE WRITTEN SUBMISSIONS FILED BY THE REVENUE AND HI S SUBMISSIONS CAN BE SUMMARIZED AS UNDER: 'A. THE REMITTANCE OF RS.78,04,58,374/- HAS BEEN MA DE FROM THE ASSESSEE'S OWN OVERSEAS BANK ACCOUNT AND THUS INCO ME, IF ANY I.T.A. NO. 1482/HYD/2014 SRI MADHUSUDAN RAO LAGADAPATI, CHAIRMAN, M/S.LANCO INFRATECH LTD., :- 17 - : HAD ALREADY BEEN RECEIVED IN ABROAD. CONSEQUENTLY THE QUESTION OF RECEIVING THE SAME INCOME AGAIN IN INDIA DOES NOT ARISE. HENCE, SUCH RECEIPT SHALL NOT BE TAXED UNDER SECTION 5(2) OF THE ACT. B. THE ASSESSEE HAS MERELY TRANSFERRED HIS OWN MON EY FROM MAURITIUS TO INDIA AND NO CREDIT HAS BEEN OBTAINED BY THE ASSESSEE AS THE MONEY HAS BEEN TRANSFERRED FROM HIS BARCLAY S BANK, MAURITIUS TO NRI A/C. HELD IN AXIS BANK AND INDUSI ND BANK. THIS TANTAMOUNT TO NOTHING BUT PASSING OF MONEY FROM RI GHT HAND TO LEFT HAND. HENCE, NO ADDITION CAN BE MADE AS UNEXPLAIN ED CREDIT U/S.68/69/69A/69C OF THE ACT. C. THE ASSESSEE HAS RECEIVED THE ABOVE SAID AMOUNT FROM HIS BARCLAYS BANK, MAURITIUS TO NRI A/C. FROM THE LOAN OBTAINED FROM M/S.VITRUAL INTERNATIONAL LIMITED, MAURITIUS IN SU PPORT OF WHICH THE ASSESSEE HAS SUBMITTED CONFIRMATION LETTER FROM M/ S.VITRUAL INTERNATIONAL LIMITED, MAURITIUS. D. WITHOUT PREJUDICE TO THE ABOVE, THE ASSESSEE HA S NOT ONLY ESTABLISHED THE SOURCE OF THE MONEY AS ALSO ESTABL ISHED THE SOURCE TO SOURCE BY WAY OF SUBMITTING THE CONFIRMATION FR OM M/S.VITRUAL INTERNATIONAL LIMITED, MAURITIUS. AS THE ASSESSEE IS A NON-RESIDENT INDIAN AND THE SOURCE OF MONEY IS RAISED FROM OUTS IDE INDIA, THE APPLICATION OF 5(2) R.W.S. 9 OF THE ACT IS NOT VAL ID. E. IN SUPPORT OF THE SUBMISSIONS/ARGUMENTS OF THE RESPONDENT HERE IN, HE RELIES ON THE ORDER OF THE CIT(APPEALS)-V, HYDERABAD'. 10. WE HAVE CONSIDERED THE RIVAL CONTENTIONS, PERUS ED THE DOCUMENTS PLACED ON RECORD AND THE ORDERS OF THE AUTHORITIES. FIRST OF ALL WE ARE UNABLE TO UNDERSTAND HOW ASSESSING OFFICER CAN CONS IDER INWARD REMITTANCE OF MONEYS INTO NRI A/C OF A NON-RESIDENT INDIAN AS INCOME OF ASSESSEE AS UNEXPLAINED. ASSESSEE IN THE COURSE OF ASSESSMENT PROCEEDINGS FURNISHED ENOUGH EVIDENCES IN SUPPORT O F INWARD REMITTANCE OF FUNDS INCLUDING A CERTIFICATE FROM M/S.VITRUAL I NTERNATIONAL LTD., ABOUT THE SOURCE OF FUNDS BEING LOAN. IF ASSESSING OFFICER HAS ANY DOUBT ABOUT THE SAID COMPANY IN MAURITIUS, HE CANNOT REJE CT THE GENUINENESS OF THE SAID COMPANY WITHOUT MAKING NECESSARY ENQUIR IES EITHER THROUGH THE INTERNAL MECHANISM OF FOREIGN TAX DIVISION OF C BDT OR BY ANY OTHER I.T.A. NO. 1482/HYD/2014 SRI MADHUSUDAN RAO LAGADAPATI, CHAIRMAN, M/S.LANCO INFRATECH LTD., :- 18 - : MEANS. JUST BECAUSE THE CERTIFICATE FURNISHED DOES NOT HAVE ANY SEAL, THE SAME CANNOT BE REJECTED OUTRIGHT. HOWEVER, THE MATTER DID NOT END THERE. ASSESSING OFFICER TOOK PAINS TO VERIFY FROM THE INTERNET AND ALSO FROM THE WEBSITE OF THE SEBI AND CAME TO THE CONCLU SION THAT THE SAID COMPANY IS ONE OF THE GROUP COMPANIES OF ASSESSEE L ISTED AS PERSONS CONSTITUTING GROUP UNDER MONOPOLIES AND RESTRICTIVE TRADE PRACTICES ACT, 1969 AND FURTHER NOTICED FROM THE RED HERRING PROSP ECTUS OF M/S.LANCO INFRATECH LIMITED, WHEREIN THIS COMPANY WAS SHOWN A S SINGLE SHAREHOLDER COMPANY OF ASSESSEE AS ON 29-07-2006. THIS MEANS THE EXISTENCE OF THE COMPANY IS ACCEPTED BY THE AUTHORI TIES, NOT ONLY BY SEBI AND OTHER STATUTORY AUTHORITIES BUT EVEN BY TH E ASSESSING OFFICER, AS CAN BE SEEN FROM THE ENQUIRIES CONDUCTED. WE AR E UNABLE TO UNDERSTAND HOW THE REVENUE COULD RAISE GROUND ON EX ISTENCE OF THE ABOVE COMPANY IN GROUND NO.7 ABOUT THE IDENTITY OF THE COMPANY WHEN ASSESSING OFFICER HIMSELF ACKNOWLEDGED THE SAME IN THE ASSESSMENT ORDER. 11. COMING TO THE CREDITWORTHINESS OF THE AMOUNT, A SSESSEE'S EXPLANATION IS THAT THE AMOUNTS WERE TRANSFERRED FR OM HIS OWN BANK ACCOUNT IN MAURITIUS TO THE NRI ACCOUNT IN INDIA. THEREFORE, THE IMMEDIATE SOURCE OF FUNDS IS HIS OWN ACCOUNT FROM M AURITIUS WHICH IS NOT DISPUTED. IF FUNDS ARE RECEIVED INTO MAURITIUS ACCOUNT, THEN THAT BECOMES SOURCE OF THE SOURCE WHICH CANNOT BE EXAMIN ED BY ASSESSING OFFICER, UNLESS THERE IS ANY INCRIMINATING EVIDENCE . EXCEPT PRESUMPTIONS AND ALLEGATIONS, VIRTUALLY THERE IS NO EVIDENCE AGA INST ASSESSEE THAT THESE FUNDS RECEIVED INTO HIS BANK ACCOUNT IN MAURITIUS A RE HIS OWN INCOMES FROM INDIA OR 'ROUND TRIP' FUNDS OF ASSESSEE AS ALL EGED. THEREFORE, ALL THE GROUNDS RAISED ON THIS ISSUE, PARTICULARLY GROUND N O.10 & 11 DOES NOT REQUIRE ANY CONSIDERATION ON THE FACTS OF THE CASE. I.T.A. NO. 1482/HYD/2014 SRI MADHUSUDAN RAO LAGADAPATI, CHAIRMAN, M/S.LANCO INFRATECH LTD., :- 19 - : 12. COMING TO THE ISSUE OF CREDITWORTHINESS OF THE ABOVE SAID COMPANY, THERE IS NO DISPUTE WITH REFERENCE TO THE FUNDS. IT HAS ITS OWN FUNDS AND LD.CIT(A) TOOK PAINS TO EXAMINE AND HOLD THAT IT IS CREDITWORTHY. NOTHING WAS BROUGHT ON RECORD TO COU NTER THE FINDINGS OF LD.CIT(A), EXCEPT CONTENDING THAT THE ORDER OF THE CIT(A) IS NOT CORRECT. THEREFORE, THE GROUND REGARDING CREDITWORTHINESS OF THE COMPANY PARTICULARLY FROM GROUND NO.6 TO 10 ALSO DOES NOT R EQUIRE ANY CONSIDERATION. 13. ONE OF THE ISSUES TO BE CONSIDERED IS WHETHER T HE ADMISSION OF ADDITIONAL EVIDENCE BY ASSESSEE AT THE DIRECTIONS O F CIT(A) REQUIRED TO BE SENT TO ASSESSING OFFICER UNDER RULE 46A(1). IT IS NOT ASSESSEE WHO FURNISHED THE ADDITIONAL EVIDENCE. THEREFORE, IT C ANNOT BE STRICTLY CONSIDERED AS ADDITIONAL EVIDENCE UNDER RULE 46A. CIT HAS CO-TERMINUS POWERS AS THAT OF ASSESSING OFFICER AS FAR AS APPEA LS BEFORE HIM ARE CONCERNED. IN FACT, HE EVEN HAD ENHANCEMENT POWERS , IF ASSESSING OFFICER HAS MISSED OUT BRINGING INTO TAX ANY AMOUNT S. HE ALSO HAS POWERS OF ENQUIRY AND INVESTIGATION. THEREFORE, TH E CIT(A) IF EXERCISES HIS POWERS AS AN ASSESSING OFFICER, THERE IS NO NEE D TO GIVE AN OPPORTUNITY TO THE ASSESSING OFFICER WHO PASSED THE ASSESSMENT ORDER UNDER RULE 46A. THE ACTION OF THE CIT(A) IS COMPLE TELY JUSTIFIED AND IS IN LINE WITH THE JUDICIAL PRONOUNCEMENTS IN DCIT CIRCL E-16(1), HYDERABAD VS. NE TECHNOLOGIES INDIA (P) LTD., [47 TAXMANN.COM , 405 (HYDERABAD- TRIB)] AND ITO VS. INDUSTRIAL ROAD WAYS [112 ITD 29 3 (MUMBAI-TRIB)]. IN THE CASE OF ITO VS. INDUSTRIAL ROAD WAYS (SUPRA) , THE CO-ORDINATE BENCH HAS HELD AS UNDER: 'HAVING REGARD TO THE PROVISIONS OF PART A OF CHAP TER XX RELATING TO THE APPEALS BEFORE THE FIRST APPELLATE AUTHORITY, A DISTINCTION HAS TO BE MADE BETWEEN THE EVIDENCE AND MATERIAL VOLUNTAR ILY FURNISHED BY AN ASSESSEE IN SUPPORT OF HIS APPEAL AND THE EV IDENCE/MATERIAL REQUISITIONED FROM AN ASSESSEE BY THE FIRST APPELL ATE AUTHORITY WITH I.T.A. NO. 1482/HYD/2014 SRI MADHUSUDAN RAO LAGADAPATI, CHAIRMAN, M/S.LANCO INFRATECH LTD., :- 20 - : A VIEW TO HAVE PROPER DISPOSAL OF PROCEEDINGS BEFO RE HIM. WHILE THE PROVISIONS OF RULE 46A APPLY TO THE FORMER, THE SA ME HAVE NO APPLICATION TO THE LATTER. {PARA 4] PROVISION OF RULE 46A ENJOINS UPON THE FIRST APPEL LATE AUTHORITY NOT TO ADMIT ANY FRESH EVIDENCE UNLESS HE RECORDS IN WRIT ING HIS REASONS FOR ITS ADMISSION. FURTHER, RULE 46A ENJOINS UPON HIM TO PROVIDE THE ASSESSING OFFICER WITH A REASONABLE OPPORTUNITY TO EXAMINE THE FRESH EVIDENCE OR TO CROSS EXAMINE THE WITNESS PRO DUCED BY THE ASSESSEE OR TO PRODUCE ANY EVIDENCE OR DOCUMENT OR ANY WITNESS ILL REBUTTAL OF THE ADDITIONAL EVIDENCE PRODUCED BY T HE ASSESSEE. {PARA 5} THE PROVISIONS OF SECTION 250(4), CM THE OTHER HAN D, EMPOWER THE FIRST APPELLATE AUTHORITY TO MAKE SUCH FURTHER ENQ UIRY AS HE THINKS FIT OR TO DIRECT THE ASSESSING OFFICER TO MAKE F URTHER ENQUIRY AND REPORT THE RESULT OF THE SAME. THERE ARE MANY JUDG MENTS TO THE EFFECT THAT IN VIEW OF THE PROVISIONS OF SECTION 2 50(4), THE FIRST APPELLATE AUTHORITY IS DUTY BOUND TO MAKE AN ENQUIRY EVEN IF SUCH AN ENQUIRY WAS NOT MADE BY THE ASSESSING OFFICER I F THE FACTS AND CIRCUMSTANCES OF THE CASE WARRANT SUCH AN ENQUIRY TO BE MADE. IT, THEREFORE, FOLLOWS THAT THE MATTERS TO BE CONSIDERED BY THE FIRST APPELLATE AUTHORITY NEED NOT BE CONFINED TO WHAT W AS CONSIDERED BY THE ASSESSING OFFICER WHILE MAKING THE ORDER APPEA LED AGAINST. {PARA 6] THERE ARE OF COURSE SEVERAL JUDGMENTS WHCRE IT HAS CLEARLY BEEN LAID DOWN THAT THE ASSESSEE ON HIS OWN CANNOT PRODUCE A NY ADDITIONAL EVIDENCE NOT FURNISHED BEFORE THE ASSESSING OFFICE R WITHOUT MEETING THE VARIOUS CONDITIONS PROVIDED UNDER RULE 46A FOR WHICH SATISFACTION IS TO BE RECORDED BY THE APPELLATE AU THORITY IN WRITING AND WITH WHICH THE APPELLATE AUTHORITY IS FURTHER REQUIRED TO CONFRONT THE ASSESSING OFFICER AND ALLOW HIM A REA SONABLE OPPORTUNITY TO HAVE HIS SAY IN THE MATTER. [PARA 9 ] FROM THE VARIOUS AUTHORITIES OF COURTS, THE LEGAL POSITION IS THAT THE FIRST APPELLATE AUTHORITY HAS WIDE POWERS OVER THE ORDER OF ASSESSMENT APPEALED AGAINST BEFORE HIM. IN THE CO URSE OF EXERCISE OF SUCH POWER THE FIRST APPELLATE AUTHORITY CAN DI RECT THE ASSESSEE TO PRODUCE ANY EVIDENCE, INFORMATION OR MATERIAL THAT WAS NOT PRODUCED BEFORE OR WAS NOT CONSIDERED BY THE ASSES SING OFFICER. THE PURPOSE OF RULE 46A IS TO PLACE FETTERS ON THE RIGHTS OF AN APPELLANT TO PRODUCE ADDITIONAL EVIDENCE BEFORE TH E FIRST APPELLATE AUTHORITY AND NOT ON THE RIGHTS OF THE FIRST APPEL LATE AUTHORITY TO CALL I.T.A. NO. 1482/HYD/2014 SRI MADHUSUDAN RAO LAGADAPATI, CHAIRMAN, M/S.LANCO INFRATECH LTD., :- 21 - : FOR PRODUCTION OF ANY FRESH EVIDENCE OR INFORMATIO N. THIS ASPECT OF THE PROVISIONS OF RULE 46A IS CLEAR FROM THE PROVI SIONS OF SUB-RULE (4) OF RULE 46A ITSELF T HAT NOTHING CONTAINED IN RULE 46A SHALL AFFECT THE POWER OF THE FIRST APPELLATE AUTHORITY TO DIRECT T HE PRODUCTION OF ANY DOCUMENT OR TO EXAMINE ANY WITNESS TO ENABLE HIM T O DISPOSE OF THE APPEAL OR FOR ANY OTHER SUBSTANTIAL CAUSE INCLUDIN G THE ENHANCEMENT OF THE ASSESSMENT OR PENALTY (WHETHER ON HIS OWN MOTION OR ON THE REQUEST OF THE ASSESSING OFFICER) .[(PARA 13] IN THE INSTANT CASE, THE ENTIRE ADDITIONAL EVIDENC E HAD COME ON THE RECORD OF THE COMMISSIONER (APPEALS) BECAUSE HE HA D DECIDED TO EXAMINE THE FACTS OF THE CASE IN DEPTH AND THEN AD JUDICATE UPON THE MATTER ON THE BASIS OF EVIDENCE AND MATERIAL, THUS , GATHERED. THE COMMISSIONER (APPEALS) WAS EMPOWERED TO DO SO UNDE R THE PROVISIONS OF SECTION 250(4). THE RESULT OF ENQUIRY CONDUCTED BY HIM COULD EITHER GO TO FURTHER CEMENT THE CASE MADE OUT BY THE ASSESSING OFFICER OR TO HELP OUT THE ASSESSEE AGAI NST THE FINDINGS OF THE ASSESSING OFFICER. THE MERE FACT THAT THE RESU LTS OF THE ENQUIRIES THUS CONDUCTED SUPPORTED THE CASE OF THE ASSESSEE AND NOT THAT OF THE REVENUE, IT HAS NO BEARING ON THE JURISDICTION AND POWERS OF THE COMMISSIONER (APPEALS). THE COMMISSIONER (APPEALS) COULD HAVE CONFRONTED THE ASSESSING OFFICER WITH THE EVIDENCE THUS RECEIVED AND THE MATERIAL THUS GATHERED AND ALLOWED THE ASS ESSING OFFICER TO HAVE HIS SAY IN THE MATTER AND PERHAPS HAD HE DONE SO THE DISPUTE IN QUESTION WOULD NOT HAVE ARISEN. BUT THERE IS NO REQUIREMENT, IN LAW, THAT THE COMMISSIONER (APPEALS) SHOULD INVARI ABLY CONSULT OR CONFRONT THE ASSESSING OFFICER EVERY TIME AN ADDIT IONAL EVIDENCE THAT WAS NOT BEFORE THE ASSESSING OFFICER COMES ON THE RECORD OF THE COMMISSIONER (APPEALS). WHERE THE ADDITIONAL EVIDE NCE IS OBTAINED BY THE FIRST APPELLATE AUTHORITY ON ITS OWN MOTION , THERE IS NO REQUIREMENT, IN LAW, TO CONSULT/CONFRONT THE ASSES SING OFFICER WITH SUCH ADDITIONAL EVIDENCE. THERE MAY BE CASES WHERE ADDITIONAL EVIDENCE IS ADMITTED BY THE FIRST APPELLATE AUTHOR ITY ON A REQUEST OR APPLICATION MADE BY THE ASSESSEE. IN SUCH CASES SU B-RULE (2) OF RULE 46A REQUIRES THE FIRST APPELLATE AUTHORITY TO ALLO W THE ASSESSING OFFICER A FURTHER OPPORTUNITY TO REBUT THE FRESH E VIDENCE FILED BY THE ASSESSEE. EVEN THAT REQUIREMENT CANNOT BE SAID TO BE A RULE OF UNIVERSAL APPLICATION. IF THE ADDITIONAL EVIDENCE FURNISHED BY THE ASSESSEE BEFORE THE FIRST APPELLATE AUTHORITY IS I N THE NATURE OF A CLINCHING EVIDENCE LEAVING NO FURTHER ROOM FOR ANY DOUBT OR CONTROVERSY, IN SUCH A CASE NO USEFUL PURPOSE WOUL D BE SERVED BY PERFORMING THE RITUAL OF FORWARDING THE EVIDENCE/M ATERIAL TO THE ASSESSING OFFICER TO OBTAIN HIS REPORT. IN SUCH EX CEPTIONAL CIRCUMSTANCES THE REQUIREMENT OF SUB-RULE (3) MAY BE DISPENSED WITH. [PARA 14] I.T.A. NO. 1482/HYD/2014 SRI MADHUSUDAN RAO LAGADAPATI, CHAIRMAN, M/S.LANCO INFRATECH LTD., :- 22 - : THEREFORE, THERE WAS NO INFIRMITY IN THE IMPUGNED ORDER OF THE COMMISSIONER (APPEALS) WHO HAD TAKEN PAINS TO COMP REHENSIVELY EXAMINE THE ISSUE BEFORE HIM AND ARRIVE AT A CORRE CT FINDING OF FACT AND HE SHOULD BE CONGRATULATED FOR HAVING DONE SO. THEREFORE, HIS ORDER WAS TO BE UPHELD AND THE APPEALS WERE TO BE DISMISSED. [PARA 15]. 14. IN THIS CASE CIT(A) REQUISITIONED THE EVIDENCE TO EXAMINE THE CONTENTIONS. THEREFORE, THE GROUNDS RAISED FROM GR OUND NO.3 TO 6 ON THE ISSUE OF ADDITIONAL EVIDENCE ARE INFRUCTUOUS AN D DOES NOT REQUIRE ANY CONSIDERATION. 15. THEREFORE, ON THE FACTS OF THE CASE, IT IS TO B E ADMITTED THAT ASSESSEE HAVING HIS OWN FUNDS ABROAD HAS REMITTED T HE AMOUNT TO INDIA AND THIS INWARD REMITTANCE CANNOT BE CONSIDERED AS UNACCOUNTED INCOME OF ASSESSEE FOR THE YEAR UNDER CONSIDERATION . 16. REVENUE HAS RAISED VARIOUS GROUNDS ON THE LEGAL PRINCIPLES. WE ARE OF THE OPINION THAT THESE ARE ALL MISPLACED OR WRONGLY APPLIED TO THE FACTS OF THE CASE. FIRST OF ALL, ASSESSEE BEING A NON-RESIDENT INVOKING THE PROVISIONS OF SECTION 68 & 69 HAS ITS OWN LIMITATIO NS. EVEN THOUGH, THE CREDITS ARE TO BE EXAMINED U/S.68 AND 69, 69A OR 69 C PRIMA FACIE THESE SECTIONS ARE NOT APPLICABLE IN THE CASE OF ASSESSEE FOR THE FOLLOWING REASONS. SECTION EXPLANATION FOR NON APPLICABILITY OF SECTIO N 68: UNEXPLAINED CASH CREDIT THE ASSESSEE HAS MERELY TRANSFERRED HIS OWN MONEY FROM HIS ACCOUNT IN BARCLAYS BANK, MAURITIUS TO NRI A/C HELD IN AXIS BANK AND INDUSIND BANK. AS HE TRANSFERRED THE AMOUNT FROM HIS OWN BANK A/C. THEREFORE, THE QUESTION OF UNEXPLAINED CREDIT WILL NOT COME. 69: UNEXPLAINED INVESTMENT THE AMOUNT OF RS.78,04,58,374/- DOES NOT REPRESENT ANY INVESTMENT, IT IS THE ASSESSEE OWN MONEY TRANSFERRED FROM OUTSIDE INDIA A/C TO INDIAN NRI A/C. THEREFORE, UNEXPLAINED INVESTMENT DOES I.T.A. NO. 1482/HYD/2014 SRI MADHUSUDAN RAO LAGADAPATI, CHAIRMAN, M/S.LANCO INFRATECH LTD., :- 23 - : NOT ATTRACTS. 69A: UNEXPLAINED MONEY THE AMOUNT OF RS.78,04,58,374/- IS THE CREDIT APPEARING IN THE CAPITAL ACCOUNT OF THE ASSESSEE. THE MONEY TRANSFERRED FROM HIS OWN FOREIGN BANK A/C TO HIS OWN NRI A/C IN INDIA. THIS WILL NOT ATTRACT UNEXPLAINED MONEY. 69C: UNEXPLAINED EXPENDITURE THIS SECTION WILL NOT ATTRACT AS NO EXPENDITURE IS INVOLVED. 17. REFERENCE TO THE BOARD CIRCULAR BY ASSESSING OF FICER IS ALSO NOT CORRECT AS THE SAME WAS EXTRACTED AND WAS DISCUSSED IN DETAIL BY THE LD.CIT(A). ONE CANNOT QUOTE OUT THE CONTEXT TO TAK E A DIFFERENT MEANING OF THE GENERAL CIRCULAR ISSUED BY THE BOARD. LD.CI T(A) HAVING EXAMINED THAT THE PRINCIPLES LAID DOWN BY THE BOARD CIRCULAR ARE CLEARLY APPLICABLE TO THE FACTS OF THE CASE, WE DO NOT SEE ANY MERIT I N GROUND NO.15 RAISED BY REVENUE UNLESS IT IS ESTABLISHED THAT ASSESSEE H AS EARNED INCOME IN INDIA OR RECEIVED IN INDIA. PROVISIONS OF SECTION 5 DOES NOT PERMIT TAXATION OF AMOUNTS REMITTED TO INDIA FROM SOURCES OUTSIDE INDIA WHICH ARE NOT INCOMES UNDER THE PROVISIONS OF THE ACT. T HIS ISSUE WAS DISCUSSED ELABORATELY BY THE CO-ORDINATE BENCH IN T HE CASE OF DCIT VS. FINLAY CORPORATION LTD., [86 ITD 626], DELHI, WHERE IN IT WAS HELD AS UNDER: 'THE ISSUE WHETHER THE INCOME OF NON-RESIDENT IS T AXABLE OR NOT IS STILL TO BE DECIDED WITH REFERENCE TO THE PROVISIO NS OF SECTION 5(2) AND, THE PROVISIONS OF SECTION 68 OR 69 CANNOT ENL ARGE THE SCOPE OF SECTION 5(2). WHAT IS NOT TAXABLE UNDER SECTION 5 (2) CANNOT BE TAXED UNDER THE PROVISIONS OF SECTION 68 OR SECTION 69. UNDER SECTION 5(2) THE INCOME ACCRUING OR ARISING OUTSIDE INDIA IS NO T TAXABLE UNLESS IT IS RECEIVED IN INDIA. SIMILARLY, IF ANY INCOME IS ALREADY RECEIVED OUTSIDE INDIA, THE SAME CANNOT BE TAXED IN INDIA M ERELY ON THE GROUND THAT IT IS BROUGHT IN INDIA BY WAY OF REMIT TANCES. REFERENCE CAN BE MADE TO THE JUDGMENT OF SUPREME COURT IN TH E CASE OF KESHAV MILLS LTD. V. CIT (1953) 23 ITR 230 (SUPREM E COURT OF INDIA) IF SUCH INCOME IS SHOWN IN THE BOOKS OF ACCOUNT TH EN IT CANNOT BE TAXED IN INDIA MERELY BECAUSE THE ASSESSEE IS UNAB LE TO PROVE THE SOURCE OF SUCH ENTRY. FOR EXAMPLE, THERE MAY BE A PPEARING AN ENTRY OF CASH CREDIT IN THE NAME OF A PERSON OF USA BY W AY OF LOAN I.T.A. NO. 1482/HYD/2014 SRI MADHUSUDAN RAO LAGADAPATI, CHAIRMAN, M/S.LANCO INFRATECH LTD., :- 24 - : RECEIVED THROUGH CHEQUE AND DEPOSITED IN THE BANK ACCOUNT MAINTAINED AT ANY CITY IN USA. SUCH MONEY BEING R ECEIVED OUTSIDE INDIA CANNOT BE TAXED UNDER SECTION 5(2) UNLESS IT IS PROVED THAT SUCH MONEY IS RELATABLE TO THE INCOME ACCRUED OR A RISING IN INDIA. THEREFORE, THE SAME CANNOT BE TAXED UNDER SECTION 68 MERELY ON THE GROUND THAT THE ASSESSEE FAILS TO PROVE THE GENUIN ENESS AND SOURCE OF SUCH CASH CREDIT. THEREFORE, WE ARE OF THE CON SIDERED VIEW THAT THE PROVISIONS OF SECTION 68 OR 69 WOULD BE APPLIC ABLE IN THE CASE OF NON-RESIDENT ONLY WITH REFERENCE TO THOSE AMOUNTS WHOSE ORIGIN OF SOURCE CAN BE LOCATED IN INDIA. THEREFORE, THE PR OVISIONS OF SECTION 68 OR 69, IN OUR OPINION, HAVE LIMITED APPLICATION IN THE CASE OF NON- RESIDENT.' 18. LIKEWISE, IN THE CASE OF SMT. SUSILA RAMASAMY V . ACIT, CENTRAL CIRCLE II(2), CHENNAI [008 ITR (TRIB) 18 (CHENNAI) ], CHENNAI BENCH HAS HELD AS UNDER: 'A NON-RESIDENT PERSON HAVING MONEY IN FOREIGN COU NTRY COULD NOT BE CALLED UPON TO PAY INCOME TAX ON THAT MONEY IN INDI A. THE REASON IS OBVIOUS BECAUSE IN RESPECT OF THAT M ONEY IT WILL NOT BE POSSIBLE FOR THE AO TO SAY IT WAS EITHER RECEIVED B Y HIM IN INDIA, OR IT WAS DEEMED TO BE RECEIVED BY HIM IN INDIA, OR IT ACCRUED TO HIM IN INDIA, OR IT AROSE TO HIM IN INDIA, OR IT IS DEEMED TO ACCRUE TO HIM IN INDIA, OR IT IS DEEMED TO ARISE TO HIM IN INDIA. [PARA 14.1]. IF A NON RESIDENT PERSON, HAVING MONEY IN A FOREIGN COUNTRY, BRINGS THAT MONEY TO I NDIA, THROUGH A BANKING CHANNEL, HE CANNOT BE CALLED UPON TO PAY INCOME TAX ON THAT MONEY IN INDIA, FIRSTLY, FOR TH E REASONS STATED ABOVE AND SECONDLY, BECAUSE THE REMITTANCE OF MONEY INTO INDIA THROUGH BANKING CHANNEL WILL MAKE, THE ONUS ON THE ASSESSEE UNDER SECTION 69, DISCHARGED. [PARA 14.2]. ONCE AN AMOUNT IS RECEIVED AS INCOME, ANY REMITTANCE OR TRANSMISSION OF THAT AMOUNT TO ANOTHER PLACE DOES NOT RESULT IN RECEIPT ONCE AGAIN AT OTHER PLACE, WITHIN THE MEANING OF SECTION 5. THEREFORE, IF CERTAIN INCOME, PROFITS OR GAINS WAS RECEIVED BY THE ASSESSEE OUTSIDE INDIA I T DOES NOT BECOME CHARGEABLE TO INCOME TAX IN INDIA BY REASON OF THAT MONEY HAVING BEEN BROUGHT INTO INDIA. THIS IS BECA USE WHAT IS CHARGEABLE IS THE FIRST RECEIPT OF THE MONEY AN D NOT A SUBSEQUENT DEALING BY THE ASSESSEE WITH THE SAID M ONEY. IN THAT EVENT THE MONEY IS BROUGHT BY THE ASSESSEE AS HIS OWN MONEY WHICH HE HAD ALREADY RECEIVED AND HAD CONTRO L OVER IT AND IT DOES NOT TAKE THE CHARACTER OF INCOME, PROF ITS AND GAINS AFTER BEING BROUGHT INTO INDIA. [PARA 14.3]. THERE COULD, I.T.A. NO. 1482/HYD/2014 SRI MADHUSUDAN RAO LAGADAPATI, CHAIRMAN, M/S.LANCO INFRATECH LTD., :- 25 - : OF COURSE BE A SITUATION WHERE A NON-RESIDENT HAS MONEY IN INDIA, TRANSMITS IT TO A FOREIGN COUNTRY THEN BRIN GS IT BACK TO INDIA THROUGH A BANKING CHANNEL. IF THIS CIRCULAR MOTION OF THE MONEY IS CONCLUSIVELY PROVED WITH EVIDENCE THE N THE NON RESIDENT WILL SURELY DO THE, EXPLAINING UNDER SECT ION 69, DESPITE THE MONEY HAVING BEEN BROUGHT INTO INDIA T HROUGH BANKING CHANNEL. BUT MERELY ON SUSPICIONS OR DOUBT S, CONJECTURES OR SURMISES, NO INFERENCE CAN BE DRAWN AGAINST THE ASSESSEE. IT IS TRITE LAW THAT THERE CAN BE NO PRESUMPTION IN FAVOR OF ANY ILLEGALITY OF A TRANSACTION. IN FA CT THE PRESUMPTION IS THE OTHER WAY ABOUT. [PARA 14.4]. I N THE CASES OF REMITTANCES THROUGH BANKING CHANNEL THE N ATURE AND SOURCE OF THE FUNDS GET EXPLAINED AND THE ONUS ON THE ASSESSEE UNDER SECTION 69 GETS DISCHARGED, AND CONSEQUENTLY SUCH REMITTANCES CANNOT BE TAXED UNDE R SECTION 5(2) (B). THEREFORE, THE ARGUMENT OF THE R EVENUE THAT, IN THE PRESENT CASE, THE IMPUGNED MONEY WAS TAXABL E UNDER SECTION 5(2)(B) READ WITH SECTION 69, ON THE FACTS , AS NO MERIT AND CANNOT BE ACCEPTED. [PARA 14.6]. BUT, THE POSI TION WILL BE ENTIRELY DIFFERENT IF THE MONEY HAS BEEN BROUGH T INTO INDIA OTHERWISE THAN THROUGH BANKING CHANNEL, BECA USE IN THAT CASE THE ONUS ON THE ASSESSEE UNDER SECTION 6 9 WILL NOT STAND DISCHARGED. IN SUCH A CASE THE PROVISIONS OF SECTION 5(2)(B) READ WITH SECTION 69 WILL SURELY BE ATTRAC TED. [PARA 14. 7]. IN THE PRESENT CASE, THE AO WHILE RELYING ON THE CBDT CIRCULAR, HAS COMMITTED AN ERROR OF REPRODUCI NG IN HIS ORDER FROM PARA 4 OF THE CIRCULAR, WHICH DOES NOT APPLY TO THE REMITTANCES THROUGH BANKING CHANNELS. HE SHOULD HAVE APPLIED THE PARA 2 AND FIRST PART OF PARA 3 OF THE CIRCULAR. IN THE CIRCUMSTANCES, THEREFORE, HIS ORDER HAS NO MER IT AND CANNOT BE SUSTAINED.[PARA 15.4]. THE ASSESSEE, WHO IS A NON RESIDENT BROUGHT MONEY INTO INDIA THROUGH BANKING CHANNEL AND THE MANNER IN WHICH THIS MONEY WAS UTILIZED IN INDIA IS DESCRIBED IN THE ANNEXURE. IT HAS BEEN OBSERVED TH AT BECAUSE OF THE MODE OF BANKING CHANNEL, ADMITTEDLY , USED FOR THE REMITTANCE IN THIS CASE, THE ONUS ON THE A SSESSEE UNDER SECTION 69 STOOD DISCHARGED, AND THEREFORE I T WAS NOT TAXABLE IN INDIA UNDER SECTION 5(2)(B). THE CBDT C IRCULAR SQUARELY SUPPORTS THE CASE OF THE ASSESSEE. THE FA CT THAT THE TRANSACTIONS AND EVENTS NARRATED IN THE ANNEXU RE LOOK CURIOUS AND SUSPICIOUS MAKES NO DIFFERENCE TO THE CONCLUSIONS THAT HAVE BEEN DRAWN IN THIS CASE, AS PER LAW. [PARA 16.2]' I.T.A. NO. 1482/HYD/2014 SRI MADHUSUDAN RAO LAGADAPATI, CHAIRMAN, M/S.LANCO INFRATECH LTD., :- 26 - : 19. IN VIEW OF THE LEGAL PRINCIPLES AS STATED ABOVE , PROVISIONS OF SECTION 5(2) ARE ALSO NOT APPLICABLE AS THE AMOUNT RECEIVED IS RECEIVED FROM ASSESSEE'S OWN ACCOUNT OUTSIDE INDIA AND NO INCOME HAS ACCRUED OR ARISEN IN INDIA. THESE FUNDS WERE ALSO RECEIVED TH ROUGH BANKING CHANNELS WITH NECESSARY STATUTORY APPROVALS. THERE FORE, ASSESSEE HAS PROVED THE SOURCES OF RECEIPTS AND DISCHARGED THE O NUS. IT IS THE REVENUE WHICH FAILED IN PROVING THAT THIS AMOUNT IS UNEXPLAINED INCOME OF ASSESSEE. IN VIEW OF THESE FACTS OF THE CASE, W E ARE OF THE OPINION THAT VARIOUS CASE LAWS RELIED BY THE REVENUE DOES NOT AP PLY AND THEY ARE CLEARLY DISTINGUISHABLE. IN VIEW OF THIS, WE HAVE NO HESITATION IN UPHOLDING THE ORDER OF THE CIT(A) AND REJECTING THE REVENUE'S GROUNDS. 20. IN THE RESULT, APPEAL OF REVENUE IS DISMISSED. ORDER PRONOUNCED IN OPEN COURT ON 18 TH MARCH, 2015 SD/- SD/- (ASHA VIJAYARAGHAVAN) (B. RAMA KOTAIAH) JUDICIAL MEMBER ACC OUNTANT MEMBER HYDERABAD, DATED 18 TH MARCH, 2015 TNMM COPY TO : 1. THE DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE-16 (1), 6 TH FLOOR, AAYAKAR BHAVAN, BASHEERBAGH, HYDERABAD. 2. SRI MADHUSUDAN RAO LAGADAPATI, CHAIRMAN, M/S.LAN CO INFRATECH LTD., PLOT NO.4, SOFTWARE UNIT LAYOUT, MA DHAPUR, HYDERABAD. 3. CIT(APPEALS)-V, HYDERABAD 4. THE DIT (IT & TP), HYDERABAD 5. D.R. ITAT, HYDERABAD
