ACIT Corporate Circle 3(2), CHENNAI V. V.M.Aviation Pvt. Ltd., CHENNAI

ITA 1987/CHNY/2018

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 9438 (ITAT-CHENNAI)
• Duration Of Justice: 1 year(s) 6 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-01-2020
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2013-2014
• Appeal Filed On: 20-06-2018
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: S BHARATH
• Keywords: Unexplained cash credit; Set aside
• Section: 68

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, CHENNAI . . . , . !, # !$ BEFORE SHRI N.R.S. GANESAN, JUDICIAL MEMBER AND SHRI S. JAYARAMAN, ACCOUNTANT MEMBER ./ ITA NO.1987/CHNY/2018 & '& / ASSESSMENT YEAR : 2013-14 THE ASSISTANT COMMISSIONER OF INCOME TAX, CORPORATE CIRCLE -3(2), CHENNAI - 600 034. V. M/S V.M. AVIATION PVT. LTD., NO.480, 6 TH FLOOR, KHIVRAJ COMPLEX II, ANNA SALAI, NANDANAM, CHENNAI - 600 035. PAN : AADCV 3922 A ()*/ APPELLANT) (+,)*/ RESPONDENT) )* - . / APPELLANT BY : SHRI S. BHARATH, CIT +,)* - . / RESPONDENT BY : SHRI Y. SRIDHAR, CA / - 0# / DATE OF HEARING : 27.11.2019 12' - 0# / DATE OF PRONOUNCEMENT : 03.01.2020 / O R D E R PER N.R.S. GANESAN, JUDICIAL MEMBER : THIS APPEAL OF THE REVENUE IS DIRECTED AGAINST T HE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) -11, CHENNAI, DATED 28.03.2018 AND PERTAINS TO ASSESSMENT YEAR 2013-14. 2. THERE WAS A DELAY OF FIVE DAYS IN FILING THIS AP PEAL BY THE REVENUE. THE REVENUE HAS FILED A PETITION FOR COND ONATION OF DELAY. WE HAVE HEARD THE LD. D.R. AND THE LD. REPRESENTATIVE FOR THE ASSESSEE. 2 I.T.A. NO.1987/CHNY/18 WE FIND THAT THERE WAS SUFFICIENT CAUSE FOR NOT FIL ING THE APPEAL BEFORE THE STIPULATED TIME. THEREFORE, WE CONDONE THE DELAY A ND ADMIT THE APPEAL. 3. SHRI S. BHARATH, THE LD. DEPARTMENTAL REPRESENTA TIVE, SUBMITTED THAT THE ONLY ISSUE ARISES FOR CONSIDERATION IS DEL ETION OF ADDITION MADE BY THE ASSESSING OFFICER UNDER SECTION 68 OF THE INCOM E-TAX ACT, 1961 (IN SHORT 'THE ACT'). ACCORDING TO THE LD. D.R., THE A SSESSEE HAS RECEIVED SHARE CAPITAL FOR ALLOTMENT OF SHARES FROM M/S MANI AN POWER PVT. LTD. AND M/S RANIA INVESTMENT & HOLDING LTD. ACCORDING TO THE LD. D.R., IN RESPECT OF M/S MANIAN POWER PVT. LTD., THE ASSESSEE HAS FURNISHED NECESSARY CONFIRMATION FOR THE INVESTMENTS. HOWEVE R, IN RESPECT OF M/S RANIA INVESTMENT & HOLDING LTD., WHICH IS A BRITISH VIRGINS ISLAND COMPANY, THE ASSESSEE COULD NOT FILE THE CONFIRMATI ON. SINCE THE ASSESSEE COULD NOT FILE NECESSARY DOCUMENTS TO ESTA BLISH CREDITWORTHINESS AND GENUINENESS OF TRANSACTION, AC CORDING TO THE LD. D.R., THE ASSESSING OFFICER FOUND THAT THE INVESTME NTS TO THE EXTENT OF 13,00,08,500/- WAS UNEXPLAINED CREDIT UNDER SECTION 68 OF THE ACT. HOWEVER, ACCORDING TO THE LD. D.R., THE CIT(APPEALS ) ALLOWED THE CLAIM OF THE ASSESSEE ON THE GROUND THAT THE FOREIGN INWA RD REMITTANCE CERTIFICATE WAS RECEIVED FROM M/S KOTAK MAHINDRA BA NK LTD., CHENNAI AND THE ENTIRE INVESTMENT WAS ACCEPTED BY THE RESER VE BANK OF INDIA. ACCORDING TO THE LD. D.R., RESERVE BANK OF INDIA DO ES NOT ACCEPT THE 3 I.T.A. NO.1987/CHNY/18 INVESTMENTS. MERELY BECAUSE THE INVESTMENT WAS REC EIVED FROM FOREIGN COMPANY, IT DOES NOT MEAN THAT THE FOREIGN COMPANY CANNOT BE CALLED FOR PROOF OF ITS CREDITWORTHINESS. WHETHER IT IS FOREI GN COMPANY OR INDIAN COMPANY, IT IS FOR THE ASSESSEE TO ESTABLISH CREDIT WORTHINESS OF INVESTMENT. THEREFORE, ACCORDING TO THE LD. D.R., TO THAT EXTENT, THE ORDER OF THE CIT(APPEALS) IS NOT CORRECT. 4. ON THE CONTRARY, SHRI Y. SRIDHAR, THE LD. REPRES ENTATIVE FOR THE ASSESSEE, SUBMITTED THAT ADMITTEDLY, THE INVESTMENT S WERE RECEIVED FROM TWO COMPANIES, NAMELY, M/S MANIAN POWER PVT. LTD. A ND M/S RANIA INVESTMENT & HOLDING LTD. IN RESPECT OF M/S M/S MA NIAN POWER PVT. LTD., THE ASSESSING OFFICER HIMSELF ACCEPTED THE SOURCE. HOWEVER, IN RESPECT OF M/S RANIA INVESTMENT & HOLDING LTD., THE ASSESSI NG OFFICER DOUBTED THE GENUINENESS, THEREFORE, HE MADE ADDITION UNDER SECTION 68 OF THE ACT. ACCORDING TO THE LD. REPRESENTATIVE, FOREIGN INWARD REMITTANCE CERTIFICATE WAS FILED BEFORE THE ASSESSING OFFICER. MOREOVER, THE RESERVE BANK OF INDIA HAS APPROVED THE INVESTMENTS. HENCE, THE CIT(APPEALS) FOUND THAT THE ASSESSEE HAS DISCHARGED ITS ONUS. ON A QUERY FROM THE BENCH, THE LD. REPRESENTATIVE PRODUC ED THE COPY OF SO CALLED APPROVAL OF THE RESERVE BANK OF INDIA, AVAIL ABLE AT PAGE 47 OF THE PAPER-BOOK, WHICH DOES NOT INDICATE ANYTHING ABOUT THE SOURCE. IT SIMPLY ACKNOWLEDGES THE RECEIPT OF DECLARATION IN FORM FC- GPR IN RESPECT OF 4 I.T.A. NO.1987/CHNY/18 EQUITY SHARES TO FOREIGN INVESTOR. IT DOES NOT EST ABLISH THE CREDITWORTHINESS OF THE FOREIGN INVESTORS. THE LD. REPRESENTATIVE SUBMITTED THAT IN THAT CASE, THE MATTER MAY BE REMI TTED BACK TO THE FILE OF THE ASSESSING OFFICER SO THAT NECESSARY EXAMINATION WITH REGARD TO CREDITWORTHINESS OF M/S RANIA INVESTMENT & HOLDING LTD. CAN BE MADE. 5. HAVING HEARD THE LD. D.R. AND THE LD. REPRESENTA TIVE FOR THE ASSESSEE, WE PERUSED THE RELEVANT MATERIAL AVAILABL E ON RECORD. AS RIGHTLY SUBMITTED BY THE LD. D.R. AND THE LD. REPRE SENTATIVE FOR THE ASSESSEE, THE SO CALLED APPROVAL OF RESERVE BANK OF INDIA IS ONLY ACKNOWLEDGEMENT OF RECEIPT OF DECLARATION FILED BY THE ASSESSEE WITH REGARD TO INVESTMENTS IN EQUITY SHARES. IT DOES NO T SAY ANYTHING ABOUT THE CREDITWORTHINESS OF CREDITORS. FOR ESTABLISHIN G THE CREDIT, THE ASSESSEE HAS TO ESTABLISH THREE CORDIAL PRINCIPLES (I) CREDITWORTHINESS OF CREDITOR; (II) GENUINENESS OF TRANSACTION AND (III) IDENTITY OF THE CREDITOR. IN THIS CASE, THE IDENTITY OF CREDITOR, NAMELY, RAN IA INVESTMENT & HOLDING LTD. IS NOT IN DOUBT. HOWEVER, THE CREDITWORTHINES S OF CREDITOR AND GENUINENESS OF TRANSACTION ARE TO BE ESTABLISHED. THEREFORE, THIS TRIBUNAL IS OF THE CONSIDERED OPINION THAT THE MATT ER NEEDS TO BE RE- EXAMINED BY THE ASSESSING OFFICER. ACCORDINGLY, OR DERS OF BOTH THE AUTHORITIES BELOW ARE SET ASIDE AND THE ISSUE OF IN VESTMENT SAID TO BE MADE BY M/S RANIA INVESTMENT & HOLDING LTD. IS REMI TTED BACK TO THE FILE 5 I.T.A. NO.1987/CHNY/18 OF THE ASSESSING OFFICER. THE ASSESSING OFFICER SH ALL RE-EXAMINE THE MATTER ON THE BASIS OF THE MATERIAL THAT MAY BE FIL ED BY THE ASSESSEE AND THEREAFTER DECIDE THE ISSUE AFRESH IN ACCORDANCE WI TH LAW, AFTER GIVING A REASONABLE OPPORTUNITY TO THE ASSESSEE. 6. IN THE RESULT, THE APPEAL FILED BY THE REVENUE I S ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE COURT ON 3 RD JANUARY, 2020 AT CHENNAI. SD/- SD/- (. !) ( . . . ) (S. JAYARAMAN) (N.R.S. GANESAN) # / ACCOUNTANT MEMBER /JUDICIAL MEMBER /CHENNAI, 4 /DATED, THE 3 RD JANUARY, 2020. KRI. - +056 76'0 /COPY TO: 1. )*/ APPELLANT 2. +,)*/ RESPONDENT 3. / 80 () /CIT(A)-11, CHENNAI 4. PRINCIPAL CIT, CHENNAI-3, CHENNAI 5. 69 +0 /DR 6. :& ; /GF.