The ITO, Ward-1(1)(3), Ahmedabad V. Calica Resources Pvt. Ltd., Ahmedabad

ITA 2769/AHD/2016

• Counselvise Citation: [2021] 107 COUNSELVISE.COM (IT) 6869 (ITAT-AHMEDABAD)
• Duration Of Justice: 4 year(s) 9 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-08-2021
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 22-04-2020
• Assessment Year: 2012-2013
• Appeal Filed On: 25-10-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: R R MAKWANA
• Assessee Lawyers: VIJAY RANJAN
• Keywords: Unexplained cash credit; Initiation of penalty proceedings; Corroborative evidences
• Section: 143(3); 234B; 208; 13; 68

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL, B BENCH, AHMEDABAD (CONDUCTED THROUGH VIRTUAL COURT AT AHMEDABAD) BEFORE SHRI MAHAVIR PRASAD, JUDICIAL MEMBER, AND WASEEM AHMED, ACCOUNTANT MEMBER ./ ITA NO. 2721/AHD/2016 / ASSTT. YEAR: 2012-2013 M/S. CALICA RESOURCES PVT. LTD., PLOT NO.395, ASHWAMEGH INDUSTRIAL ESTATE, NR. NUTAN NAGRIK BANK, B/H, GATI LOGISTICS, CHANGODAR, TAL. SANAND, AHMEDABAD. PAN: AAECC4869L VS. I.T.O., WARD-1(1)(3), AHMEDABAD. AND ./ ITA NO. 2769/AHD/2016 / ASSTT. YEAR: 2012-2013 I.T.O., WARD-1(1)(3), AHMEDABAD. VS. M/S. CALICA RESOURCES PVT. LTD., PLOT NO.395, ASHWAMEGH INDUSTRIAL ESTATE, NR. NUTAN NAGRIK BANK, B/H, GATI LOGISTICS, CHANGODAR, TAL. SANAND, AHMEDABAD. PAN: AAECC4869L (APPLICANT) (RESPONDENT) ASSESSEE BY : SHRI VIJAY RANJAN, A.R REVENUE BY : SHRI R.R. MAKWANA, SR.D.R /DATE OF HEARING : 22/06/2021 /DATE OF PRONOUNCEMENT: 06/08/2021 ITA NOS.2721 & 2769/AHD/2016 ASSTT. YEAR 2012-13 2 /O R D E R PER WASEEM AHMED, ACCOUNTANT MEMBER: THE CAPTIONED CROSS APPEALS HAVE BEEN FILED AT THE INSTANCE OF THE ASSESSEE AND THE REVENUE AGAINST THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS)-1, AHMEDABAD, DATED 30/08/2016 ARISING IN THE MATTER OF ASSESSMENT ORDER PASSED UNDER S. 143(3) OF THE INCOME TAX ACT, 1961 (HERE-IN-AFTER REFERRED TO AS 'THE ACT') RELEVANT TO THE ASSESSMENT YEAR 2012-2013. 2. FIRST, WE TAKE UP THE APPEAL FILED BY THE ASSESSEE BEARING ITA NO. 2721/AHD/2016 FOR A.Y. 2012-13 FOR THE PURPOSE OF ADJUDICATION. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: 1. ON THE FACTS AND IN THE CIRCUMSTANCE OF THE CASE, THE LEARNED CIT(A) ERRED IN CONFIRMING ADDITION TO THE EXTENT OF RS.80,00,000/-, OUT OF TOTAL ADDITION OF RS.2,56,50,000/-- MADE BY THE ASSESSING OFFICER U/S.68 OF THE I.T. ACT BY TREATING THE GENUINE SHARE CAPITAL AS UNEXPLAINED. 2. ON THE FACTS AND IN THE CIRCUMSTANCE OF THE CASE, THE LEARNED CIT(A) HAS FAILED TO APPRECIATE THAT THE APPELLANT COMPANY HAS FULLY DISCHARGED ITS ONUS CAST UPON IT U/S.68 OF THE I.T. ACT. HENCE THE ADDITION AS AFFIRMED BY CIT(A) TO THE EXTENT OF RS 80,00,000/- IS UNCALLED AND UNWARRANTED AND HENCE MAY BE DELETED. 3. ON THE FACTS AND IN THE CIRCUMSTANCE OF THE CASE, THE LEARNED CIT(A) HAS FAILED TO APPRECIATE THAT THE APPELLANT WAS A NEWLY INCORPORATED COMPANY IN THE FIRST YEAR AND HAD NO BUSINESS AND ONCE THE CONFIRMATION WITH IDENTITY AND GENUINENESS OF TRANSACTIONS WERE ESTABLISHED, ADDITION COULD NOT HAVE BEEN MADE IN THE HANDS OF THE APPELLANT. 4. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED IN NOT TREATING THE ORDER PASSED BY AO AS ILLEGAL AND BAD IN LAW AS IT WAS AGAINST THE LEGAL POSITION SETTLED BY THE APEX COURT AND JURISDICTIONAL HIGH COURT DECISIONS. 5. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED IN NOT UPHOLDING THE CLAIM THAT IT WAS NOT A FIT CASE FOR LEVY OF INTEREST UNDER SECTION 234A, 234B AND 234C AND 234D OF THE ACT. 6. IN LAW AND IN THE FACTS AND CIRCUMSTANCES OF THE APPELLANT'S CASE, THE LEARNED CIT(A) HAS GROSSLY ERRED IN DISMISSING AS PREMATURE GROUND NO. 8 OF THE APPELLANT'S APPEAL CHALLENGING INITIATION OF PENALTY PROCEEDINGS U/S. 271(L)(C). HE OUGHT TO HAVE APPRECIATED, INTER ALIA, THAT IN THE PECULIAR FACTS AND CIRCUMSTANCES OF THE APPELLANT'S CASE, THERE BEING ABSOLUTELY NO WARRANT/JUSTIFICATION FOR INITIATING THE PENALTY PROCEEDINGS, HE OUGHT TO HAVE ORDERED FOR THEIR ITA NOS.2721 & 2769/AHD/2016 ASSTT. YEAR 2012-13 3 BEING DROPPED, THEREBY SAVING BOTH THE APPELLANT AND THE DEPARTMENT FROM LONG DRAWN UNNECESSARY LITIGATION. 7. THE APPELLANT CRAVES LEAVE TO ADD, ALTER, AMEND AND/OR WITHDRAW ANY GROUND OR GROUNDS OF APPEAL EITHER BEFORE OR DURING THE COURSE OF HEARING OF THE APPEAL. 3. THE ONLY ISSUE RAISED BY THE ASSESSEE IS THAT THE LEARNED CIT (A) ERRED IN CONFIRMING THE ADDITION OF RS. 80,00,000/- IN PART OUT OF THE TOTAL ADDITION OF RS.2,56,50,000/- U/S 68 OF THE ACT INSTEAD OF DELETING THE ADDITION IN ENTIRETY. 4. THE FACTS IN BRIEF ARE THAT THE ASSESSEE IN THE PRESENT CASE IS A PRIVATE LIMITED COMPANY AND ENGAGED IN THE BUSINESS OF MANUFACTURING OF GUAR GUM POWDER. THE ASSESSEE IN THE YEAR UNDER CONSIDERATION HAS RECEIVED SHARE APPLICATION MONEY FOR RS. 2,56,50,000/- FROM FIVE INDIVIDUALS WHO ARE NRIS AND RESIDING IN USA. THE DETAILS OF SUCH INDIVIDUALS AND SHARE APPLICATION MONEY PAID BY THEM STANDS AS UNDER: SR. NAME OF THE SHARE APPLICANTS SHARE APPLICATION MONEY 1. SHRI MAYUR PATEL 89,50,000 2. SHRI VIMAL PATEL 87,00,000 3. SHRI DIVYESH PATEL 40,00,000 4. SMT. RIMA J. PATEL 35,00,000 5. SHRI KETUL B. PATEL 5,00,000 TOTAL 2,56,50,000 4.1 THE ASSESSEE IN SUPPORT OF SHARE APPLICATION MONEY HAS FILED THE FOLLOWINGS DOCUMENTS: I. LEDGER ACCOUNT OF SHARE APPLICATION MONEY. II. FRC FROM CITY BRANCH. III. BANK STATEMENTS OF SHRI VIMAL PATEL MAINTAINED WITH BANK OF AMERICA. IV. PASSPORT COPIES OF THE SUBSCRIBERS/ OF THE INDIVIDUALS AS DISCUSSED ABOVE. V. STATEMENT OF SPECIFIED FINANCIAL ASSET OF SHRI VIMAL PATEL AND SHRI MAYUR PATEL ONLY. ITA NOS.2721 & 2769/AHD/2016 ASSTT. YEAR 2012-13 4 4.2 IT WAS CONTENDED BY THE ASSESSEE THAT ALL THE SUBSCRIBERS OF THE SHARES HAVE BEEN RESIDING IN USA FOR MORE THAN 20 YEARS AND THEY HAVE MADE INVESTMENTS IN THE COMPANY OUT OF THEIR OWN INCOME AND THROUGH THE NRE BANK ACCOUNTS. 4.3 AS PER THE ASSESSEE THE DOCUMENTS FURNISHED ABOVE ARE SUFFICIENT ENOUGH TO PROVE THE IDENTITY, GENUINENESS OF THE TRANSACTION AND CREDIT WORTHINESS OF THE PARTIES. 4.4 THE ASSESSEE ALSO CONTENDED THAT IT IS THE FIRST YEAR OF THE REGISTRATION AND NO BUSINESS ACTIVITY HAS BEEN CARRIED IN THIS YEAR. THEREFORE IN SUCH FACTS AND CIRCUMSTANCES THE AMOUNT OF SHARE CAPITAL RECEIVED BY IT CANNOT BE TREATED AS UNEXPLAINED CASH CREDIT OF THE ASSESSEE. 4.5 HOWEVER, THE AO BEING DISSATISFIED OBSERVED THAT THE COPIES OF THE PASSPORT AND FRC CAN ONLY PROVE THE IDENTITY AND GENUINENESS OF THE TRANSACTION AS IT WAS ROUTED THROUGH BANKING CHANNEL. BUT THE CREDITWORTHINESS OF THE PARTIES CANNOT BE PROVED BASED ON THESE DOCUMENTS. AS SUCH ASSESSEE WAS UNDER THE OBLIGATION TO PROVIDE THE BANK STATEMENTS AS WELL AS COPIES OF THE ITRS FILED BY THESE PERSON IN THEIR COUNTRY TO JUSTIFY THE CREDITWORTHINESS. 4.6 ACCORDINGLY, THE AO HELD THAT THE AMOUNT OF SHARE CAPITAL OF RS.2,56,50,000/- REPRESENTS UNEXPLAINED CASH CREDIT U/S 68 OF THE ACT. 5. AGGRIEVED ASSESSEE PREFERRED AN APPEAL BEFORE THE LD.CIT(A), WHO CALLED FOR THE REMAND REPORT FROM THE AO. 6. THE LD. CIT(A) AFTER CONSIDERING THE SUBMISSION OF THE ASSESSEE AND REMAND REPORT SUBMITTED BY THE AO ALLOWED THE RELIEF TO THE ASSESSEE IN PART BY OBSERVING AS UNDER: ITA NOS.2721 & 2769/AHD/2016 ASSTT. YEAR 2012-13 5 AFTER GOING THROUGH THE FACTS OF THE CASE, IT IS SEEN THAT THE DEPOSITORS (TABLE SUPRA) AT SR.NO.1 TO 2 ARE FILING THE FEDERAL RETURN OF INCOME WITH US AUTHORITIES STATEMENTS OF FOREIGN BANK ACCOUNTS OF VIMAL PATEL AND MAYUR PATEL WERE FURNISHED WITH DETAILS OF FUNDS TRANSFER. DURING THE COURSE OF HEARING IN CONNECTION WITH REMAND PROCEEDINGS BEFORE THE AO, THE APPELLANT EXPLAINED THAT THE SAID SHAREHOLDERS NAMELY MAYUR PATEL & VIMAL PATEL WERE RESIDING AT USA SINCE MORE THAN 20 YEARS FOR WHICH EVIDENCES WERE FURNISHED AND THAT THEY HAD SIZABLE INCOME FOR LAST SEVERAL YEARS HAVING THEIR OWN SOCIAL SECURITY NUMBERS. THE GENUINENESS OF INVESTMENT IS ALREADY ACCEPTED BEING FORM OFFICIAL BANKING CHANNELS OF NRI BANK ACCOUNTS. IT IS PERTINENT THAT IN THE FEDERAL INCOME TAX RETURNS IN THE STATEMENT NO 8938, THE ABOVE SHAREHOLDERS HAVE SHOWN AND DECLARED THEIR SPECIFIED FOREIGN ASSETS IN WHICH THE INVESTMENT MADE BY THEM IN APPELLANT COMPANY IS SHOWN TO THE REVENUE AUTHORITIES WHICH PROVE BEYOND DOUBT THAT THE INVESTMENT MADE IN THE FORM OF SHARE CAPITAL IS GENUINE AND THEIR OWN SOURCES. AS REGARDS PARA (II) OF REMAND REPORT ABOUT BANK STATEMENTS, THE AO HAS NOT OFFERED ANY COMMENTS ON BANK STATEMENTS OF MAYUR PATEL AS FURNISHED AT PAGE 188-204 OF THE PAPER BOOK. THE APPELLANT HAS SUBMITTED THAT AS REGARDS BANK STATEMENT OF VIMAL PATEL, THE AO ERRED IN OBSERVING THAT VIMAL PATEL WAS NOT HAVING SUFFICIENT FUNDS TO INVEST IN THE SHARES AS HE HAD BORROWED SOME FUNDS FROM MAYUR PATEL. HOWEVER, THE FACTUM OF TRANSFER ENTRIES FROM MAYUR PATEL ACCOUNT IS ALSO ESTABLISHED FROM THE BANK ACCOUNT OF MAYUR PATEL WHERE THERE ARE SEVERAL INCOME AND RECEIPTS ENTRIES IN THE BANK ACCOUNT OF VIMAL PATEL WHICH ARE COMPLETELY IGNORED BY THE AO. IT IS SEEN THAT AO HAS NOT AT ALL TAKEN PAINS TO LOOK TO THE EVIDENCES AND HAS PREFERRED TO REITERATE THE STAND TAKEN WHILE FINALIZING THE ASSESSMENT. IN VIEW OF THE ABOVE, IT IS HELD THAT AS FAR AS THE INVESTMENT FROM MAYUR PATEL AND VIMAL PATEL IS CONCERNED, THE APPELLANT PROVED BEYOND DOUBT THAT THESE TRANSACTIONS ARE GENUINE AND THEY HAD THE CAPACITY TO LEND/INVEST AS DISCUSSED. THE A.O IS DIRECTED TO DELETE THE ADDITION TO THE EXTENT OF RS.1,76,50,000/- 7. BEING AGGRIEVED BY THE ORDER OF THE LD. CIT(A) BOTH THE ASSESSEE AND REVENUE ARE IN APPEAL BEFORE US. 8. THE ASSESSEE IS IN APPEAL BEFORE US AGAINST THE CONFIRMATION OF THE ADDITION FOR RS. 80,00,000/- WHEREAS THE REVENUE IS IN APPEAL IN ITA NO.2769/AHD/2016 FOR A.Y. 2012-13 AGAINST THE DIRECTION OF DELETING OF THE ADDITION OF RS. 1,76,50,000/-. THE REVENUE HAS RAISED THE FOLLOWING GROUND OF APPEAL: THAT THE LD.CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELETING THE ADDITION OF RS.1,76,50,000/- MADE U/S.68 OF THE I.T ACT ON ACCOUNT OF BOGUS SHARE CAPITAL. 9. THE LD.A.R BEFORE US FILED A PAPER BOOK RUNNING FROM PAGES 1 TO 322 AND CONTENDED THAT THE MONEY WAS RECEIVED TOWARDS SHARE APPLICATION THROUGH THE BANKING CHANNEL. FOR THIS PURPOSE, THE LD. AR DREW OUR ATTENTION ON THE BANK STATEMENTS RUNNING FROM PAGES 17 TO 51 OF THE PAPER BOOK. ITA NOS.2721 & 2769/AHD/2016 ASSTT. YEAR 2012-13 6 9.1 THE LD. AR ALSO DREW OUR ATTENTION ON THE CONFIRMATION FILED BY THE INVESTORS WHICH ARE PLACED ON PAGES 6 TO 11 OF THE PAPER BOOK. THE LD. AR ALSO CONTENDED THAT THE MONEY WAS RECEIVED THROUGH THE RBI CHANNEL AND DREW OUR ATTENTION ON THE RECEIPTS OF SHARE APPLICATION MONEY WHICH IS PLACED ON PAGES 145 TO 157 OF THE PAPER BOOK. 9.2 THE LD. AR ALSO FILED THE COPY OF THE INCOME-TAX RETURN OF SHRI MAYUR PATEL AND SHRI VIMAL PATEL WHICH ARE PLACED ON RECORD. 9.3 IN VIEW OF THE ABOVE, THE LD. A.R CONTENDED THAT THE ASSESSE HAS DISCHARGED ITS ONUS CAST U/S 68 OF THE ACT AND THUS NO ADDITION WHATSOEVER IS WARRANTED UNDER THE PROVISION OF SECTION 68 OF THE ACT IN THE GIVEN FACTS AND CIRCUMSTANCES. 10. ON THE OTHER HAND, THE LD. DR CONTENDED THAT THE ASSESSEE HAS FAILED TO FURNISH THE CREDIT WORTHINESS OF THE PARTIES AND THEREFORE THE AMOUNT OF SHARE APPLICATION MONEY REPRESENT UNEXPLAINED CASH CREDIT U/S.68 OF THE ACT. 11. BOTH THE LD. AR AND LD. DR VEHEMENTLY SUPPORTED THE ORDER OF THE AUTHORITIES BELOW TO THE EXTENT FAVORABLE TO THEM. 12. WE HAVE HEARD THE RIVAL CONTENTIONS OF BOTH THE PARTIES AND PERUSED THE MATERIALS AVAILABLE ON RECORD INCLUDING THE CASE LAWS CITED BY THE LEARNED AR AND THE LEARNED DR AT THE TIME OF HEARING. THE ASSESSEE IN THE PRESENT CASE HAS RECEIVED SHARE APPLICATION MONEY FROM THE NRIS AMOUNTING TO RS. 2,56,50,000/ WHICH WAS TREATED AS UNEXPLAINED CASH CREDIT UNDER THE PROVISIONS OF SECTION 68 OF THE ACT BY THE AO FOR THE REASON THAT THE ASSESSEE, BASED ON DOCUMENTARY EVIDENCE FAILED TO JUSTIFY THE CREDITWORTHINESS OF THE INVESTORS. HOWEVER, THE LEARNED CIT (A) WAS PLEASED TO DELETE THE ADDITION MADE BY THE AO FOR RS. 1,76,50,000/- AND CONFIRMED THE ADDITION OF THE BALANCE AMOUNT OF RS. 80 LAKH AS UNEXPLAINED CASH CREDIT UNDER SECTION 68 OF THE ACT. ITA NOS.2721 & 2769/AHD/2016 ASSTT. YEAR 2012-13 7 12.1 THE PROVISION OF SECTION 68 OF THE ACT FASTENS THE LIABILITY ON THE ASSESSEE TO ESTABLISH THE IDENTITY OF THE LENDERS/CREDITOR, GENUINENESS OF THE TRANSACTIONS AND CREDITWORTHINESS OF THE LENDERS/CREDITOR. THESE LIABILITIES ON THE ASSESSEE WERE IMPOSED TO JUSTIFY THE CASH CREDIT ENTRIES UNDER SECTION 68 OF THE ACT BY THE HONBLE CALCUTTA HIGH COURT IN THE CASE OF CIT VS. PRECISION FINANCE (P) LTD REPORTED IN 208 ITR 465 WHEREIN IT WAS HELD AS UNDER: IT WAS FOR THE ASSESSEE TO PROVE THE IDENTITY OF THE CREDITORS, THEIR CREDITWORTHINESS AND THE GENUINENESS OF THE TRANSACTIONS. ON THE FACTS OF THIS CASE, THE TRIBUNAL DID NOT TAKE INTO ACCOUNT ALL THESE INGREDIENTS WHICH HAD TO BE SATISFIED BY THE ASSESSEE. MERE FURNISHING OF THE PARTICULARS WAS NOT ENOUGH. THE ENQUIRY OF THE ITO REVEALED THAT EITHER THE ASSESSEE WAS NOT TRACEABLE OR THERE WAS NO SUCH FILE AND, ACCORDINGLY, THE FIRST INGREDIENT AS TO THE IDENTITY OF THE CREDITORS HAD NOT BEEN ESTABLISHED. IF THE IDENTITY OF THE CREDITORS HAD NOT BEEN ESTABLISHED, CONSEQUENTLY, THE QUESTION OF ESTABLISHMENT OF THE GENUINENESS OF THE TRANSACTIONS OR THE CREDITWORTHINESS OF THE CREDITORS DID NOT AND COULD NOT ARISE. THE TRIBUNAL DID NOT APPLY ITS MIND TO THE FACTS OF THIS PARTICULAR CASE AND PROCEEDED ON THE FOOTING THAT SINCE THE TRANSACTIONS WERE THROUGH THE BANK ACCOUNT, IT WAS TO BE PRESUMED THAT THE TRANSACTIONS WERE GENUINE. IT WAS NOT FOR THE ITO TO FIND OUT BY MAKING INVESTIGATION FROM THE BANK ACCOUNTS UNLESS THE ASSESSEE PROVED THE IDENTITY OF THE CREDITORS AND THEIR CREDITWORTHINESS. MERE PAYMENT BY ACCOUNT PAYEE CHEQUE WAS NOT SACROSANCT NOR COULD IT MAKE A NON-GENUINE TRANSACTION GENUINE. 12.2 ADMITTEDLY, THERE IS NO ISSUE WITH REGARD TO THE IDENTITY OF THE PARTIES WHO HAVE SUBSCRIBED THE SHARES OF THE ASSESSEE COMPANY. LIKEWISE, THE GENUINENESS OF THE TRANSACTION WAS ALSO NOT DOUBTED BY THE REVENUE AS ALL THE TRANSACTIONS WERE CARRIED OUT THROUGH THE BANKING CHANNEL. AS ALL THE SUBSCRIBERS OF THE SHARES OF THE ASSESSEE COMPANY ARE THE NRIS I.E. RESIDING IN USA, THE PAYMENT WAS MADE BY THEM FOR ACQUIRING THE SHARES THROUGH THE NRE ACCOUNT. THE NECESSARY DETAILS OF THE NRE ACCOUNT OF ALL THE SUBSCRIBERS ARE PLACED ON PAGES 17 TO 51 OF THE PAPER BOOK. 12.3 NOW THE ISSUE REVOLVES WITH RESPECT TO THE CREDITWORTHINESS OF THE PARTIES WHO HAVE SUBSCRIBED THE SHARES OF THE ASSESSEE COMPANY. IN THIS CONNECTION WE FIND THAT THE ASSESSEE HAS FILED THE INCOME TAX RETURN OF TWO NRIS FOR THE LAST TWO YEARS ALONG WITH THE BANK STATEMENT MAINTAINED IN USA AS WELL AS NRE ACCOUNT IN INDIA. THE NAME OF THESE TWO NRIS ARE AS UNDER: ITA NOS.2721 & 2769/AHD/2016 ASSTT. YEAR 2012-13 8 S. NO. NAME OF INVESTOR AMOUNT CREDITED 1 SHRI MAYUR PATEL RS. 89,50,000/ - 2 SHRI VIMAL PATEL RS. 87,00,000/ - TOTAL RS. 1,76,50,000/ - 12.4 THE COPIES OF THE BANK STATEMENT AND THE INCOME TAX RETURN ALONG WITH RECONCILIATION OF BANK STATEMENT ARE PLACED ON PAGES 158 TO 261 OF THE PAPER BOOK. ON PERUSAL OF THE INCOME TAX RETURN, WE NOTE THAT THESE 2 PARTIES NAMELY SHRI MAYUR PATEL AND SHRI VIMAL PATEL HAVE DISCLOSED THE INCOME AS DETAILED UNDER: S. NO. NAME OF INVESTOR RETURN INCOME (2011) RETURN INCOME (2012) 1 SHRI MAYUR PATEL $ 2,20,215/ - $ 2,29,524/ - 2 SHRI VIMAL PATEL $ 1,16,939/ - $ 1,40,533/ - 12.5 ON MAKING THE REFERENCE TO THE AVERAGE CONVERSION RATE OF THE DOLLAR INTO INDIAN CURRENCY, ON THE BASIS OF INFORMATION AVAILABLE ON GOOGLE AS APPLICABLE FOR THE YEAR 2011 AND 2012. THE RETURN OF INCOME IN INDIAN CURRENCY WORKS OUT AT RS. 2,25,14,877/- ONLY ( $ 2,20,215* RS. 47 + $ 2,29,524* RS. 53) FOR SHRI MAYUR PATEL AND RS. 1,29,44,382/- ONLY FOR SHRI VIMAL PATEL. BASED ON THESE DOCUMENTS, WE CAN DRAW AN INFERENCE THAT THERE WERE SUFFICIENT FUNDS AVAILABLE WITH THESE INVESTORS NAMELY SHRI MAYUR PATEL AND SHRI VIMAL PATEL FOR ACQUIRING THE SHARES OF THE ASSESSEE COMPANY. ACCORDINGLY, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE LEARNED CIT (A) FOR THE DELETION MADE BY HIM WITH RESPECT TO THESE TWO INVESTOR. 12.6 NOW COMING TO THE REMAINING THREE INVESTORS NAMELY SHRI DIVYESH PATEL, KETU PATEL AND RIMA PATEL WHO HAVE SUBSCRIBED SHARES OF THE ASSESSEE COMPANY. IN THIS CONNECTION WE NOTE THAT THE ASSESSEE HAS NOT FILED ANY COPY OF THE INCOME TAX RETURN FILED BY THEM IN THEIR COUNTRY OF RESIDENCE I.E. USA. LIKEWISE, THE ASSESSEE HAS ALSO NOT FILED THE BANK STATEMENT OF THESE PARTIES MAINTAINED BY THEM IN THEIR COUNTRY OF RESIDENCE EXCEPT THE NRE ACCOUNTS MAINTAINED IN INDIA. ADMITTEDLY, ALL THE TRANSACTIONS WERE ROUTED THROUGH THE BANKING CHANNEL I.E. NRE ACCOUNT. IN THIS REGARD, WE FIND THAT THERE IS A CIRCULAR ISSUED BY THE CBDT BEARING NUMBER 05 OF 1969 DATED 20-02-1969 WHEREIN IT WAS INSTRUCTED THAT THERE CANNOT BE ANY TAX ITA NOS.2721 & 2769/AHD/2016 ASSTT. YEAR 2012-13 9 LIABILITY ON THE AMOUNT REMITTED BY THE NRI IN INDIA FOR INVESTMENT IN INDIA. THE EXTRACT OF THE RELEVANT CIRCULAR IS REPRODUCED AS UNDER: 2. MONEY BROUGHT INTO INDIA BY NON-RESIDENTS FOR INVESTMENT OR OTHER PURPOSES IS NOT LIABLE TO INDIAN INCOME-TAX. THEREFORE, THERE IS NO QUESTION OF A REMITTANCE INTO THE COUNTRY BEING SUBJECTED TO INCOME-TAX IN INDIA. THE QUESTION OF ASSESSMENT TO TAX ARISES ONLY WHEN THERE IS NO EVIDENCE TO SHOW THAT THE AMOUNT, IN QUESTION, IN 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 MONEY HAD IN FACT BEEN EARNED IN INDIA. 3. IF THE MONEY HAS BEEN BROUGHT INTO INDIA THROUGH BANKING 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 BANKING CHANNELS AND THERE IS NO EVIDENCE REGARDING THE TRANSFER OF THE MONEY, THAT THE DEPARTMENT HAS TO MAKE ENQUIRIES ABOUT THE SOURCE THEREOF. 12.7 BESIDES THE ABOVE, WE ALSO NOTE THAT THE HONBLE GUJARAT HIGH COURT IN THE CASE OF CIT VS. HARISHBHAI RAOJIBHAI PATEL HUF REPORTED IN 39 TAXMANN.COM 13 HAS HELD AS UNDER: 2. NOW SO FAR AS QUESTION NO. 1 IS CONCERNED, CONSIDERING THE SPECIFIC FINDING GIVEN BY THE CIT(A) AS WELL AS THE ITAT THAT THE AMOUNT OF RS.10,10,000/- WAS GIVEN BY SHRI JIGAR A. PATEL STAYING AT U.K. VIDE CHEQUE NO. 481971 DRAWN ON ICICI BANK DATED 27/03/2008 AND THE SAID AMOUNT WAS FROM NRI ACCOUNT NO.008501014581 OF ICICI BANK AT VALLABH VIDYANAGAR AND CONSIDERING THE FACT THAT EVEN THE AFORESAID WAS CONFIRMED BY SHRI JIGAR A. PATEL, BOTH THE CIT(A) AS WELL AS ITAT HAVE RIGHTLY HELD THAT THE SAME CANNOT BE SAID TO BE UNEXPLAINED CASH DEPOSIT AND HAVE RIGHTLY DELETED THE ADDITION OF RS.10,10,000/-UNDER SECTION 68 OF THE INCOME-TAX ACT MADE BY THE ASSESSING OFFICER. THE RELEVANT OBSERVATIONS OF ITAT ARE IN PARAGRAPH 6 OF THE IMPUGNED JUDGMENT AND ORDER PASSED BY THE ITAT. 12.8 IN VIEW OF THE ABOVE, IT CAN BE SAFELY CONCLUDED THAT THE AMOUNT RECEIVED BY THE ASSESSEE FROM THE NRIS IN THE MANNER AS DISCUSSED ABOVE CANNOT BE TREATED AS UNEXPLAINED CASH CREDIT UNDER THE PROVISIONS OF SECTION 68 OF THE ACT. ACCORDINGLY, THERE IS NO QUESTION FOR TREATING THE AMOUNT OF SHARE CAPITAL RECEIVED BY THE ASSESSEE AS UNEXPLAINED CASH CREDIT UNDER SECTION 68 OF THE ACT. HENCE THE GROUND OF APPEAL OF THE ASSESSEE IS ALLOWED WHEREAS GROUND OF APPEAL OF THE REVENUE IS DISMISSED. ITA NOS.2721 & 2769/AHD/2016 ASSTT. YEAR 2012-13 10 13. IN THE COMBINED RESULTS, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED AND THE APPEAL FILED BY THE REVENUE IS DISMISSED . ORDER PRONOUNCED IN THE COURT ON 06/08/2021 AT AHMEDABAD. SD/- SD/ (MAHAVIR PRASAD) (WASEEM AHMED) JUDICIAL MEMBER ACCOUNTANT MEMBER (TRUE COPY) AHMEDABAD; DATED 06/08/2021 MANISH