Bycell Telecommunications India Pvt. Ltd., New Delhi V. Pr. CIT- 2, New Delhi

ITA 2822/DEL/2017

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 3851 (ITAT-DELHI)
• Duration Of Justice: 8 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-01-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2009-2010
• Appeal Filed On: 05-05-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: GAURAV JAIN ADV RESPONDE
• Keywords: Unexplained cash credit; Bogus Share capital; Gift; Revision of order; Double taxation relief; Principle of natural justice; Source of fund; Deemed to accrue or arise in india; Tangible material; Assessment record; Onus to prove; Reason to believe; Reassessment proceedings
• Section: 143(3); 147; 68; 69; 148; 263; 90

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH A NEW DELHI BEFORE SHRI AMIT SHUKLA, JUDICIAL MEMBER & SHRI L.P. SAHU, ACCOUNTANT MEMBER I.T.AS. NO.2819, 2820, 2821, 2822 & 2823/DEL/2017 ASSESSMENT YEARS: 2006-07 TO 2010-11 BYCELL TELECOMMUNICATIONS INDIA PVT. LTD., SUITE NO.10, 1- LINK ROAD, JANGPURA EXTENSION, NEW DELHI. VS. PR. COMMISSIONER OF INCOME TAX-II, ROOM NO.394, C.R. BUILDING, I.P. ESTATE, NEW DELHI. TAN/PAN: AACCB 7403K (APPELLANT) (RESPONDENT) APPELLANT BY: SHRI AJAY VOHRA, SR. ADV & SHRI GAURAV JAIN, ADV. RESPONDENT BY: SMT. APARNA KARAN, CIT(DR) DATE OF HEARING: 27 10 2017 DATE OF PRONOUNCEMENT: 24 01 2018 O R D E R PER AMIT SHUKLA, J.M.: THE AFORESAID APPEALS HAVE BEEN FILED BY THE ASSES SEE AGAINST COMMON IMPUGNED ORDER DATED 30.03.2017, PASSED BY L D. PRINCIPAL COMMISSIONER OF INCOME TAX-II, (PCIT) DELHI, UNDER SECTION 263 OF THE INCOME TAX ACT, 1961, FOR THE ASSESSMENT YEARS 2006-07 ; 2007-08; 2008-09; 2009-10 & 2010-11. 2. SINCE THE ISSUES INVOLVED IN ALL THE APPEALS ARE C OMMON ARISING OUT OF IDENTICAL SET OF FACTS, THEREFORE, SAME WERE HEARD TOGETHER AND ARE BEING DISPOSED OF BY WAY OF THIS CON SOLIDATED ORDER. THE ENTIRE ISSUE WHICH REVOLVES AROUND THE IMPUGNED R EVISION ORDER U/S. 263 IS THAT, RE-ASSESSMENT PROCEEDINGS FOR THE I MPUGNED I.T.AS. NO.2819 TO 2823/DEL/2017 2 ASSESSMENT YEARS ARE ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENUE, BECAUSE THE ASSESSING OFFICER HAS FAILED TO EXAMINE THE SHARE APPLICATION MONEY RECEIVED FROM THE FOREIGN ENTITY, I. E., BYCELL HOLDING AG, SWITZERLAND, AS THE ASSESSING OFFICER HAS ONLY VE RIFIED THE IDENTITY OF THE SAID ENTITY BUT HAS FAILED TO VERIFY THE CREDITWO RTHINESS OF SUCH INVESTOR AND ALSO THE GENUINENESS OF THE TRANSACTION. TH E AMOUNT OF SHARE APPLICATION MONEY RECEIVED FROM BYCELL HOLDING AG, SWITZERLAND WHICH IS ONE OF THE MAIN SUBJECT MATTER OF PRESENT REVI SION PROCEEDINGS U/S.263 ARE AS UNDER:- S.NO A.Y. AMOUNT OF SHARE APPLICATION MONEY (FROM BYCELL AG, SWITZERLAND) 1. 2006-07 RS. 17,68,00,000 2. 2007 - 08 (RS.4,87,97,080) [REPAYMENT OF SHARE APPLICATION MONEY DURING THE YE AR, INADVERTENTLY CONSIDERED AS INFLOW BY LD. PCIT] 3. 2008-09 RS.70,90,15,846 4. 2009-10 RS.7,09,84,431 5. 2010-11 RS.96,36,035 3. TO CHALLENGE THE IMPUGNED ORDER, THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS WHICH ARE COMMON AND ARE IDENTICAL IN ALL THE YEARS. A. THE LD. PCIT HAS ERRED IN LAW AND IN FACT IN HOLDIN G THAT THE SUFFICIENT INQUIRIES WERE NOT MADE TO ASCERTAIN THE GENUINENES S AND CREDIT WORTHINESS OF THE TRANSACTIONS UNDERTAKEN BY THE AS SESSEE IN THE ASSESSMENT YEAR 2006-07. B. THAT THE LD PCIT HAS ERRED BY NOT TAKING INTO ACCO UNT THE FACT THAT THE GENUINENESS AND CREDITWORTHINESS OF THE SHARE APPLI CATION MONEY RECEIVED BY THE ASSESSEE FROM ITS FOREIGN PROMOTER, NAMELY BYCELL HOLDING AG, WAS EXAMINED BY THE ASSESSING OFFICER B Y SEEKING INFORMATION FROM THE FT& TR, DIVISION OF THE CBDT. I.T.AS. NO.2819 TO 2823/DEL/2017 3 C. THE LD. PCIT HAS ERRED IN LAW AND IN FACT IN HOLDI NG THAT THE EARLIER ORDERS OF THE AO UNDER SECTION 143(3)/147 OF THE AC T WERE ERRONEOUS AND PREJUDICIAL TO THE INTERESTS OF THE REVENUE. D. THE ORDER OF THE LD. PCIT WAS PASSED WITHOUT GIVIN G A REASONABLE AND FAIR OPPORTUNITY TO THE ASSESSEE TO RESPOND TO THE ISSUE OF IDENTITY OF THE ASSESSEES SHAREHOLDERS, AS THIS ISSUE WAS NEITHER MENTIONED IN THE SHOW CAUSE NOTICE NOR BROUGHT UP BY THE LD. PCIT DU RING THE PROCEEDINGS UNDER SECTION 263. E. THE ORDER OF THE LD. PCIT WAS PASSED WITHOUT GI VING A REASONABLE AND FAIR OPPORTUNITY TO THE ASSESSEE TO RESPOND TO THE ISSUE OF GENUINENESS AND CREDITWORTHINESS OF SHARE APPLICATION MONEY REC EIVED BY THE ASSESSEE FROM BITCORP PRIVATE LIMITED AS THIS ISSUE WAS NEITHER MENTIONED IN THE SHOW CAUSE NOTICE NOR DURING THE P ROCEEDINGS UNDER SECTION 263 BEFORE THE LD. PCIT. F. THE ORDER OF THE LD. PCIT WAS PASSED MECHANICALL Y WITHOUT ANY APPLICATION OF MIND. BRIEF FACTS & BACKGROUND 4. BEFORE DEALING WITH THE RELEVANT ISSUES AND POINTS AS RAISED BY THE LEARNED PCIT IN THE IMPUGNED ORDER, IT WOULD B E PERTINENT TO DEAL WITH THE RELEVANT FACTS AND BACKGROUNDS OF THE CA SE AS CULLED OUT FROM THE MATERIAL PLACED ON RECORD BEFORE US. THE AS SESSEE IS A PRIVATE LIMITED COMPANY WHICH WAS INCORPORATED IN INDIA WITH THE MAIN OBJECT OF CARRYING BUSINESS IN THE FIELD OF TELECOMMUNICAT ION SERVICES IN INDIA. THE 74% EQUITY WAS HELD BY A FOREIGN COMPANY , NAMELY, BYCELL HOLDING AG, SWITZERLAND AND REMAINING 26% WAS HELD B Y AN INDIAN COMPANY, NAMELY, BITCORP PVT. LTD. THE SWISS ENTITY IN TURN WAS HELD BY A CYPRUS ENTITY, M/S. TENOCH HOLDING LTD, CYPRUS ( 97% HOLDING). M/S. TENOCH HOLDING LTD., CYPRUS WAS IN TURN WAS EQUA LLY HELD BY M/S. QUALLIS INC., PANAMA AND M/S. KYNANCE BUSINESS LTD., BRITISH VIRGIN ISLANDS. M/S. QUALLIS INC., PANAMA IN RETURN WAS 100% HELD BY MR. MAXIM NAUMCHENKO; AND M/S. KYNANCE BUSINESS LTD. , BRITISH I.T.AS. NO.2819 TO 2823/DEL/2017 4 VIRGIN ISLANDS WAS 100% HELD BY MR. ANDREY POLVEKTOW . CONSIDERING THE FACT THAT FOREIGN INVESTMENT IN TELECOMM SECTOR WAS REG ULATED BY FOREIGN INVESTMENT PROMOTION BOARD, (FIPB) MINISTRY OF FINANCE, GOVERNMENT OF INDIA, THE BYCELL HOLDING AG, SWITZERLAN D APPLIED FOR APPROVAL OF INVESTMENT TO THE EXTENT OF 74% IN EQUITY S HARE OF THE INDIAN COMPANY TO UNDERTAKE THE BUSINESS OF TELECOM S ERVICES IN INDIA. THE SAID APPROVAL WAS ACCORDED BY FIPB VIDE LETTER DATED 17.01.2006. LATER ON, THE ASSESSEE FILED ANOTHER APPLI CATION DATED 26.09.2007 BY FIPB FOR ENHANCEMENT OF AMOUNT OF INVE STMENT IN INDIA SO AS TO EXPAND THE AREA FOR PROVIDING TELECOM SERVIC ES IN INDIA. NECESSARY APPROVAL WAS GRANTED BY FIPB INCLUDING APP ROVAL DATED 08.02.2008 FOR ADDITIONAL INVESTMENT BY THE SWISS ENTITY . BASED ON SUCH APPROVALS, M/S BYCELL HOLDING AG, SWITZERLAND R EMITTED FUNDS FROM OVERSEAS TOWARDS SHARE APPLICATION MONEY/ SHARE CAPITAL IN THE INDIAN COMPANY FROM TIME TO TIME WHICH WAS UTILIZED F OR APPLYING OF TELECOM LICENSES TO THE DEPARTMENT OF TELECOMMUNICATIO N, (DOT) GOVERNMENT OF INDIA. AN AGGREGATE AMOUNT OF RS.23 CRO RE WAS GIVEN TO THE DOT TOWARDS ENTRY FEE FOR OBTAINING UAS LICENSE FOR NORTH-EAST, WEST BENGAL, ORISSA, ASSAM AND BIHAR SERVICE AREA. L ATER ON, ON ACCOUNT OF CERTAIN SECURITY CLEARANCE ISSUE BASED BY MINISTRY OF HOME AFFAIRS (MHA), FIPB ON 13.05.2009 WITHDREW THE APPRO VALS GRANTED TO THE ASSESSEE COMPANY FOR CARRYING OUT ANY TELECOM OPER ATION IN INDIA WITH FOREIGN EQUITY PARTICIPATIONS. THE SAID WITHDRAW AL OF APPROVAL AS WELL AS FOR THE REFUND OF ENTRY FEE PAID BY THE ASSE SSEE TO DOT FOR OBTAINING THE TELECOM LICENSES WERE CHALLENGED BY THE ASSESSEE UNDER WRIT JURISDICTION BEFORE HON'BLE DELHI HIGH COURT. T HE HON'BLE DELHI HIGH COURT DISMISSED THE WRIT PETITION ON THE GROUND THAT THE COURT WOULD NOT INTERFERE WITH THE POLICY DECISION OF THE CE NTRAL GOVERNMENT. THEREAFTER, THE FOREIGN INVESTOR HAD INVOK ED ARBITRATION PROCEEDINGS UNDER BILATERAL TREATIES SEEKING COMPENSATI ON FOR I.T.AS. NO.2819 TO 2823/DEL/2017 5 WITHDRAWAL OF APPROVALS AND REFUND OF ENTRY FEES PAI D BY THE ASSESSEE. THE SAID ARBITRATION HAS BEEN STATED TO BE PENDING FOR D ISPOSAL BEFORE THE PERMANENT COURT OF ARBITRATION AT HAGUE. 5. FOR THE IMPUGNED ASSESSMENT YEARS REGULAR RETURN OF INCOME WERE FILED AND SUCH RETURNS WERE SUBJECTED TO SCRUTINY PROCEEDINGS FROM TIME TO TIME AND ASSESSMENTS WERE COMPLETED MOSTLY U/S.143(3). IN THE SAID ASSESSMENTS, THE AMOUNTS SHOWN IN THE BALAN CE SHEET TOWARDS SHARE APPLICATION MONEY/SHARE CAPITAL WERE DU LY ACCEPTED BY THE THEN ASSESSING OFFICER. THE YEAR-WISE POSITIONS O F COMPLETED ASSESSMENT ARE AS UNDER:- S. NO. AY ASSESSED INCOME REMARK 1. 2006-07 RS.4,49,567 ASSESSMENT COMPLETED VIDE ORDER DATED 02.04.2008 PASSED UNDER SECTION 143(3) ACCEPTING RETURNED INCOME 2. 2007-08 RS. 1,18,37,231 ASSESSMENT COMPLETED VIDE ORDER DATED 30.11.2009 PASSED UNDER SECTION 143(3) ACCEPTING RETURNED INCOME. 3. 2008-09 RS.84,33,099 ASSESSMENT COMPLETED VIDE ORDER DATED 30.06.2010 PASSED UNDER SECTION 143(3) ACCEPTING RETURNED INCOME. 4. 2009-10 RS.5,50,40,150 ASSESSMENT COMPLETED VIDE ORDER DATED 20.12.2011 PASSED UNDER SECTION 143(3) ACCEPTING RETURNED INCOME. 5. 2010-11 RS. 1,90,54,266 PROCESSED UNDER SECTION 143(1) ACCEPTING RETURNED INCOME. 6. IN THE WAKE OF WITHDRAWAL OF APPROVAL BY FIPB ON TH E GROUND OF SECURITY CLEARANCE BY MINISTRY OF HOME AFFAIRS, F OREIGN TAX AND TAX RESEARCH (FT&TR) DIVISION OF CBDT REFERRED THE MATTER TO THE CONCERNED CHIEF COMMISSIONER OF INCOME TAX FOR COND UCTING NECESSARY EXAMINATION AND VERIFICATION OF SOURCE OF F UNDS OF THE INVESTMENT MADE BY BYCELL HOLDING AG, SWITZERLAND IN TH E ASSESSEE- COMPANY. BASED ON THE AFORESAID INFORMATION RECEIVED FROM FT&TR I.T.AS. NO.2819 TO 2823/DEL/2017 6 DIVISION, THE ASSESSING OFFICER INITIATED THE REOPENIN G OF THE ASSESSMENTS U/S. 147 VIDE ISSUANCE OF NOTICES U/S.14 8 FOR ALL THE IMPUGNED ASSESSMENT YEARS, TO VERIFY THE IDENTITY, CRED ITWORTHINESS OF THE FOREIGN INVESTOR AND THE GENUINENESS OF THE TRANSACTI ON IN TERMS OF SECTION 68. THE RELEVANT REASONS RECORDED BY THE ASS ESSING OFFICER READ AS UNDER:- RETURN OF INCOME IN THIS CASE FOR A.Y. 2006-07 WAS FILED ON DECLARING TOTAL INCOME AT RS.4,49,567/-. THE RETURN WAS PROCE SSED - U/S 143(1) OF THE INCOME-TAX ACT AT THE RETURNED INCOME. THE ASSE SSEE HAS SHOWN SHARE CAPITAL OF RS.17,30,76,920/-. FURTHER, THE AS SESSEE HAS SHOWN UNSECURED LOANS AMOUNTING TO RS.4,97,43,080/- FOLLO WING INFORMATION WAS FORWARDED BY THE OSD, FOREIGN PROMOTION INVESTM ENT BOARD, FT&TR, CBDT TO THE OFFICE OF THE UNDERSIGNED: 'M/S BYCELL TELECOMMUNICATION INDIA PVT LTD IS AND INDIA COMPANY WITH REGISTERED AND CORPORATE OFFICE AT 249, GROUND FLOOR, OKHLA INDUSTRIAL ESTATE PHASE-III, NEW DELHI-20. THE SHAR EHOLDERS OF THE COMPANY ARE (I) M/S BYCELL HOLDING AG, SWITZERLAND HOLDING 64.66% AND (II) M/S BITCORP PVT. LTD. M/S BYCELL HOLDING A G, SWITZERLAND IN TURN IS 97% HELD BY M/S TENOCH HOLDINGS, CYPRUS THE SHAREHOLDING OF WHICH IS EQUALLY HELD BY M/S QUALLIS INC, PANAMA AND M/S KYNANCE BUSINESS LTD, BRITISH VIRGIN ISLANDS. M/S Q UALLIS LNC, PANAMA IS 100% HELD BY MR. MAXIM NAUMCHENKO AND M/S KYNANCE BUSNIESS LTD, BRITISH VIRGIN ISLANDS IS 100% HELD B Y MR. ANDREY POLUEKTOW. A DIAGRAMMATIC REPRESENTATION OF THE COR PORATE STRUCTURE IS ENCLOSED AS ANNEXURE-1. 1.13 M/S BYCELL HOLDING A.G. SWITZERLAND WAS GRANTED FO REIGN COLLABORATION APPROVAL VIDE NO. 24(2006)/ 382 (2005 ) DATED 17.01.2006 TO UNDERTAKE THE ACTIVITIES OF OFFERING CGM BASED CELLULAR TELEPHONE SERVICES IN INDIA IN THIRTEEN STATES ACRO SS THE FIVE CIRCLE OF ASSAM, BIHAR, JHARKHAND, NORTH EAST, ORISSA AND WES T BENGAL. VIDE AMENDMENT LETTER DATED J2.02.2007 THE SHAREHOLDING PATTERN OF THE IMPLEMENTED COMPANY I.E., BYCELL TELECOMMUNICATION INDIA PVT LTD WAS NOTED BY FIPB AS UNDER:- I. M/S BYCELL HOLDING AG, SWITZERLAND: 64.66% II. M/S BITCORP PRIVATE LIMITED (INDIAN PROMOTER): 35.3 4% I.T.AS. NO.2819 TO 2823/DEL/2017 7 1.14 THE M/S BYCELL TELECOMMUNICATIONS INDIA PVT LTD VI DE LETTER DATED 26.09.2007 HAS SOUGHT THE FOLLOWING PERMISSIO N FROM FIPB: I. TO UNDERTAKE ACTIVITIES OF OFFERING GSM BASED CELL ULAR TELEPHONE SERVICES UNDER UAS LICENSE AGREEMENT ALL OVER INDIA . II. FOREIGN EQUITY PARTICIPATION OF 74% AMOUNTING TO U SD 500 MILLION IN THE NEXT 3-5 YEAR IN THE PAID UP CAPITAL OF THE COMPANY. 1.15 THE APPROVAL OF THE GOVERNMENT WAS CONVEYED TO THE COMPANY VIDE LETTER DATED14.02.2008 SUBJECT TO THE FOLLOWIN G CONDITION: III. THE COMPANY SHALL ADHERE TO THE CONDITIONS AS MENT IONED IN PRESS NOTE 3 OF2007; IV. THE OPERATING LICENSE FOR TELECOM SERVICES SHALL BE CONSIDERED ONLY UNDER UNIFIED ACCESS SERVICE (UAS); AND V. THE FIPB APPROVAL MAY NOT BE CONSTRUED AS ANY COMM ITMENT OF GOVERNMENT FOR ALLOCATION OF SPECTRUM FOR THE OPERA TION OF MOBILE TELEPHONE SERVICES. 1.16 IT IS STATED THAT M/S BYCELL HOLDING AG, SWITZERLA ND INVESTED OVER RS. 120 CRORES IN M/S BYCELL TELECOMMUNICATION S INDIA PVT LTD AS FDI SINCE JANUARY, 2006 FOR OPERATIONS IN INDIA. 1.17 MINISTRY OF HOME AFFAIRS (MHA) HAS FURNISHED CERTA IN INPUTS TO FIPB FROM THE SECURITY ANGLE REGARDING THE INVESTME NT: I. WHILE BYCELL HOLDING AG IS BASED IN ZUG, SWITZERLA ND, IT DOES NOT HAVE SIGNIFICANT PRESENCE THERE, AND THE SWIS S ADDRESS PROVIDED BY THE COMPANY IS ONLY A POSTAL ADDRESS WITHOUT ANY PHYSICAL OFFICE AND STAFF. THE REGISTRAR OF COMPANIES, GENEVA WHICH KEEPS A TRACK RECORD OF COMPANIES WITH OPERATIONAL OFFICES IN SWI TZERLAND IS REPORTEDLY NOT AWARE OF THE EXISTENCE OF THIS COMPANY. II. 97% STAKE IN BYCELL HOLDING AG SWITZERLAND IS OWNED BY TENOCH HOLDING CYPRUS WHICH IS JOINTLY OWNED AND CONTROLLE D BY ANDREY POLOUEKTOV AND MAXIM NAUMCHENKO. MAXIM NAUMCHENKO I S MAJOR SHAREHOLDER IN M/S BYCELL HOLDING AG AND ALSO SIMUL TANEOUSLY HOLDS POST IN A NUMBER OF COMPANIES INVOLVED IN DIFFERENT BUSINESS, INCLUDING THE ST. PETERSBURG TELECOM SECTOR, SET UP A COMPANY BY THE NAME OF MEGAFON WHICH WAS SET UP WITH FLOWING CURRENCY INVE STED BY RICH INDIVIDUALS IN ST. PETERSBURG AND THIS COMPANY WAS ALLEGEDLY INVOLVED IN A MONEY LAUNDERING SCANDAL. III. IT HAS COME TO THE NOTICE THAT TENOCH HOLDING CYPRU S, WHICH HOLDS 97% STAKE IN BYCELL AG SWITZERLAND, IS JOINTL Y HELD BY (A) QUALLIS I.T.AS. NO.2819 TO 2823/DEL/2017 8 INCORPORATED, PANAMA (50%) AND; (B) KYNANCE BUSINES S LIMITED, BRITISH VIRGIN ISLAND (50%). BOTH PANAM AND BRITISH VIRGIN ISLANDS ARC WELL KNOWN TAX HAVENS AND THERE IS NO INFORMATION ABOUT WHO ARE THE OWNERS OF QUALLIS INCORPORATED AND KYNANCE BUSINESS LIMITED AND WHAT IS THE SOURCES OF FUNDS FOR THESE TWO COMPANIE S WHICH CONTROL BYCELL TELECOMMUNICATIONS INDIA LIMITED. 1.18 FIPB IN ITS I36 MEETING HELD ON 11-05-2005 DEL IBERATED THE ISSUED RAISED BY MHA AND HAS WITHDRAWN THE APPROVAL GRANTE D BY IT EARLIER. DEPARTMENT OF REVENUE FORWARDED THE FOLLOWING COMME NTS TO FIPB FOR ITS REVIEWING: 'M/S BYCELL HOLDING AG, SWITZERLAND WAS FORMED IN 2 005 WITH 100 SHARES OF CHF 1,000 EACH. IT IS STATED THAT M/S BYCELL HOLDING AS HAS ALREADY INVESTED IN M/S BYCELL TELECOMMUNICATION INDIA PRIVATE LIMITED LOAN AMOUNT OF OVER RS. 120 CRORES AS FDI. NO SUPPORTING DOCUMENTS LIKE BAL ANCE SHEET ETC., HAVE BEEN PROVIDED TO EXAMINE THE COMPANY'S C APACITY TO INVEST THAT AMOUNT. MOREOVER, THE SHARE CAPITAL OF THE HOLDING COMPANY OF BYCELL HOLDING AG I.E., TENOCH HOLDING, CYPRUS IS ONLY EUR 17,100 AND NEITHER ITS FINANCIAL STATEMENT S ARE GIVEN NOR THE FINANCIAL STATEMENTS OF M/S KYNANCE BUSINES S LTD, BVI AND M/S QUALLIS INC , PANAMA. FURTHER IT IS STATED THAT THE SOURCE OF FUNDS FOR THE INVESTMENT BY MR. MAXIM V NAUMCHEN KO AND MR. ANDREY PLOUEKTOV, IS THE RETAINED EARNINGS OF THE C OMPANIES IN WHICH THEY HOLD SHARES. THE RETAINED EARNINGS OF TH E COMPANIES ARE NOT FURNISHED. IN VIEW OF THE ABOVE, DOR CANNOT OFFER ANY COMMENTS ON THE SOURCE OF FUNDS FOR INVESTMENT UNTI L ALL DOCUMENTS ARE MADE AVAILABLE.' 3. ON PERUSAL OF RECORDS, IT IS NOTICED THAT THE AS SESSEE HAS NOT OFFERED SUCH INCOME FOR TAXATION PURPOSE EVEN THOUGH THE AS SESSEE FAILED TO PROVE THE IDENTITY, CREDITWORTHINESS AND GENUINENES S OF THE INVESTORS. MOREOVER THE APPROVAL ACCORDED BY THE GOVT .HAS ALS O BEEN WITHDRAWN IN THE CASE OF THE ASSESSEE. FROM THE ABOVE, IT IS CLEAR THAT UNEXPLAINED INVEST MENTS HAVE BEEN MADE IN THE ASSESSEE CO. AND THE SAME AXE LIABLE TO BE TAXED U/S. 68 OF THE IT ACT. THE ASSESSEE FAILED TO DISCLOSE THE SAM E IN THE RETURN OF INCOME FILED BY IT FOR THE RELEVANT PERIOD. 4. IN VIEW OF THE ABOVE, I HAVE REASONS TO BELIEVE TH AT TAXABLE INCOME TO THE TUNE OF THE INVESTMENTS AMOUNTING TO RS. 17,30,76,920/- HAS ESCAPED ASSESSMENT AND I AM SATISFIED THAT IT IS A FIT CASE FOR ISSUE OF NOTICE U/S148 OF THE INCOME-TAX ACT. I.T.AS. NO.2819 TO 2823/DEL/2017 9 5. SINCE THE INCOME CHARGEABLE TO THE TAX ESCAPED ASS ESSMENT IS MORE THAN ONE LAKH RUPEES AS PER SECTION 149 OF THE I.T. ACT, THE PRIOR APPROVAL OF THE WORTHY CIT, DELHI-1, NEW DELHI IS R EQUIRED FOR THE ISSUE OF THE NOTICE U/S 148 AS PER SECTION 151(2) OF THE I.T. ACT 1961. HENCE THE SAME IS PUT UP FOR YOUR KIND APPROVAL. PUT UP FOR KIND PERUSAL. (SHIV SWAROOP SINGH) DCIT, CIRCLE-3(1), NEW DELHI. 7. THUS, THE ASSESSMENTS WERE REOPENED TO VERIFY THE SO URCE OF FUND RECEIVED BY THE ASSESSEE COMPANY FROM BYCELL HO LDING AG, SWITZERLAND. DURING THE COURSE OF RE-ASSESSMENT PROCE EDINGS, THE LEARNED ASSESSING OFFICER HAD RAISED QUESTIONNAIRES TO VERIFY THE TRANSACTION OF FOREIGN INVESTMENT IN THE SHARE APPLICATIO N/ SHARE HOLDINGS IN THE ASSESSEE COMPANY. IN RESPONSE TO WHIC H, THE ASSESSEE HAD ALSO FILED ITS RESPECTIVE REPLIES/EXPLANATIONS AND DOCUMENTS. ALL THE RELEVANT QUESTIONNAIRES AND REPLY SUBMITTED BY THE A SSESSEE HAVE BEEN SUBMITTED BY THE DEPARTMENT AS DIRECTED BY THE BENC H AT THE TIME OF HEARING IN THE FORM OF SEPARATE COMPILATION. 8. ON BEHALF OF THE ASSESSEE, LEARNED SENIOR COUNSEL , SHRI AJAY VOHRA, AT THE OUTSET POINTED OUT THAT FOLLOWING DETAILS AND MATERIALS WERE FURNISHED BY THE ASSESSEE COMPANY BEFORE THE ASS ESSING OFFICER DURING THE COURSE OF ASSESSMENT/REASSESSMENT PROCEEDIN GS TO ESTABLISH THE IDENTITY/CREDITWORTHINESS OF THE FOREIGN INVESTOR AND THE GENUINENESS OF THE TRANSACTION. FINANCIAL STATEMENTS OF THE APPELLANT WHEREIN DETAILS/ AM OUNTS OF SHARE APPLICATION MONEY RECEIVED AND SHARES ALLOTTED W ERE DULY REFLECTED; APPROVAL OBTAINED FROM FIPB BY THE FOREIGN INVESTOR & APPELLANT; I.T.AS. NO.2819 TO 2823/DEL/2017 10 RBI APPROVAL FOR ALLOTMENT FOR SHARES BY THE APPELLANT COMPANY IN FAVOUR OF THE FOREIGN INVESTOR; COPY OF FIRCS ESTABLISHING THE SOURCE OF FOREIGN REMI TTANCE AND RECEIPT OF FUNDS THROUGH BANKING CHANNEL; INCORPORATION CERTIFICATE, MEMORANDUM & ARTICLES OF ASS OCIATION OF THE FOREIGN INVESTOR, BYCELL HOLDING AG, SWITZERLAND. EXPLANATION QUA SOURCE OF FUNDS OF THE FOREIGN INVES TOR, IN THE FORM OF LOANS AND ADVANCES FROM ITS HOLDING COMPANY, I.E. , TENOCH HOLDING LTD, CYPRUS. INCORPORATION CERTIFICATE, MEMORANDUM & ARTICLES OF ASS OCIATION OF TENOCH HOLDING LIMITED, CYPRUS, NICOSIA, FROM WHOM B YCELL HOLDING AG HAD RECEIVED THE LOAN FOR FURTHER INVESTMEN T IN THE APPELLANT COMPANY IN INDIA. 9. THE LEARNED ASSESSING OFFICER COMPLETED THE ASSES SMENT FOR ALL THE ASSESSMENT YEARS U/S.147/143(3) VIDE ORDER DATED 20.03.2015. THE RELEVANT OBSERVATIONS OF THE ASSESSING OFFICER IN THE IMPUGNED ASSESSMENT ORDER FOR THE A.Y. 2006-07 WHICH IS COMMON TO ALL THE YEARS UNDER APPEAL, READS AS UNDER:- 2.1 THE BRIEF FACTS OF THE CASE LEADING TO THE REOPENIN G OF THE ASSESSMENT ARE AS DISCUSSED ABOVE. THE DETAILS WERE CALLED FOR FROM THE ASSESSEE REGARDING THE AFORESAID ISSUE TO PROVE THE IDENTITY AND CREDITWORTHINESS OF THE INVESTORS IN R EGARD TO THE SHARE APPLICATION MONEY RECEIVED FROM IT FOREIGN HO LDING COMPANY AND OTHER DETAILS RELEVANT TO THE ISSUE. THE DETAIL S OF THE AMOUNTS RECEIVED ARE AS FOLLOWS: I.T.AS. NO.2819 TO 2823/DEL/2017 11 FINANCIAL YEAR NAME OF THE COMPANY SHARE APPLICATION MONEY RECEIVED SHARE ALLOTTED SHARE APPLICATION MONEY RETURNED REMAINING SHARE APPLICATION MONEY 2005-06 BYCELL HOLDING AG 17,68,00,000 12,80.02.920 (INCLUDING 74,000 PURCHASED FROM INITIAL SUBSCRIBERS) NIL 4,87,97,080 2.2 THE MATTER WAS ALSO SIMULTANEOUSLY REFERRED TO THE FT&TR, CBDT FOR EXCHANGE OF INFORMATION VIDE THIS OFFICE L ETTER DATED 20.01.2014 IN ORDER TO VERIFY THE IDENTITY AND CRED IT WORTHINESS OF THE HOLDING COMPANY BYCELL HOLDING AG AND ITS PROMO TERS. 3. IN RESPONSE TO THE QUERIES THE ASSESSEE FILED RE PLIES FROM TIME TO TIME WHICH INCLUDE THE CERTIFICATE OF INCORPORATION OF BYCELL AG. SWITZERLAND, THE DETAILS OF THE SHARE APPLICATION M ONEY RECEIVED DURING THE YEAR, COPIES OF THE FIRC ETC. IT WAS SUB MITTED THAT THE AMOUNT HAD COME THROUGH PROPER BANKING CHANNELS AND AFTER FOLLOWING ALL KYC AND RBI NORMS AND AS TIRE SOURCE AND IDENTITY OF THE PROMOTER COMPANY WAS PROVED, IT WAS NOT NECESSA RY TO PROVE THE SOURCE OF SOURCE AND THE SAME WOULD NOT HAVE AR TY RELEVANCE ON THE NATURE OF RECEIPT ONCE TIRE SOURCE IS PROVED . IT WAS SUBMITTED THAT THE WITHDRAWAL OF F1PB APPROVAL WOUL D NOT CHANGE THE NATURE OF RECEIPT AND COULD NOT BE THE S OLE REASON TO TAX THE RECEIPT AS UNEXPLAINED CASH CREDIT. IT WAS ALSO ARGUED THAT IF THE IDENTITY OF THE NON-RESIDENT REMITTER IS ES TABLISHED AND THE MONEY HAS COME THROUGH NORMAL BANKING CHANNELS IT C ANNOT BE I.T.AS. NO.2819 TO 2823/DEL/2017 12 TREATED AS DEEMED INCOME UNDER SECTION 68 OR 69 OF THE INCOME TAX ACT 1961. THE ASSESSEE RELIED ON SEVERAL RULING S TO DRIVE HOME THE AFORESAID ARGUMENTS WHICH ARE ON RECORD. 3.1 THE DETAILS BROUGHT ON RECORD BY THE ASSESSEE H AVE BEEN VERIFIED AND SUBMISSIONS CONSIDERED. THE INFORMATIO N RECEIVED FROM FT&TR IS ALSO ON RECORD AND NOT BEING DISCUSSE D IN DETAIL AS IT IS COVERED UNDER THE CONFIDENTIALITY OBLIGATIONS AS PER THE DTAA BETWEEN THE SWISS CONFEDERATION AND THE REPUBLIC OF THE GOVERNMENT OF INDIA. AFTER EXAMINATION OF DETAILS FILED AND DISCUSSION W ITH THE AR, RETURNED INCOME OF RS.4,49,567/- IS ACCEPTED. 10. ONE VERY IMPORTANT FACT AS CULLED OUT FROM THE AFORE SAID READING OF THE ASSESSMENT ORDER BESIDES CONSIDERING THE DOCUMENTS AND EVIDENCES FILED BY THE ASSESSEE WAS THAT, THE ASSE SSING OFFICER IN THE COURSE OF HIS ENQUIRY HAD REFERRED THE MATTER TO FT &TR CBDT FOR EXCHANGE OF INFORMATION FROM SWISS TAX AUTHORITIES IN ORDER TO VERIFY THE IDENTITY AND CREDITWORTHINESS OF THE HOLDING COMP ANY, BYCELL HOLDING AG, SWITZERLAND AND ITS PROMOTERS. SUCH INFORM ATION WAS RECEIVED BY THE ASSESSING OFFICER THROUGH FT&TR CBDT WHICH HAS BEEN KEPT ON RECORD IN THE ASSESSMENT RECORDS. DURING THE COURSE OF THE HEARING, THE BENCH DIRECTED THE LEARNED CIT-DR TO P RODUCE THE SAID INFORMATION RECEIVED FROM FT & TR AND ALSO THE OFFICE NOTE OF THE ASSESSING OFFICER WHILE COMPLETING THE ASSESSMENT O RDER U/S. 143(3)/147, WHICH IS VERY VITAL TO THE ISSUE INVOLVED AND ALSO TO EXAMINE, WHETHER ASSESSING OFFICER HAS APPLIED HIS M IND OR HAS CARRIED OUT INQUIRY OR NOT, WHILE COMPLETING THE ASSES SMENT. THE SAID OFFICE NOTE HAS BEEN KEPT ON RECORD BY THE ASSESSIN G OFFICER WHILE I.T.AS. NO.2819 TO 2823/DEL/2017 13 ACCEPTING THE SHARE APPLICATION MONEY WHICH FOR SAKE O F APPRECIATION OF CASE IS REPRODUCED HEREUNDER:- OFFICE NOTE: THE ISSUE RELEVANT IN THE AFORESAID ASSESSMENT WAS REFERRED TO THE FT&TR, CBDT FOR EXCHANGE OF INFORMATION THIS OF FICE LETTER DATED 20.01.2014 IN ORDER TO VERIFY THE IDENTITY AN D CREDIT WORTHINESS OF THE HOLDING COMPANY BYCELL HOLDING AG AND ITS PROMOTERS. AS PER THE INFORMATION RECEIVED BY THIS OFFICE VIDE LETTER DATED 04.02.2015 FROM THE FT&TR THROUGH THEIR COUNTERPART S IN SWITZERLAND M/S BYCELL AG, SWITZERLAND IS A COMPANY REGISTERED IN ZUG, SWITZERLAND. THE COMPANY HAD NO REVENUE BUT HAD ASSETS FROM INVESTORS IN THE FORM OF A SUBORDINATED AND CO NDITIONAL LOAN FROM ITS SOLE SHAREHOLDER TENOCH HOLDING LTD, CYPRU S. BYCELL HOLDING AG RECEIVED THE ASSET WHICH, THEY THEN INVE STED IN THE INDIAN COMPANY BYCELL TELECOMMUNICATION INDIA PVT L TD. THE DETAILS OF THE RECEIPTS FOR SHARE APPLICATION MONEY , SHARES ALLOTTED AND MONEY RETURNED FROM THE PROMOTER COMPANY HAVE B EEN PROVIDED. IT IS ALSO BEEN MENTIONED IN THE REPORT THAT IN VIE W OF REFUSAL OF INDIA AUTHORITIES TO GRANT THE TELECOM LICENSE THE FUNDS WERE RETURNED IN PART BY BYCELL TELECOMMUNICATIONS INDIA PRIVATE LIMITED TO BYCELL AG, SWITZERLAND AND IN TURN TO TH E INVESTORS WITH EXCEPTION OF THE AMOUNT USED FOR FUNCTIONING OF THE COMPANY IN INDIA. THE FEDERAL TAX ADMINISTRATION SWITZERLAND (FTA FOR SERVICE OF EXCHANGE OF INFORMATION ON TAX MATTERS) HAS HOWEVER OBSERVED THAT THE INFORMATION ON FISCAL YEARS PRIOR TO FISCA L YEAR 2011/12 ARE NOT COVERED UNDER THE TEMPORAL SCOPE OF ARTICLE 26 OF THE UPDATED DTAA BETWEEN SWITZERLAND AND INDIA AS HELD BY THE SWISS FEDERAL ADMINISTRATIVE COURT IN ITS DECISION A-4232/2013 OF 17 TH DECEMBER 2013. ON VERIFICATION OF THE, SUBMISSIONS AND FINANCIAL S TATEMENTS OF THE ASSESSEE COMPANY REGARDING THE RECEIPT OF SHARE APP LICATION MONEY, SHARES ALLOTTED AND AMOUNT RETURNED THE FOLL OWING YEAR WISE DETAILS ARE GATHERED: I.T.AS. NO.2819 TO 2823/DEL/2017 14 ASST. YEAR PERIOD NAME OF THE COMPANY OPENING BALANCE SHARE APPLICATION MONEY RECEIVED SHARES ALLOTTED SHARE APPLICATION MONEY RETURNED REMAINING SHARE APPLICATION MONEY 2006-07 01.04.2005 TO 31.03.2006 BYCELL HOLDING AG NIL 17,68,00,000 12,80,02,920 (INCLUDING 74,000 RECD. FROM INITIAL SUBSCRIBER) NIL 4,87,97,080 2007-08 01.04.2006 TO 31.03.2007 BYCELL HOLDING AG 4,87,97,080 - 4,87,97,080 2008-09 01.04.2007 TO 31.03.2008 BYCELL HOLDING AG - 70,90,15,846 - 70,90,15,846 2009-10 01.04.2008 TO 31.03.2009 BYCELL HOLDING AG 70,90,15,846 7,09,84,431 7,18,72,740 70,81,27,537 2010-11 01.04.2009 TO 31.03.2010 BYCELL HOLDING AG AND BIT CORP INDIA PVT. LTD. 70,81,27,537 86,36,035 10,00,000 71,77,63,572 2011-12 01.04.2010 31.03.2011 BYCELL HOLDING AG 71,77,63,572 45,00,00,000 26,77,63,572 2012-13 01.04,2011 TO 31.03.2012 BYCELL HOLDING AG 26,77,63,572 18,00,00,000 8,77,63,572 96,64,36,312 19,98,75,660 67,87,97,080 AFORESAID DETAILS WERE TALLIED WITH THE INFORMATION RECEIVED FROM FT&TR AND ARE FOUND TO BE IN ORDER EXCEPT FOR AN ER ROR IN THE FT&TR REPORT IN THE A.Y 2011-12 WHERE IN THE CORRES PONDING PERIOD IS WRONGLY MENTIONED AS 01.04.2011 TO 31.03. 2012 WHILE IT SHOULD BE 01.04.2010 TO 31.03.2011.THE AMOUNT RETUR NED TO BYCELL AG IN THAT PERIOD IS PER THE INFORMATION REC EIVED. THERE IS ALSO TYPOGRAPHICAL ERROR IN THE REPORT FOR SHARE APPLICATION MONEY RECEIVED IN A.Y 2009-10 WHICH ACTUALLY IS 7,0 9,84,431/- WHILE SHOWN IN THE REPORT AS AMOUNTING TO 70,90,15, 846/-. HOWEVER THE COLUMN OF REMAINING APPLICATION MONEY A T THE END OF THE YEAR CONFIRMS THAT THE SAME IS AN ERROR, HENCE NO ADVERSE VIEW IS TAKEN. THE INFORMATIONN RECEIVED FROM FT&TR IS ON RECORD A ND HAS NOT BEING DISCUSSED IN DETAIL IN THE ORDER IN VIEW OF T HE CONFIDENTIALITY OBLIGATIONS AS PER ARTICLE 26 ON EXCHANGE OF INFORM ATION IN THE I.T.AS. NO.2819 TO 2823/DEL/2017 15 DTAA BETWEEN THE SWISS CONFEDERATION AND THE REPUBL IC OF THE GOVERNMENT OF INDIA. IT IS SEEN THAT AN AMOUNT OF RS 23 CRORES PAID AS L ICENSE ENTRY FEE IS LYING AS WITH THE DEPARTMENT OF TELECOM GOVERNME NT OF INDIA AS OF DATE FOR WHICH THE PROMOTERS OF BYCELL AG HAVE I NITIATED ARBITRATION PROCEEDINGS AGAINST GOVERNMENT OF INDIA UNDER UNCITRAL ARBITRATION RULES, 1976 ON 04.10.2010 AND THE MATTER IS PENDING BEFORE, THE PERMANENT .COURT OF ARBITRA TION, THE INTERNATIONAL COURT OF JUSTICE, THE HAGUE, NETHERLA NDS. THE BREAKUP OF THE TOTAL RECEIPTS AND PAYMENTS FROM BYCELL AG TILL DATE IS AS IS AS FOLLOWS: TOTAL AMOUNT RECEIVED - 96,54,36,312/ AMOUNT REFUNDED - 67,87,97,080/- BALANCE - 28,66,39,232/- SHARES ALLOTTED FOR RS. -19,9 8,75,660) IN VIEW OF THE ABOVE, NO ADVERSE VIEW IS TAKEN IN T HIS CASE. SD/- DY. COMMISSIONER OF INCOME TAX, CIRCLE-5(1), NEW DELHI. ISSUES RAISED BY LD. PCIT U/S 263 11. AFTER THE CONCLUSION OF THE ASSESSMENT IN THE AFORESAID MANNER, LEARNED PCIT UNDER HIS REVISIONARY JURISDICT ION U/S. 263 ISSUED A SHOW CAUSE NOTICE DATED 23.02.2017 STATING THAT ORDER PASSED U/S.147/143(3) IS ERRONEOUS IN SO FAR AS IT IS PREJUDICIAL TO THE INTEREST OF THE REVENUE. HIS SOLE ALLEGATION IS THAT THE ASSESSING OFFICER HAS ONLY VERIFIED THE IDENTITY OF THE SHARE APPLICANT BY PLACING RELIANCE ON DOCUMENTS LIKE CER TIFICATE OF INCORPORATION OF BYCELL HOLDING AG, SWITZERLAND AND COPIES OF I.T.AS. NO.2819 TO 2823/DEL/2017 16 FIRC FILED BY THE ASSESSING OFFICER, HOWEVER HE HAS FAILED TO VERIFY THE SECOND AND THIRD LIMB OF THESE TRANSACTIONS, I. E., GENUINENESS OF THE TRANSACTIONS AND CREDITWORTHINESS OF THE SWI SS ENTITY THE RELEVANT OBSERVATIONS WITH REGARD TO THE SHOW CAUSE NOTICE FOR EACH ASSESSMENT YEAR HAS BEEN INCORPORATED BY HIM F ROM PAGES 2 TO 4 OF THE APPELLATE ORDER. AFTER PERUSING THE E NTIRE RECORDS, HE HAS MADE CERTAIN OBSERVATIONS IN THE IMPUGNED YEAR WHICH ARE BASICALLY THE NARRATION OF FACTS AND BACKGROUND OF THE CASE WHICH BY AND LARGE HAS BEEN DISCUSSED BY US IN THE EARLIE R PART OF OUR ORDER, HOWEVER FOR THE SAKE OF READY REFERENCE SOME OF HIS OBSERVATIONS ON THE BACKGROUND AND FACTS OF THE CAS ES ARE REPRODUCED HEREUNDER:- (I) M/S BYCELL TELECOMMUNICATIONS INDIA PRIVATE LIMITED IS AN INDIAN COMPANY WITH REGISTERED AND CORPORATE ADDRES S AT 249, GROUND FLOOR, OKHLA INDUSTRIAL ESTATE, PHASE-III, N EW DELHI-20. A PERUSAL OF ASSESSMENT RECORDS OF THE CASE REVEALED THAT THE MAJOR SHARE HOLDERS OF THE COMPANY ARE M/S BYCELL HOLDING AG, SWITZERLAND (64.66%) AND M/S BITCORP PRIVATE LIMITE D,(35.34%). M/S BYCELL HOLDING AG, SWITZERLAND IN TURN IS 97% H ELD BY M/S TENOCH HOLDINGS CYPRUS, THE SHAREHOLDING OF WHICH I S EQUALLY HELD BY M/S QUALLIS INC, PANAMA AND M/S KYNANCE BUS INESS LIMITED, BRITISH VIRGIN ISLANDS. (II) M/S BYCELL HOLDING AG, SWITZERLAND WAS GRANTED FOR EIGN COLLABORATION APPROVAL BY FIPB, MINISTRY OF FINANCE VIDE LETTER DATED 17.01.2006 SO AS TO UNDERTAKE THE ACTIVITIES OF OFFERING CGM BASED CELLULAR TELEPHONE SERVICES IN THIRTEEN S TATES. (III) BYCELL TELECOMMUNICATIONS INDIA PRIVATE LIMITED VI DE ITS LETTER DATED 26.09.2007 SOUGHT PERMISSION FROM FIPB TO UNDERTAKE ACTIVITIES OF OFFERING GSM BASED CELLULAR TELEPHONE SERVICES UNDER UAS LICENSE AGREEMENT ALL OVER INDIA AND PERMISSION FOR FOREIGN EQUITY PARTICIPATION OF 74%, I.E., AMOUNTING TO USD 500 MILLION IN NEXT 3-5 YEARS IN THE FORM OF ADDITION TO PAID-UP C APITAL OF THE I.T.AS. NO.2819 TO 2823/DEL/2017 17 COMPANY. THE APPROVAL OF GOVERNMENT OF INDIA WAS CO NVEYED TO THE COMPANY ON 14.02.2008. (IV) SUBSEQUENTLY, MINISTRY OF HOME AFFAIRS FURNISHED SP ECIFIC INPUTS TO F.I.P.B FROM THE SECURITY PERSPECTIVE WHI CH CAST SERIOUS ASPERSIONS REGARDING GENUINENESS OF THE SOURCE OF I NVESTMENT MADE IN THE ASSESSEE COMPANY, WHICH ARE ELABORATED AS UNDER:- I. WHILE BYCELL HOLDING IS BASED IN ZUG SWITZERLAND , IT DOES NOT HAVE ANY SIGNIFICANT PRESENCE THERE AND THE SWISS A DDRESS PROVIDED IS MERELY A POSTAL ADDRESS, WITHOUT ANY PH YSICAL PRESENCE OR STAFF. THE REGISTRAR OF COMPANIES, GENE VA WHICH KEEPS A TRACK RECORD OF COMPANIES WITH OPERATIONAL ADDRESS IN SWITZERLAND IS REPORTEDLY NOT AWARE OF EXISTENCE OF THE SAID COMPANY. II. 97% STAKE IN BYCELL HOLDING A.G IS OWNED BY M/S TENOCH HOLDING, CYPRUS WHICH IS JOINTLY OWNED AND CONTROLL ED BY AUDREY POLOUEKTEV AND MAXIM NAUMCHENKO. MAXIM NAUMCHENKO IS ALSO A MAJOR SHAREHOLDER IN M/S BYCEL L HOLDING A.G AND ALSO A NUMBER OF OTHER BUSINESSES INCLUDING ST PETERSBURG TELECOM SECTOR. III. IT HAS ALSO COME TO THE NOTICE THAT M/S TENOCH HOLDING, CYPRUS IS JOINTLY HELD BY (A) QUALIS INCORPORATED, PANARNA(50%) AND (B) KYNANCE BUSINESS LIMITED, BRITISH VIRGIN ISLANDS(50%).BOTH, PANAMA AND ARE WELL KNOWN TAX HA VENS AND THERE IS NO INFORMATION ABOUT WHO ARE THE OWNER S OF THESE TWO COMPANIES, WHICH ACTUALLY CONTROL M/S BYCELL HO LDING A.G. (V) IN THESE CIRCUMSTANCES, F.I .P.B WITHDREW THE APPR OVAL GRANTED EARLIER TO THE ASSESSEE, AND FORWARDED THE SAID INPUTS TO THIS OFFICE VIDE ITS LETTER DATED 15.05.2009 FOR NE CESSARY ACTION IN ACCORDANCE WITH PROVISIONS OF LAW. THEREFORE, AFTER DUE EXAMINATION AND ANALYSIS OF INPUTS RECEIVED FROM FI PB, NOTICE U/S 148 OF THE INCOME TAX ACT, 1961 WAS ISSUED IN THIS CASE FOR ASSESSMENT YEARS 2006-07 TO 2010-11. (VI) THEREAFTER, VIDE A LETTER DATED 06.02.2014, A REQUE ST WAS MADE U/S 90 OF THE INCOME TAX ACT, 1961 TO TAX AUTHORITIES IN SWITZERLAND TO EXAMINE THE GENUINENESS O F I.T.AS. NO.2819 TO 2823/DEL/2017 18 SOURCE OF INCOME CLAIMED TO HAVE BEEN RECEIVED BY THE ASSESSEE FROM M/S BYCELL HOLDING A.G. SWITZERLAND AND T HE ACTUAL; BENEFICIARIES TO WHOM SHARE APPLICATION MONEY CLAIMED TO HAVE BEEN RETURNED. (VIII) SUBSEQUENTLY, THE REQUISITE' INFORMATION WAS R ECEIVED FROM SWITZERLAND TAX AUTHORITIES AND AFTER CONDUCTING HEARING FROM TIME TO TIME, THE AO HAS PASSED ORDERS U/ S 147/143(3) OF THE INCOME TAX ACT, 1961 IN RESPECT OF ASSESSMENT YEARS 2006-07,2007-08,2008-09,2009-10, A ND 2010-11 ON 20.03.2015. [EM PHASIS IN BOLD ADDED IS OURS] 12. THEREAFTER, THE LD. PCIT OBSERVED THAT AS SESSEE COMPANY HAD RECEIVED SUBSTANTIAL AMOUNT OF SHARE APPLICATIO N MONEY FROM BITCORP PVT. LTD. FOR WHICH ONLY PRELIMINARY INFORM ATION PERTAINING TO CERTIFICATE OF INCORPORATION, COMPANY MASTER DATA AND PAN HAVE BEEN SUBMITTED WHICH ONLY PROVES THE I DENTITY OF BITCORP PVT. LTD., BUT THE DOCUMENTARY EVIDENCE TO PROVE THE GENUINENESS AND CREDITWORTHINESS HAVE NOT BEEN SUBM ITTED DURING THE COURSE OF ASSESSMENT PROCEEDINGS LIKE BA NK STATEMENT, INCOME TAX RETURN, BALANCE SHEETS, ETC., WHICH HAVE NOT BEEN ANALYZED BY THE AO. APART FROM THAT, ASSES SING OFFICER HAS NOT MADE ANY INQUIRY BY ISSUING A NOTICES U/S. 133(6). SIMILARLY WITH REGARD TO THE SHARE APPLICATION MONE Y BY BYCELL HOLDING AG, SWITZERLAND, THE ASSESSING OFFICER HAS ONLY EXAMINED THE PRELIMINARY INFORMATION BUT NO DOCUMEN TARY EVIDENCE IN SUPPORT OF THE GENUINENESS AND CREDITWO RTHINESS HAVE BEEN FOUND ON RECORD. HERE AGAIN THE BANK STAT EMENT OF THE SHARE APPLICANT MONEY HAS NOT BEEN BROUGHT ON RECOR D INCLUDING P & L ACCOUNT AND BALANCE SHEET OF M/S. BYCELL HOLD ING AG, I.T.AS. NO.2819 TO 2823/DEL/2017 19 SWITZERLAND. BASED ON THE PERUSAL OF THE ASSESSMENT RECORD, HE HELD THAT FOLLOWING ISSUES HAVE REMAINED UNVERIFIED DURING THE COURSE OF ASSESSMENT PROCEEDINGS:- 1. NO ENQUIRIES HAVE BEEN CONDUCTED TO ASCERTAIN WH ETHER ANY BUSINESS ACTIVITY WAS CARRIED OUT BY M/S BYCELL HOL DING AG IN SWITZERLAND, NATURE OF BUSINESS ACTIVITIES CARRIED OUT BY THAT COMPANY, DETAILS OF DIRECTORS & STAFF EMPLOYED BY M /S BYCELL HOLDING AG IN SWITZERLAND, AND WHETHER THE CREDENTI ALS OF THAT COMPANY ARE GENUINE AND RELIABLE. 2. NO ENQUIRIES WERE MADE WITH THE RELEVANT BANKS T O OBTAIN THE BANK STATEMENTS OF M/S BYCELL HOLDING AG, SWITZ ERLAND WHICH COULD HAVE LEAD TO TRAIL OF SOURCE OF FUNDS IN THE BANK ACCOUNTS OF M/S BYCELL HOLDING, AG. 3. DESPITE SPECIFIC INFORMATION ON RECORD, PARTICUL ARLY THE INPUTS RECEIVED FROM MINISTRY OF HOME AFFAIRS AS DISCUSSED IN PRECEDING PARAGRAPHS, THE AO HAS NOT MADE ANY ENQUIRIES REGAR DING GENUINENESS AND CREDITWORTHINESS OF THE COMPANY M/S TENOCH HOLDING, CYPRUS WHICH HOLDS MORE THAN 97% SHAREHOLD ING M/S M/S BYCELL HOLDING, AG., AND WHICH WAS THE ACTUAL S OURCE FROM WHICH FUNDS WERE INVESTED IN ASSESSEE COMPANY. THE AO HAS NOT TAKEN COGNIZANCE OF INPUTS FROM MHA, WHICH CONSTITU TED THE VITAL REASON FOR REOPENING OF THE CASE. IN VIEW OF THE FACTS AND FINDINGS DISCUSSED ABOVE, THE IDENTITY, CREDITWORTHINESS AND GENUINENESS OF SOURCE OF SHARE APPLICATION MONEY INTRODUCED INTO THE BOOKS OF ACCOUNTS OF THE ASSESSEE COMPANY DURING THE PERIOD AY-2006-07 TO AY-2010-11 HAVE NOT BEEN PROPERLY INQUIRED INTO AND EXAMINED. 13. AFTER CONSIDERING THE ASSESSEES REPLY AND I NVOKING THE PROVISION OF EXPLANATION - 2 TO SECTION 263 INSERTED BY THE FINANCE ACT, 2015, HE HELD THAT THE ASSESSMENT ORDERS PASSE D U/S. 147/143(3) FOR THE ASSESSMENT YEARS 2006-07 TO 2010 -11 ARE ERRONEOUS INS SO FAR AS PREJUDICIAL TO THE INTEREST OF REVENUE AS HE HAS NOT DONE PROPER INQUIRY AND ACCORDINGLY, DIR ECTED THE I.T.AS. NO.2819 TO 2823/DEL/2017 20 ASSESSING OFFICER TO PASS FRESH ASSESSMENT ORDERS A FTER MAKING PROPER INQUIRIES AND VERIFICATION WITH REGARD TO TH E MONEY RECEIVED DURING THE YEAR IN THE FORM OF SHARE APPLI CATION MONEY/SHARE CAPITAL. DOCUMENTS REQUIRED BY THE BENCH DURING THE HEARING 14. DURING THE COURSE OF HEARING, WE REQUIRED BOTH THE PARTIES TO FURNISH VARIOUS DOCUMENTS, VIDE SEPARATE ORDER S HEET ENTRIES (AS PER RECORDS), LIKE:- FIRSTLY , COPY OF OFFICE NOTE BY THE ASSESSING OFFICER ACCEPTING THE SHARE APPLICATION MONEY, WHICH HAS BE EN PRODUCE OF LEARNED CIT-DR (THE RELEVANT CONTENT HAS ALREADY BEEN EXTRACTED ABOVE); SECONDLY , INFORMATION SENT BY SWITZERLAND TAX AUTHORITIES TO FT & TR DIVISION, PRODUCED BY LD. CIT DR WHICH S HALL BE DISCUSSED IN OUR LATER PART OF THE ORDER; THIRDLY, QUESTIONNAIRE AND REPLIES SUBMITTED BY THE ASSESSEE DURING THE COURSE OF THE ORIGINAL ASSESSME NT PROCEEDINGS AS WELL AS RE-ASSESSMENT PROCEEDINGS (SUBMITTED BY LD. CIT DR); FOURTHLY , COPIES OF AUDITED FINANCIAL STATEMENT OF BYCELL HOLDING AG, SWITZERLAND ALONG WITH ENGLISH TRANSLAT ION FOR ALL THE ASSESSMENT YEARS SO THAT AVAILABILITY O F FUNDS WITH THE BYCELL HOLDING AG, SWITZERLAND CAN BE SEEN (SUBMITTED BY ASSESSEE); I.T.AS. NO.2819 TO 2823/DEL/2017 21 LASTLY , COPIES OF FIRCS WHICH HAVE BEEN FILED BEFORE THE ASSESSING OFFICER DURING THE COURSE OF RE-ASSESSMEN T PROCEEDINGS RELATING TO REMITTANCE OF FUNDS BY BYCE LL HOLDING AG, SWITZERLAND (SUBMITTED BY ASSESSEE). ALL THESE DOCUMENTS HAVE BEEN FILED BEFORE US BY TH E RESPECTIVE PARTIES ON THE BASIS OF WHICH WE HAVE HEARD BOTH TH E PARTIES AT LENGTH. ARGUMENTS ON BEHALF OF THE ASSESSEE 15. BEFORE US, LEARNED SENIOR COUNSEL, SHRI AJA Y VOHRA AFTER EXPLAINING THE ENTIRE FACTS AND MATERIAL PLACED ON RECORD IN THIS CASE, GAVE FOLLOWING SEQUENCE OF EVENTS TO EXPLAIN THE ENTIRE FACTS AND MATERIAL WHICH WAS FILED BY THE ASSESSEE BEFORE THE ASSESSING OFFICER TO PROVE THE GENUINENESS OF THE TRANSACTION AND HOW THIS ISSUE HAS BEEN EXAMINED BY THE ASSESSING OFFICER DU RING THE COURSE OF TWO ROUND OF ASSESSMENT PROCEEDINGS. THE SAID DATE CHART SPECIFICALLY FOR THE ASSESSMENT YEAR 2006-07 IS REPRODUCED HEREIN BELOW, WHICH IS ALMOST IDENTICAL WITH THE OT HER ASSESSMENT YEARS:- DATE PARTICULARS - THE APPELLANT FILED RETURN OF INCOME DECLARING INCO ME OF RS.4,49,567. I.T.AS. NO.2819 TO 2823/DEL/2017 22 NOVEMBER 2005 TO FEB 2008 BYCELL HOLDING AG, SWITZERLAND FILED APPLICATION F OR FIPB APPROVAL FOR 74% FOREIGN INVESTMENT IN TELECOM SECTOR IN INDIA ( IN THE APPELLANT COMPANY). AFTER DUE VERIFICATION OF ALL THE DETAILS AND AFTER OBTAINING MANDATORY REQUISITE SECURITY CLEARANCES, FIPB APPRO VAL WAS ISSUED IN FAVOUR OF THE INVESTOR COMPANY. 02.04.2008 ORIGINAL ASSESSMENT, AFTER DUE VERIFICATION OF RECO RDS, WAS COMPLETED UNDER SECTION 143(3) OF THE INCOME TAX ACT, 1961 ( THE ACT) (ORIGINAL ASSESSMENT ORDER) ACCEPTING THE INCOME RETURNED BY THE APPELLANT. MAY 2009 FIPB APPROVAL WITHDRAWN ON THE BASIS THAT MINISTRY OF HOME AFFAIRS (MHA) HAD WITHDRAWN THE SECURITY CLEARANCE. 15.05.2009 AFTER WITHDRAWAL OF FIPB APPROVAL ON THE BASIS OF I NPUTS FROM THE MHA REGARDING INVESTMENTS RECEIVED FROM BYCELL HOLDING AG, SWITZERLAND, THE FOREIGN TAX AND TAX RESEARCH (FT&TR) DIVISION OF CB DT REFERRED THE MATTER TO THE CCIT/ INCOME TAX DEPARTMENT REQUESTIN G RELATED EXAMINATION OF SOURCE OF FUNDS OF INVESTMENT MADE BY (A) BYCELL HOLDING AG, SWITZERLAND; AND (B) BITCORP PVT LTD. (INDIA PROMOT ER), IN THE APPELLANT COMPANY. 14.03.2013 PURELY ON THE BASIS OF INFORMATION FROM THE FT & TR DIVISION, CBDT, THE ASSESSING OFFICER REOPENED THE CASE OF THE APPELLAN T UNDER SECTION 147/148 OF THE ACT FOR THE SPECIFIC PURPOSE OF EXAM INATION OF SOURCE OF FUNDS RECEIVED BY THE APPELLANT FROM THE FOREIGN IN VESTOR. EXAMINATION OF DETAILS/ REPLIES FILED DURING REASSE SSMENT PROCEEDINGS 22.11.2013 APPELLANT FILED THE AUDITED FINANCIAL STATEMENT FOR THE RELEVANT YEAR. COMPLETE DETAILS OF SHARE CAPITAL/ APPLICATION MONE Y IS REFLECTED ON THE FACE OF THE BALANCE SHEET AND SCHEDULE 1 THERETO. 07.01.2014 IN RESPONSE TO THE QUERIES OF THE ASSESSING OFFICER THE APPELLANT FILED: DETAILS OF FDI RECEIVED FROM BYCELL HOLDING AG, SWI TZERLAND ALONG-WITH RELEVANT FOREIGN INWARD REMITTANCE CERTIFICATE (FIR C); - APPROVAL ISSUED BY RBI FOR ISSUANCE OF EQUITY SHA RES IN FAVOUR OF BYCELL HOLDING AG, SWITZERLAND I.T.AS. NO.2819 TO 2823/DEL/2017 23 15.01.2014 THE APPELLANT EXPLAINED THE SOURCE OF FUNDS RECEIVE D BY THE APPELLANT FROM BYCELL HOLDING AG, SWITZERLAND. 18.02.2014 THE APPELLANT FILED:- - DETAILS OF BITCORP PVT. LTD. FROM ROC MASTER DATA , CERTIFICATE OF INCORPORATION AND PROOF OF PAN; DETAILS OF SHARE APPLICATION MONEY RECEIVED FROM BY CELL HOLDING AG, SWITZERLAND FEBRUARY/ MARCH 2015 THE APPELLANT FILED: CERTIFICATE OF INCORPORATION, MEMORANDUM AND ARTICL ES OF ASSOCIATION OF BYCELL HOLDING AG, SWITZERLAND; CERTIFICATE OF INCORPORATION, MEMORANDUM AND ARTICL ES OF ASSOCIATION OF TENOCH HOLDING LTD, CYPRUS (FURTHER HOLDING OF BYCE LL HOLDING AG, SWITZERLAND). VIDE THE SAID REPLY, THE APPELLANT ALSO EXPLAINED T HE SOURCE OF FUNDS (CREDITWORTHINESS) IN THE HANDS OF THE INVESTOR COM PANY (BYCELL HOLDING AG, SWITZERLAND). IT WAS CATEGORICALLY STATED THAT THE INVESTOR COMPANY HAD RECEIVED THESE FUNDS IN THE FORM OF LOANS AND A DVANCES FROM TENOCH HOLDING LTD, CYPRUS (FURTHER HOLDING OF BYCELL HOLD ING AG, SWITZERLAND). I.T.AS. NO.2819 TO 2823/DEL/2017 24 20.03.2015 RE-ASSESSMENT ORDER UNDER SECTION 147/143(3) OF THE ACT WAS PASSED WHEREIN AFTER EXAMINATION OF ALL THE ASPECTS, CONSI DERING THE REPLIES AND THE DOCUMENTARY EVIDENCES PLACED ON RECORD, THE ASS ESSING OFFICER ACCEPTED THE RETURNED INCOME OF THE APPELLANT. THE ASSESSING OFFICER HAD, IN PARA 2.1, CATEGORICAL LY STATED THAT THE ENQUIRIES MADE TO VERIFY THE IDENTITY AND CREDITWOR THINESS OF THE SHARE APPLICATION MONEY RECEIVED FROM THE FOREIGN HOLDING COMPANY. IT WOULD BE PERTINENT TO NOTE THAT BEFORE CONCLUSIO N OF THE ASSESSMENT THE ASSESSING OFFICER HAD SOUGHT A REPORT FROM THE FT & TR DIVISION, CBDT (THE VERY WING WHICH HAD DIRECTED THE DEPARTMENT/ A SSESSING OFFICER TO EXAMINE THE ISSUE, AS EXPLAINED ABOVE) IN RESPECT O F THE SHARE APPLICATION MONEY RECEIVED BY THE APPELLANT FROM BYCELL HOLDING AG, SWITZERLAND. THE PENULTIMATE PARAGRAPH OF THE REASSESSMENT ORDER CLEARLY STATES THAT THE REPORT WAS RECEIVED BY THE ASSESSING OFFICER FR OM THE FT & TR DIVISION, CBDT. AFTER CONSIDERING THE REPORT AND THE DETAILS FILED BY THE APPELLANT, NO DOUBTS ABOUT THE IDENTITY AND CREDITWORTHINESS O F THE INVESTOR AND THE GENUINENESS OF THE TRANSACTION WERE LEFT. IN LIGHT OF THIS SPECIFIC REPORT, THE ASSESSING OFF ICER HAD ACCEPTED THE RETURNED INCOME. 08.03.2017 SHOW CAUSE NOTICE UNDER SECTION 263 OF THE ACT ISSU ED BY PCIT ON THE GROUND THAT ONLY IDENTITY OF THE FOREIGN INVESTOR, BYCELL HOLDING AG, SWITZERLAND, WAS EXAMINED BY THE ASSESSING OFFICER BUT GENUINENESS OF TRANSACTION & CREDITWORTHINESS OF BYCELL HOLDING AG , SWITZERLAND WAS NOT VERIFIED. 21.03.2017 THE APPELLANT DULY RESPONDED TO THE AFORESAID NOTIC E ISSUED UNDER SECTION 263 OF THE ACT. I.T.AS. NO.2819 TO 2823/DEL/2017 25 30.03.2017 IMPUGNED ORDER UNDER SECTION 263 OF THE ACT PASSED BY THE PCIT SETTING ASIDE THE REASSESSMENT ORDER DATED 30.03.2015 HOLDI NG THAT THE ASSESSING OFFICER DID NOT MAKE ENQUIRY RELATING TO BUSINESS, DIRECTORS & STAFF, CREDENTIAL OF THE INVESTOR COMPANIES. THE CI T DIRECTED THE ASSESSING OFFICER TO MAKE NECESSARY ENQUIRIES AND VERIFICATIO N ON: (A) SOURCE OF FUNDS RECEIVED BY THE APPELLANT COMPANY F ROM BYCELL HOLDING AG, SWITZERLAND; (B) SOURCE OF FUNDS RECEIVED BY THE APPELLANT COMPANY F ROM BITCORP PVT LTD. (INDIA PROMOTER), WHICH WAS NOT PART OF THE NO TICE UNDER SECTION 263 OF THE ACT NOR ANY OPPORTUNITY WAS GRANTED TO T HE APPELLANT IN THIS REGARD DURING THE REVISIONARY PROCEEDINGS. 16. FROM THE ABOVE, MR. VOHRA SUBMITTED THAT HE RE IN THIS CASE, THE ISSUE OF SHARE APPLICATION MONEY/SHARE CA PITAL WAS NOT ONLY EXAMINED DURING THE COURSE OF THE ORIGINAL ASS ESSMENT PROCEEDINGS BUT VERY EXTENSIVELY DURING THE COURSE OF REASSESSMENT PROCEEDINGS ALSO, BECAUSE THE CASE WAS REOPENED U/S.148 SPECIFICALLY IN THE CASE OF BYCELL HOLDINGS AG, TO EXAMINE THE IDENTITY AND CREDITWORTHINESS OF THE CR EDITOR AND ALSO THE GENUINENESS OF THE TRANSACTION WHICH IS EVIDENT FROM THE REASONS RECORDED. THE ASSESSEE HAD DULY SUBMITTED ALL THE RELEVANT RECORDS AND DOCUMENTS REQUIRED FROM TIME T O TIME BY THE ASSESSING OFFICER AND IT IS NOT THE CASE OF THE ASSESSING OFFICER THAT ANY DOCUMENTS REQUIRED HAS NOT BEEN FU RNISHED. HERE IN THIS CASE THE SHARE APPLICATION MONEY HAS C OME FROM A FOREIGN ENTITY AFTER FIPB APPROVAL AND ALL THE REMI TTANCES ARE DULY BACKED BY FIRCS ISSUED BY THE BANKS. THE SAID FIRCS CLEARLY STATE THE NAME OF THE REMITTER AND THE PURPOSE OF T HE REMITTANCE. I.T.AS. NO.2819 TO 2823/DEL/2017 26 HE ALSO POINTED OUT THAT THE REPORT/INFORMATION WAS REQUISITIONED BY THE FT & TR DIVISION OF CBDT ON THE BEHEST OF TH E AO AS A PART OF HIS INQUIRY FROM THE SWISS TAX AUTHORITIES FROM WHOM SPECIFIC INFORMATION WITH REGARD TO THE REMITTANCE AND GENUINENESS OF THE SAID TRANSACTION WAS ENQUIRED FO R. IN RESPONSE, THE SWISS AUTHORITIES HAVE DULY PROVIDED THE DETAILS, WHEREBY IT IS CONCLUSIVELY PROVED THAT BYCELL HOLDI NG AG, SWITZERLAND HAS GIVEN THE FUNDS FOR THE SHARE APPLI CATION MONEY TO THE INDIAN COMPANY AND THIS IS AN INVESTMENT COM PANY WHICH IN TURN HAS RECEIVED THE FUNDS FROM ITS HOLDING COM PANY, M/S TENOCH HOLDINGS CYPRUS. EVEN THE FIRCS ISSUED BY RB I CONTAINS NAME OF REMITTER AS FRIXAN SERVICES LTD., NICOSIA C YPRUS. BYCELL HOLDING AG, SWITZERLAND HAS INITIALLY OBTAINED LOAN FROM ITS HOLDING COMPANY TENOCH HOLDING CYPRUS. THE REPORT O BTAINED THROUGH FT&TR CLEARLY MENTIONS THAT BYCELL HOLDING AG, SWITZERLAND HAS ARRANGED FUND AS SUBORDINATED LOAN FROM ITS SOLE SHARE HOLDERS, I.E., TENOCH HOLDINGS CYPRUS FOR THE PURPOSE OF INVESTMENT IN THE INDIAN COMPANY. THUS, THE DOCUMEN TARY EVIDENCES WHICH HAS BEEN SOUGHT BY THE ASSESSING OF FICER THROUGH CBDT GOES TO PROVE THE SOURCE OF FUNDS AND IN FACT, EVEN THE SOURCE OF THE SOURCE STANDS PROVED, AS BYCELL H OLDINGS AG HAS RECEIVED THE FUNDS FROM CYPRUS ENTITY, ITS HOLD ING COMPANY. WHEN SOURCE IS EXPLAINED FROM THE BALANCE SHEET OF THE FOREIGN ENTITY, THEN CREDITWORTHINESS AUTOMATICALLY STANDS ESTABLISHED. ONCE THESE EVIDENCES AND DOCUMENTS HAVE BEEN APPREC IATED BY THE ASSESSING OFFICER, THEN IT CANNOT BE HELD THAT THE ASSESSING OFFICER HAS FAILED TO CARRY OUT ANY INQUIRY OR HAS NOT APPLIED HIS I.T.AS. NO.2819 TO 2823/DEL/2017 27 MIND PROPERLY ON THE FACTS AND MATERIAL ON RECORD W HILE FRAMING THE ASSESSMENT. 17. HE FURTHER SUBMITTED THAT IT IS QUITE SETT LED PROPOSITION THAT THE TWIN CONDITION AS ENVISAGED IN SECTION 263 , I.E., FIRSTLY , IT IS ERRONEOUS AND SECONDLY , IT IS PREJUDICIAL TO THE INTEREST OF THE REVENUE SHOULD BE SATISFIED SIMULTANEOUSLY AND IN S UPPORT HE RELIED UPON VARIOUS DECISIONS INCLUDING THAT OF HON 'BLE SUPREME COURT IN THE CASE OF MALABAR INDUSTRIES COMPANY LTD. VS. CIT, 243 ITR 83 (SC); CIT VS. KWALITY STEEL SUPPLIERS CO MPLEX, 395 ITR 1 (SC); CIT VS. MAX INDIA LIMITED, 295 ITR 282 (SC). HERE IN THIS CASE, THE ASSESSMENT ORDER CANNOT BE H ELD TO BE ERRONEOUS, AS THE AO HAS PASSED THE ORDER AFTER CAR RYING OUT DETAIL INQUIRY AND DULY EXAMINING THE EVIDENCES. 18. MR. VOHRAS SECOND LIMB OF ARGUMENT WAS T HAT THE LD. PCIT CANNOT SET ASIDE THE ASSESSMENT MERELY BECAUSE , ACCORDING TO HIM INQUIRY SHOULD HAVE BEEN CONDUCTED IN A PART ICULAR MANNER OR ANY FURTHER INQUIRY OUGHT TO HAVE BEEN DO NE BY THE ASSESSING OFFICER. INADEQUACY OF INQUIRY CANNOT BE THE GROUND FOR ACQUIRING JURISDICTION U/S.263. APART FROM THAT, THE LEARNED PCIT PRIMA FACIE SHOULD HAVE RECORDED HIS FINDINGS ON ME RITS BEFORE SETTING ASIDE THE ASSESSMENT AND THAT TO BE AFTER C ONDUCTING SOME KIND OF INQUIRY ESPECIALLY WHEN AO HAS DILIGEN TLY DONE HIS JOB; AND SIMPLY CANNOT MAKE BLANKET SET ASIDE OF SUC H AN ASSESSMENT ORDER ON THE GROUND THAT SUFFICIENT INQU IRIES WERE NOT CONDUCTED BY THE ASSESSING OFFICER. IN SUPPORT OF H IS AFORESAID CONTENTIONS, HE RELIED UPON THE FOLLOWING DECISIONS :- I.T.AS. NO.2819 TO 2823/DEL/2017 28 ITO V. DG HOUSING PROJECTS LTD.:343 ITR 329 (DEL.) DIT V. JYOTI FOUNDATION: 357 ITR 388 (DEL.) CIT V. DELHI AIRPORT METRO EXPRESS (P) LTD.: ITA NO . 705/2017 (DATED 5.9.2017); CIT V. MODICARE LTD.: 759/2016 (DATED 20.9.2017) 19. ON THE ISSUE OF SECTION 68 ALSO, HE HAS AGA IN CITED AND RELIED UPON THE VARIOUS JUDICIAL PROPOSITIONS, THE L IST OF WHICH HAVE BEEN DULY ELABORATED IN HIS WRITTEN SYNOPSIS. HIS SUBMISSION WITH REGARD TO THE VARIOUS ISSUES RAISED BY HIM TO CHALLENGE THE IMPUGNED ORDER, INCLUDING THE NEW ISS UE RAISED OF SHARE APPLICATION MONEY FROM BITCORP PVT. LTD. WHIC H WAS NOT EVEN ARISING FROM THE REASSESSMENT ORDER OR SHOW CA USE NOTICE U/S 263, IS REPRODUCED HEREUNDER:- RE: ORDER NOT ERRONEOUS MUCH LESS PREJUDICIAL TO TH E INTEREST OF THE REVENUE: IN THE FACTS OF THE PRESENT CASE, AS EXPLAINED ABOV E, SINCE ALL THE NECESSARY DOCUMENTS AND EXPLANATION TO ESTABLISH TH E IDENTITY, CREDITWORTHINESS OF THE FOREIGN INVESTOR AND GENUIN ENESS OF THE TRANSACTION WERE FURNISHED BY THE APPELLANT, THE IN ITIAL BURDEN PLACED UPON ON THE APPELLANT WAS DISCHARGED. IT WOULD FURTHER BE PERTINENT TO POINT OUT THAT THE APPELLANT NEVER SHIED AWAY FROM DISCLOSING THE IDENTITY OF THE FOREIGN IN VESTORS TO THE GOVERNMENT, INTER ALIA, BY WAY OF (I) FILING FIPB A PPLICATIONS SEEKING APPROVAL OF FOREIGN INVESTMENT IN THE INDIAN COMPAN Y; (II) APPLYING FOR TELECOM LICENSES AND PAYMENT OF LICENSE FEE THEREFO R; (III) FILING VARIOUS WRIT PETITION(S) BEFORE THE DELHI HIGH COURT AGAINS T WITHDRAWAL OF FIPB APPROVAL; (IV) AND INVOKING ARBITRATION PROCEEDINGS BEFORE PCA, ETC. IT IS SUBMITTED THAT, IF THE APPELLANT HAD ENTERED INTO A NY SUSPICIOUS TRANSACTION WITH ALLEGED NON-EXISTENT INVESTORS, TH E APPELLANT WOULD NOT I.T.AS. NO.2819 TO 2823/DEL/2017 29 HAVE RISKED THE SAME BY APPLYING TO GOVERNMENT FOR NECESSARY APPROVALS, ISSUE OF LICENSES AND THEN RAISING DISPU TES WITH GOVERNMENT AT DIFFERENT STAGES. IN THAT VIEW OF THE MATTER, IT IS THE RESPECTFUL SUBMISSION OF THE APPELLANT THAT THE ENTIRE CONTOUR S OF SECTION 68 OF THE ACT WITH RESPECT TO THE IMPUGNED AMOUNT OF SHARE AP PLICATION MONEY RECEIVED FROM THE FOREIGN INVESTOR, VIZ. IDENTITY A ND CREDITWORTHINESS OF THE FOREIGN INVESTOR AND GENUINENESS OF THE TRANSAC TION, WERE SATISFIED IN THE INSTANT CASE. BE THE CASE AS IT MAY, SINCE THE APPELLANT HAD, AS EXPLAINED ABOVE, DURING THE COURSE OF REASSESSMENT PROCEEDINGS DISCH ARGED THE INITIAL BURDEN PLACED ON IT BY ESTABLISHING THE IDENTITY, C REDITWORTHINESS OF THE INVESTOR AS ALSO GENUINENESS OF THE TRANSACTION, TH E BURDEN SHIFTED TO THE ASSESSING OFFICER/ REVENUE TO CONDUCT FURTHER E NQUIRIES TO CORROBORATE THE AFORESAID TRANSACTION. CONSIDERING THAT THE AFORESAID INVESTMENT WAS RECEI VED FROM THE FOREIGN INVESTOR, THE ASSESSING OFFICER, WHILE DISCHARGING THE BURDEN SHIFTED ON HIM, FOLLOWED THE ONLY AVAILABLE RECOURSE OF CONDUC TING NECESSARY ENQUIRIES QUA ESTABLISHING IDENTITY AND CREDITWORTH INESS OF THE FOREIGN INVESTOR, BY MAKING REFERENCE TO THE FT&TR DIVISION OF THE CBDT, WHICH WAS A COMPETENT FORUM TO CONDUCT FURTHER NECESSARY ENQUIRIES FROM THE FOREIGN INVESTOR THROUGH THE FOREIGN TAX DIVISION O F THE OTHER COUNTRY I.E., SWITZERLAND IN THE PRESENT CASE, IN EXERCISE OF POW ER AVAILABLE UNDER ARTICLE 26 (EXCHANGE OF INFORMATION) OF INDO-SWITZE RLAND DTAA. THE EX-PARTE REPORT RECEIVED BY FT&TR DIVISION OF T HE CBDT FROM THE FEDERAL TAX ADMINISTRATION DIVISION OF SWITZERLAND, PURSUANT TO REFERENCE MADE AT THE REQUEST OF THE ASSESSING OFFI CER, CORROBORATED THE DOCUMENTS / INFORMATION / MATERIAL FURNISHED BY THE APPELLANT WITH REGARD TO THE IDENTITY AND CREDITWORTHINESS OF BYCE LL HOLDING AG, SWITZERLAND AND GENUINENESS OF THE TRANSACTION, VIZ , SUBSCRIPTION TO SHARE CAPITAL OF THE APPELLANT COMPANY. IT WOULD BE APPRECIATED THAT SINCE FT&TR DIVISION O F CBDT, ON WHOSE I.T.AS. NO.2819 TO 2823/DEL/2017 30 DIRECTION THE REASSESSMENT PROCEEDINGS UNDER SECTIO N 147 WERE INITIATED BY THE ASSESSING OFFICER, ISSUED A CLEAN REPORT OR IN OTHER WORDS THERE WAS NO MATERIAL WITH THE ASSESSING OFFI CER EVEN AFTER MAKING REFERENCE TO THE FTA DIVISION OF SWITZERLAND TO DOUBT THE IDENTITY / CREDITWORTHINESS OF THE INVESTOR AS ALSO GENUINENESS OF THE TRANSACTION, THE ASSESSING OFFICER COMPLETED THE AS SESSMENT(S) AT THE RETURNED INCOME. IT WOULD BE PERTINENT TO POINT OUT THAT THE ASSESSING OFFICER SPECIFICALLY RELIED UPON THE AFORESAID REPO RT ISSUED BY FT&TR DIVISION OF CBDT IN THE REASSESSMENT ORDER(S) AND A LSO RECORDED OFFICE NOTE TO THAT EFFECT BEFORE ACCEPTING THE SAID TRANS ACTION. HAVING REGARD TO THE AFORESAID DOCUMENTS PLACED ON RECORD BY THE APPELLANT, SPECIFIC REPORT OF THE FT & TR DIVISION AND THE FACT THAT AMENDMENT TO SECTION 68 OF THE ACT BY INSERTION OF THE PROVISO THERETO WAS ALSO NOT APPLICABLE SINCE REASSESSMENTS COMPLET ED UNDER SECTION 147 PERTAIN TO ASSESSMENT YEARS 2006-07 TO 2010-11 AND THE SHARE CAPITAL/ APPLICATION MONEYS IN QUESTION WERE RECEIV ED FROM A NON- RESIDENT INVESTOR, THE ASSESSING OFFICER RIGHTLY AC CEPTED THE AMOUNTS REMITTED BY BYCELL HOLDING AG, SWITZERLAND AS GENUI NE AND DID NOT MAKE ADDITION TO THE INCOME OF THE APPELLANT UNDER SECTION 68 OF THE ACT. IN LIGHT OF THE AFORESAID DOCUMENTS FORMING PART OF THE ASSESSMENT RECORDS, ON THE BASIS OF EXAMINATION OF WHICH THE C IT ISSUED NOTICE UNDER SECTION 263 AND HAVING REGARD TO THE SETTLED LEGAL POSITION QUA SECTION 68 OF THE ACT, IT COULD NOT BE SAID THAT TH E ASSESSMENT ORDER(S) PASSED BY THE AO ACCEPTING AS GENUINE THE AMOUNTS R ECEIVED FROM BYCELL HOLDING AG, SWITZERLAND, WAS ERRONEOUS MUCH LESS PREJUDICIAL TO THE INTEREST OF THE REVENUE, IN THE ABSENCE OF ANY CONTRARY MATERIAL AGAINST THE APPELLANT BEING ON RECORD. IN THAT VIEW OF THE MATTER, THE JURISDICTION ASSUMED BY THE CIT IS CLEARLY FLAWED, BEING CONTRARY TO THE LAW LAID DOWN BY THE APEX COURT IN MALABAR INDUSTRI AL CO. LTD. (SUPRA) AND FOLLOWED IN MAX INDIA (SUPRA) AND KWALITY STEEL SUPPLIERS (SUPRA). I.T.AS. NO.2819 TO 2823/DEL/2017 31 RE: ORDER CANNOT BE SET ASIDE FOR MAKING FURTHER ENQU IRIES: IT IS ALSO IMPORTANT TO NOTE THAT IN THE IMPUGNED O RDER, IT IS NOT THE CASE OF THE CIT THAT THE APPELLANT HAD NOT DISCHARGED IT S INITIAL / PRIMARY ONUS; ON THE CONTRARY THE CIT HAS MERELY DIRECTED T HE ASSESSING OFFICER TO MAKE FURTHER ENQUIRIES QUA (I) SOURCE OF FUNDS R ECEIVED BY THE APPELLANT COMPANY FROM ITS HOLDING COMPANY BYCELL H OLDING AG, SWITZERLAND; AND (II) SOURCE OF FUNDS RECEIVED BY T HE APPELLANT COMPANY FROM BITCORP PVT. LTD. (INDIAN PROMOTER) FOR THE PU RPOSES OF SECTION 68 OF THE ACT. IN THE CONTEXT OF SECTION 68 OF THE ACT, THE COURTS HAVE IN THE UNDER NOTED CASES UNANIMOUSLY HELD THAT WHERE THE REVENUE DOES NOT BRING ON RECORD ANY CONTRARY MATERIAL AND FAILS TO DISCHA RGE THE ONUS THAT SHIFTED TO THE REVENUE, POST DISCHARGE OF INITIAL/ PRIMARY ONUS BY THE ASSESSEE, THE ADDITION MADE UNDER SECTION 68 OF THE ACT HAD TO BE DELETED: CIT V. OASIS HOSPITALITIES P. LTD: 333 ITR 119 (DEL ) CIT V. DWARKADHISH INVESTMENT LTD: 194 TAXMAN 43 (D EL) CIT V. KAMDHENU STEEL AND ALLOYS LTD: 361 ITR 220 ( DEL) CIT V. GANGESHWARI METAL (P) LTD: 264 CTR 277 (DEL ) THE PLEA OF THE REVENUE TO SET ASIDE THE MATTER TO THE ASSESSING OFFICER, TO GRANT ANOTHER OPPORTUNITY FOR FURTHER INVESTIGAT ION, WAS SPECIFICALLY NEGATIVE IN THE FOLLOWING DECISIONS: CIT V. KAMDHENU STEEL AND ALLOYS LTD: 361 ITR 220 (DEL) PCIT V. LAXMAN INDUSTRIAL RESOURCES LTD.: ITA 169/ 2017 (DEL.) DT. 14.3.2017 THE FACTS OF THE PRESENT CASE, IT IS SUBMITTED, STA NDS ON A MUCH BETTER FOOTING INASMUCH AS THE ASSESSING OFFICER, APART FR OM THE DETAILS FILED BY THE APPELLANT, DULY MADE INDEPENDENT INQUIRIES DURI NG THE REASSESSMENT PROCEEDINGS, QUA THE SOURCE OF FUNDS R ECEIVED FROM THE FOREIGN INVESTOR THROUGH THE FT & TR DIVISION BEFOR E THE ACCEPTING THE I.T.AS. NO.2819 TO 2823/DEL/2017 32 SHARE APPLICATION MONEY/ CAPITAL AS GENUINE. BEING SO, THE CIT COULD NOT HAVE SET ASIDE THE SAID REASSESSMENT ORDER(S) D IRECTING THE ASSESSING OFFICER TO MAKE ANY FURTHER INQUIRIES QUA SOURCE OF SUCH FUNDS, WITHOUT EVEN POINTING OUT HOW THE ASSESSING OFFICER WAS TO PROCEED TO CONDUCT ENQUIRIES IN A FOREIGN JURISDICT ION, OTHER THAN INVOKING THE EXCHANGE OF INFORMATION ARTICLE IN THE DTAA, WHICH HAD ALREADY BEEN DONE. MATTER DEBATABLE- JURISDICTION UNDER SECTION 263 CA NNOT BE ASSUMED: THE QUESTION WHETHER ADDITION UNDER SECTION 68 OF T HE ACT WAS NOT TO BE MADE OR THE ASSESSING OFFICER WAS TO BE DIRECTED TO CARRY FURTHER ENQUIRIES, SPECIALLY ONCE IT IS ACCEPTED THAT (I) T HE ASSESSEE HAD DISCHARGED THE INITIAL BURDEN CAST UPON THE APPELLA NT (II) THE REPORT RECEIVED FROM THE FOREIGN TAX OFFICE PURSUANT TO EX -PARTED REFERENCE MADE BY THE ASSESSING OFFICER CONFIRMED THE STAND O F THE ASSESSED, AND (III) THERE WAS MATERIAL TO THE CONTRARY ON RECORD, MAY, AT THE HIGHEST, BE REGARDED AS DEBATABLE, ON WHICH THERE CAN CONCEIVAB LY BE TWO OPINIONS. IN THAT VIEW OF THE MATTER, THE CIT COULD NOT HAVE ASSUMED JURISDICTION UNDER SECTION 263 OF THE ACT TO SET ASIDE THE REASS ESSMENT(S) AND DIRECT THE AO TO MAKE FURTHER ENQUIRIES QUA VERIFICATION I NTO SOURCE OF FUNDS RECEIVED BY THE APPELLANT COMPANY (I) FROM ITS HOLD ING COMPANY BYCELL HOLDING AG, SWITZERLAND; AND (II) FROM BITCORP PVT. LTD. (INDIAN PROMOTER), AS HELD BY THE HONBLE APEX COURT IN MAL ABAR INDUSTRIAL AND MAX INDIA LIMITED {SUPRA). RE: NO PRIMA FACIE FINDING BY THE CIT ; ON PERUSAL OF THE IMPUGNED ORDER PASSED UNDER SECTI ON 263 OF THE ACT, IT WOULD BE APPRECIATED THAT THE CIT HAS SIMPLY SET ASIDE THE REASSESSMENT ORDER(S) PASSED BY THE ASSESSING OFFIC ER ON THE GROUND THAT NECESSARY INQUIRIES QUA SOURCE OF FUNDS WERE N OT CONDUCTED DURING THE COURSE OF ASSESSMENT PROCEEDINGS WITHOUT HIMSEL F CONDUCTING ANY INQUIRY WHATSOEVER OR RENDERING ANY INDEPENDENT FIN DING QUA SHARE I.T.AS. NO.2819 TO 2823/DEL/2017 33 APPLICATION MONEY/ CONTRIBUTION TOWARDS SHARE CAPIT AL RECEIVED FROM BYCELL HOLDING, AG CONSTITUTING UNEXPLAINED MONEYS OF THE APPELLANT WHICH, AS EXPLAINED ABOVE, IS IMPERMISSIBLE IN LAW. [REFER DG HOUSING, CIT V. DELHI AIRPORT METRO AND CIT V. MODICARE LTD. (SUPRA)]. RE: INVOCATION OF EXPLANATION 2 TO SECTION 263 NOT VALID: IN THE IMPUGNED ORDER PASSED UNDER SECTION 263 OF THE ACT, THE CIT, IN SUPPORT OF THE ASSUMPTION OF JURISDICTION UNDER THE SAID SECTION IN THE PRESENT CASE, HAS RELIED UPON THE PROVISIONS OF EXP LANATION 2 TO SECTION 263 OF THE ACT, INSERTED IN THE STATUTE BY THE FINA NCE ACT 2015 W.E.F. 1- 6-2015, WHICH, EMPOWERS THE CIT TO REVISE THE ASSES SMENT ORDER, IF IN THE OPINION OF THE CIT, THE ORDER IS, INTER ALIA, PASSED WITHOUT MAKING ANY INQUIRIES OR INQUIRIES/ VERIFICATION WHICH SHOULD H AVE BEEN MADE. THE SAID EXPLANATION CANNOT, IN OUR RESPECTFUL SUBM ISSION, BE READ TO PROVIDE UNFETTERED POWERS TO THE CIT TO SET ASIDE A N ASSESSMENT ORDER, ON A PALTRY GROUND OF INSUFFICIENT ENQUIRY BEING CO NDUCTED BY THE ASSESSING OFFICER, AT HIS WHIMS AND FANCIES. EVEN A FTER INSERTION OF THE AFORESAID EXPLANATION, THE CIT, WOULD, IN OUR RESPE CTFUL SUBMISSION, NEED TO POINT OUT FAILURE ON THE PART OF THE ASSESS ING OFFICER IN NOT CONDUCTING RELEVANT ENQUIRIES WHICH WERE CRITICAL F OR DECISION ON AN ISSUE, BEFORE RENDERING THE ASSESSMENT ORDER TO BE ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE. ANY FAI LURE ON THE PART OF THE ASSESSING OFFICER IN CONDUCTING AN ENQUIRY, WHICH I S NOT CRITICAL FOR AN ISSUE OR DID NOT RENDER THE DECISION OF THE ASSESSI NG OFFICER TO BE FATAL, WOULD NOT, IN OUR RESPECTFUL SUBMISSION, VALIDATE A SSUMPTION OF JURISDICTION BY THE CIT UNDER SECTION 263 OF THE AC T, IN ACCORDANCE WITH THE CONSISTENT VIEW OF THE COURTS REFERRED SUPRA. RE: SHARE APPLICATION MONEY/ CAPITAL FROM BITCORP INDIA PVT. LTD. (INDIAN PARTNER) IN THE FACTS OF THE PRESENT CASE, SHOW CAUSE NOTIC E DATED 8.3.2017 WAS ISSUED BY THE CIT UNDER SECTION 263, R EQUIRING THE I.T.AS. NO.2819 TO 2823/DEL/2017 34 APPELLANT TO SHOW CAUSE AS TO WHY THE REASSESSMENT ORDER(S) UNDER SECTION 147 OF THE ACT BE NOT REGARDED AS ERR ONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENUE FOR LACK OF CONDUCTING NECESSARY ENQUIRIES QUA SOURCE OF FUNDS RECEIVED FR OM BYCELL HOLDINGS AG, SWITZERLAND (REFER PAGE 152 OF PAPER BOOK) WHICH WAS DULY RESPONDED BY THE APPELLANT VIDE REPLY DATE D 21.03.2017 IT IS SUBMITTED THAT, NEITHER IN THE AFORESAID NOTI CE NOR DURING THE COURSE OF HEARING, ANY QUERY WAS RAISED WITH RE SPECT TO SHARE APPLICATION MONEY RECEIVED FROM THE INDIAN PA RTNER, VIZ., BITCORP PVT. LTD . HOWEVER, IN THE IMPUGNED ORDER DATED 30.03.2017, THE CIT HAD, WITHOUT AFFORDING ANY OPPO RTUNITY OF BEING HEARD TO THE APPELLANT, SET ASIDE THE REASSES SMENT ORDER , INTER ALIA, FOR VERIFICATION OF SOURCE OF FUNDS RECEIVED BY THE APPELLANT FROM BITCORP INDIA PVT. LTD. AS WELL, WHICH IS BEYO ND JURISDICTION AND OUTSIDE THE SCOPE OF SECTION 263 OF THE ACT IN AS MUCH AS THE SAID FINDINGS HAVE BEEN GIVEN IN VIOLATION OF PRINC IPLES OF NATURAL JUSTICE, WHICH VITIATES THE IMPUGNED ORDER QUA THE AFORESAID ISSUE. RELIANCE, IN THIS REGARD, IS PLACED ON THE FOLLOWIN G DECISIONS: CIT V. AMITABH BACHCHAN: 384 ITR 200 (SC) COMMISSIONER OF CUSTOMS V. TOYO ENGG. INDIA LTD. [2 006] 7 SCC 592 PCIT V. KRISHAK BHARTI CO-OPERATIVE LTD.: 395 ITR 5 72 (DEL.) CIT V. ASHISH RAJPAL: 320 ITR 674 (DELHI) CIT V. CONTIMETERS ELECTRICALS (P.) LTD.: 317 ITR 2 49 (DELHI) MAXPAK INVESTMENT V. ACIT: 104 TTJ 881 (DEL.)/13 SO T 67 (DEL.) CIT V. JAGADHRI ELECTRIC SUPPLY & INDUSTRIAL CO.: 1 40 ITR 490 (P&H.) CIT V. R.G. UMARANEE [2003] 262 ITR 507 2 (MAD.) I.T.AS. NO.2819 TO 2823/DEL/2017 35 BEING SO, IN VIEW OF THE LEGAL POSITION ELABORATED SUPRA, THE ACTION OF THE CIT IN SETTING ASIDE THE REASSESSMENT ORDER QUA FUNDS RECEIVED FROM THE INDIA PROMOTER IS ILLEGAL AND BAD IN LAW. THAT APART, THE REASSESSMENT PROCEEDINGS UNDER SECT ION 147/148 OF THE ACT WERE, AS IS EVIDENT FROM THE REASONS REC ORDED BY THE ASSESSING OFFICER (REFER PAGES 44-46 OF THE PAPER BOOK), INITIATED TO VERIFY SUM RECEIVED BY THE APPELLANT FROM THE FO REIGN INVESTOR I.E., BYCELL HOLDING AG, SWITZERLAND IN TERMS OF SE CTION 68 OF THE ACT. IT IS WELL SETTLED THAT, THE ASSESSING OFFICER IS NOT PERMITTED TO CONDUCT ROVING AND FISHING ENQUIRIES DURING THE COU RSE OF RE- ASSESSMENT PROCEEDINGS UNDER SECTION 147 OF THE ACT AND THE SCOPE OF RE-ASSESSMENT IS RESTRICTED TO ISSUES RAIS ED IN THE REASONS RECORDED OR IN TERMS OF EXPLANATION 3 THERE TO ON ISSUES WHICH COME TO THE NOTICE OF THE ASSESSING OFFICER D URING THE COURSE OF RE-ASSESSMENT PROCEEDINGS. IN THE PRESENT CASE, AS POINTED OUT ABOVE, THE ISSU E OF GENUINENESS OF SHARE APPLICATION MONEY RECEIVED FRO M BITCORP PRIVATE LIMITED NEITHER FORMED PART OF THE REASONS RECORDED BEFORE ISSUING NOTICE UNDER SECTION 148 OF THE ACT, NOR AN Y MATERIAL CAME TO THE NOTICE OF THE ASSESSING OFFICER SUBSEQUENTLY DURING THE COURSE OF RE-ASSESSMENT PROCEEDINGS TO DOUBT THE SO URCE OF SUCH FUNDS RECEIVED FROM THE INDIAN PROMOTER. IN FACT TH E CIT, TOO, IN THE IMPUGNED ORDER PASSED UNDER SECTION 263 OF THE ACT HAS NOT MADE REFERENCE TO ANY ADVERSE MATERIAL REGARDING SHARE A PPLICATION MONEY RECEIVED FROM BITCORP PRIVATE LIMITED AND THE AFORESAID ISSUE WAS SET ASIDE IN THE IMPUGNED ORDER ONLY ON T HE GROUND THAT NO ENQUIRY QUA THAT PARTY/ INVESTOR WAS CONDUCTED B Y THE ASSESSING OFFICER DURING THE COURSE OF RE-ASSESSMEN T PROCEEDINGS. IN THAT VIEW OF THE MATTER, SINCE INQUIRIES ON THE AFORESAID ISSUE OF I.T.AS. NO.2819 TO 2823/DEL/2017 36 SHARE APPLICATION MONEY RECEIVED FROM BITCORP INDIA PRIVATE LIMITED WERE BEYOND THE SCOPE OF JURISDICTION UNDER SECTION 147, NO ERROR CAN BE ATTRIBUTED TO THE ASSESSING OFFICER IN NOT MAKING INQUIRIES ON THE AFORESAID ISSUE OR NOT MAKING ANY ADDITION THEREOF UNDER SECTION 68 IN THE REASSESSMENT ORDER(S) PASSE D UNDER SECTION 147 OF THE ACT. RELIANCE IN THIS REGARD IS PLACED ON THE FOLLOWING DECISIONS, WHEREIN IT HAS BEEN HELD THAT WHAT THE ASSESSING OF FICER COULD NOT DIRECTLY DO, THE CIT CANNOT INDIRECTLY DO THE SAME IN EXERCISE OF POWER UNDER SECTION 263 OF THE ACT: CIT V. SOFTWARE CONSULTANTS: 341ITR 240 (DEL.) ABAD FISHERIES V. DCIT: 80 ITD 153 (COCH.) AFFIRMED BY KER. HC IN 246 CTR 513. SIMBHAOLI INDUSTRIES LTD. V. DCIT: 78 ITD 161 (DEL .)(SB) PAUL JOHN, DELICIOUS CASHEW CO.: 94 1TD 131 (COCH.) GIFT LAND HANDICRAFTS V. CIT: 108 TTJ 312 (DEL.) PEERLESS GENERAL FINANCE & INVESTMENT CO. V. ACIT: 96 TTJ 834 (KOL) RAJASTHAN SPINNING & WEAVING MILLS V. DCIT: 281 ITR 177 (RAJ.) SMT. N. SASIKALA V. DCIT: 115 TTJ 563 (CHENN.) IN VIEW OF THE ABOVE, THE IMPUGNED ORDER PASSED BY THE CIT TO THE EXTENT OF SETTING ASIDE THE ISSUE OF VERIFYING SOUR CE OF FUNDS RECEIVED FROM THE BITCORP PRIVATE LIMITED IS BEYOND JURISDICTION, ILLEGAL AND BAD IN LAW. I.T.AS. NO.2819 TO 2823/DEL/2017 37 ARGUMENTS ON BEHALF OF THE REVENUE 20. ON THE OTHER HAND, LEARNED CIT-DR AFTER EXP LAINING THE FACTS AND BACKGROUND OF THE CASE, SUBMITTED THAT, W HEN THE ASSESSMENT WAS REOPENED U/S.147 BY THE ASSESSING OF FICER SOLELY ON THE BASIS OF INFORMATION RECEIVED THROUGH FT&TR, THAT GENUINENESS AND CREDITWORTHINESS OF THE SHARE APPLI CATION MONEY/SHARE CAPITAL NEEDS TO BE EXAMINED, THEN THE ASSESSING OFFICER UNDER THE LAW WAS REQUIRED TO CARRY OUT NEC ESSARY INQUIRIES NOT ONLY FOR ESTABLISHING THE IDENTITY AN D CREDITWORTHINESS OF THE FOREIGN ENTITY BUT ALSO TO EXAMINE THE GENUINENESS OF THE TRANSACTION. THE ASSESSING OFFIC ER HAS ONLY EXAMINED THE IDENTITY AND FACTUM OF REMITTANCE OF T HE MONEY BY RELYING ON FIPB APPROVAL AND FIRC CERTIFICATES. THE ASSESSING OFFICER HAS MISERABLY FAILED TO CARRY OUT ANY INQUI RY TO EXAMINE THE CREDITWORTHINESS AND THE BUSINESS ACTIVITY OF M /S. BYCELL HOLDINGS AG AND ALSO THE CREDENTIALS OF THE COMPANY , WHETHER IT IS GENUINE OR JUST A PAPER COMPANY. THE ASSESSING OF FICER HAS EVEN NOT ASKED FOR RELEVANT BANK ACCOUNTS OF M/S. B YCELL HOLDINGS AG FROM WHERE HE COULD HAVE VERIFIED THE S OURCE AND TRAIL OF FUNDS IN THE BANK ACCOUNT. HERE IN THIS CA SE M/S. TENOCH HOLDING CYPRUS HOLDS MORE THAN 97% OF SHARE HOLDING IN M/S. BYCELL HOLDINGS AG, WHICH HAS BEEN STATED TO BE THE ACTUAL SOURCE OF PROVIDING THE FUNDS FOR THE INVESTMENT IN THE ASSESSEE COMPANY. THE ASSESSING OFFICER HAS EVEN FAILED TO E XAMINE THE GENUINENESS AND CREDITWORTHINESS OF THIS CYPRUS COM PANY. IN HER SUBMISSIONS SHE HIGHLIGHTED THAT, THE ISSUES AN D THE FACTS I.T.AS. NO.2819 TO 2823/DEL/2017 38 WHICH REQUIRE CONSIDERATION BY THIS BENCH WHILE ADJ UDICATING THE MATTER ARE:- 1. IN THE CASE OF ASSESSEE, BYCELL HOLDING AG SWITZER LAND INVESTED OVER RS.120 CRORES AS FDI SINCE 2006 FOR OPERATION I N INDIA. BYCELL HOLDING AG SWITZERLAND WAS GRANTED FOREIGN COLLABORATI ON APPROVAL ON 17.01.2006 TO UNDERTAKE THE ACTIVITIES OF OFFERING C GB BASED CELLULAR TELEPHONE SERVICES IN INDIA IN THIRTEEN STATES , WHICH WAS WITHDRAWN BY FIPB IN ITS 136 TH MEETING HELD ON 11.05.2009. FIPB WITHDREW ALL APPROVALS ON 24.07.2009. 2. APPROVAL WAS WITHDRAWN ON THE BASIS OF INPUTS FU RNISHED BY MINISTRY OF HOME AFFAIRS TO FIPB FROM THE SECURITY ANG LE REGARDING THE INVESTMENT AS UNDER:- (I) WHILE BYCELL HOLDING AG IS BASED IN ZUG, SWITZERLAN D, IT DOES NOT HAVE SIGNIFICANT PRESENCE THERE, AND THE SWISS ADDRESS PROVIDED BY THE COMPANY IS ONLY A POSTAL ADDR ESS WITHOUT ANY PHYSICAL OFFICE AND STAFF. THE REGISTRAR O F COMPANY, GENEVA WHICH KEEPS A TRACK RECORD OF COMPANIES WITH OPERATIONAL OFFICES IN SWITZERLAND IS REPORTEDLY NOT AWARE OF THE EXISTENCE OF THIS COMPANY. (II) 97% STAKE IN BYCELL HOLDING AG SWITZERLAND IS OWNED BY TENOCH HOLDING OF CYPRUS WHICH IS JOINTLY OWNED AND CONTROLLED BY ANDREY POLOUEKTOV AND MAXIM NAUMCHENKO. MAXIM NAUMCHENKO IS A MAJOR SHAREHOLDER IN M/S BYCE LL HOLDING AG AND ALSO SIMULTANEOUSLY HOLDS POSTS IN A NUMBER OF COMPANIES INVOLVED IN DIFFERENT BUSINESS, INCLUDING THE ST. PETERSBURG TELECOM SECTOR. (III) ANDRERY POLOUEKTOV, WHO IS THE DIRECTOR OF THE INDIAN VENTURE AND IS ALSO A PARTNER WITH NAUMCHENKO IN BYCEL L I.T.AS. NO.2819 TO 2823/DEL/2017 39 HOLDING, WAS EARLIER ASSOCIATED WITH A COMPANY CALLE D GAMMA GROUP WHICH WAS SET UP WITH FUNDS FROM INDIVIDUALS INVOLVED IN THE TELECOM SECTOR IN ST. PETE RSBURG. THE GAMMA GROUP FURTHER SET UP A COMPANY BY THE NAME OF MEGAFON WHICH WAS SET UP WITH FLOATING CURRENCY INVESTED BY RICH INDIVIDUALS IN ST. PETERSBURG AND THI S COMPANY WAS ALLEGEDLY INVOLVED IN A MONEY LAUNDERIN G SCANDAL. (IV) IT HAS COME TO THE NOTICE THAT TENOCH HOLDINGS CYPRUS, WHICH HOLDS 97% STAKE IN BYCELL AG SWITZERLAND, IS JO INTLY HELD BY (A) QUALLIS INCORPORATED, PANAMA (50%) AND; (B) KYNANCE BUSINESS LIMITED, BRITISH VIRGIN ISLANDS (50% ). BOTH PANAMA AND BRITISH VIRGIN ISLANDS ARE WELL KNOW N TAX HAVENS AND THERE IS NO INFORMATION ABOUT WHO ARE THE OWNERS OF QUALLIS INC. AND KYNANCE BUSINESS LIMITED AND WHAT IS THE SOURCE OF FUNDS FOR THESE TWO COMPANIES W HICH CONTROL BYCELL TELECOMMUNICATIONS INDIA LIMITED. 3. ISSUE REQUIRED TO THE EXAMINED AS PER THE INP UTS PROVIDED BY MHA & COMMENTS OF DEPARTMENT OF REVENUE AS UNDER:- (I) THE SOURCE OF FUNDS FOR THE FOREIGN INVESTMENT IN M/S BYCELL TELECOMMUNICATIONS INDIA PVT. LTD. BY M/S BYCE LL HOLDING AG, SWITZERLAND. THIS MAY LEAD TO EXAMINATION OF SOURCE OF FUNDS OF M/S TENOCH HOLDINGS, CYPRUS, M/S QUALLI S INC. PANAMA, M/S KYNANCE BUSINESS LTD., BRITISH VIRGIN ISL ANDS, MR. MAMIM NAUMCHENKO AND MR. ANDREY POLUEKTOV. (II) THE SOURCE OF FUNDS FOR DOMESTIC INVESTMENT IN M/S BY CELL TELECOMMUNICATIONS INDIA PVT. LTD. BY M/S BITCORP PVT. LTD. 4. AGAINST WITHDRAWAL OF FIPB APPROVAL, ASSESSEE HAS FILED WRIT I.T.AS. NO.2819 TO 2823/DEL/2017 40 PETITION IN DELHI HIGH COURT. HONBLE DELHI HIGH COURT DISMISSED THE WRIT PETITION BY ORDER DATED 16 TH APRIL, 2010. HONBLE HIGH COURT CONSIDERED THE MHA INPUTS RECEIVED BY MINISTRY OF HOME AFFAIRS FROM THE SECURITY AGENCIES IN RESPECT OF THE DOCUMENTS FURNISHED BY THE APPELLANT AND ACTIVITIES OF THE ENTITIES AND THEIR DIRECTORS I.E. QUALLIS AND KBL BOTH OF WHICH HAVE 50 % SHAREHOLDING ON THC AND WHICH IN TURN HAD A CONTROLL ING INTEREST IN BYCELL AG. BYCELL AG HOLD 73.99% SHARE OF BYCELL TELECOMMUNICATION LTD. ASSESSEE HAS PROVIDED THE INFO RMATION ON THE SOURCE OF FUNDS ON THE BASIS OF WHICH INPUTS WERE CALLED FOR FROM SECURITY AGENCIES BY MHA. MAJORITY OF FUNDS (M ORE THAN 50%) WERE SOUGHT TO BE RAISED FROM LOANS FROM TWO RUSSIAN NATIONALS. 5. EVEN IN REGULAR DECISION DATED 09.12.2011, HONB LE DELHI HIGH COURT DISMISSED ASSESSEES APPEAL WITH THE OBSERVATION IN PARA 11 WHICH READS AS UNDER:- WE ARE AGAIN NOT SATISFIED. ONCE THE APPROPRIATE A GENCIES HAVE FOUND IT UNSAFE TO ALLOW INROADS ON THE COUNTRY TO A PARTICULAR FOREIGN ENTITY, MERELY BECAUSE SUCH FOREIGN ENTITY UNDERGOES A MUTATION WOULD NOT CHANGE THE POSITION. SUCH MUTATI ON CANNOT WASH AWAY THE TAINT WHICH INVESTMENT WAS FOUND TO B E SUFFERING. SINCE THE INVESTMENTS WHICH WERE MADE IN THE FORM OF SH ARE CAPITAL NOT FOUND GENUINE. FIPB APPROVAL, PAYMENT RECE IVED THROUGH BANKING CHANNEL & FTRC COULD NOT MAKE IT EXPLA INED. ASSESSEE TRIED TO PROVE GENUINENESS AND CREDITWORTHIN ESS WITHOUT FURNISHING ANY EVIDENCE IN SUPPORT OF ITS CONTENTION. E VEN HONBLE HIGH COURT OF DELHI WHILE DISMISSING APPEAL OF ASSES SEE AGAINST FIPB APPROVAL GIVEN OBSERVATION ABOUT TAINTED INVESTMENT. I.T.AS. NO.2819 TO 2823/DEL/2017 41 6. ASSESSEE HAS SHOWN INVESTMENT IN SHARE CAPITAL FROM B YCELL AG SWITZERLAND, WHEREAS IT IS OBSERVED THAT ASSESSEE HAS F ILED ONE FIRC CERTIFICATE FOR A. Y. 2006-07 ON P-64 OF PAPER B OOK IN WHICH NAME OF THE REMITTER IS SHOWN FRIXAN SERVICES LTD. NIC OSIA, CYPRUS NOT BYCELL AG SWITZERLAND. THIS SHOWS THE STATE OF AF FAIR OF ASSESSEE REGARDING INVESTMENT IS SHARE CAPITAL. 7. ASSESSEE FAILED TO EXPLAIN THE SOURCE OF INVESTMEN T BY BYCELL AG, SWITZERLAND AND BITCORP PVT. LTD. THE GENUINENESS O F TRANSACTION IS ALSO DOUBTFUL AS THE FIPB APPROVAL WITHD RAWN ONLY ON THE BASIS OF THE INFORMATION PROVIDED BY ASSESSEE IN RESPECT OF INVESTMENT AS FDI. 8. ASSESSEE FAILED TO SATISFY THE CONDITIONS AS PER PR OVISION OF SECTION 68. IT HAS TO PROVE IDENTITY, CREDITWORTHINESS A ND GENUINENESS OF THE TRANSACTION IN RESPECT OF THE AMOUNT CREDITED IN ITS BOOKS OF ACCOUNT AS SHARE CAPITAL. 9. FIPB IS THE DECIDING AUTHORITY IN RESPECT OF INVESTM ENT OF FOREIGN ENTITY IN INDIA BUT IT DOES NOT EXAMINE THE SOU RCE OF INVESTMENT (SHARE CAPITAL) WHETHER IT IS FROM DISCLOSED SOURCES OR UNDISCLOSED SOURCES. FIPB APPROVAL IS SUBJECT TO IND IAN LAWS. ASSESSEE HAS CLAIMED THAT CREDITWORTHINESS AND GENUI NENESS OF THE TRANSACTION PROVED AS AMOUNT RECEIVED THROUGH BANKING C HANNELS AND FIRCS ARE THERE. IT IS WORTHWHILE TO MENTION HERE T HAT AMOUNT RECEIVED THROUGH BANKING CHANNEL COULD NOT MAKE IT GEN UINE BECAUSE BANK DOES NOT EXAMINE THE SOURCE OF FUNDS FO R WHICH FIRC IS ISSUED. 10. IN THIS CASE, THE ISSUE WHICH WAS REQUIRED TO BE E XAMINED AS PER THE INPUTS RECEIVED WERE THE SOURCE OF FUNDING FROM TENOCH I.T.AS. NO.2819 TO 2823/DEL/2017 42 HOLDING CYPRUS M/S QUALLIS INC. PANAMA, M/S KYNANCE BUSINESS LTD., BRITISH VIRGIN ISLANDS, MR. MAMIM NAUMCHENKO AN D MR. ANDREY POLUEKTOV. AO EVEN FAILED TO EXAMINE THE SOURCE OF INVESTMENT FROM BYCELL HOLDINGS AG SWITZERLAND AND BITC ORP PVT. LTD. ASSESSEE HAS NOT FILED BALANCE SHEET, BANK ACCOU NT, COPY OF RETURN ETC. IN SUPPORT OF CREDITWORTHINESS OF THE SUBSCR IBER COMPANY WHOM IT HAS RECEIVED SHARE CAPITAL. IT IS HEL D BY THE JUDICIAL AUTHORITIES THAT THERE SHOULD BE SOME POSITIVE EVIDENCE TO SHOW THE NATURE AND SOURCE OF THE RESOURCES OF THE SHAR ES SUBSCRIBERS AND BANK STATEMENT FILED BEFORE THE AO MAY NOT BE SUFFICIENT TO PROVE THE CREDITWORTHINESS WITHOUT ANY EXP LANATION FOR THE DEPOSITS IN THE ACCOUNTS AND THEIR SOURCE. 11. IN THIS CASE ASSESSEE FAILED TO EXPLAIN THE SOURCE OF INVESTMENT IN SHARE CAPITAL & WHATEVER INFORMATION WAS P ROVIDED BY IT TO FIPB REGARDING INVESTMENT WAS NOT SUFFICIENT TO ESTABLISH GENUINENESS AND CREDITWORTHINESS OF THE SHARE APPLICA NT. 21. LD. CIT (DR) FURTHER RELIED UPON THE DECISI ONS ON SECTION 68, WHEREIN IN THE CASES OF SHARE APPLICATION MONEY , STRICT INTERPRETATION HAVE BEEN GIVEN BY THE HON'BLE COURT S, LIKE:- 1. CIT VS. NIPUN BUILDERS & DEVELOPERS (P.) LTD, D ELHI HIGH COURT, 2013, 30 TAXMANN.COM 292. WHERE ASSESSEE FAILED TO PROVE IDENTITY AND CAPACI TY OF SUBSCRIBER COMPANIES TO PAY SHARE APPLICATION MONEY, AMOUNT SO RECEIVED WAS LIABLE TO BE TAXED UNDER SECTION 68. 2. CIT VS. NAVODAYA CASTLE PVT. LTD., DELHI HIGH C OURT, 2014, [2014] 50 TAXMANN.COM 110 (DELHI) I.T.AS. NO.2819 TO 2823/DEL/2017 43 SECTION 68 OF THE INCOME-TAX ACT, 1961 - CASH CREDI TS (SHARE APPLICATION MONEY) - ASSESSMENT YEAR 2002-03 - WHETHER CERTIFIC ATE OF INCORPORATION, PAN, ETC., ARE RELEVANT FOR PURPOSE OF IDENTIFICATION, BUT HAVE THEIR LIMITATION WHEN THERE IS EVIDENCE AND MA TERIAL TO SHOW THAT SUBSCRIBER WAS A PAPER COMPANY AND NOT A GENUINE IN VESTOR - HELD, YES - WHETHER IN CASE OF PRIVATE LIMITED COMPANIES, GEN ERALLY PERSONS KNOWN TO DIRECTORS OR SHAREHOLDERS, DIRECTLY OR IND IRECTLY, BUY OR SUBSCRIBE TO SHARES AND, THEREFORE, AN ASSESSEE CAN NOT SIMPLY FURNISH SOME DETAILS AND REMAIN QUIET WHEN SUMMONS ISSUED T O SHAREHOLDERS REMAIN UN-SERVED AND UNCOMPLIED; THEIR RELUCTANCE A ND HIDING MAY REFLECT ON GENUINENESS OF TRANSACTION AND CREDITWOR THINESS OF CREDITORS - HELD, YES - WHETHER CREDITWORTHINESS IS NOT PROVED BY SHOWING ISSUE AND RECEIPT OF A CHEQUE OR BY FURNISHING A COPY OF STATEMENT OF BANK ACCOUNT, WHEN CIRCUMSTANCES REQUIRE THAT THERE SHOU LD BE SOME MORE EVIDENCE OF POSITIVE NATURE TO SHOW THAT SUBSCRIBER S HAD MADE GENUINE INVESTMENT OR HAD ACTED AS ANGEL INVESTORS AFTER DU E DILIGENCE OR FOR PERSONAL REASONS - HELD, YES [PARAS 13-18] [MATTER REMANDED] 3. CIT VS. BIKRAM SINGH, DELHI HIGH COURT, 2017, I TA 55/2017. THE USE OF DECEPTIVE LOAN ENTRIES TO BRING UNACCOUN TED MONEY INTO BANKING CHANNELS PLAGUES THE LEGITIMATE ECONOMY OF OUR COUNTRY. THE MERE FACT THAT THE IDENTITY OF THE LENDERS IS ESTAB LISHED & PAYMENTS ARE MADE BY CHEQUES DOES NOT MEAN THEY ARE GENUINE. IF THE LENDERS DO NOT HAVE THE FINANCIAL STRENGTH TO LEND SUCH HUGE SUMS AND IF THERE IS NO EXPLANATION AS TO THEIR RELATIONSHIP WITH THE ASSES SEE, NO COLLATERAL SECURITY AND NO AGREEMENT, THE TRANSACTIONS HAVE TO BE TREATED AS BOGUS UNEXPLAINED CREDITS. 4. DHINGRA GLOBAL CREDENCE (P.) LTD. VS ITO, ITAT DELHI, 2009,1 ITR(T) 529. WHERE BASIC IDENTITY OF RESPECTIVE SHARE APPLICANTS ITSELF WAS NOT PROVED, ADDITION OF SHARE APPLICATION MONEY ALLEGED LY RECEIVED FROM THEM WAS JUSTIFIED. I.T.AS. NO.2819 TO 2823/DEL/2017 44 5. CIT VS EMPIRE BUILTECH (P.) LTD., DELHI HIGH CO URT, 2014, 366 ITR 110 UNDER SECTION 68 IT IS NOT SUFFICIENT FOR ASSESSEE TO MERELY DISCLOSE ADDRESS AND IDENTITIES OF SHAREHOLDERS; IT HAS TO S HOW GENUINENESS OF SUCH INDIVIDUALS OR ENTITIES 6. B.R. PETROCHEM (P.) LTD. VS ITO, MADRAS HIGH CO URT, 2017, [2017] 81 TAXMANN.COM 424 (MADRAS) WHERE ASSESSEE RECEIVED SHARE CAPITAL FROM VARIOUS CONTRIBUTORS, IN VIEW OF FACT THAT THOSE CONTRIBUTORS WERE PERSONS O F INSIGNIFICANT MEANS AND THEIR CREDITWORTHINESS TO HAVE MADE CONTRIBUTIO NS HAD NOT BEEN ESTABLISHED, IMPUGNED ADDITION MADE BY AUTHORITIES BELOW IN RESPECT OF AMOUNT IN QUESTION UNDER SECTION 68 WAS TO BE CONFI RMED. 22. THUS, IN SUM AND SUBSTANCE, SHE SUBMITTED THAT; FIRSTLY, THE ASSESSING OFFICER HAS FAILED TO ENQUIRE ABOUT T HE CREDITWORTHINESS OF M/S. BYCELL HOLDINGS AG BY NOT LOOKING INTO BANK ACCOUNTS AND SOURCES OF FUNDS HIMSELF AND THE ENTIRE FLOW OF FUNDS FROM VARIOUS CHAINS OF ENTITIES; SECONDLY , HAS NOT EXAMINED THE GENUINENESS OF THE TRANSACTION ESPECIA LLY IN THE BACKGROUND OF THE FACT THAT MINISTRY OF HOME AFFAIR S HAD GIVEN ITS ADVERSE REPORT THOUGH IT WAS IN RESPECT OF SECURITY REASONS, BUT ALSO THE HON'BLE HIGH COURT TOO HAVE DISMISSED THEI R WRIT PETITIONS, AND LASTLY , THE ASSESSEE BEFORE THE LD. PCIT OR BEFORE THIS TRIBUNAL HAS NOT FILED ANY DOCUMENT LIKE, STAT EMENT OF BANK ACCOUNT, COPY OF RETURN, ETC. IN SUPPORT OF THE CRE DITWORTHINESS OF THE SUBSCRIBER COMPANIES FROM WHOM IT HAS RECEIVED THE SHARE CAPITAL AND IN SUPPORT SHE HAS RELIED UPON VARIOUS JUDGMENTS ON POWERS OF LD. PCIT UNDER SECTION 263 AND ON SECTION 68. I.T.AS. NO.2819 TO 2823/DEL/2017 45 REJOINDER BY ASSESSEE 23. IN REJOINDER, MR. VOHRA SUBMITTED THAT WHEN THE INFORMATION RECEIVED FROM THE SWISS TAX AUTHORITIES TO THE GOVERNMENT OF INDIA, CLEARLY GIVES THE DETAILS OF T HE TRANSACTION AND ALSO THE SOURCE OF THE FUNDS, THEN THEIR REMAIN S NO DOUBT ABOUT THE SOURCE OF THE MONEY RECEIVED AND THE CRED ITWORTHINESS OF THE M/S. BYCELL HOLDINGS AG WHICH STANDS CONCLUS IVELY PROVED. IN ANY CASE, HE SUBMITTED THAT ASSESSEE HAS ALSO FI LED THE COPIES OF BALANCE SHEETS FOR ALL THE YEARS UNDER DISPUTE A S DIRECTED BY THIS BENCH, WHICH CLEARLY POINTS OUT THAT MONEY GIV EN FOR SHARE CAPITAL IS DULY REFLECTED IN THE BALANCE SHEETS FOR VARIOUS YEARS AND ALSO PROVIDES THE SOURCE OF FUNDS WITH M/S. BYC ELL HOLDINGS AG, WHICH WAS FROM LOAN BY ITS HOLDING COMPANY M/S TENOCH HOLDINGS LTD. CYPRUS. APART FROM THAT, CERTIFICATE OF FOREIGN INWARD REMITTANCES ALSO CATEGORICALLY PROVES THAT T HE MONEY HAS COME FROM THE FOREIGN ENTITY TOWARDS SHARE CAPITAL THROUGH ITS BANKS. THUS, THE ENTIRE ONUS UPON WHICH LIED UPON T HE ASSESSEE NOT ONLY STANDS DISCHARGED IN TERMS OF SECTION 68; BUT ALSO THE ASSESSING OFFICER WHO HAS COMPLETED THE ASSESSMENT AFTER CARRYING OUT INQUIRIES BY SEEKING THE INFORMATION F ROM THE SWISS TAX AUTHORITIES WHO HAVE VERIFIED AND CERTIFIED THE TRANSACTION, THEN IT CANNOT BE HELD THAT THE ASSESSING OFFICER H AS NEITHER CARRIED OUT ANY INQUIRY NOR HAS APPLIED HIS MIND WH ILE DECIDING THE ISSUE OF SHARE CAPITAL. I.T.AS. NO.2819 TO 2823/DEL/2017 46 DECISION 24. WE HAVE HEARD THE RIVAL SUBMISSIONS, PER USED THE RELEVANT FINDINGS GIVEN IN THE IMPUGNED ORDER AS WE LL AS THE MATERIAL PLACED ON RECORD. THE CORE ISSUE BEFORE US IS, WHETHER THE LD. PCIT WAS JUSTIFIED IN LAW AND ON FACTS IN EX ERCISING HIS REVISIONARY JURISDICTION U/S 263 FOR CANCELLING AND SETTING ASIDE THE REASSESSMENT ORDER WHICH WAS REOPENED U/S 147 F OR EXAMINING THE SHARE APPLICATION MONEY RECEIVED FROM A HOLDING FOREIGN ENTITY, BYCELL HOLDINGS AG, SWITZERLAND; ON THE GROUND THAT ASSESSING OFFICER HAS NOT CONDUCTED PROPER INQ UIRY IN SO FAR AS TO ESTABLISH THE CREDITWORTHINESS OF THE INVESTO R. FOR COMING TO HIS CONCLUSION HE HAS BY AND LARGE INCORPORATED THE FACTS AS HAVE BEEN INCORPORATED IN THE REASONS RECORDED WHICH I N TURN WAS BASED ON INFORMATION RECEIVED FROM FT&TR ABOUT THE CHAINS OF ENTITIES INVOLVED WITH BYCELL HOLDING AG, SWITZERLA ND AND CANCELLATION OF FIPB APPROVAL. HE HAS MAINLY GONE B Y HIS PREMISE THAT THE AO HAS ACCEPTED THE CREDIT OF SHARE APPLIC ATION WITHOUT LOOKING TO THE DOCUMENTS, LIKE BANK STATEMENTS, RET URN OF INCOME, ETC., AND NO DOCUMENT IS FOUND ON RECORDS W HICH CAN ESTABLISH THE CREDITWORTHINESS OF THE PARTIES AND T HE GENUINENESS OF THE TRANSACTIONS. THUS, DISPUTE IS NOT WITH REGA RD TO NATURE OF CREDIT, ALBEIT, WHETHER THE ONUS TO PROVE THE ENTIRE LIMBS OF SOURCE IN TERMS OF SECTION 68 IS ESTABLISHED OR NOT. THE A MOUNT OF SHARE APPLICATION MONEY INVOLVED IN THE IMPUGNED ASSESSME NT YEARS BEFORE US AND THE DETAILS OF THE ASSESSMENTS MADE I N VARIOUS SECTIONS ARE AS UNDER:- I.T.AS. NO.2819 TO 2823/DEL/2017 47 SL.NO. ASSESSMENT YEAR AMOUNT OF SHARE APPLICATION MONEY (FROM BYCELL AG, SWITZERLAND) [RS.] REMARK 1. 2006-07 17,68,00,000 ASSESSMENTS UNDER SECTIONS: (I) 143(3); (II) 147/143(3). 2. 2007-08 4,87,97,080 ASSESSMENTS UNDER SECTIONS: (I) 143(3); (II) 147/143(3). THE AMOUNT OF RS.4,87,97,080 HAS BEEN INADVERTENTLY MENTIONED AS INFLOW OF SHARE APPLICATION MONEY, WHICH IN FACT IS REPAYMENT/ OUTFLOW BY THE ASSESSEE COMPANY TO THE FOREIGN ENTITY. 3. 2008-09 70,90,15,846 ASSESSMENTS UNDER SECTIONS: (I) 143(3); (II) 147/143(3). 4. 2009-10 7,09,84,431 ASSESSMENTS UNDER SECTIONS: (I) 143(3); (II) 147/143(3). 5. 2010-11 96,36,035 ASSESSMENTS UNDER SECTIONS: (I) 143(1); (II) 147/143(3). I.T.AS. NO.2819 TO 2823/DEL/2017 48 25. AS DISCUSSED IN THE EARLIER PART OF THE OR DER, THE ASSESSEE COMPANY WAS INCORPORATED FOR PROVIDING TELECOM SERV ICES IN INDIA IN WHICH, 74% EQUITY WAS HELD BY A FOREIGN COMPANY, VIZ., M/S. BYCELL HOLDINGS AG; AND REMAINING 26% WAS HELD BY A N INDIAN COMPANY, VIZ., M/S. BITCORP PVT. LTD. FOR MAKING TH E INVESTMENT IN THE EQUITY SHARE CAPITAL IN THE INDIAN COMPANY, M/S. BYCELL HOLDINGS AG FILED APPLICATION BEFORE THE FIPB FOR S EEKING APPROVAL AND THE SAID APPROVAL WAS ACCORDED BY FIPB FROM TIM E TO TIME. ON THE BASIS OF SAID APPROVALS, M/S. BYCELL HOLDING S AG REMITTED TO THE INDIAN COMPANY (ASSESSEE), FUNDS FROM OVERSE AS TOWARDS SHARE APPLICATION MONEY/SHARE CAPITAL WHICH WAS PAR TLY UTILIZED BY THE ASSESSEE IN APPLYING FOR TELECOM LICENSES TO THE DOT (DEPARTMENT OF TELECOMMUNICATION). LATER ON, DUE TO CERTAIN SECURITY CLEARANCE RAISED BY THE MINISTRY OF HOME A FFAIRS, FIPB WITHDREW THE APPROVAL GRANTED TO THE ASSESSEE FOR C ARRYING OUT TELECOM OPERATIONS IN INDIA WITH FOREIGN EQUITY PAR TICIPATIONS. AGAINST SUCH WITHDRAWAL OF APPROVAL THE ASSESSEE CO MPANY HAD APPROACHED THE HON'BLE DELHI HIGH COURT UNDER WRIT JURISDICTION, WHICH WAS DISMISSED BY THE HON'BLE HIGH COURT ON TH E GROUND THAT THE COURT WILL NOT INTERFERE IN THE POLICY DEC ISION OF THE GOVERNMENT OF INDIA. AT PRESENT THE MATTER IS SUBJUD ICE IN ARBITRATION PROCEEDINGS BEFORE THE PERMANENT COURT OF ARBITRATION AT HAGUE. IN ALL THE YEARS BEFORE US, THE ORIGINAL ASSESSMENTS WERE COMPLETED U/S. 143(3) BARRING FOR THE ASSESSME NT YEAR 2010-11, WHEREIN THE RETURN WAS ACCEPTED U/S. 143(1 ). IN ALL SUCH ASSESSMENTS, THE AMOUNT OF SHARE APPLICATION M ONEY STOOD ACCEPTED. LATER ON, IN THE WAKE OF WITHDRAWAL OF AP PROVAL BY I.T.AS. NO.2819 TO 2823/DEL/2017 49 FIPB, FT&TR DIVISION OF CBDT REFERRED THE MATTER TO THE CONCERNED CCIT FOR CONDUCTING NECESSARY EXAMINATION AND VERIFICATION OF SOURCE OF FUNDS OF INVESTMENT MADE BY M/S. BYCELL HOLDINGS AG IN THE INDIAN COMPANY. BASED ON THIS IN FORMATION, ALL THE ASSESSMENTS WERE REOPENED U/S.147 AS PER TH E REASONS RECORDED (REPRODUCED IN THE FOREGOING PARAGRAPHS). THUS, THE CASES WERE REOPENED BY THE ASSESSING OFFICER WITH S OLE PURPOSE OF VERIFYING THE ENTIRE SOURCE AND GENUINENESS OF THE SHARE APPLICATION MONEY/SHARE CAPITAL MADE BY M/S. BYCELL HOLDINGS AG. FROM THE ASSESSMENT RECORDS PRODUCED BY THE LEA RNED CIT- DR BEFORE US, WE FIND THAT ASSESSING OFFICER DID EN QUIRE FROM THE ASSESSEE TO PROVE THE IDENTITY AND CREDITWORTHINESS OF THE FOREIGN INVESTOR AND THE GENUINENESS OF THE TRANSACTION WHI CH HAVE BEEN RESPONDED ALSO BY THE ASSESSEE. THE MAIN DOCUMENTS RELIED UPON BY THE ASSESSEE WERE MAINLY; THE FINANCIAL STATEMEN TS OF THE ASSESSEE COMPANY, WHEREIN DETAILS OF AMOUNT OF SHAR E APPLICATION MONEY RECEIVED AND SHARE ALLOTTED WERE DULY REFLECTED; APPROVAL OBTAINED FROM FIPB; RBI APPROVAL FOR ALLOT MENT OF SHARES IN FAVOUR OF THE FOREIGN INVESTOR; COPY OF F IRCS ESTABLISHING THE FOREIGN REMITTANCE RECEIVED THROUG H BANKING CHANNELS; THE INCORPORATION CERTIFICATE AND MEMORAN DUM AND ARTICLES OF ASSOCIATION OF M/S. BYCELL HOLDINGS AG; EXPLANATION REGARDING THE SOURCE OF FUNDS OF FOREIGN INVESTOR W HICH WAS IN THE FORM OF LOAN AND ADVANCE FROM ITS HOLDING COMPANY, I.E., TENOCH HOLDING, CYPRUS; AND LASTLY, INCORPORATION CERTIFIC ATE AND MEMORANDUM OF ASSOCIATION OF TENOCH HOLDING, CYPRUS FROM WHOM M/S. BYCELL HOLDINGS AG HAS RECEIVED THE LOAN FOR FURTHER I.T.AS. NO.2819 TO 2823/DEL/2017 50 INVESTMENT IN THE INDIAN COMPANY. THE ASSESSING OFF ICER AFTER EXAMINING SUCH MATERIAL AND RECORD PRODUCED BEFORE HIM DURING THE COURSE OF RE-ASSESSMENT PROCEEDINGS, MADE FURTH ER INQUIRY BY SEEKING INFORMATION FROM SWITZERLAND TAX AUTHORITIE S THROUGH PROPER CHANNEL OF FT&TR DIVISION OF CBDT, FOR EXCHA NGE OF INFORMATION SO AS TO VERIFY THE IDENTITY, SOURCE OF FUNDS AND CREDITWORTHINESS OF THE HOLDING COMPANY, M/S. BYCEL L HOLDINGS AG AND ITS PROMOTERS. THE SAID INFORMATION WAS DULY RECEIVED TO THE ASSESSING OFFICER VIDE LETTER DATED 04.02.2015 THROUGH FT&TR WHICH WAS RECEIVED FROM THEIR COUNTER PARTS I N SWITZERLAND. THE SWISS TAX AUTHORITIES HAVE CATEGOR ICALLY STATED THAT M/S. BYCELL HOLDINGS AG IS REGISTERED IN ZUG S WITZERLAND. THE SAID COMPANY THOUGH HAD NO REVENUE BUT HAD ASSE TS FROM INVESTORS IN THE FORM OF A SUBORDINATED AND CONDITI ONAL LOAN FROM HIS SOLE SHAREHOLDER M/S TENOCH HOLDING PVT. LTD., CYPRUS; AND M/S. BYCELL HOLDINGS AG AFTER RECEIVING THE ASSET H AD THEN INVESTED IN THE INDIAN COMPANY. THE DETAILS OF SHAR E APPLICATION AND SHARE ALLOTTED AND MONEY RETURNED FROM THE PROM OTER COMPANY WAS DULY PROVIDED. THIS FACT HAS BEEN NOTED BY THE ASSESSING OFFICER IN HIS OFFICE NOTE AS REPRODUCED IN THE EARLIER PART OF THE ORDER. SUCH AN INFORMATION WAS MADE AVA ILABLE BY SWISS AUTHORITIES FROM THE FINANCIAL STATEMENTS OF BYCELL HOLDINGS AG. BASED ON THIS INFORMATION AO HAD ACCEP TED THE SOURCE OF FUNDS, CREDITWORTHINESS OF THE INVESTOR A ND GENUINENESS OF THE TRANSACTION. 26. WE HAD ALSO DIRECTED THE LEARNED CIT-DR TO PRODUCE THE RELEVANT COPY OF SAID INFORMATION RECEIVED FROM SWI TZERLAND I.T.AS. NO.2819 TO 2823/DEL/2017 51 AUTHORITIES WITH REGARD TO M/S. BYCELL HOLDINGS AG. IN RESPONSE, THE DEPARTMENT HAS PRODUCED THE SAID REPORT, WHICH FOR THE SAKE OF READY REFERENCE IS REPRODUCED HEREIN BELOW:- 6 NOV 2014 ADMINISTRATIVE ASSISTANCE IN ACCORDANCE WITH THE AG REEMENT DATED 2 NOVEMBER 1994 BETWEEN THE SWISS CONFEDERATION AND T HE REPUBLIC OF INDIA FOR THE AVOIDANCE OF DOUBLE TAXATION WITH RESPECT TO TAXES ON INCOME (DTA CH-IN, SR 0.672.942.31)CONCERNING M/S B Y CELL TELECOMMUNICATIONS INDIA PVT. LTD. DEAR MR. RANJAN, WE REFER TO THE AFOREMENTIONED REQUESTS FOR INFORMA TION. BASED ON ARTICLE 26 DTA CH-IN WE CAN PROVIDE YOU WI TH THE FOLLOWING INFORMATION FOR THE FISCAL YEAR 2011/2012 , WHICH IS THE APPLICABLE TIME PERIOD UNDER THE DTA IN-CH; 1. THE LEGAL IDENTITY OF BYCELL AG SWITZERLAND IS TO BE VERIFIED. BYCELL HOLDING AG IS REGISTERED IN THE COMMERCIAL REGIST RY AS WELL AS WITH THE TAX OFFICE UNDER THE FOLLOWING ADDRESS: BAHNHOFSTRASSE 23, 6300 ZUG, SWITZERLAND. PLEASE FIND ENCLOSED AN EXTRACT OF THE COMMERCIAL R EGISTRY. 2. THE SOURCES OF INCOME OF BYCELL AG SWITZERLAND WHEREFORE IT HAD MADE INVESTMENTS IN CAPITAL SHARES OF BYCELL TELECOMMUNICATIONS INDIA PRIVATE LIMITED, YEAR-WISE DETAILS OF WHICH ARE MENTIONED BELOW. FEDERAL TAX ADMINISTRATION FTA NINA ULRICH EIGERSTRA6EE 65 CH-3003 BERN TEL. [phone], FAX [phone] [e-mail] WWW.ESTV.ADMIN.CH I.T.AS. NO.2819 TO 2823/DEL/2017 52 THE COMPANY HAS STRICTLY SPEAKING NO INCOME, BUT HAS ASSETS FROM ITS INVESTORS. IN THE CONTEXT OF A SUBORDINATED AND CONDITIONED LOAN FROM ITS SOLE SHAREHOLDER TENOCH HOLDINGS LIMITED, NICOSIA, CYPRUS, BYCELL HOLDING AG RECEIVED TH E ASSETS WHICH THEY THEN INVESTED IN THE INDIAN COMPANY BYCELL TELECOMMUNICATIONS INDIA PRIVATE LIMITED. 1. DETAILS OF WHERE THE MONEY HAS GONE, WHICH WAS RETURNED BY BYCELL TELECOMMUNICATION INDIA PRIVATE LIMITED TO B YCELL AG SWITZERLAND, YEAR-WISE DETAILS OF WHICH ARE MENTION ED BELOW: ASST YEAR PERIOD OPENING BALANCE SHARE APPLICATION MONEY RECEIVED SHARE ALLOTTED SHARE APPLICATION MONEY RETURNED REMAINING SHARE APPLICATION MONEY 2006 - 2007 01/04/2005 31/03/2006 NIL 176800000 128 002 920 + 7400 PURCHASED FROM INITIAL SUBSCRIBERS NIL 4897 080 2007-2008 01/04/2006 31/03/2007 48 797 080 NIL NIL 48 797 080 NIL 2008 - 2009 01/04/2007 31/03/2008 NIL 709 015846 NIL NIL 7095 846 2009-2010 01/04/2008 31/03/2009 709 015 846 709015 846 71872540 NIL 708 127 537 2010 - 2011 01/04/2009 31/03/2010 708 127 537 9636 035 NIL NIL 717 763 572 2011 - 2012 01/04/2011 TO 31/03/2012 717 763 572 NIL NIL 450 000 000 267 763 572 DUE TO THE RECENT DECISION OF THE SWISS FEDERAL ADM INISTRATIVE COURT (SWISS FEDERAL ADMINISTRATIVE COURT DECISION A-4232 /2013 OF 17 DECEMBER 2013), ADMINISTRATIVE ASSISTANCE CAN ONLY PROVIDE INFORMATION FOR TAX YEARS FROM THE FISCAL YEAR 2011 /2012 AS THE PRIOR YEARS ARE NOT COVERED BY THE TEMPORAL SCOPE OF ARTI CLE 26 OF THE UPDATED AGREEMENT BETWEEN INDIA AND SWITZERLAND. HAVING INVESTED THE MENTIONED AMOUNT, BYCELL HOLDIN G AG CLAIMS THAT THE INDIAN AUTHORITIES REFUSED TO PROVIDE BYCE LL TELECOMMUNICATIONS INDIA PRIVATE LIMITED WITH A MOB ILE PHONE I.T.AS. NO.2819 TO 2823/DEL/2017 53 LICENSE. IN THIS CONTEXT, CERTAIN PORTIONS OF THE I NVESTED ASSETS WERE RETURNED (MAINLY BY BANK DEPOSIT GUARANTIES). THE I NDIAN AUTHORITIES HOLD FUNDS WHICH WERE TRANSFERRED BY BYCELL TELECOM MUNICATIONS INDIA PRIVATE FOR FEES RELATED TO LICENSES, BUT THA T THESE HAD NOT BEEN ISSUED UP TO TODAY. THE ORIGINAL OWNER OF THESE FUN DS IS BYCELL HOLDING AG. ACCORDING TO THE DECISION OF THE SHAREHOLDERS, AND IN THE ABSENCE OF ANY DEBTS OR OTHER INVESTMENT PURPOSES, T HE FUNDS RETURNED BY BYCELL TELECOMMUNICATIONS INDIA PRIVATE LIM ITED TO BYCELL HOLDING AG WERE REIMBURSED TO THE SHAREHOLDE R AND THEREFORE TO THE INVESTORS WHO PROVIDED THESE FUNDS, WITH THE EXCEPTION OF MARGINAL AMOUNTS USED FOR THE FUNCTIONING O F THIS COMPANY. BYCELL HOLDING AG STATED THAT THE FIGURES IN THE AB OVE MENTIONED TABLE FOR THE TIME PERIOD FROM 1 APRIL 2011 TO 31 M ARCH 2012 COULD NOT BE LOCATED IN THEIR BOOKS. THEY DID HOWEVER STA TE THAT ONE TRANSACTION TOOK PLACE ON 19 APRIL 2011 WHEN BYCELL TELECOMMUNICATIONS INDIA PRIVATE LIMITED TRANSFERRE D THE AMOUNT OF $ 4026815.00 TO BYCELL HOLDING AG. ON THE 26 APRI L 2011 AN AMOUNT OF $ 4003000.00 WAS TRANSFERRED BY BYCELL HOLDING AG TO TENOCH HOLDINGS LIMITED, NICOSIA, CYPRUS. WITH REGARD TO THE AFOREMENTIONED INFORMATION WE WO ULD LIKE TO DRAW YOUR ATTENTION TO THE RESTRICTIONS ON THE USAB ILITY OF THE TRANSMITTED INFORMATION AS WELL AS THE CONFIDENTIAL ITY OBLIGATIONS UNDER THE ADMINISTRATIVE ASSISTANCE PROVISIONS OF T HE APPLICABLE AGREEMENT (ARTICLE 20 PARAGRAPH 2 TAAA) IN CONNECTI ON WITH ARTICLE 26 DBA CH-IN. PLEASE DO NOT HESITATE TO CONTACT US SHOULD YOU HAV E ANY FURTHER QUESTIONS. KINDLY CONFIRM RECEIPT OF THIS LETTER. YOURS SINCERELY, SERVICE FOR EXCHANGE OF INFORMATION IN TAX MATTERS SD/- SD/- MIEK HALLER NINA ULRICH DEPUTY HEAD SEI LAWYER I.T.AS. NO.2819 TO 2823/DEL/2017 54 27. THE ABOVE INFORMATION OSTENSIBLY DIVULGE FOLLOWING FACTS:- LEGAL IDENTITY OF BYCELL HOLDING AG IS ESTABLISHED AS IT IS REGISTERED IN THE COMMERCIAL REGISTRY AS WELL AS WI TH THE TAX OFFICE AT ZUG SWITZERLAND. HENCE TAX RESIDENT OF SWITZERLAND. SOURCES FROM WHERE IT HAS MADE INVESTMENT IN THE IN DIAN COMPANY IS FROM THE ASSETS RECEIVED FROM ITS INVEST ORS BY WAY SUBORDINATED AND CONDITIONED LOAN FROM ITS SOLE SHAREHOLDER, TENOCH HOLDINGS LTD. NICOSIA, CYPRUS. THUS, THE SOURCE FROM WHERE THE FUNDS HAVE BEEN INVESTED HAS BEEN PROVIDED. YEAR WISE DETAILS OF MONEY GONE TO INDIAN COMPANY F ROM SWISS COMPANY AND LATER ON RETURNED BACK HAVE BEEN DULY ELABORATED. PART OF THE FUNDS RETURNED BY THE INDIAN COMPANY HA S BEEN REIMBURSED TO THE SHAREHOLDERS AND INDIAN AUTH ORITIES HAVE STILL HOLD PART OF THE FUNDS WHICH WERE TRANSF ERRED BY BYCELL INDIAN COMPANY FOR FEES AND LICENSE TO DOT. THE AFORESAID FACTS CLEARLY ESTABLISH THE NATURE AN D SOURCE OF FUNDS RECEIVED BY BYCELL TELECOMMUNICATIONS INDIA ( PVT.) LTD., I.E., ASSESSEE FROM ITS HOLDING COMPANY. LD. AO, WH EN IN WAKE OF SUCH CREDIBLE MATERIAL HAS ACCEPTED THE SHARE APPLI CATION/SHARE CAPITAL MADE BY SWISS ENTITY IN THE INDIAN COMPANY, COUPLED WITH OTHER MATERIAL PLACED BY ASSESSEE BEFORE HIM, THEN WE DO FIND ANY INFIRMITY IN HIS ORDER EITHER IN LAW OR ON FACTS THAT IN I.T.AS. NO.2819 TO 2823/DEL/2017 55 TERMS OF REQUIREMENT UNDER THE PROVISION OF SECTION 68, THE CREDITS DOES NOT STAND PROVED. 28. LD. PCIT WHILE EXERCISING HIS REVISIONARY JURISDICTION U/S. 263 HAS STRESSED UPON THE FACT THAT ONLY IDENTITY O F THE SHARE APPLICATION MONEY HAS BEEN EXAMINED BY THE ASSESSIN G OFFICER, BUT THE GENUINENESS OF THE TRANSACTION AND CREDITWO RTHINESS OF THE INVESTOR HAS NOT BEEN VERIFIED AND NO INQUIRY W HATSOEVER HAS BEEN DONE BY THE ASSESSING OFFICER IN THIS REGARD. IN THE IMPUGNED ORDER, THE LEARNED PCIT THOUGH HAS ACKNOWL EDGED THE AFORESAID INFORMATION RECEIVED FROM SWITZERLAND TAX AUTHORITIES REQUISITIONED BY CBDT ITSELF, BUT NOWHERE HAS COMME NTED OR GIVEN ANY FINDING AS TO HOW THE SAID INFORMATION RE CEIVED FROM SWISS TAX AUTHORITY DOES NOT EITHER PROVE THE SOURC E OR CREDITWORTHINESS OF THE INVESTOR OR THE GENUINENESS OF THE TRANSACTION. GREAT EMPHASIS HAS BEEN LAID BY THE LE ARNED PCIT AS WELL AS THE LEARNED CIT-DR BEFORE US THAT BANK ACCO UNTS OF THE M/S. BYCELL HOLDINGS AG HAS NOT BEEN BROUGHT ON REC ORD DURING THE ASSESSMENT PROCEEDINGS SO THAT THE GENUINENESS OF THE FINANCIAL TRANSACTION CAN BE VERIFIED AND ALSO THE COPY OF AUDITED BALANCE SHEETS. WHENCE THE MONEY IS FLOWING FROM TH E BOOKS OF THE INVESTOR AS CERTIFIED BY SWISS TAX AUTHORITIES FROM THEIR FINANCIAL ACCOUNTS INCLUDING THE SOURCE OF THEIR FU NDS FOR INVESTING IN INDIAN COMPANY AND REMITTANCES ARE CER TIFIED FROM FIRCS ISSUED BY RESPECTIVE BANKS OF THE INVESTOR AN D THE INVESTEE DULY APPROVED BY RBI, THEN HOW MERE NOT FILING OF B ANK STATEMENT VITIATES THE ONUS OF PROVING THE SOURCE. FURTHER, NOWHERE IN THE IMPUGNED ORDER LEARNED PCIT HAS EVEN UTTERED A I.T.AS. NO.2819 TO 2823/DEL/2017 56 WHISPER AS TO WHAT KIND OF FURTHER INQUIRY WAS REQU IRED TO BE DONE BY THE ASSESSING OFFICER ESPECIALLY WHEN THE S WISS AUTHORITY HAVE CLEARLY CONFIRMED, FIRSTLY , THE SOURCE OF FUND OF M/S. BYCELL HOLDINGS AG FOR INVESTING IN SHARE APPL ICATION MONEY IN THE INDIAN COMPANY (WHICH WAS IN THE FORM OF LOA N FROM ITS SOLE SHAREHOLDER COMPANY, M/S. TENOCH HOLDINGS LTD. , NICOSIA CYPRUS); AND SECONDLY , THE DETAILS OF MONEY GONE FROM SWITZERLAND TO INDIA AND ALSO THE RETURN OF FUNDS B Y THE INDIAN COMPANY TO M/S. BYCELL HOLDINGS AG. YEAR-WISE DETAI LS HAVE BEEN GIVEN WHICH WAS ON THE BASIS OF BOOKS OF ACCOU NT OF M/S. BYCELL HOLDINGS AG. IN THE WAKE OF THIS INFORMATION /CONFIRMATION, WE ARE UNABLE TO APPRECIATE AS TO, WHAT ELSE WAS RE QUIRED FROM THE ASSESSING OFFICER OR WHAT KIND OF FURTHER INQUI RY WAS REQUIRED TO BE DONE OR OTHERWISE THE ENTIRE SOURCE OF THE SH ARE CAPITAL MADE IN THE INDIAN COMPANY WOULD BE DISBELIEVED. 29. HERE IN THIS CASE THE ENTIRE EXERCISE OF DO UBTING THE GENUINENESS OF THE TRANSACTION IS FROM THE FACT THA T THE MINISTRY OF HOME AFFAIRS HAVE RAISED THE ISSUE OF SECURITY C ONCERN, ON THE BASIS OF WHICH FIPB APPROVAL WAS WITHDRAWN. HOWEVER , THIS FACT ALONE DOES NOT IPSO FACTO CAN LEAD TO AN INFERENCE THAT ENTIRE SHARE APPLICATION MONEY RECEIVED FROM THE FOREIGN E NTITY HAS BECOME NON GENUINE. WHEN THE MONEY WAS INVESTED THE RE WAS A DUE APPROVAL BY GOVT. OF INDIA (FIPB) WHICH WAS GIV EN FOR OBTAINING TELECOM LICENSE WITH DOT AND THE FLOW OF TRANSACTION WAS DULY CERTIFIED BY FIRC CERTIFICATE WHICH WAS PL ACED ON RECORD NOT ONLY BEFORE THE ASSESSING OFFICER BUT ALSO BEFO RE THE LEARNED PCIT. THESE FIRCS DULY PROVIDE THE SOURCE OF ENTITY WHO HAS I.T.AS. NO.2819 TO 2823/DEL/2017 57 GIVEN THE MONEY AND ALSO THE PERSON WHO HAD RECEIVE D THE MONEY IN INDIA AND THE PURPOSE FOR WHICH THE SAID MONEY W AS GIVEN. FURTHER, MUCH HAS BEEN HARPED UPON BY THE LD. PCIT AND LD. CIT-DR WHO TRIED TO IMPRESS UPON US THAT, M/S. TENO CH HOLDINGS LTD. CYPRUS WAS JUST A HOLDING COMPANY WHICH WAS FUR THER HELD BY TWO DIFFERENT ENTITIES, M/S. QUALLIS INC, PANAMA AND M/S. KYANANCE BUSINESS LTD, BRITISH VIRGIN ISLAND AND BO TH THESE COMPANIES WERE HELD BY SOME INDIVIDUALS, ONE OF WHO M ALLEGEDLY HAD SOME SHADY PAST OR WERE INVOLVED IN SOME KIND O F SCAMS, THOUGH NOT MUCH HAS NOT BEEN BROUGHT ON RECORD IN T HIS REGARD. ON THESE FACTS, SHE HAD SUBMITTED THAT THE ASSESSIN G OFFICER SHOULD HAVE INQUIRED ABOUT THE ENTIRE LINK WHILE EX AMINING THE CREDITWORTHINESS OF THE FOREIGN ENTITIES. 30. UNDER THE DEEMING PROVISION OF SECTION 68 AS WAS APPLICABLE AT THE RELEVANT TIME, THE PERSON IN WHOS E BOOKS OF ACCOUNT ANY SUM IS FOUND CREDITED DURING THE RELEVA NT PREVIOUS YEAR, WAS REQUIRE TO EXPLAIN THE NATURE AND SOURCE OF SUCH CREDIT. FOR PROVING THE SOURCE, THE COURTS SINCE TIME IMMEMORIAL HAVE LAID DOWN THAT ASSESSEE NEEDS TO PRIMA FACIE PROVE THE IDENTITY AND CREDITWORTHINESS OF THE CREDITOR AND T HE GENUINENESS OF THE TRANSACTION. ONCE IT IS PRIMA FACIE ESTABLIS HED BY THE ASSESSEE, THEN ONUS SHIFTS UPON THE ASSESSING OFFIC ER TO REBUT SUCH EVIDENCE IF HE IS NOT SATISFIED WITH THE EXPLA NATION BASED ON THE EVIDENCE FILED, BY BRINGING COGENT MATERIAL ON RECORD AFTER CARRYING OUT NECESSARY INQUIRY. IF THE AO FAILS TO UNEARTH ANY INCRIMINATING MATERIAL TO DISLODGE ASSESSEES EVIDE NCE, THEN HE CANNOT OBDURATELY DISBELIEVE THE TRANSACTION ON HIS SUSPICION. I.T.AS. NO.2819 TO 2823/DEL/2017 58 INQUIRY SHOULD BE MADE TO EXAMINE WHETHER THE CREDI TOR/LENDER OR INVESTOR IS LEGALLY IDENTIFIED AND HAS THE CREDI TWORTHINESS TO LEND/ ADVANCE OR GIVE THE MONEY. THE PROVING OF SOU RCE IS LIMITED QUA THE CREDITOR/LENDER/INVESTOR. IT CANNOT BE EXTENDE D TO LOOK THE SOURCE OF FUND OF SUCH PERSON UNLESS, IT IS FOU ND BY THE AO THAT MONEY OF THE ASSESSEE HAS BEEN CIRCUITOUSLY RO UTED THROUGH THAT PERSON. IF THERE IS NO MATERIAL TO DOUBT THE C REDITORS SOURCE THEN IT HAS TO BE ACCEPTED. PROVING OF SOURCE OF TH E SOURCE IS NOT REQUIRED TO BE GONE INTO AND CAN ONLY BE RESORTED T O UNDER EXCEPTIONAL CIRCUMSTANCES WHEN THERE IS STRONG PRIM A FACIE MATERIAL THAT SOURCE ITSELF IS NOT GENUINE. HERE IN THIS CASE, SOURCE OF FUNDS OSTENSIBLY FLOWS FROM BYCELL HOLDIN GS AG, SWITZERLAND AND NOT ONLY THIS, ITS SOURCE OF ADVANC ING THE SUM IS TRACEABLE TO ITS HOLDING COMPANY, M/S TENOCH HOLDIN GS LTD. CYPRUS. THUS, IN THE PRESENT CASE, SOURCE OF THE SO URCE HAS ALSO BEEN ESTABLISHED. BEYOND THAT, IS NOT THE MANDATE O R REQUIREMENT OF LAW TO BE ADHERED BY THE ASSESSING O FFICER. NOTHING HAS BEEN BROUGHT ON RECORD BY THE LD. PCIT OR THE LD. CIT DR THAT ASSESSEES OWN MONEY HAS BEEN ROUTED TH ROUGH MULTI LAYERED ENTITIES OR MONEY HAS FLOWN FROM THE COFFERS OF THE ASSESSEE. HERE IN THIS CASE IT HAS ALREADY BEEN FOU ND THAT WHEN LICENSE WAS CANCELLED BY FIPB, THE MONEY HAS BEEN R EFUNDED BACK TO THE SHAREHOLDERS. THIS FURTHER PROVES THAT IT WAS NOT THE ASSESSEES MONEY BROUGHT UNDER THE GARB OF SHARE AP PLICATION MONEY. SWISS ENTITY IS MAJOR SHAREHOLDER OF THE IND IAN COMPANY WHICH WAS ESTABLISHED SOLELY WITH A VIEW TO CARRY O UT TELECOM BUSINESS IN INDIA POST GRANTING OF LICENSE BY DOT A ND IT IS AN I.T.AS. NO.2819 TO 2823/DEL/2017 59 ADMITTED FACT THAT IT COULD NOT CARRY OUT THE OPERA TION AFTER CANCELLATION OF LICENSE, WHICH DISPUTE BETWEEN ASSE SSEE COMPANY AND GOVT. OF INDIA IS BEFORE INTERNATIONAL COURT OF ARBITRATION. ALL THE DOUBT BY LD. PCIT IS BASED ON SUSPICION AND SUR MISE SANS ANY MATERIAL. AS REGARD THE ALLEGATION THAT CREDITW ORTHINESS OF M/S. BYCELL HOLDINGS AG WAS NOT LOOKED INTO OR EXAM INED BY THE ASSESSING OFFICER, IT IS SEEN FROM THE FROM RECORDS THAT THE ASSESSING OFFICER DID NOT JUST MERELY ACCEPTED THE A SSESSEES EXPLANATION OR EVIDENCE IN AIR, BUT CARRIED OUT INQ UIRY TO ASCERTAIN THE ASSESSEES VERSION BY CALLING FOR THE INFORMATION FROM SWISS AUTHORITIES WHO HAD THE JURISDICTION ON THE INVESTOR COMPANY AND AFTER RECEIVING THE AFORESAID REPORT FR OM THE SWISS AUTHORITY WAS SATISFIED THAT THE MONEY WHICH WAS GI VEN BY THE M/S. BYCELL HOLDINGS AG TO THE INDIAN COMPANY TOWAR DS SHARE APPLICATION MONEY HAS COME FROM ITS SOLE PROMOTER C OMPANY, M/S. TENOCH HOLDING, NICOSIA CYPRUS. THUS, THE ENTI RE CREDITWORTHINESS OF THE INVESTOR STANDS PROVED AND ONUS THAT LIED UPON THE ASSESSEE AND AO STOOD DISCHARGED. FURTHER IT IS NOT NECESSARY, WHETHER THE M/S. BYCELL HOLDINGS AG WAS HAVING ITS OWN REVENUE FROM OPERATION OR NOT BUT IF THE FUNDS HAVE BEEN GIVEN FROM THE LOAN TAKEN FROM THE HOLDING COMPANY, IT SUFFICES THE TEST OF CREDITWORTHINESS FOR PROVING THE SOURCE . WHETHER THE TENOCH HOLDING HAD THE CREDITWORTHINESS TO GIVE SUC H AMOUNT TO M/S. BYCELL HOLDINGS AG TO PROVE THE CREDIT OF SHAR E APPLICATION MONEY IN THE BOOKS OF ACCOUNT OF THE INDIAN COMPANY , AS HELD BY US, WAS NOT THE REQUIREMENT EITHER UNDER THE FACTS OF THE CASE OR UNDER THE LAW. I.T.AS. NO.2819 TO 2823/DEL/2017 60 31. EVEN UNDER THE AMENDED PROVISION OF SECTIO N 68, BROUGHT BY THE FINANCE ACT, 2012, W.E.F. 01.04.2013, WHEREB Y PROVISO HAS BEEN INSERTED QUA THE DEEMING FICTION ON SHARE APPLICATION MONEY, SHARE CAPITAL, SHARE PREMIUM OR ANY SUCH CRE DIT, HAS BEEN MADE APPLICABLE TO RESIDENT ENTITY ONLY AND NOT TO NON- RESIDENT ENTITY. THIS INTER-ALIA MEANS THAT DEEMING FICTION CANNOT BE EXTENDED TO NON-RESIDENT ENTITIES. BE IT AS MAY BE, UNDER THE AMENDED LAW ALSO THE ONUS STANDS DISCHARGED AS THE INVESTOR COMPANY HAS EXPLAINED THE NATURE AND SOURCE OF CRED IT, THAT IS, THE SHARE APPLICATION MONEY/SHARE CAPITAL HAS BEEN GIVEN OUT OF ITS DECLARED SOURCES IN ITS BOOKS OF ACCOUNT. THUS, UNDER AMENDED PROVISION ALSO THE ADDITION COULD NOT HAVE BEEN MADE AND AO HAS RIGHTLY ACCEPTED THE ASSESSEES EXPLANAT ION AFTER FINDING IT SATISFACTORILY. 32. HERE IN IMPUGNED ORDER, NOWHERE THE LD. PCIT HAS SPECIFIED AS TO AFTER CONCLUSIVE CONFIRMATION BY SW ISS TAX AUTHORITIES, WHAT OTHER INQUIRY WAS REQUIRED UNDER THE LAW WHICH ASSESSING OFFICER HAS FAILED TO CARRY OUT. WITHOUT SPECIFYING AS TO WHAT POSSIBLE INQUIRY UNDER JURISDICTIONAL POWER OF AO COULD HAVE BEEN DONE, HE CANNOT SET ASIDE THE ASSESSMENT. IS THE LD. PCIT MEANT THAT AO SHOULD HAVE MADE THE INQUIRY FRO M CYPRUS TAX AUTHORITIES FOR THE SOURCE OF PROVIDING LOAN TO ITS SWISS HOLDING COMPANY BY THE TENOCH HOLDING LTD.? THEN IN THAT CASE, HE SHOULD HAVE HIMSELF INVOKED HIS POWERS UNDER THE TREATY PROVISION WITH CYPRUS TO OBTAIN FURTHER INFORMATION THROUGH CBDT. HE HAS NOT MADE ANY KIND OF INQUIRY TO DISLOD GE AOS INQUIRY OR FINDING, WHICH IN TERMS OF SECTION 263, IS REQUIRED IF HE I.T.AS. NO.2819 TO 2823/DEL/2017 61 DEEMS NECESSARY, ALBEIT HAS SIMPLY DISCARDED THE AOS EFFORT WITHOUT ANY COGENT MATERIAL BROUGHT ON RECORD BY HI M. IN VARIOUS JUDGMENTS AS HIGHLIGHTED BY THE LEARNED SENIOR COUNS EL, IT HAS BEEN CATEGORICALLY HELD THAT, UNDER SECTION 263, LD . CIT IF REQUIRED, HIMSELF HAS TO UNDERTAKE A MINIMAL INQUIR Y AND GIVE REASONS FOR COMING TO THE CONCLUSION THAT ASSESSMEN T ORDER WAS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE RE VENUE. THERE HAS TO BE SOME FINDING ON MERITS AFTER CARRYING OUT NECESSARY INQUIRY. THIS PROPOSITION HAS BEEN EXPLAINED IN THE JUDGMENT OF ITO VS. DG HOUSING PROJECTS LTD. REPORTED IN 343 ITR 329 (DEL); DIT VS. JYOTI FOUNDATION REPORTED IN 357 ITR 388 (D EL.); CIT VS. DELHI AIRPORT METRO EXPRESS (P) LTD., IN ITA NO .705/2017; CIT VS. MODICARE LTD IN ITA NO.759/2016. THUS, THE IMPUGNED ORDER OF LD. PCIT CANCELLING AND SETTING ASIDE THE ASSESSMENT ORDER CANNOT BE UPHELD ON THIS GROUND ALSO. 32. ONCE AGAIN ON MERITS, AS DISCUSSED ABOVE, I T EVIDENTLY BORNE OUT THAT THE MONEY FOR SHARE APPLICATION/SHAR E CAPITAL IN THE INDIAN COMPANY IS FLOWING FROM THE SWISS COMPAN Y FROM THE SOURCES DISCLOSED IN ITS REGULAR BOOKS DULY REFLECT ED IN THE ANNUAL FINANCIAL ACCOUNTS AND HAS COME THROUGH THE BANKING CHANNEL. MERELY BECAUSE THE RELEVANT BANK STATEMENT WAS NOT GIVEN BEFORE THE AO AND TO DRAW ADVERSE INFERENCE, IN OUR OPINIO N CANNOT BE THE SOLE DECIDING FACTOR WHEN THE FOREIGN BANK AS W ELL AS THE INDIAN BANK HAVE DULY CONFIRMED THE TRANSACTION BY THE FLOW OF MONEY FROM SWITZERLAND TO INDIA. IN SUCH CIRCUMSTAN CES IT CANNOT BE SAID THAT BANK STATEMENT WAS REQUIRED TO SEE THE GENUINENESS OR THE CREDITWORTHINESS. HERE IN THIS C ASE THE I.T.AS. NO.2819 TO 2823/DEL/2017 62 CREDITWORTHINESS IS FURTHER BORNE OUT FROM THE BALA NCE SHEETS OF BYCELL HOLDINGS AG, (THE ENGLISH VERSION OF WHICH W AS PRODUCED BEFORE US BY THE ASSESSEE AS PER OUR DIRECTION ALON G WITH THE ORIGINAL BALANCE SHEET WHICH WAS IN FRENCH). FROM T HE PERUSAL OF THE BALANCE SHEET, WE FIND THAT THE ENTIRE SHARE AP PLICATION MONEY GIVEN TO THE INDIAN COMPANY HAS BEEN DULY REF LECTED INCLUDING THE LOAN TAKEN FROM ITS HOLDING COMPANY I N CYPRUS. THIS PROVES THE LINK OF MONEY FLOWN FROM THE COFFER S OF ITS HOLDING COMPANY, M/S. TENOCH LTD. CYPRUS TO M/S. BYCELL HOL DINGS AG. DURING THE COURSE OF THE HEARING THE LD. CIT-DR TRI ED TO IMPRESS UPON THE FACT THAT M/S. TENOCH LTD. CYPRUS WAS THE HOLDING COMPANY FURTHER HELD BY M/S. QUALLIS INC, PANAMA AN D M/S. KYANANCE BUSINESS LTD, BRITISH VERSION ISLAND AND B OTH THESE COMPANIES WERE HELD BY SOME INDIVIDUALS. ON THIS PR EMISE, SHE SUBMITTED THAT THE ASSESSING OFFICER SHOULD HAVE IN QUIRED ABOUT THE ENTIRE LINK WHILE EXAMINING THE CREDITWORTHINES S OF THE FOREIGN ENTITIES. WE ARE UNABLE TO APPRECIATE SUCH KIND OF REMOTE LINK ESPECIALLY WHEN THE ASSESSING OFFICER UNDER THE LAW WAS REQUIRED TO SEE THE NATURE AND SOURCE OF THE CREDIT WHICH HA D COME FROM A SWISS COMPANY AND NOT TO EXAMINE THE SOURCE OF MONE Y ADVANCED BY M/S. TENOCH HOLDING LTD TO SWISS COMPAN Y. GOING BEYOND AS TO HOW THE M/S. TENOCH HOLDING COMPANY HA S RECEIVED THE MONEY AND WHAT IS THE SOURCE OF M/S. T ENOCH HOLDING LTD. IS DEFINITELY NOT THE REQUIREMENT OF T HE LAW UNLESS ANY CONTRARY MATERIAL IS FOUND. OTHERWISE THERE WOU LD BE NO END TO ROVING AND FISHING INQUIRY. THUS, THE CONTENTION RAISED BY THE LEARNED CIT-DR ABOUT THE BACKGROUND OF THE PERSONS WHO WERE I.T.AS. NO.2819 TO 2823/DEL/2017 63 HOLDING TENOCH HOLDING LTD. THROUGH THEIR COMPANIES WILL NOT MAKE MUCH DIFFERENCE IN THE LAW IN SO FAR AS TO FUR THER EXAMINE THE SOURCE OF SHARE APPLICATION MONEY/SHARE CAPITAL BROUGHT BY NON-RESIDENT ENTITY. HERE IN THIS CASE THE LEARNED PCIT HAS COMPLETELY IGNORED THE FACTUM OF REPORT RECEIVED FR OM SWISS TAX AUTHORITIES, WHICH PERHAPS CLINCHES THE ENTIRE ISSU E IN FAVOUR OF THE ASSESSEE AND HAS NOT EVEN LAID DOWN THE PARAMET ERS AS TO WHAT SHOULD HAVE BEEN THE INQUIRY MADE BY THE ASSES SING OFFICER AFTER RECEIVING SUCH A REPORT. ACCORDINGLY, THE REA SSESSMENT ORDERS PASSED BY THE AO FOR THE IMPUGNED ASSESSMENT YEARS CANNOT BE RECKONED AS ERRONEOUS IN SO FAR AS IT IS PREJUDICIAL TO THE INTEREST OF REVENUE. 33. LASTLY, AT THE TIME OF HEARING, LD. COUNSE L FOR THE ASSESSEE HAS STRONGLY RELIED UPON THE JUDGMENT OF ITAT DELHI BENCH IN THE CASE OF RUSSIAN TECHNOLOGY CENTRE VS. DCIT, REPORTE D IN 155 TTJ 316, TO CONTEND THAT ON SIMILAR SET AND CIRCUMSTANC ES, THE IDENTITY OF THE NON-RESIDENT REMITTER AND SOURCE OF FUNDS STOOD ESTABLISHED THROUGH FIPB APPROVAL AND FIRCS ISSUED BY THE AUTHORISED DEALER, RBI, IT WAS HELD THE SHARE APPLI CATION MONEY STANDS PROVED AND NO ADDITION CAN BE MADE U/S 68. W E FIND THAT NOW THAT DECISION OF THE TRIBUNAL HAS BEEN AFFIRMED THE HONBLE JURISDICTIONAL HIGH COURT, VIDE JUDGMENT DATED 5.12. 2017 REPORTED IN ( 2017) 100 CCH 0141 (DEL) IN THE CASE OF CIT AND ANOTHER VS. RUSSIAN TECHNOLOGY PVT. LTD. THOUGH THIS JUDGMENT CAME TO OUR NOTICE AFTER THE HEARING OF THE CASE, WE ARE YET TAKING NOTE OF THIS JUDGMENT BEING THE JUDGMENT O F HONBLE JURISDICTIONAL HIGH COURT. IN THIS CASE, THE ASSESS EE COMPANY I.T.AS. NO.2819 TO 2823/DEL/2017 64 HAD RECEIVED VARIOUS AMOUNTS FROM ITS HOLDING FOREI GN COMPANY TO ITS SUBSIDIARY. THE ASSESSEE TO PROVE THE GENUIN ENESS AND IDENTITY OF THE SHAREHOLDER FURNISHED FIPB APPROVAL COPY OF CERTIFICATE OF INCORPORATION OF SHAREHOLDERS COPY O F BANK STATEMENT AND COPY OF FORM-II FILED BEFORE ROC AND BALANCE SHEETS. DESPITE ALL THOSE EVIDENCES THE ASSESSING O FFICER HAD MADE THE ADDITION WHICH WAS CONFIRMED BY THE LD. CI T (A), HOWEVER THE TRIBUNAL HAD DELETED THE SAID ADDITION. IN THE WAKE OF THIS BACKGROUND THE HON'BLE HIGH COURT HAS OBSER VED AND HELD AS UNDER:- 12. THE PRECEDING ENUMERATION OF THE CIRCUMSTANCES OF THE CASE SHOW THAT THE ASSESSEE HAD FURNISHED ALL RELEVANT D ATA BEFORE THE AO AND THE CIT(A), WHICH, HOWEVER, WERE NOT INQUIRE D INTO BY THE AO. INSTEAD HE OBDURATELY ADHERED TO HIS FIRST IMPR ESSION AND/OR INITIAL UNDERSTANDING THAT THE ENTIRE TRANSACTION W AS NEITHER CREDITWORTHY NOR GENUINE. THE ASSESSEE RELIED UPON THE DOCUMENTS TO PROVE THAT THE MONIES HAD BEEN RECEIVE D THROUGH BANKING CHANNELS FROM ITS PRINCIPAL AND OTHER RELAT ED COMPANIES; IT HAD SUBMITTED THE FIPB APPROVAL DATED 10.12.2005 AUTHORIZING THE ASSESSEE COMPANY TO RAISE CAPITAL UPTO RS.600 C RORES, COPY OF CERTIFICATES OF INCORPORATION OF SHARE HOLDERS, COP Y OF BANK STATEMENT, COPY OF FORM 2 FILED BEFORE ROC, COPIES OF CERTIFICATES OF (I) INCORPORATION OF RTCFIL, (II) INCUMBENCY OF RTCFIL, (III) GOOD STANDING OF RTCFIL, (IV) DIRECTOR CERTIFICATE OF RT CHL AS WELL AS THE BALANCE SHEET OF RTCFIL FOR THE YEARS 2004-05 A ND THE CONFIRMATION GIVEN BY THE REMITTERS TOWARDS REMITTA NCE OF SHARE CAPITAL ETC. THIS WAS ALL THAT THE ASSESSEE COULD H AVE FURNISHED IN THE CIRCUMSTANCES. IT COULD NOT BE EXPECTED TO PROV E THE NEGATIVE I.T.AS. NO.2819 TO 2823/DEL/2017 65 THAT THE MONIES RECEIVED BY IT WERE SUSPICIOUS OR N OT GENUINE INFUSION OF CAPITAL ETC. THE ASSESSEE HAD DISCHARGE D ITS BURDEN OF PROOF IN TERMS OF THE SETTLED DICTA IN DIVINE LEASING (SUPRA). IT IS ONLY LOGICAL TO EXPECT THAT IF THE AO WAS NOT CONVI NCED ABOUT THE GENUINENESS OF THE SAID DOCUMENTS, HE WOULD HAVE IN QUIRED INTO THEIR VERACITY FROM THE BANK(S) TO ASCERTAIN THE TR UTH OF THE ASSESSEE'S CLAIMS. HAVING NOT DONE SO, HE WAS NOT J USTIFIED IN DISREGARDING THE ASSESSEE'S CONTENTIONS THAT THE IN FUSION OF MONIES INTO ITS ACCOUNTS WAS LEGITIMATE. CONSEQUENT LY, THE AO WAS NOT JUSTIFIED IN MAKING ADDITIONS OF THE VARIOU S SUMS UNDER SECTION 68 OF THE ACT. THIS JUDGMENT MERELY CORROBORATES OUR FINDING ON ME RITS THAT THE SHARE APPLICATION MONEY RECEIVED FROM THE HOLDING F OREIGN ENTITY, THE DOCUMENTS AS MENTIONED ABOVE ARE SUFFICIENT TO HOLD THAT TRANSACTION IS GENUINE, AND IN THE PRESENT CASE ALS O ALL THESE DOCUMENTS HAVE BEEN PLACED ON RECORD AT SOME STAGE OR THE OTHER AND THEREFORE, ON MERITS ALSO THE ADDITIONS U/S.68 IS NOT CALLED FOR. 34. NOW IN SO FAR AS THE OBSERVATION AND THE FI NDING OF THE LEARNED PCIT WITH REGARD TO THE SHARE APPLICATION M ONEY RECEIVED FROM OTHER INDIAN PARTNER, M/S. BITCORP INDIA PVT. LTD., FIRST OF ALL, WE FIND THAT THIS ISSUE WAS NEITHER THERE IN T HE REASONS RECORDED BY THE ASSESSING OFFICER AS THE INFORMATION WHICH WAS RECEIVED FOR REOPENING OF THE ASSESSMENT COMPLETED U/S.143(3) WAS ONLY WITH REGARD TO THE EXAMINATION OF THE FUND RECEIVED FROM THE FOREIGN INVESTOR, M/S. BYCELL HOLDINGS AG IN TE RMS OF SECTION 68; NOR ANY REASON TO BELIEVE HAS BEEN ENTERTAINE D BY AO DURING I.T.AS. NO.2819 TO 2823/DEL/2017 66 THE COURSE OF ASSESSMENT PROCEEDINGS BASED ON ANY T ANGIBLE MATERIAL COMING ON RECORD. ONCE THE CASE WAS REOPEN ED U/S 147 ONLY TO EXAMINE THE SOURCE OF SHARE APPLICATION MON EY/SHARE CAPITAL OF THE NON-RESIDENT ENTITY AND WITHOUT THER E BEING ANY TANGIBLE MATERIAL ON RECORD THAT THE SHARE APPLICAT ION MONEY RECEIVED FROM M/S. BITCORP INDIA PVT. LTD. IS NOT G ENUINE, THE ASSESSING OFFICER UNDER THE LAW WAS NOT REQUIRED TO CONDUCT ANY ROVING AND FISHING INQUIRY WITHIN THE SCOPE OF RE-A SSESSMENT PROCEEDINGS WHICH IS CIRCUMSCRIBED OR LIMITED ONLY TO THE ISSUES RAISED AND REASON TO BELIEVE ENTERTAINED IN THE REASONS RECORDED; OR IN THE TERMS OF EXPLANATION-3 TO SECTION 147, I.E., ON THE ISSUE WHICH COMES TO THE NOTICE OF THE ASSESSIN G OFFICER DURING THE COURSE OF RE-ASSESSMENT PROCEEDINGS. NOT ONLY THAT, WE FIND THAT EVEN THE LEARNED PCIT WHILE ISSUING TH E SHOW CAUSE NOTICE TO THE ASSESSEE U/S.263, NO ISSUE WITH RESPE CT TO SHARE APPLICATION RECEIVED TO INDIA PARTNERS, VIZ. M/S. B ITCORP INDIA PVT. LTD. WAS RAISED BY HIM. IT IS ALSO NOT COMING FROM THE IMPUGNED ORDER AS TO WHAT WAS THE ADVERSE MATERIAL AVAILABLE IN THE ASSESSMENT RECORD OR COMING TO HIS NOTICE WITH REGA RD TO THE SHARE APPLICATION MONEY RECEIVED FROM M/S. BITCORP PVT. LTD. ONCE THIS ISSUE IS NEITHER FLOWING FROM THE INITIAT ION OF RE- ASSESSMENT PROCEEDINGS U/S.147, I.E., REASONS RECO RDED NOR ARISING FROM THE REASSESSMENT ORDER, THEN WITHOUT T HERE BEING ANY ADVERSE MATERIAL ON RECORD AND WITHOUT ISSUING ANY SHOW CAUSE NOTICE TO THE ASSESSEE ON THIS POINT, LEARNED PCIT CANNOT SET ASIDE THIS ISSUE ON THE GROUND THAT NO INQUIRY QUA THAT PARTY/ INVESTOR HAS BEEN CONDUCTED BY THE ASSESSING OFFICE R. WE ARE I.T.AS. NO.2819 TO 2823/DEL/2017 67 AWARE OF THE PROPOSITION THAT EVEN IF THE ISSUE WHI CH HAS NOT BEEN RAISED IN THE SHOW CAUSE NOTICE U/S 263 BY THE LD. PCIT, BUT SAME CAN BE RAKED UP IN THE COURSE OF REVISIONARY P ROCEEDINGS, HOWEVER, LD. PCIT CAN DEAL UPON THE ISSUE ONLY WHEN IT IS CONFRONTED TO THE ASSESSEE AT THE TIME OF THE REVIS IONARY PROCEEDINGS AND THAT TO BE WHEN REASONABLE OPPORTUN ITY IS GIVEN TO THE ASSESSEE FOR EXPLAINING THE SAME. HOWEVER, I N THE PRESENT CASE, NOWHERE THE LEARNED PCIT HAS POINTED OUT THAT INQUIRY OF THE SHARE APPLICATION MONEY RECEIVED FROM M/S. BITC ORP INDIA PVT. LTD. WAS WITHIN THE SCOPE OF JURISDICTION U/W.1 47 OR IS FLOWING FROM THE REASONS RECORDED BY THE AO; AND ONCE SUCH INQUIRY WAS BEYOND THE SCOPE OF THE RE-ASSESSMENT P ROCEEDINGS, THEN NO ERROR CAN BE ATTRIBUTED TO THE ASSESSING OF FICER FOR NOT MAKING THE INQUIRIES ON THE ISSUE OR HE WAS REQUIRE D TO MAKE ANY ADDITION U/S.68 ON THIS SCORE. HERE IN THIS CASE AN OTHER VERY IMPORTANT FACT IS THAT, IN ALL THESE YEARS, THE ASS ESSMENTS WERE COMPLETED U/S. 143(3) AND PRIOR TO THE INITIATION O F RE-ASSESSMENT PROCEEDINGS ALL THESE TRANSACTION HAVE BEEN EXAMINE D AND THE SAME HAS BEEN DULY ACCEPTED. WHILE REOPENING SUCH A SSESSMENTS U/S.147, ASSESSING OFFICER SHOULD HAVE CREDIBLE INF ORMATION AND TANGIBLE MATERIAL COMING TO HIS POSSESSION TO ENTER TAIN REASON TO BELIEVE THAT THE SHARE APPLICATION MONEY RECEIVED F ROM M/S. BITCORP INDIA PVT. LTD. DURING THE ASSESSMENT YEAR 2006-07 TO 2008-09 WAS NOT GENUINE. ONCE THERE IS NO SUCH MATE RIAL, THEN THE FINALITY ATTAINED IN TERMS OF ORDERS PASSED U/S . 143(3) ACCEPTING THE SAID SHARE APPLICATION MONEY CAN NEIT HER BE RAISED NOR CAN BE DISTURBED. THUS, ON THIS SCORE ALSO, WE HOLD THAT I.T.AS. NO.2819 TO 2823/DEL/2017 68 LEARNED PCIT WAS NOT JUSTIFIED EITHER IN LAW OR ON F ACTS IN SETTING ASIDE THE ISSUE OF SHARE APPLICATION MONEY RECEIVED FROM M/S. BITCORP INDIA PVT. LTD. FOR CARRYING OUT ANY FURTHE R INQUIRY OR PASS ANY FRESH ASSESSMENT ORDER AS IT IS BEYOND THE SCOPE OF SECTION 263 IN THE PRESENT CASE. 35. ACCORDINGLY, IN VIEW OF OUR FINDING GIVEN ABOVE, WE HOLD THAT THE IMPUGNED ORDER PASSED BY LD. PCIT U/S 263 FOR ALL THE IMPUGNED ASSESSMENT YEARS ARE NOT SUSTAINABLE AND I S THUS, QUASHED. IN THE RESULT, ALL THE APPEALS OF THE ASSESSEE A RE ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 24 TH , JANUARY, 2018. SD/- SD/- [L.P. SAHU] [AMIT SHUKLA] ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 24 TH JANUARY, 2017 PKK: COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT(A) 4. CIT 5. DR ASSISTANT REGISTRAR