M/s. Induslynk Training Services (P) Ltd., Gurgaon V. ITO, Gurgaon

ITA 3426/DEL/2016

• Counselvise Citation: [2022] 104 COUNSELVISE.COM (IT) 9660 (ITAT-DELHI)
• Duration Of Justice: 6 year(s) 3 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-09-2022
• Appeal Filed By: Assessee
• Order Result: PartlyAllowed
• Bench Allotted: F
• Assessment Year: 2012-2013
• Appeal Filed On: 08-06-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Source of fund
• Section: 68; 143(3); 234B

Judgement Text

Page 1 of 11 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH ‘F’: NEW DELHI BEFORE, SHRI SAKTIJIT DEY, JUDICIAL MEMBER AND SHRI ANADEE NATH MISSHRA, ACCOUNTANT MEMBER ITA No.3426/Del/2016 (ASSESSMENT YEAR 2012-13) M/s Induslynk Training Services (P) Ltd., 1004, Towers-4, The Palms South City-1, Gurgaon-122 001 PAN-AACCI 1401N Vs. Income Tax Officer Ward-2(1)/CIT(A)-1, Gurgaon (Appellant) (Respondent) Appellant by Sh. Manuj Sabharwal, Sh. Nakul Sehgal and Sh. Nishant Jain, Advocates Respondent by Ms. Maimum Alam, Senior Departmental Representative (“Sr. DR” for short) ORDER PER ANADEE NATH MISSHRA, AM: (A) This appeal by Assessee is filed against the order of Learned Commissioner of Income Tax (Appeals)-1, Gurgaon [“Ld. CIT(A)”, for short], dated 29/03/2016 for Assessment Year 2012-13. Grounds taken in this appeal are as under: “1. That under the facts and circumstances of the case and in law, the Ld. CIT(A) has grossly erred while confirming the additions of Rs.99,88,082/- on account of share application/ premium received by the ITA No.3426/Del/2016 M/s Induslynk Training vs. ITO Page 2 of 11 appellant by recording incorrect facts and making irrelevant observations. Therefore, the orders passed by the Ld. CIT (A) may be liable to be quashed and the exorbitant additions made as such may be liable to be deleted. 2. That under the facts and circumstances of the case and in law, the Ld. CIT(A) has grossly erred while confirming the additions of Rs.49,99,559/- on account of share application / premium received by the appellant, in as much as the same was received on 4,h March 2011 i.e. during the earlier assessment year 2011-12. Therefore, the additions made as such may be liable to be deleted. 3. That under the facts and circumstances of the case and in law, the learned CIT(A) has grossly erred while confirming the additions of Rs.50,00,441/- on account of share application / premium received by the appellant, in as much as the same was received on 22nd July 2011 and was supported by the requisite documents being placed on record. Therefore, the additions made as such may be liable to be deleted. 4. That under the facts and circumstances of the case and in law interest charged under section 234A, 234B and 234C may accordingly be liable to be deleted. 5. That the appellant, crave leave to amend, alter, add or delete any of the forgoing grounds of appeal.” (B) In this case, an addition of Rs.99,88,082/- was made by the Assessing Officer (“AO”, for short) in assessment order dated 20/02/2015 passed u/s 143(3) of Income Tax Act, 1961 (“IT Act”, for short). The assessee received the aforesaid amount of Rs.99,88,082/- as share application money/share premium from M/s IL & FS Trust Co. Ltd., Trustee-Blue Venture Fund-1 (“IL & FS” for short), a venture capital fund investing in start-up companies. ITA No.3426/Del/2016 M/s Induslynk Training vs. ITO Page 3 of 11 Out of the aforesaid amount of Rs.99,88,082/-, an amount of Rs.49,99,559/- was received in previous year relevant to assessment year 2011-12 and Rs.50,00,441/- was received in previous relevant to assessment year 2012-13. In the aforesaid impugned assessment order dated 20/02/2015, the Assessing Officer observed that the entire receipts from IL & FS were shown as closing balance in the books of IL & FS. The Assessing Officer took the view that the creditworthiness of IL & FS remained unproved because IL & FS has shown losses in return of income pertaining to assessment year 2012-13 and 2013-14. Aggrieved, the assessee filed appeal in the office of the Ld. CIT(A). Vide impugned appellate order dated 29/03/2016, the Ld. CIT(A) dismissed the assessee’s appeal holding that the assessee failed to discharge onus of creditworthiness. Aggrieved again, the assessee filed this present appeal against the aforesaid impugned appellate order of Ld. CIT(A) dated 29/03/2016. In the course of appellate proceedings, the following papers were filed from the assessee’s side: (a) Paper book consisting of the following particulars. ITA No.3426/Del/2016 M/s Induslynk Training vs. ITO Page 4 of 11 Sr. No. Particulars 1. Copy of appellate order dated 29/03/2016 passed by the CIT(A) 2. Copy of assessment order dated 20/02/2015 passed by the AO 3. Copy of written submission dated 03/12/2015 filed before the CIT(A) 4. Copy of written submission dated 16/12/2015 filed before the CIT(A) 5. Copy of notice under s.133(6) dated 02/03/2016 sent by the AO on 16/03/2016 requisitioning information from Blume Ventures Fund I along with reply by Blume Ventures Fund I 6. Copy of remand report dated 15/03/2016 sent by AO on 16/03/2016 7. Copy of rejoinder dated 29/03/2016 against the remand report 8. Copy of relevant extracts of submissions before the AO. a) Dated 21/01/2015 b) Dated 28/01/2015 c) Dated 09/02/2015 d) Dated 18/02/2015 9. Copy of notice under s.148 dated 29/03/2021 along with reasons. 10. Copy of notice dated 22/01/2022 and supply of material/investigation report along with typed copy 11. Copy of submissions dated 28/01/2022 filed by the appellant 12. Copy of the notice under s.142(1) dated 14/03/2022 issued by the AO 13. Copy of submission dated 15/03/2022 14. Copy of show cause notice dated 15/03/2022 16. Copy of final order dated 24/03/2022 under s. 143(3) ITA No.3426/Del/2016 M/s Induslynk Training vs. ITO Page 5 of 11 (b) Copy of order dated 12/08/2015 of Hon’ble Delhi High Court in the case of CIT vs. Vrindaban Farms (P) Ltd. in ITA No.71,72 & 85/2015 (c) Copy of order of Hon’ble Rajsthan High Court in CIT vs. Prameshar Bohra, 301 ITR 404 (2007) (Rajsthan) (d) Copy of order of Co-ordinate bench of ITAT, Delhi in the case of Hindon Forge (P) Ltd. vs. DCIT 2020 SCC Online ITAT 13412 (Order date 03/12/2020 in ITA No.3800/Del/2017) (C) At the time of hearing before us, the Ld. Counsel for the assessee submitted that the issue regarding creditworthiness of IL & FS stands covered in favour of the assessee vide assessment order dated 24/03/2022 passed by the Assessing Officer himself in the subsequent assessment year. i.e., Asst. Year 2015-16, in which no adverse view was taken in respect of the fresh amount of Rs.53,82,200/- received by the assessee from IL & FS by way of share application/share premium. The Ld. Counsel for the assessee further submitted that the entire aforesaid amount of Rs.99,88,082/- was duly reflected in the accounts of M/s IL &FS and it was of no relevance that the amount was shown as closing balance in the books of IL & FS. He further submitted that the aforesaid amount of Rs.99,88,082/- appeared in the books of the IL & FS as an asset, which was sufficient to show that this amount was duly accounted for in the books of IL & FS. He submitted that ITA No.3426/Del/2016 M/s Induslynk Training vs. ITO Page 6 of 11 the details of shares allotted on 01/04/2011 and 23/07/2011 against the entire aforesaid amount received from IL & FS were furnished to the AO and were available on record. The Ld. Counsel for the assessee submitted that full details of the investment made by IL & FS in the share company was shown in the balance sheet of IL & FS as on 31.03.20212; and that source of funds in respect of IL & FS was also shown by way of the liabilities in the Balance Sheet of IL & FS. The Ld. Counsel drew our attention to the Balance Sheet of IL & FS, which showed investment amounting to Rs.1 Crore as on 31/03/2012 including the aforesaid amount of Rs.99,88,082/- out of which Rs.49,99,559/- was also shown in the Balance Sheet as on 31/03/2011. The Ld. Counsel for the assessee drew our attention to Registration Certificate dated 07/01/2011 of SEBI whereby IL & FS was recognized as a venture capital fund, and submitted that share capital and share premium received by the assessee from IL & FS was in the normal course of business of IL & FS. The Ld. Counsel for the assessee also submitted that proviso to section 68 of IT Act inserted by Finance Act, 2012 w.e.f 01/04/2013 had no application for AY 2012-13 to which this ITA No.3426/Del/2016 M/s Induslynk Training vs. ITO Page 7 of 11 appeal pertains. The Ld. Counsel for the assessee also drew our attention to internal report of Income Tax Department, vide F. No. DIT (I & C.1)/Chd/2018-19/3073 dated 08/03/2019 wherein transaction of IL & FS with the assessee was accepted as explained and verified. The Ld. Counsel for the assessee relied on the order dated 12/08/2015 of Hon’ble Delhi High Court in the case of CIT vs. Vrindavan Farms (P) Ltd. in ITA No.71/2015 (supra), [in which the Hon’ble Delhi High Court duly considered CIT vs. Nova Promoters & Finlease Ltd. 342 ITR 169 (Delhi)]; for the proposition that no presumption could be raised about the creditworthiness merely on the ground of low income. For this very proposition, the Ld. Counsel for the assessee also relied on Hindon Forge (P) Ltd. vs. DCIT (supra). Ld. Counsel for the assessee submitted that the issue was squarely covered in favour of the assessee and against Revenue by aforesaid orders of CIT vs. Vrindavan Farms (P) Ltd. (supra) and Hindon Forge (P) Ltd. vs. DCIT (supra). He also submitted that profit/loss to IL &FS depended on sales realization of investments; and contended that in some years such as in Asst. Year 2012-13 ITA No.3426/Del/2016 M/s Induslynk Training vs. ITO Page 8 of 11 and 2013-14 profit was not earned by IL & FS as sufficient quantities of its investments were not sold. (C.1) Without prejudice to his aforesaid submissions, the Ld. Counsel for the assessee also submitted that out of the aforesaid amount of Rs.99,88,082/- an amount of Rs.49,99,559/- was received in previous year relevant to assessment year 2011-12 and contended that no adverse view could be taken in Asst. Year 2012- 13 (to which this appeal pertains) in respect of the aforesaid amount of Rs.49,99,559/-. In support of this contention, he relied on CIT vs. Prameshwar Bohra 301 ITR 404 (Rajasthan). (C.2) The Ld. Senior Department Representative for Revenue relied on orders of lower authorities. However she failed to controvert the submissions and contentions of Ld. Counsel for assessee, referred to in foregoing paragraphs (C) and (C.1) of this order. She also did not dispute the legal contention of Ld. Counsel for the assessee, that proviso to section 68 of IT act inserted by Finance Act, 2012 w.e.f., 01/04/2013 had no application for Asst. Year 2012-13 to which this appeal pertains. ITA No.3426/Del/2016 M/s Induslynk Training vs. ITO Page 9 of 11 (C.2.1) We have heard both sides. We have perused the materials on record. It is not in dispute that the aforesaid amount of Rs.99,88,082/- received by the assessee is duly reflected in the Balance Sheet of IL &FS as investment. There is also no dispute that the transaction between the assessee and IL & FS received clean chit in internal report of Income Tax Department vide aforesaid F. No. DIT (I & C.I)/Chd/2018-19/3037 dated 08/03/2019. It is further not in dispute that no adverse view was taken by the Assessing Officer in respect of aforesaid fresh amount of Rs.53,82,200/- received by the assessee from IL & FS. It is furthermore not in dispute that IL & FS is registered with SEBI as a Venture Capital Fund. Impliedly, the transactions of IL & FS with the assessee were in the normal course of business of IL & FS as a Venture Capital Fund. Furthermore, it is not in dispute that shares have been allotted by the assessee to IL & FS in respect of the entire aforesaid amount of Rs.99,88,082/-. Moreover, the Ld. Sr. DR for Revenue did not dispute that issue was squarely covered in favour of assessee and against Revenue, by aforesaid order of Hon’ble Delhi High Court in the case of CIT vs. Vrindavan Farms (P) Ltd. ITA No.3426/Del/2016 M/s Induslynk Training vs. ITO Page 10 of 11 (supra) and by order of Co-ordinate Bench of ITAT, Delhi in the case of Hindon Forge (P) Ltd. vs. DCIT (supra). The Ld. Sr. DR for Revenue also did not dispute the legal contention of Ld. Counsel for the assessee, that proviso to section 68 of IT Act inserted by Finance Act, 2012 w.e.f. 01/04/2013 had no application for Asst. Year 2012-13 to which this appeal pertains. Further, loss in the hands of IL & FS is duly explained by the contention made from the assessee’s side that IL & FS, as a Venture Capital Fund, did not sell investments in sufficient quantities in Asst. Year 2012-13 and 2013-14; which was not disputed by Ld. Sr. DR for Revenue. In view of the specific facts and circumstances of this case, and also respectfully following CIT Vs. Vrindavan Farms (P) Ltd. (supra) and Hindon Forge (P) Ltd. vs. DCIT (supra); we are of the view that the Ld. CIT(A) and the AO erred in taking an adverse view regarding creditworthiness of IL & FS and regarding genuineness of transaction of the assessee with IL & FS. Accordingly, we direct the Assessing Officer to delete the aforesaid addition of Rs.99,88,082/-. Grounds 1 and 3 of appeal are decided accordingly, and treated as allowed for statistical purposes. ITA No.3426/Del/2016 M/s Induslynk Training vs. ITO Page 11 of 11 (D) As we have directed the AO to delete the entire amount of Rs.99,88,082/- including the amount of Rs.49,99,559/-; ground 2 of appeal is merely academic; hence not decided. (E) Ground 4 of appeal is consequential in nature. The AO is directed to recompute interest under sections 234A, 234B and 234C of IT Act, if applicable, in accordance with law. For statistical purposes, ground 4 of appeal is treated as partly allowed. (F) In the result, the appeal is partly allowed for statistical purposes. Order pronounced on 29/09/2022 Sd/- Sd/- (SAKTIJIT DEY) (ANADEE NATH MISSHRA) JUDICIAL MEMBER ACCOUNTANT MEMBER Dated: 29/09/2022 Pk Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(Appeals) 5. DR: ITAT ASSISTANT REGISTRAR ITAT NEW, DELHI