FINO FINTECH FOUNDATION, NAVI MUMBAI V. ITO 8(1)(4), MUMBAI

ITA 3686/MUM/2015

• Counselvise Citation: [2019] 112 COUNSELVISE.COM (IT) 1810 (ITAT-MUMBAI)
• Duration Of Justice: 4 year(s) 5 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-11-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2010-2011
• Appeal Filed On: 15-06-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SATISH RAJORE
• Keywords: Unexplained cash credit; Assessment record; Sham transactions; TDS; Set aside
• Section: 133(6); 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH B, MUMBAI BEFORE SHRI SANDEEP GOSAIN, JUDICIAL MEMBER AND SHRI RAJESH KUMAR, ACCOUNTANT MEMBER ITA NO.3686/M/2015 ASSESSMENT YEAR: 2010-11 M/S. FINO FINTECH FOUNDATION TARUN BHARAT, PLOT NO.38/39, SECTOR NO.30, NEAR SANPADA RAILWAY STATION, NAVI MUMBAI 400 075 PAN: AABCF 1125D VS. ITO 8(1)(4), MUMBAI - 400051 (APPELLANT) (RE SPONDENT) PRESENT FOR: ASSESSEE BY : SHRI ASHISH KUMAR, A.R. REVENUE BY : SHRI SATISH RAJORE, D.R. DATE OF HEARING : 30.08.2019 DATE OF PRONOUNCEMENT : 28.11.2019 O R D E R PER RAJESH KUMAR, ACCOUNTANT MEMBER: THE PRESENT APPEAL HAS BEEN PREFERRED BY THE ASSES SEE AGAINST THE ORDER DATED 31.03.2015 OF THE COMMISSIO NER OF INCOME TAX (APPEALS) [HEREINAFTER REFERRED TO AS TH E CIT(A)] RELEVANT TO ASSESSMENT YEAR 2010-11. 2. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: 1) THE ORDER OF THE CIT(A) IS AGAINST THE FACTS AN D CIRCUMSTANCES OF THE CASE AND AGAINST THE PREPONDERANCES OF PROBABILITY OF TH E CIRCUMSTANTIAL EVIDENCES. 2) WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CA SE, THE CIT(A) IS JUSTIFIED IN CONFIRMING THE ADDITION OF RS.47, 15, 244/- U/S 68 MADE BY A.O WHICH IS AGAINST THE SUBMISSION MADE BY THE APPELLANT COMPANY DURING THE COURSE OF ASSESSMENT PROCEEDINGS. 3) WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CA SE AND IN LAW, THE HON'BLE CIT(A) ERRED IN CONFIRMING THE ORDER OF THE ID. A.O . IN DISALLOWING AN AMOUNT OF RS. ITA NO.3686/M/2015 M/S. FINO FINTECH FOUNDATION TARUN BHARAT 2 89,69,869/- BEING SERVICE CHARGES INCURRED FOR THE SERVICES RENDERED BY FINANCIAL INFORMATION NETWORK & OPERATION LTD(FINO) FOR THE P URPOSE OF BUSINESS OF THE APPELLANT. THE APPELLANT SUBMITS THAT THE AMOUNT IN CURRED WAS FOR THE PURPOSE OF CARRYING ON THE APPELLANT'S BUSINESS AND SAME IS AD MISSIBLE AND MAY PLEAS BE ALLOWED. 4) ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE CIT (A) ERRED IN CONFIRMING THE ADDITION OF RS.89, 69, 869/- MADE BY ID. A.O ON HIS OWN ASSUMPTIONS AND PRESUMPTION THAT THE APPELLANT COMPANY REDUCED THE TAXABLE INCOME AND TAX LIABILITY WHICH IS NOT CORRECT. 5) FOR THESE AND OTHER REASONS WHICH MAY BE ADDUCED AT THE TIME OF HEARING, THE APPELLANT PRAYS BEFORE YOUR HONOUR TO DELETE THE AD DITION CONFIRMED BY THE CIT(A) TO MEET THE JUSTICE END. 6) APPELLANT CRAVES LEAVES TO ADD, TO ALTER, TO AME ND AND TO DELETE ANY OTHER GROUNDS DURING THE COURSE OF HEAR. 3. THE GROUND NO.1 IS GENERAL IN NATURE AND NEEDS N O ADJUDICATION. 4. THE ISSUE RAISED IN GROUND NO.2 IS AGAINST THE C ONFIRMATION OF ADDITION OF RS.47,15,244/- BY LD. CIT(A) AS MADE BY THE A.O UNDER SECTION 68 OF THE ACT. 5. THE FACTS IN BRIEF ARE THAT THE AO DURING THE CO URSE OF ASSESSMENT PROCEEDINGS OBSERVED THAT ASSESSEE IS CA RRYING BUSINESSES OF BANKING AND FINANCIAL SERVICES AND IS CARRYING OUT ITS BUSINESS IN THE RURAL AREA AS PER RBI DIRECTION S. THE AO NOTED THAT ASSESSEE HAS ALSO APPOINTED AGENTS TO CA RRY OUT CASH TRANSACTIONS ON DAY TO DAY BASIS AND FOR THAT PURPO SE THE ASSESSEE COMPANY HAS OBTAINED DEPOSITS FROM THE AUT HORISED AGENTS RANGING FROM OF RS.5,000/- TO 10,000/-. DUR ING THE COURSE OF ASSESSMENT PROCEEDINGS THE ASSESSEE WAS A SKED TO FURNISH THE NAME AND ADDRESSES OF SUCH AGENTS AS TH E AMOUNTS SHOWN AS OUTSTANDING ON ACCOUNT OF SECURITY DEPOSIT S WAS RS.47,15,244/-. THE AO ALSO ISSUED NOTICE UNDER SE CTION 133(6) ITA NO.3686/M/2015 M/S. FINO FINTECH FOUNDATION TARUN BHARAT 3 TO 35 AGENTS OUT OF WHICH ALL THE NOTICES WERE RETUNED BA CK BY THE POSTAL AUTHORITY EXCEPT TO UJWAL YADAV AND DEV PRAKASH. ACCORDINGLY, THE AO ASKED THE ASSESSEE TO PRODUCE T HE SAID PARTIES FOR VERIFICATION OF GENUINENESS OF THE TRAN SACTIONS FAILING WHICH THE SAME WOULD BE TREATED AS UNEXPLAINED CASH CREDIT WHICH WAS REPLIED BY THE ASSESSEE VIDE LETTER DATED 27.07.2012 BY SUBMITTING THAT ASSESSEE WAS INCORPORATED UNDER COMPANIES ACT UNDER SECTION 25 AFTER FOLLOWING GUIDELINES FR OM RESERVE BANK OF INDIA WITH THE SOLE AIM OF PROVIDING BUSINE SS CORRESPONDENT SERVICES ON BEHALF OF BANKS IN THE RU RAL AREAS. THE ASSESSEE SUBMITTED THAT THE GOVERNMENT OF INDIA HAS TAKEN IT A PRIME OBJECTIVE TO BRING THE MAXIMUM OF THE RU RAL POPULATION UNDER BANKING CHANNEL SO THAT THEIR SAV INGS COULD BE CHANNELISED INTO BANKING SYSTEM. UNDER THIS MOD EL THE BANKS APPOINT NOR FOR PROFITS ORGANIZATIONS TO DO BANKING ACTIVITIES IN THE RURAL AREAS. THE BUSINESS CORRES PONDENT ENGAGES PEOPLE FROM VILLAGES ITSELF TO ACT AS CUSTO MER SERVICE POINT (CSP) ON ITS BEHALF. THE APPOINTED PERSON IS GIVEN A HAND HELD DEVICE CALLED AS POINT OF TRANSACTION (POT) MA CHINE. THE SAID POT IS UPDATED ON DAILY BASIS BY CONNECTING TO THE SERVER USING INTERNET CONNECTIVITY OF THE BANKS WITH THE B ALANCES IN THE INDIVIDUAL BANKS OF THAT PARTICULAR AREA. THE REPL Y OF THE ASSESSEE FILED BEFORE THE AO IS EXTRACTED AS UNDER : 'AS DISCUSSED PERSONALLY, FINO FINTECH FOUNDATION, A SECTION 25 COMPANY, WAS INCORPORATED IN LINE WITH RESERVE BANK OF INDIA'S G UIDELINES WITH A SOLE AIM OF PROVIDING BUSINESS CORRESPONDENT SERVICES ON BEHALF OF BANKS IN THE RURAL AREA. GOVERNMENT HAS TAKEN IT A PRIME OBJECTIVE TO BRING THE MAXIMUM OF THE RURAL POPULATION UNDER THE BANKING CHANNEL SO THAT THEIR SAVING CAN BE CHANNELIZED INTO THE BANKING SYSTEM AS ALSO THEY ARE PROVIDED SUPPOR T OF BANKS TO MEET THEIR CREDIT REQUIREMENTS. UNDER THE MODEL, BANKS APPOINT 'NOR F OR PROFIT' ORGANIZATION TO DO THE BANKING ACTIVITIES IN THE RURAL AREA. THE BC ENGAGES PEOPLE FROM THE VILLAGES ITSELF TO ACT AS CUSTOMER SERVICE POINT (CSP) ON TH EIR BEHALF. THE PERSON APPOINTED IS GIVEN A HAND HELD DEVICE CALLED AS POINT OF TRAN SACTION (POT) MACHINE. THE POT IS UPDATED ON DAILY BASIS BY CONNECTING TO THE SERVER USING INTERNET CONNECTIVITY OF ITA NO.3686/M/2015 M/S. FINO FINTECH FOUNDATION TARUN BHARAT 4 BANKS WITH THE BALANCES IN INDIVIDUAL'S BANK ACCOUN T OF THAT PARTICULAR AREA PEOPLE M THE RURAL AREAS, DESIROUS OF DOING THE BANK ACCOU NT OPERATION OF WITHDRAWAL AND DEPOSIT OF CASH APPROACHES TO THE CSP AND BY INSERT ING THE CARDS IN THE POT, AND BY PUTTING HIS FIGURE PRINT ON THE CARDS CAN DO THE DE SIRED TRANSACTION THUS, THE CSP IS REQUIRED TO MAINTAIN CASH IN HAND WHICH IS KEPT WIT H HIM FOR FACILITATING WITHDRAWAL OF CASH IN THE FIELD. THE ONE OF THE CONDITION OF T HE APPOINTMENT AS CSP IS THAT HE IS REQUIRED TO PROVIDE SECURITY DEPOSIT AS HE IS IN CU STODY OF THE POT MACHINE AS ALSO HE HANDLES CASH IN THE FIELD. ON HIS DISENGAGEMENT, ON FULL AND FINAL SETTLEMENT, THE AMOUNT OF SECURITY DEPOSIT IS RETURNED BACK TO THE CSP. PROVIDE BELOW SUMMARY OF THE AMOUNTS COLLECTED AND ALSO REFUNDED DURING THE CURRENT FINANCIAL YEAR AS WELL AS SUBSEQUENT FINANCIAL YEARS FOR YOUR REFERENCE: FINANCIAL YEAR OPENING ADDITION REFUND CLOSING 2009-10 4791334 - 4716334 2010-11 4716334 20253800 1522800 23447334 FROM THE ABOVE, YOU WILL PLEASE OBSERVE THAT THERE ARE ADDITIONS AS WELL AS REFUNDS ON ACCOUNT OF CSP'S DISENGAGEMENTS. PLEASE NOTE THA T AS ON DATE WE HAVE A FILED FORCE OF 18110 CSP'S IN VARIOUS STATES IN THE EXTRE ME RURAL AND BACKWARD AREA OF THE COUNTRY. AS REGARDS SAMPLES SELECTED BY FOR CONFIRM ATION OF DEPOSITS, WE WISH TO INFORM YOU THAT OUT OF THOSE 70 CSP'S. 32 HAVE ALRE ADY BE DISASSOCIATED WITH US AND THE SECURITY DEPOSIT HAVE ALREADY BEEN REFUNDED BY WAY OF ISSUING ACCOUNT PAYEE CHEQUES. PAYMENTS DETAILS IN RESPECT OF 10 REMAININ G CSP'S ARE BEING COMPILED FROM THE FIELD AND SHALL BE SHARED SEPARAFE/Y TWO O F THEM, WHO DIRECTLY RESPONDED, THOUGH HAVE SHARED SOME GRIEVANCES, HAVE NOT DENIED HAVING PROVIDED THE SECURITY DEPOSIT TO THE COMPANY AS SUCH THEIR CONFIRMATIONS MAY PLEASE BE TAKEN ON RECORD. PLEASE NOTE THAT THE CSP'S ARE DAILY WAGE EARNERS: THEIR LIVELIHOOD IS DEPENDENT ON THE PAYOUTS WE DO WHICH IS IN THE MEAGRE RANGE OF R S.750/- TO RS.1500/- PER MONTH, AS SUCH WERE DISMAYED ON RECEIPT OF THE NOTI CES AND THUS EITHER REFUSED TO RECEIVE OR DID NOT REPLY TO THE NOTICE. IN VIEW OF THIS WE WOULD REQUEST YOU TO PLEASE DO AWAY WITH THE REQUIREMENT OF THEIR PHYSIC AL PRESENCE AS THEY WILL RESULT INTO DISTURBANCE IN THE TRANSACTING ACTIVITIES AND A/SO THEIR ABSENCE WILL NOT BE TAKEN INTO THE RIGHT SENSE WHICH MAY HAVE BEARING O N THE IMAGE OF THE CONCERNED BANK AS WELL. STILL, IF YOU WANT TO GET THEIR PHYSI CAL PRESENCE, WE MAY PRODUCE SOME OF THE ACTIVE CSP'S WHO ARE BASED IN THE NEARBY ARE AS TO SUBSTANTIATE OUR SUBMISSION. PLEASE NOTE THAT APPOINTMENT OF CSP IS THE BASIC RE QUIREMENT OF THE BUSINESS MODEL WE ARE INTO. COLLECTING SECURITY DEP OSIT IS JUST TO ENSURE THAT THEY HANDLE THE EQUIPMENT PROPERLY AS ALSO GIVE THE ACCO UNT OF CASH TRANSACTED ON TIME. AS SUCH WE HOPE THIS EXPLAINS THE CREDITS WHICH ARE GENUINE AND CANNOT IN ANY CASE, BE TREATED AS UNEXPLAINED CREDIT. 4.3 IN RESPONSE TO THIS OFFICE LETTER DT.05.12.2012 , THE ASSESSEE COMPANY VIDE LETTER DT.04.01.2013 FURTHER SUBMITTED AS FOLLOWS: ITA NO.3686/M/2015 M/S. FINO FINTECH FOUNDATION TARUN BHARAT 5 'FURTHER, TO OUR LETTER DT.27.12.2012 WISH TO INFOR M YOU THAT PEOPLE ARE HESITANT TO APPEAR BEFORE THE INCOME TAX OFFICER AN D INSPITE OF EVERY EFFORTS WE COULD ARRANGE ONLY ONE OF THE ACTIVE CSP MR. RAJ ESH KUMAR VISHWAKARMA TO PRESENT BEFORE YOU FOR VERIFICATION. YOU MAY PLE ASE RECORD HIS STATEMENT TO YOUR SATISFACTION. AS STATED EARLIER, SECURITY D EPOSIT IS A PRECONDITION TO THE BUSINESS MODEL WE ARE INTO: THUS WE CAN PRODUCE CSP'S WHO ARE WORKING IN THE NEARBY THANE, BHIWANDI AND OTHER MAHARASHTRA LOCATION FOR THE CONFIRMATION OF THE SECURITY DEPOSITS BEING PROVIDE D BY THEM AS PER THE BUSINESS MODEL.' 6. FINALLY, THE AO REJECTED THE CONTENTION OF THE A SSESSEE BY HOLDING THAT THE NOTICES UNDER SECTION 133(6) OF TH E ACT COULD NOT BE SERVED AND THEREFORE GENUINENESS OF THE TRAN SACTIONS REMAINED IN DOUBT AND HELD THAT THE SAID SECURITY D EPOSITS AS UNEXPLAINED CASH CREDIT UNDER SECTION 68 OF THE ACT AND CONSEQUENTLY ADDED THE ENTIRE AMOUNT TO THE INCOME OF THE ASSESSEE. 7. IN THE APPELLATE PROCEEDINGS, THE LD. CIT(A) DIS MISSED THE APPEAL OF THE ASSESSEE BY OBSERVING AS UNDER: 2.3 DECISION AFTER CAREFUL PERUSAL OF THE ASSESSMENT ORDER AND W RITTEN SUBMISSIONS OF THE A/R OF THE APPELLANT IT HAS BEEN OBSERVED THAT THE ADDITIO N OF RS.47,57,441 /- HAS BEEN MADE BY THE AO U/S 68 ON ACCOUNT OF SECURITY DEPOSI TS OBTAINED BY THE APPELLANT FROM ITS AUTHORISED AGENTS FOR WHICH THE APPELLANT HAS FAILED TO PROVE THAT THESE HAVE BEEN ACTUALLY RECEIVED FROM THE AGENTS. THE AP PELLANT HAS FILED AN APPEAL ON THIS ISSUE. ACCORDING TO THE AO THE APPELLANT WAS INFORMED BY H IM VIDE LETTER DATED 05.12.2012 THAT REQUISITION U/S 133(6) WAS SENT TO THE PARTIES FOR VERIFICATION OF THE GENUINENESS OF SECURITY DEPOSITS CLAIMED TO HAVE BE EN RECEIVED BY THE APPELLANT COMPANY BUT ALL NOTICES WERE RETURNED BY THE POSTAL AUTHORITIES EXCEPT IN THE CASE OF TWO PARTIES MENTIONED AT SR.NO. 9 & 25 IN THE DETAILED REPRODUCED SUPRA. THE APPELLANT HAS FILED TWO DETAILED REPLIES IN RESPONS E TO THE NOTICE WHICH HAVE ALSO REPRODUCED SUPRA. THE APPELLANT ALSO PRODUCED MR. R AJESH KUMAR VISHKARMA BUT HIS POSTAL ADDRESS WAS DIFFERENT THEN THE POSTAL AD DRESS IN THE RECORDS OF THE COMPANY. THE PERSON WHO WAS PRODUCED AS RAJESH KUMA R VISHKARMA DID NUT CONFIRM THE DEPOSIT GIVEN TO THE COMPANY. HIS STATE MENT HAS BEEN ENCLOSED WITH THE ASSESSMENT ORDER AS ANNEXURE 1. THE AO HAS ALSO RELIED ON THE REPLY OF SH. DEV PRAKASH IN RESPONSE TO NOTICE U/S 133(6) IN WHICH H E HAS NOT CONFIRMED THE PAYMENT OF DEPOSIT TO THE APPELLANT. DURING THE COU RSE OF APPELLATE PROCEEDINGS THE A/R OF THE APPELLANT HAS RELIED ON THE WRITTEN SUBMISSIONS PLACED ON RECORD ITA NO.3686/M/2015 M/S. FINO FINTECH FOUNDATION TARUN BHARAT 6 DURING THE COURSE OF ASSESSMENT PROCEEDINGS AND HAS FURTHER ASKED FOR OPPORTUNITY TO PRODUCE THE CUSTOMER SERVICE POINT (CSP) WHO HAS DEPOSITED THE SECURITY TO PROVE THE GENUINENESS OF THE TRANSACTIONS. HE HAS RELIED ON THE JUDGEMENT OF KANPUR COAL SYNDICATE IN WHICH IT HAS BEEN HELD THA T THE CIT(A) HAS POWERS CO- TERMINUS WITH THE AO. THE ASSESSMENT RECORD AND THE CONTENTIONS OF THE A/ R OF THE APPELLANT HAS CAREFULLY PERUSED AND IT HAS BEEN OBSERVED THAT THE APPELLANT HAS MISERABLY FAILED TO PROVE ANY CREDIBLE EVIDENCE EITHER BEFORE THE AO DURING THE COURSE OF ASSESSMENT PROCEEDINGS OR BEFORE ME DURING THE COUR SE OF APPELLATE PROCEEDINGS TO PROVE THE SOURCE OF SECURITY DEPOSIT. THE EXPLAN ATION OF THE APPELLANT THAT THE SECURITY DEPOSIT WERE OBTAINED FROM THE PERSONS WHO WERE APPOINTED AT CUSTOMER SERVICE POINT TO COLLECT THE DEPOSITS IS WITHOUT AN Y DOCUMENTARY EVIDENCE OR MATERIAL TO ACCEPT THE EXPLANATION OF THE APPELLANT . THE REQUEST OF THE A/R OF THE APPELLANT TO ALLOW ANOTHER OPPORTUNITY TO PRODUCE T HE PERSONS APPOINTED AS CSP CANNOT BE ACCEPTED AT THIS STAGE AS SUFFICIENT OPPO RTUNITIES WERE PROVIDED TO THE APPELLANT BY THE AO DURING THE COURSE OF ASSESSMENT PROCEEDINGS AND THE APPELLANT HAS ALSO FAILED TO GIVE ANY EXPLANATION THAT WHY TH E CSP'S FROM WHOM SECURITY DEPOSIT WAS OBTAINED COULD NOT BE PRODUCED BEFORE T HE AO. HENCE THE ADDITION MADE BY THE AO IS CONFIRMED AND THE GROUNDS OF APPE AL NO.2 IS DISMISSED. 8. AFTER HEARING BOTH THE PARTIES AND PERUSING THE MATERIAL ON RECORD, WE OBSERVE THAT THE AO HAS ADDED THE AMOUNT OF SECURITY DEPOSITS RECEIVED FROM CUSTOMER SERVICE PO INT ENGAGED BY THE ASSESSEE COMPANY AT THE LOCAL LEVEL IN THE VILLAGES. IT IS UNDISPUTED THAT THE ASSESSEE IS A BUSINESS CORRESPO NDENT (BC) WHICH HAS BEEN LAUNCHED BY THE RBI TO EXPAND THE BA NKING NETWORK IN THE RURAL AREAS AND VILLAGES WHERE IT IS NOT ECONOMICAL FOR THE BANKS TO OPEN BRANCHES IN FULL- FLEDGED MANNER. ONLY THOSE COMPANIES REGISTERED UNDER SECT ION 25 OF THE ACT CAN ACT AS BUSINESS CORRESPONDENT TO ASSIST BANKS TO DO THESE ACTIVITIES. THE SYSTEM OF OPERATION OF THIS SCHEME IS THAT AN AGENT IS PROVIDED WITH A HANDHELD DEVICE CALLED POINT OF TRANSACTION MACHINE (POT). THE CUSTOMER SERVICE PO INT BEGINS HIS DAY BY UPDATING THE POT MACHINE WITH THE RECORD S OF THE BENEFICIARY BY CONNECTING THE POT WITH BANK SERVER AND THUS THE ACCOUNT HOLDER CAN TRANSACT WITHDRAWAL OR DEPOS IT OF MONEY IN HIS/HER ACCOUNT BY INSERTING HIS BIOMETRIC CARD WHICH IS ITA NO.3686/M/2015 M/S. FINO FINTECH FOUNDATION TARUN BHARAT 7 SIMILAR TO ATM. IN THIS SYSTEM THE BENEFICIARY HAS TO VALIDATE HIS IDENTITY BY PUTTING HIS FIGURE PRINT ON POT RATHER THAN INSERTING PIN. THE CUSTOMER SERVICE POINT HAS TO C ONNECT WITH THE POT WITH THE BANKS SERVER AND TRANSFER THE TRAN SACTIONS TO BANK SERVER ON DAILY BASIS. THE MONEY SO COLLECTED WILL BE HANDED OVER TO THE COMPANYS REPRESENTATIVE ON REGU LAR INTERVAL. THIS WAS THE MODUS OPERANDI FOR DOING THIS BUSINESS . IN ORDER TO BECOME (CSP) CUSTOMER SERVICE POINT A PERSON IS REQUIRED TO DEPOSIT CERTAIN AMOUNT WITH THE ASSESSEE AS SECURIT Y DEPOSIT IN ORDER TO SAFEGUARD THE INTEREST OF THE ASSESSEE AGA INST ANY EMBEZZLEMENT. THE SAID INTEREST DEPOSIT IS TO BE RE FUNDED ONCE THE PERSON IS DISENGAGED FROM CSP ACTIVITY . THE C OST OF POT MACHINES IS APPROXIMATELY RS.18,000 TO RS.25,000. THE AO HAS MADE ADDITION MAINLY ON ACCOUNT OF NON PRODUCTI ON OF CSP. IT WAS ALSO CONTENDED BEFORE US THAT CONFIRMATIONS OF THE CSP COULD NOT BE PRODUCED IN VIEW OF THE HUGE NUMBER AN D ALSO THE FACT THAT CSPS WERE DAILY WAGE EARNER AND PAY OUT I S VERY MEAGER WHICH RANGES BETWEEN 750 TO 1500 PER MONTH. CONSIDERING THE PECULIAR NATURE OF THE BUSINESS AND CIRCUMSTANCES IN WHICH THE ASSESSEE OPERATES, WE ARE OF THE VIEW THAT THE ADDITION UNDER SECTION 68 CAN NOT BE MADE IN RESPECT OF SECURITY DEPOSITS WHICH IS ACCUMULATED O VER THE YEARS ON THE GROUND THAT NO CONFIRMATIONS WERE PRODUCED E SPECIALLY WHEN THE CAUSE IS TO SPREAD BANKING FACILITIES IN T HE FAR FLUNG AREAS . THE ASSESSEE IS DOING NON PROFIT BUSINESS AND BRIDGES THE GAP BETWEEN THE BANKS AND THE RURAL MASSES WHIC H ARE RESIDING IN THE DIFFICULT TERRAIN WHERE THE BANKS C AN NOT OPEN THEIR FULL-FLEDGED BRANCHES BECAUSE OF ECONOMIC CON SIDERATION. WE FURTHER NOTE THAT OUT OF 70 BUSINESS CORRESPONDE NTS, THE 32 ITA NO.3686/M/2015 M/S. FINO FINTECH FOUNDATION TARUN BHARAT 8 WERE ALREADY LEFT AND THEIR SECURITY DEPOSITS WERE REFUNDED BY ACCOUNT PAYEE CHEQUES.UNDER THESE CIRCUMSTANCES, WE ARE OF THE VIEW THAT ADDITION MADE BY THE AO IS WRONG AND CAN NOT BE SUSTAINED AS IT IS NOT A CASE OF ACCEPTING THE HUGE MONEY FROM THE OTHER COMPANIES OR CORPORATES OR HAWALA TRANSAC TION. THE ORDER OF LD. CIT(A) IS SET ASIDE AND THE AO IS DIRE CTED TO DELETE THE ADDITION. 9. THE ISSUE RAISED IN 2 ND GROUND OF APPEAL IS AGAINST THE CONFIRMATION OF DISALLOWANCE OF RS.89,69,869/- AS M ADE BY THE AO TOWARDS SERVICE CHARGES INCURRED FOR THE SERVICE S RENDERED BY FINANCIAL INFORMATION NETWORK AND OPERATION LTD. (F INO) FOR THE PURPOSE OF THE BUSINESS OF THE ASSESSEE. 10. THE FACTS IN BRIEF ARE THAT THE ASSESSEE HAS DE BITED IN THE P&L ACCOUNT, ENROLMENT EXPENSES AMOUNTING TO RS.8,96,98,699/- AND ACCORDINGLY ASKED THE ASSESSEE TO FURNISH THE DETAILS AND EVIDENCES IN SUPPORT OF THE ADMISSI BILITY OF THE SAME. THE COMPANY REPLIED VIDE LETTER DATED 11.03. 2013 WHEREIN IT IS SUBMITTED THAT THE ENROLMENT RELATES TO THE SET OF ACTIVITIES PERFORMED THROUGH VARIOUS AGENCIES IN TH E FIELD, THE ACTIVITIES INVOLVED DATA ENTRY, DIGITALIZATION AND SEMI SKILLED INDIVIDUALS OR THROUGH VARIOUS ENTITIES PROVIDING S UCH SERVICES. ONE TIME ACTIVITY I.E. ENROLMENT OF BENEFICIARY IS DONE IN FINO. THE SAID ACTIVITY INVOLVED ARRANGING THE OPERATORS IN THE MANDATED FIELD, COLLECTING DEMOGRAPHIC AND BIOMETRI C AND PARTICULARS OF BENEFICIARIES. THE DATA ARE PRINTED ON A SMART CARD AND BIOMETRIC PARTICULARS ARE RECORDED IN THE MEMORY CHIP AND CARD IS USED FOR CARRYING OUT OF ACTIVITIES OF POT MACHINES, PROVIDING REPORTING WORK TO ASSESSEE COMPANY UPHOLD ING MASTER ITA NO.3686/M/2015 M/S. FINO FINTECH FOUNDATION TARUN BHARAT 9 DATA ON DAILY BASIS THROUGH SERVER ETC. AS PER AGR EEMENT DATED 26.02.2009 ENTERED INTO BY THE ASSESSEE WITH FINO L TD., THE ASSESSEE AND FINO ARE TO WORK IN CO-ORDINATION FOR PROVIDING END TO END SOLUTION FOR IT ENABLED DISBURSEMENT OF PAYMENTS. AS PER THE AGREEMENT THE FIELD SUPPORT SERVICES WER E TO BE PROVIDED BY THE ASSESSEE WHEREAS TECHNICAL SUPPORT SERVICES ARE TO BE PROVIDED BY FINO. THE AO HAS ESTIMATED AS EX CESS EXPENSES AT RS. 10/- ON ACCOUNT OF OVER LAPPING SER VICES BY THE ASSESSEE AND FINO AND ACCORDINGLY THE AGREEMENT WA S HELD TO BE COLLUSIVE AGREEMENT. IN OTHER WORDS RS.10/- PE R CUSTOMER IS PAID BY ASSESSEE TO FINO AND ACCORDINGLY THE AO WOR KED OUT AT THE EXCESSIVE CLAIM AT RS.89,69,869/-. ACCORDING T O THE AO THE SAID PAYMENTS WERE SUBJECTED TO TDS PROVISIONS AND EXPENDITURE WAS INCURRED FOR OBTAINING SERVICES/ASS ESSEES EXECUTION OF WORK WHICH IS ALLOWABLE EXPENDITURE BA SED ON THE SAID AGREEMENT WITH THE FINO. THE TDS AND SERVICE TAX WAS PROPERLY PAID. THE AO MADE THE ADDITION AFTER MAKI NG A DETAILED DISCUSSION IN PARA 5 IN THE ASSESSMENT FRA MED. 11. IN THE APPELLATE PROCEEDINGS, THE LD. CIT(A) CO NFIRMED THE ORDER OF AO BY HOLDING AND OBSERVING AS UNDER: 3.3. AFTER CAREFUL PERUSAL OF THE ASSESSMENT ORDER AND WRITTEN SUBMISSIONS OF THE A/R OF THE APPELLANT IT HAS BEEN OBSERVED THAT THE AO HAS ESTIMATED THE AMOUNT OF RS.10 PER CUSTOMER AS EXCESS EXPENSES ON ACCOUNT OF OVER LAPPING SERVICES AND AFTER GIVING A CATEGORICALLY FINDING T HAT IT IS A COLLUSIVE ARRANGEMENT TO REDUCE THE TAX LIABILITY, BUT THE A/R OF THE APPELL ANT HAS ALSO NOT PROVIDED CREDIBLE EVIDENCE TO JUSTIFY THE EXPENDITURE. THE CONTENTIO N OF THE A/R OF THE APPELLANT THAT IT IS A SETTLED LAW THAT THE AO CANNOT STEP INTO TH E SHOES OF THE APPELLANT IS A VAGUE STATEMENT WHICH CANNOT BE OF ANY HELP TO THE APPELL ANT. HENCE THE ADDITION MADE BY THE AO IS CONFIRMED AND THE GROUNDS OF APPEAL NO.3 & 4 ARE DISMISSED. 12. AFTER HEARING BOTH THE PARTIES AND PERUSING THE MATERIAL ON RECORD, WE OBSERVE THAT THE ASSESSEE HAS ENTERED IN TO AN ITA NO.3686/M/2015 M/S. FINO FINTECH FOUNDATION TARUN BHARAT 10 AGREEMENT WITH FINO. UNDER THE SAID AGREEMENT , T HE ASSESSEE COMPANY IS TO PROVIDE FIELD SUPPORT SERVICES AND FI NO IS TO PROVIDE TECHNICAL SUPPORT SERVICES. ACCORDING TO T HE AO THE SERVICES RENDERED BY THE ASSESSEE AND FINO ARE OVER LAPPING AND BOTH ARE RENDERING THE SAME SERVICES. THE AO ESTIM ATED THE OVERLAPPING EXPENSES AT RS.10/- PER CUSTOMER BEING EXCESS AND TERMED THE AGREEMENT AS COLLUSIVE TO REDUCE THE TAX LIABILITY BY IGNORING THE FACT THAT THE ASSESSEE IS A NON PROFIT MAKING COMPANY REGISTERED UNDER SECTION 25 OF THE ACT AND HAS NO PROFIT MOTIVE. WE FIND THAT ON THESE PAYMENTS TO F INO, THE ASSESSEE HAS DULY DEDUCTED TDS AND DEPOSITED THE S AME TO THE GOVERNMENT TREASURY. SIMILARLY, THE SERVICE TAX WA S DULY PAID AND THERE IS NO DISPUTE THAT THE SAID RECEIPT HAS S HOWN AS INCOME BY THE FINO. MOREOVER, THE AUTHORITIES BELO W HAVE FAILED TO BRING ON RECORD ANY CONCRETE EVIDENCE ON RECORD TO SHOW THAT THESE ARE SHAM TRANSACTIONS ENTERED INTO BY THE AS SESSEE WITH FINO TO CIRCUMVENT THE TAX LIABILITY. UNDER THESE CIRCUMSTANCES AND FACTS, WE ARE INCLINED TO SET ASIDE THE ORDER O F LD. CIT(A) AND DIRECT THE AO TO DELETE THE ADDITION. 13. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS AL LOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 28.11.2019. SD/- SD/- (SANDEEP GOSAIN) (RAJESH KUMAR) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DATED: 28.11.2019. * KISHORE, SR. P.S. ITA NO.3686/M/2015 M/S. FINO FINTECH FOUNDATION TARUN BHARAT 11 COPY TO: THE APPELLANT THE RESPONDENT THE CIT, CONCERNED, MUMBAI THE CIT (A) CONCERNED, MUMBAI THE DR CONCERNED BENCH //TRUE COPY// [ BY ORD ER DY /ASSTT. REGISTRAR, ITAT, MUMBAI.