M/s Tech Trusion Systems & Services (P) Ltd., V. The Additional Commissioner Of Income Tax, Kanpur

ITA 387/LKW/2014

• Counselvise Citation: 38723714 RSA 2014
• Duration Of Justice: 1 year(s) 2 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-07-2015
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 14-06-2017
• Assessment Year: 2000-2001
• Appeal Filed On: 15-05-2014
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: R K RAM
• Keywords: Source of fund; Agreed addition; Assessment record; Capital receipt
• Section: 68; 246

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL LUCKNOW BENCH B, LUCKNOW BEFORE SHRI SUNIL KUMAR YADAV, JUDICIAL MEMBER AND SHRI. A. K. GARODIA, ACCOUNTANT MEMBER ITA NO.387/LKW/2014 ASSESSMENT YEAR:2000-01 M/S TECH TRUSION SYSTEMS & SERVICES (P) LTD. GHAZIABAD V. ACIT RANGE 6 KANPUR TAN/PAN:AAACT3885IB (APPELLANT) (RESPONDENT) APPELLANT BY: SHRI. RAKESH GARG, ADVOCATE RESPONDENT BY: SHRI. R. K. RAM, D.R. DATE OF HEARING: 10 06 2015 DATE OF PRONOUNCEMENT: 30 07 2015 O R D E R PER SUNIL KUMAR YADAV: THIS APPEAL IS PREFERRED BY THE ASSESSEE AGAINST THE ORDER OF THE LD. CIT(A), INTER ALIA, ON THE FOLLOWING GROUNDS:- 1. BECAUSE THE CIT (A) HAS ERRED ON FACTS AND IN LAW IN HOLDING THAT THE SUM OF RS. 32,51,697/- IS NOT A CAPITAL RECEIPT, BUT IS A REVENUE RECEIPT AND IS LIABLE TO TAX. 2. BECAUSE ON A PROPER CONSIDERATION OF FACTS AND CIRCUMSTANCES OF THE CASE AND ON INTERPRETATION OF VARIOUS PAPERS, REPLIES AND MATERIAL PLACED ON RECORD IT IS INFERRED THAT THE AMOUNT OF RS.32,51,697/- IS A CAPITAL RECEIPT IN THE NATURE OF NON- COMPETE FEE, THE CIT (A) HAS ERRED IN UPHOLDING THE SAME AS A REVENUE RECEIPT. 3. BECAUSE THE CIT )A) HAS ERRED ON FACTS AND IN LAW IN HOLDING THAT EVEN IF IT IS NOT A REVENUE RECEIPT, THEN IT IS AN AMOUNT TAXABLE U/S 68 OF THE ACT. :- 2 -: 4. BECAUSE OF CIT(A) HAS ERRED ON FACTS AND IN LAW IN HOLDING THAT THE ADDITION OF RS.32,51,697/- OFFERED FOR TAXATION ON CONDITIONAL BASIS, WITH NO CHARGE OF INTEREST AND LEVY OF PENALTY, WAS NOT A CONDITIONAL OFFER AND WAS A CASE OF AGREED ASSESSMENT, THUS THE ASSESSEE WAS LIABLE TO PAY INTEREST. 5. BECAUSE IN ANY CASE AND IN ALL CIRCUMSTANCES OF THE CASE, THE CIT(A) HAS ERRED IN DISMISSING THE APPEAL WITHOUT APPRECIATING THE FACTS AND CIRCUMSTANCES OF THE CASE AND HOLDING THAT THE SUM OF 32,51,697/- IS A TAXABLE RECEIPT. 6. BECAUSE THE CIT(A) HAS RELIED ON AN INCOMPLETE RECORD OF THE PAPER FILE OF THE ASSESSEE IN PASSING THE IMPUGNED ORDER, AS IMPORTANT DOCUMENTS FILED BY THE ASSESSEE HAVE BEEN DELIBERATELY REMOVED/CONCEALED AND MANIPULATED BY THE REVENUE AUTHORITIES, AS IS CLEARLY EVIDENCED BY REFERENCE TO THE FINDINGS CONTAINED IN THE IMPUGNED ORDER. THE ORDER PASSED BY CIT (A) IS BASED ON FACTS THAT HAVE BEEN DELIBERATELY FALSIFIED AND MANIPULATED BY THE REMOVAL OF CRUCIAL DOCUMENTS TO SUPPORT THE FINDINGS THEREIN AND IS THUS LIABLE TO BE SEEN ASIDE ON THIS GROUND ALONE. 2. THOUGH VARIOUS GROUNDS ARE RAISED, BUT THEY ALL RELATE TO THE NATURE OF RECEIPT RECEIVED BY THE ASSESSEE ON ACCOUNT OF NON-COMPETE FEE. 3. THE FACTS IN BRIEF BORNE FROM THE RECORD ARE THAT DURING THE COURSE OF ASSESSMENT PROCEEDINGS, IT WAS NOTICED BY THE ASSESSING OFFICER THAT THE ASSESSEE HAS RECEIVED A SUM OF RS.32,51,697/- AS COMPENSATION IN CONVERTIBLE FOREIGN EXCHANGE, BUT THIS AMOUNT WAS NOT OFFERED TO TAX, AS IT WAS TREATED TO BE CAPITAL RECEIPT IN VIEW OF THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF OBEROI HOTELS (P) LTD. VS. CIT 103 TAXMAN 236 (SC). THE ASSESSING OFFICER HAD MADE NECESSARY ENQUIRIES WITH REGARD TO THE NATURE OF RECEIPTS AND THE CIRCUMSTANCES UNDER WHICH IT WAS RECEIVED. COMPLETE DETAILS, AS SOUGHT BY THE ASSESSING OFFICER THROUGH :- 3 -: VARIOUS NOTICES RELATING TO THE FACTS AND CIRCUMSTANCES LEADING TO RECEIPT OF RS.32,51,697/- CLAIMED TO BE CAPITAL RECEIPT, HAVE NOT BEEN FILED BY THE ASSESSEE AND THEREAFTER THE ASSESSEE VIDE LETTER DATED 10.03.2003 SURRENDERED THIS AMOUNT AS INCOME STATING THAT IT WAS BEING DONE TO AVOID PROTRACTED LITIGATION AND SUBJECT TO THE CONDITION THAT NO PENALTY AND INTEREST IS LEVIED. RELYING UPON THE SURRENDER STATEMENT, THE ASSESSING OFFICER HAS MADE AN ADDITION OF RS.32,51,697/- AFTER TREATING IT TO BE REVENUE RECEIPT. 4. AGGRIEVED, THE ASSESSEE PREFERRED AN APPEAL BEFORE THE LD. CIT(A) AND RAISED A PLEA THAT THE ASSESSEE HAS MADE A CONDITIONAL SURRENDER, BUT THE ASSESSING OFFICER HAS NOT ACCEPTED THE SAME IN TOTO, THEREFORE, THE ADDITION ON THE BASIS OF SURRENDER STATEMENT IS NOT POSSIBLE. IN THE SURRENDER STATEMENT, IT WAS STATED THAT THE ASSESSEE HAS OFFERED TO PAY TAX ON THE RECEIPT SUBJECT TO THE CONDITION THAT THE MATTER IS FINALLY CLOSED AND NO TAX/INTEREST/DUES, ETC. SHALL BE PAYABLE APART FROM THE AFORESAID TAX OF RS.11,18,869/- AND INTEREST/PENALTIES, ETC SHALL BE WAIVED AND SHALL NOT BE LEVIED, BUT THE ASSESSING OFFICER HAS CHARGED INTEREST UNDER SECTION 234A OF THE INCOME-TAX ACT, 1961 (HEREINAFTER CALLED IN SHORT THE ACT') AND ALSO LEVIED THE PENALTY UNDER SECTION 271(1)(C) OF THE ACT. 5. IT WAS ALSO EXPLAINED THAT THE ASSESSEE-COMPANY WAS INCORPORATED IN 1985 AND WAS ENGAGED IN THE BUSINESS OF WEAVING GLASS CLOTH. IN THE YEAR 1995, THE ASSESSEE SOUGHT OPPORTUNITIES TO EXPORT GOODS TO USSR AND SUBSEQUENT TO NEGOTIATIONS, THE ASSESSEE ENTERED INTO AN AGREEMENT WITH GOLDEN ADA INC. HAVING ITS OFFICE AT 999, BRANNAN STREET, SAN FRANCISCO, CA 94103, USA, REPRESENTATIVE OFFICE OF GOLDEN ADA MOSCOW, RUSSIA AND GOLDEN ADA BELGIUM NV/ SHAKO REAL ESTATE, BELGIUM NV (HEREINAFTER REFERRED IN SHORT AS 'GADA') INITIALLY FOR THE PERIOD OF FIVE (5) YEARS. SUBSEQUENTLY, VIDE AN ADDENDUM TO THE AGREEMENT, THE TERM OF AGREEMENT WAS EXTENDED TO TEN (10) YEARS. ACCORDING TO THE AGREEMENT, THE ASSESSEE :- 4 -: WAS GRANTED EXCLUSIVE BUSINESS RIGHTS TO EXPORT THE GOODS TO USSR IN THE NAME OF GADA ALONG WITH FACILITIES PROVIDED BY GADA, NAMELY, LETTER OF CREDIT, BANK GUARANTEE, COUNTER GUARANTEE ETC. SINCE GADA HAD ALREADY ESTABLISHED ITS REPUTATION AS TO QUALITY AND THE GOODS, COMPANIES / BUYERS IN THE USSR WERE WILLING TO BUY THROUGH GADA AND IN ITS NAME. FURTHER, GADA ALSO AGREED TO UNDERWRITE ANY DAMAGES, LOSSES INCLUDING EXPECTED PROFIT SUFFERED BY THE APPELLANT THROUGH SECURITIZATION OF ALL TRANSACTIONS THROUGH GADA. THE ASSESSEE PUT ALL ITS SOURCES IN THE BUSINESS, BUT HOWEVER, UNFORTUNATELY, GADA FAILED TO ISSUE LETTER OF CREDIT TO THE ASSESSEE AND, THEREFORE, NO EXPORT PERFORMANCE COULD TAKE PLACE. ALSO, DUE TO FINANCIAL CRISIS IN THE US, GADA SUFFERED SEVERAL FINANCIAL SETBACK AND WAS ULTIMATELY DECLARED BANKRUPT. ASSESSEE FILED A SUIT AGAINST THE GADA FOR THE NON-PERFORMANCE OF THE CONTRACT BUT LATER ON WITHDREW THE SUIT ON ACCOUNT OF COST AND TIME FACTOR. 6. IN THE YEAR 1998, THE ASSESSEE CAME IN CONTACT WITH ONE M/S TANAIGA REAL ESTATE CORPORATION, HAVING ITS REGISTERED OFFICE AT ROAD TOWN, PASES ESTATE, TORTILLA, SWITZERLAND (HEREINAFTER REFERRED IN SHORT AS 'TANAIGA'), WHO WAS INTERESTED IN EXPORTING ITS GOODS TO USSR. HOWEVER, THE BUYERS IN USSR WERE STILL INTERESTED IN BUYING THE GOODS ONLY THROUGH GADA. IN ORDER TO PROCURE THE BUSINESS, TANAIGA ENTERED INTO AN AGREEMENT WITH THE ASSESSEE AND GADA TO PURCHASE THE RIGHTS OF THE ASSESSEE-COMPANY TO EXPORT THE GOODS IN THE NAME OF GADA FOR THE BALANCE PERIOD OUT OF TEN (10) YEARS, AS STIPULATED IN THE AGREEMENT DATED 18.09.1995. 7. TANAIGA AGAINST THE PURCHASE OF THE RIGHTS MADE THE PAYMENT OF USD $ 75000 (USD SEVENTY FIVE THOUSAND) WHICH IS EQUIVALENT TO INDIAN RS.32,51,697/- (RUPEES THIRTY TWO LAKHS FIFTY ONE THOUSAND SIX HUNDRED NINETY SEVEN) TO THE ASSESSEE-COMPANY IN ACCORDANCE WITH THE AGREEMENT DATED 10.12.1998. THE ABOVE AMOUNT OF RS.32,51,697/- RECEIVED BY THE ASSESSEE COMPANY AS COMPENSATION FOR THE LOSS OF PERMANENT SOURCE OF :- 5 -: INCOME THROUGH THE SALE OF THE 'COVENANT NOT TO COMPETE' AND RELATED CONTRACTUAL RIGHTS (IF ANY ) IN THE ASSESSMENT YEAR 2000-2001, THE ASSESSEE FILED ITS RETURN OF INCOME DECLARING THE SAID AMOUNT AS CAPITAL RECEIPTS. 8. THE LD. CIT(A) WAS NOT CONVINCED WITH THE EXPLANATIONS FURNISHED BY THE ASSESSEE AND HE ACCORDINGLY CONFIRMED THE ADDITION MADE BY THE ASSESSING OFFICER. WHILE ADJUDICATING THE APPEAL, THE LD. CIT(A) HAS OBSERVED THAT THE ASSESSING OFFICER HAS MADE ENQUIRY ABOUT THE BUSINESS ACTIVITIES OF THE ASSESSEE-COMPANY AND ITS TWO AGREEMENTS CLAIMED TO HAVE BEEN ENTERED WITH USA COMPANY NAMED GOLDEN ADA AND SWITZERLAND COMPANY NAMED TANAIGA. THE ASSESSING OFFICER HAS ALSO CALLED DETAILS OF THESE TWO COMPANIES TO VERIFY THE GENUINENESS OF THE AGREEMENTS CLAIMED TO HAVE BEEN ENTERED WITH THEM AND DURING THE COURSE OF ASSESSMENT PROCEEDINGS STATEMENT OF ONE OF THE DIRECTORS, SHRI. DEEPAK BABBAR WAS ALSO RECORDED. THE WRITTEN SUBMISSIONS OF THE ASSESSEE WERE DULY EXAMINED BY THE LD. CIT(A) IN THE LIGHT OF THE JUDGMENTS REFERRED TO BY THE ASSESSEE AND THE LD. CIT(A) HAS NOTICED THAT THE COPIES OF BOTH THE AGREEMENTS WITH USA COMPANY AND SWITZERLAND COMPANY WERE SIGNED BY SHRI. DEEPAK BABBAR, DIRECTOR OF THE COMPANY. IT WAS ALSO FOUND THAT THE PERSON WHO SIGNED THE AGREEMENT ON BEHALF OF THE USA COMPANY IS SHRI. RAJIV GOSAIN WHO IS SON OF SHRI. K.K. GOSAIN, THE PROMOTER OF THE ASSESSEE- COMPANY. IT WAS ALSO NOTICED THAT BOTH THE AGREEMENTS HAVE BEEN FOUND TO BE SIGNED IN INDIA AND THE SAME WERE AVAILABLE ON ASSESSMENT RECORD. THE LD. CIT(A) HAS ALSO TAKEN NOTE OF THE REPORT OF THE INSPECTOR, WHO CONDUCTED SPOT ENQUIRY WITH REGARD TO THE REGISTERED OFFICE OF THE ASSESSEE- COMPANY AND HAS REPORTED THAT ON THE GIVEN ADDRESS, NO SUCH OFFICE OF THE COMPANY WAS AVAILABLE. 9. THE LD. CIT(A) HAS ALSO TAKEN COGNIZANCE OF THE STATEMENT OF SHRI. DEEPAK BABBAR RECORDED BY THE ASSESSING OFFICER DURING THE COURSE OF ASSESSMENT PROCEEDINGS IN WHICH SHRI. DEEPAK BABBAR, WHO WAS SIGNATORY :- 6 -: IN BOTH THE AGREEMENTS ON BEHALF OF THE ASSESSEE-COMPANY, HAS DEPOSED THAT HE WAS AN ACCOUNTANT WITH M/S TECH. TRUSION SYSTEM & SERVICES (P) LTD. AND THIS COMPANY WAS UNDER LIQUIDATION SINCE FINANCIAL YEAR 1993-2000 AND SHRI. K.K. GOSAIN AND SHRI. C. KUMAR WERE DIRECTORS OF THE SAID COMPANY. IN RESPONSE TO THE NATURE OF AGREEMENT AND RECEIPTS, SHRI. DEEPAK BABBAR HAS DEPOSED THAT HE WAS AN ACCOUNTANT AND HE HAS SIGNED THE AGREEMENT AS AUTHORIZED SIGNATORY ON BEHALF OF THE THEN DIRECTORS AND DURING SEPTEMBER, 1995, THE DIRECTORS OF M/S TECH. TRUSION SYSTEM & SERVICES PVT. LTD. WERE SHRI. KRISHAN KUMAR GOSAIN AND HIS WIFE SMT. BEENA GOSAIN AND THE FACTS OF THE MATTER, AS REGARDS TO THE PAYMENTS, INDIAN REPRESENTATIVES AND TERMS OF THE AGREEMENTS, ARE IN THE KNOWLEDGE OF THESE PERSONS. THEREFORE, NO AUTHORIZED PERSON OF THE COMPANY WAS APPEARED TO STATE THE NATURE OF AGREEMENT AND RECEIPT DESPITE VARIOUS OPPORTUNITIES AFFORDED BY THE ASSESSING OFFICER. THE LD. CIT(A) HAS ALSO OBSERVED THAT THE ASSESSING OFFICER HAS ASKED THE ASSESSEE TO FURNISH THE DETAILS OF OTHER PARTIES WITH WHOM ASSESSEE HAS ENTERED INTO AGREEMENT, BUT THE ASSESSEE DID NOT FURNISH THE REQUISITE EVIDENCE DESPITE VARIOUS OPPORTUNITIES. THE LD. CIT(A) HAS ALSO TAKEN NOTE THAT THE ASSESSEE NEVER ENTERED INTO ANY EXPORT BUSINESS IN RUSSIA OR ANY OTHER COUNTRY. HE WAS ASKED TO FURNISH EVIDENCE IF HE HAS UNDERTAKEN ANY EXPORT ACTIVITY WITH THESE COMPANIES. DESPITE SPECIFIC QUERIES RAISED BY THE ASSESSING OFFICER, THE ASSESSEE COULD NOT FURNISH THE RELEVANT EVIDENCE. HAVING TAKEN NOTE OF ALL THESE FACTS, THE LD. CIT(A) ALSO CAME TO THE CONCLUSION THAT THE ENTIRE ARRANGEMENT IS SHAM AND FAKE AND HE ACCORDINGLY UPHELD THE ORDER OF THE ASSESSING OFFICER. THE RELEVANT OBSERVATIONS OF THE LD. CIT(A) ARE EXTRACTED HEREUNDER FOR THE SAKE OF REFERENCE:- 10. AFTER HOLDING THAT THE APPEAL FILED BY THE ASSESSES (APPELLANT) AGAINST, THE ADDITION MADE IN THE ASSESSMENT ORDER ON THE BASIS OF ITS LETTER DATED 10.03.2003 BEING IN THE NATURE OF AGREED ADDITION, :- 7 -: NO APPEAL LIES U/S 246 BEFORE ME THE DISCUSSION ABOUT THE AMOUNT OF RS.32,51,697/- IS CAPITAL RECEIPT OR REVENUE RECEIPT AS RAISED IN GROUND NO. (B) BECOMES ONLY OF ACADEMIC NATURE. HOWEVER, IN THE INTEREST OF JUSTICE AND LOOKING TO THE PLEA TAKEN BY THE LD. AR. THAT THE AO SHOULD HAVE PASSED THE ASSESSMENT ORDER ON MERIT INSTEAD OF ONLY RELYING ON ITS LETTER DATED 10.03.2003; I HAVE ALSO TAKEN UP OF THE GROUND NO. (C) FOR ADJUDICATION BASED ON THE DOCUMENTS AVAILABLE IN THE ASSESSMENT RECORD AND ALSO SUBMISSION MADE BY THE ASSESSES DURING THE APPEAL PROCEEDING. AS PER THE DETAILS SUBMITTED DURING THE ASSESSMENT PROCEEDING, THE ASSESSES COMPANY HAS CLAIMED TO HAVE ENTERED INTO AN AGREEMENT ON 18.00.1995 WITH A USA COMPANY MM GOLDAN ADA INC. 999 BANANA STREET SAN FRANCISCO CA094103 USA (HEREINAFTER REFERRED AS GADA) FOR EXPORT OF INDIAN GOODS TO RUSSIAN FEDERATION FOR A PERIOD OF 10 YEARS. THE ESSENCE OF THIS AGREEMENT WAS THAT THE GADA AND IS AFFILIATES WERE BOUND TO EXCLUSIVELY PURCHASE ALL THEIR REQUIREMENTS FROM INDIA SOLELY FROM ASSESSES COMPANY AND THE ASSESSES- COMPANY WAS BOUND TO DO BUSINESS ONLY, WITH GADA FOR ITS EXPORTS TO RUSSIAN FEDERATION. AS PER THE FURTHER SUBMISSION MADE BY THE ASSESSES COMPANY, THE AGREEMENT DID NOT MATERIALIZE AT THE OUTSET ITSELF BECAUSE THE USA COMPANY WENT INTO BANKRUPTCY BUT THE ASSESSES COMPANY ALSO DID RIOT DO ANY EXPORT BUSINESS FOR THE USA COMPANY, HOWEVER, AS CLAIMED BY THE ASSESSES COMPANY, INITIALLY IT TRIED TO PURSUE A SUIT FILED FOR DAMAGE AGAINST THE USA COMPANY BECAUSE OF NOT BEING ABLE TO DO ANY EXPORT BUSINESS, ON ITS BEHALF BUT THEREAFTER, REALIZING THAT SUCH ACTION TAKEN BY HIM AGAINST THE USA COMPANY WOULD BE A FRUITLESS EXERCISE, IT CLAIMED TO HAVE ENTERED INTO ANOTHER AGREEMENT ON 10.12.1988 WITH .THE SWISS COMPANY NAMED M/S TANAGIA REAL ESTATE CORPORATION, A COMPANY REGISTERED UNDER THE AIMS OF BRITISH VIRGIN ISLAND. AS MENTIONED IN THIS AGREEMENT, ASSESSES COMPANY AGREED NOT TO DO THE BUSINESS OF EXPERT OF ANY COMMODITIES FROM INDIA TO RUSSIAN FEDERATION FOR A PERIOD OF SEVEN YEARS FROM THE DATA OF AGREEMENT, SUBJECT TO ITS RECEIPT OF US $ 74900 AS COMPENSATION TOWARDS NON-COMPETE FEES :- 8 -: AND US $ 100 AS BALANCE TOKEN AMOUNT TOWARDS DAMAGES, TOTAL AMOUNT BEING US $ 75000 OR RS.32,51,897/-, THIS AMOUNT HAS BEEN FOUND TO BE CREDITED IN THE BANK ACCOUNT OF THE ASSESSED COMPANY ON 28.07.1999 I.E. DURING THE FINANCIAL YEAR RELATING TO THE ASSESSMENT YEAR UNDER CONSIDERATION. IN THE RETURN OF INCOME FILED FOR THE ASSESSMENT YEAR UNDER CONSIDERATION, IT HAS BEEN CLAIMED BY THE ASSESSES COMPANY THAT THE ABOVE MENTIONED AMOUNT OF RS.32,51,697/- HAS BEEN TREATED AS CAPITAL RECEIPT BY RELYING ON THE RULING OF HON'BLE SUPREME COURT OF INDIA IN THE CASE OF OBEROI HOISTS (P) LTD. VS. CIT 103 TAXMAN 236 AND HAS BEEN CREDITED TO THE CAPITAL RESERVE ACCOUNT. ON EXAMINING THIS CASE LAW, IT HAS BEEN FOUND THAT THE FACTS OF THE CASE LAWS CITED BY THE ASSESSES IS THAT M/S OBEROI HOTELS (P) LTD. WAS OPERATING AND MANAGING MANY HOTELS BELONGING TO OTHERS FOR A FEE AT SEVERAL PLACES LIKE CAIRO, COLOMBO, KATMANDU ETC. ONE SUCH HOTEL WAS BEING, OPERATED AT SINGAPORE FOR A CERTAIN AMOUNT-OF MANAGEMENT FEES: AS PER THE TERMS OF AGREEMENT, M/S OBEROI HOTELS (P) LTD, HAD A RIGHT TO EXERCISE THE OPTION OF PURCHASING THE SINGAPORE HOTEL, IN CASE ITS OWNERS DESIRED TO TRANSFER THE SAME DURING THE CURRENCY OF THE AGREEMENT. HOWEVER, THE OBEROI HOTELS (P) LTD., GAVE UP ITS RIGHT TO PURCHASE THE SAID HOTEL FOR G CONSIDERATION OF RS.29,47,500/- FROM THE RECEIVER. THE QUESTION WHICH WAS CONSIDERED IN THIS CASE LAW WAS, WHETHER THE RECEIPT OF RS.29,47,500/- WAS CAPITAL RECEIPT OR REVENUE RECEIPT. IT HAS BEEN HELD BY THE HON'BLE SUPREME COURT IN THE ABOVE CITED CASE THAT THE RECEIPT IS CAPITAL IN NATURE ON THE GROUND THAT THE COMPANY HAD GIVEN OP ITS RIGHT TO PURCHASE THE SINGAPORE HOTEL. ON COMPARING THE FACTS OF THE ABOVE CASE LAW RELIED UPON BY THE ASSESSEE WHILE MAKING DECLARATION ABOUT THE NATURE OF RECEIPT OF RS.32,51,697/- AS BEING CAPITAL RECEIPT, I FIND THAT IN THE INSTANT CASE UNDER APPEAL, IT IS SEEN THAT THE ASSESSES WAS NEITHER IN THE BUSINESS OF EXPORT NOR HAD THE INFRASTRUCTURE TO DO SUCH BUSINESS. EVEN AS PER THE INSPECTORS REPORT, NO REGISTERED OFFICE OF THE ASSESSEE COMPANY ON THE ADDRESS MENTIONED BY THE ASSESSEE :- 9 -: COMPANY HAS BEEN FOUND. IN THE STATEMENT, OF ITS DIRECTOR SRI DEEPAK BABBAR, IT HAS BEEN CLEARLY STATED IN ANSWER TO QUESTION NO. 2 THAT THE COMPANY HAS NO BUSINESS ACTIVITIES SINCE 1997, MUCH BEFORE THE YEAR 1990 IN WHICH, IT HAS BEEN CLAIMED BY THE ASSESSES COMPANY THAT IT HAS ENTERED INTO AN AGREEMENT WITH SWISS COMPANY FOR NOT DOING ANY EXPORT BUSINESS TO RUSSIAN (FEDERATION ON ACCOUNT OF WHICH, IT IS BEING CLAIMED THAT THE ASSESSES COMPANY RECEIVED A COMPENSATION OF RS.32,51,697/- AS NON-COMPETE FEES. HERE TOO QUESTION IS, WHEN NO EXPORT BUSINESS OF THE ASSESSES COMPANY EXISTED AND THE ASSESSEE COMPANY WAS NOT DOING ANY BUSINESS SINCE 1997, HOW IT CAN BE BELIEVED THAT A FOREIGN COMPANY WOULD ENTER INTO AN AGREEMENT WITH IT FOR NOT DOING SUCH BUSINESS THAT DID NOT EXIST AT ALL AND PAY A HEFTY SUM OF RS.32,51,697/-. THEREFORE, FACTS OF THE CASE OF THE CASE OF THE ASSESSES, IS TOTALLY DIFFERENT THAN THE FACTS OF THE CASE OF M/S OBEROI HOTLB (P) LTD. (SUPRA) CITED BY IT. UNLIKE, THE OBEROI HOTELS (P) LTD., WHICH WAS OPERATING AND MANAGING HOTELS AND GETTING A FEE, THE ASSESSES COMPANY HAS NEITHER DONE ANY EXPORT BUSINESS, WHATSOEVER, PRIOR TO THE AGREEMENT IN QUESTION NOR WAS IN RECEIPT OF ANY EXPORT INCOME. EVEN THE AGREEMENT ENTERED INTO WITH USA COMPANY HAS BEEN FOUND TO BE OF DOUBTFUL NATURE BECAUSE NO ACTIVITY OF THE ASSESSEE COMPANY HAS BEEN STARTED AFTER MAKING OF THIS AGREEMENT. IT IS QUITE STRANGE THAT NO ENQUIRY WAS MADE BY THE ASSESSES COMPANY ABOUT THE FINANCIAL CONDITION OF THE SAID COMPANY BEFORE ENTERING INTO AN AGREEMENT WITH THEM AND THE CLAIM OF THE ASSESSES THAT THE USA COMPANY WENT INTO BANKRUPTCY JUST, AFTER ENTERING INTO THE AGREEMENT WITH THEM IS NOT FOUND TO BE CONVINCING AT ALL SPECIALLY WHEN, NO EVIDENCE ABOUT ITS BANKRUPTCY AS CALLED FOR BY THE AO HAS BEEN FILED. IT IS ALSO QUITE INTERESTING THAT SRI RAJIV GOSAIN WHO IS SON OF SRI K.K. GOSAIN, PROMOTER OF THE ASSESSES COMPANY HAS SIGNED THE AGREEMENT ON BEHALF OF THE USA COMPANY AS BEING ITS AUTHORIZED SIGNATORY. THEREFORE, COLLUSION BETWEEN THE USA COMPANY AND THE ASSESSES COMPANY CANNOT BE RULED OUT. EVEN NO DOCUMENT HAS BEEN :- 10 -: PRODUCED FROM THE USA COMPANY TO SHOW THAT SRI RAJIV GOSAIN WAS AUTHORIZED BY THEM AS-BEING THEIR AUTHORIZED SIGNATORY. EVEN NO DETAILS OF THE USA COMPANY GIVING THE NAMES AND ADDRESSES OF ITS DIRECTORS, PROMOTERS, ITS BALANCE SHEET ETC. AS CALLED FOR BY THE AO HAS BEEN PROVIDED. IF SON OF THE PROMOTER OF THE ASSESSES COMPANY IS AUTHORIZED SIGNATORY OF THE USA COMPANY, THE RELEVANT DETAILS OF THIS COMPANY AS CALLED FOR BY THE AO COULD HAVE BEEN EASILY SUBMITTED. THEREFORE, EVEN THE GENUINENESS OF THE COPY OF THE AGREEMENT PRODUCED BY THE ASSESSES COMPANY WITH USA COMPANY, COULD NOT BE ESTABLISHED. THE AO TO GO INTO THE EXAMINATION OF FACTS OF THE CASE RELATING TO CORRECTNESS OF THE CLAIM OF THE ASSESSEE, EVEN MADE EFFORTS TO CALL THE PROMOTER OF THE ASSESSES COMPANY, SRI K.K. GOSAIN TO EXAMINE HIM BUT THE ASSESSES COMPANY DID NOT PRODUCE HIM BY TAKING THE PLEA THAT HE WAS OUT OF INDIA (OR LAST 4 TO 5 MONTHS). I HAVE ALSO FOUND FROM THE APPEAL RECORD THAT AFTER THE MATTER WAS RESTORED BY THE HON'BLE ITAT, LUCKNOW TO THIS OFFICE FOR DECIDING THE APPEAL AS PER LAW, AN AUTHORITY LETTER HAS BEEN FILED BY THE DIRECTOR OF THE ASSESSES COMPANY AUTHORIZING SRI RAJIV GOSAIN OF ITS LEGAL WORK. FOR N READY REFERENCE, THIS AUTHORITY LETTER IS, REPRODUCED AS UNDER:- :- 11 -: THOUGH SRI RAJIV GOSAIN HAS NEVER APPEARED BEFORE ME, HE APPEARED BEFORE MY PREDECESSOR ON BEHALF OF THE ASSESSEE (APPELLANT) COMPANY. HOWEVER, ONE QUESTION REMAINS THAT IF HE IS AUTHORIZED REPRESENTATIVE OF THE USA COMPANY, IN WHAT CAPACITY, HE IS REPRESENTING THE ASSESSES-COMPANY BECAUSE HE IS NEITHER AN ADVOCATE NOR A CHARTERED ACCOUNTANT ENGAGED BY THE ASSESSES COMPANY AND ALSO NOT HOLDING ANY POST IN THE ASSESSEE-COMPANY. THEREFORE, HIS INVOLVEMENT IN THE AFFAIRS OF THE ASSESSEE-COMPANY AND ALSO HAVING BEEN FOUND HIM TO HAVE SIGNED THE AGREEMENT ON BEHALF OF THE USA COMPANY, HIS DEEP INVOLVEMENT IN THE WHOLE AFFAIRS IN GETTING THE AMOUNT OF RS.32,61,697/- IN THE ACCOUNT OF USA IS VERY EVIDENT. DURING THE COURSE OF THE ASSESSMENT PROCEEDINGS, THE ASSESSEE-COMPANY COULD ALSO NOT FILE ANY EVIDENCE TO SHOW THAT THIS AMOUNT WAS PAID BY THE SWISS COMPANY M/S TANAIGA. ON ENQUIRY BY THE A.O, IT HAS ONLY BEEN STATED THAT THIS AMOUNT WAS REMITTED BY UBOCI TO WORLD TRADE CENTRE, NEW YORK ON 28.07.1999. THEREFORE, THE ORIGIN OF THE SOURCE OF FUND HAS BEEN FOUND TO BE FROM USA WHERE SRI RAJIV GOSAIN USED TO LIVE BUT ITS PAYMENT BY THE SWISS COMPANY M/S TANAIGA COULD NOT BE ESTABLISHED. EVEN THE DIRECTOR OF THE ASSESSEE-COMPANY SRI DEEPAK BABBAR WHOSE STATEMENT WAS RECORDED AT THE TIME OF ASSESSMENT IS NOTHING BUT A DUMMY DIRECTOR BECAUSE ON GOING THROUGH HIS STATEMENT AS REPRODUCED IN PARA NO. 6.6 (PAGE NO 17 TO 20), IT IS VERY CLEAR THAT HE DID NOT KNOW MUCH ABOUT THE ACTIVITIES OF THE ASSESSES COMPANY AND ADMITTEDLY, HE WAS AN ACCOUNTANT OF THIS COMPANY PRIOR TO BECOMING THE DIRECTOR. IT HAS ALSO BEEN STATED BY HIM THAT HE IS NOT IN RECEIPT OF ANY KIND OF REMUNERATION FROM THE ASSESSES COMPANY AND HE IS IN THIS COMPANY BECAUSE HE IS SENTIMENTALLY ATTACHED TO SRI K.K. GOSAIN. THOUGH FATHER OF SRI RAJIV GOSAIN, SRI K.K. GOSAIN IS PROMOTER OF THE ASSESSES COMPANY AND ALL ITS AFFAIRS ARE BEING MANAGED BY SRI K.K, GOSAIN AND HIS SON SHRI. RAJIV GOSAIN BUT THEY DO NOT HOLD ANY OFFICIAL POST IN THE ASSESSES COMPANY AND ONLY THEIR EMPLOYEES ARE BEING MADE DUMMY DIRECTORS. FOR RECORDING OF THE STATEMENT ON OATH ALSO, SRI :- 12 -: K.K. GOSAIN DID NOT APPEAR BEFORE THE AO TO AVOID ANY DIRECT CONFRONTATION WITH RESPECT TO THE FACTS OF THE CASE. CONSIDERING THE ABOVE FACTS AND CIRCUMSTANCES OF THE CASE AND FAILURE OF THE ASSESSEE COMPANY DURING THE ASSESSMENT PROCEEDING AS WELL AS DURING THE APPEAL PROCEEDING TO ESTABLISH THE SOURCE OF FUND BEING FROM THE SWISS COMPANY M/S TANAIGA AND TO ESTABLISH THE GENUINENESS OF BOTH THE AGREEMENTS CLAIMED TO HAVE BEEN ENTERED WITH BOTH USA & SWISS COMPANY RESULTING INTO RECEIPT OF RS.32,51,897/-; BY THE ASSESSEE (APPELLANT) COMPANY AS DECLARED BY IT IN THE RETURN OF INCOME AND FURTHER BECAUSE OF VARIOUS DOUBTFUL FEATURES FOUND SURROUNDING THE STORY MADE BY THE ASSESSEE (APPELLANT) SHOWING THE RECEIPT OF THIS AMOUNT AS BEING NON COMPETE FEES IN THE NATURE OF CAPITAL RECEIPT AND THEREFORE, SUCH DETAILS GIVEN BY THE ASSESSEE COMPANY TO EXPLAIN THE RECEIPT OF THIS AMOUNT HAS BEEN FOUND TO BE NOTHING BUT A COLOURABLE DEVICE AND HENCE, IN MY CONSIDERED OPINION, THE ASSESSEE (APPELLANT) HAS FAILED TO SATISFACTORILY EXPLAIN SHE NATURE OF THE RECEIPT OF RS.32,51,S97/- AS BEING CAPITAL RECEIPT IN THE HAND OF THE ASSESSES (APPELLANT) AND THEREFORE, IT HAS LATER ON DECLARED THIS AMOUNT AS ITS INCOME BY FILING A LETTER DATED 10.3.2013. CONSIDERING THESE FACTS, I FIND THAT THIS AMOUNT IS NOTHING BUT AN UNEXPLAINED RECEIPT IN THE HAND OF THE ASSESSES LIABLE TO BE ADDED UNDER SECTION 68 AND THEREFORE, I FIND THAT THE AO HAS RIGHTLY TREATED THIS AMOUNT IN THE HAND OF THE ASSESSEE AS ITS INCOME, THOUGH SUCH DECISION OF THE AO HAS BEEN TAKEN ON THE BASIS OF THE LETTER DATED 10.03.2003. CONSIDERING THE ABOVE FACTS AND CIRCUMSTANCES OF THE CASE, THE RECEIPT OF RS.32,51,697/- SHOWN BY THE ASSESSEE IN THE RETURN OF INCOME CANNOT BE CONSIDERED AS CAPITAL RECEIPT AND THE ASSESSING OFFICER HAS RIGHTLY TREATED IT AS REVENUE RECEIPT AND MORE SO, THIS AMOUNT BEING IN THE NATURE OF UNEXPLAINED RECEIPT IS LIABLE TO BE ADDED UNDER SECTION 68. THEREFORE, I DISMISS THE GROUND NO. (B). :- 13 -: 10. AGGRIEVED, THE ASSESSEE HAS PREFERRED AN APPEAL BEFORE THE TRIBUNAL AND HAS REITERATED ITS CONTENTIONS AS RAISED BEFORE THE LD. CIT(A). THE LD. COUNSEL FOR THE ASSESSEE HAS FURTHER CONTENDED THAT HAVING EXECUTED THE NON-COMPETE FEES AGREEMENT WITH M/S TANAIGA REAL ESTATE CORPORATION, THE ASSESSEE HAS SURRENDERED ITS RIGHT TO SUPPLY OR EXPORT ANY PRODUCT TO ANOTHER ENTITY WHETHER IN USA OR ELSEWHERE AND THE CONSIDERATION OF A LUMP SUM AMOUNT OF US $ 75000 AS OVERALL AND FINAL CONSIDERATION TO BE PAID ON OR BEFORE 31.7.1999 AS COMPENSATION TOWARDS NON-COMPETE FEES AND LOSS OF SOURCE OF INCOME. HE HAS ALSO INVITED OUR ATTENTION TO THE NON- COMPETE FEE AGREEMENT AT PAGE 89 OF THE COMPILATION OF THE ASSESSEE THAT TANAIGA HAS PURCHASED THE RIGHTS AND CLAIMS OF TTS ON AN AS IS WHERE IS BASIS AND THERE SHALL BE NO LIABILITY OF ANY NATURE WHATSOEVER ON TTS BY REASON OF THE CLAIMS BEING DISALLOWED IN THE BANKRUPTCY COURT FOR LACK OF SUFFICIENT EVIDENCE, OR ANY OTHER REASON. SINCE THE ASSESSEE HAS RECEIVED THE AFORESAID AMOUNT ON ACCOUNT OF SALE OF HIS RIGHT TO EXPORT IN USSR AND OTHER COUNTRIES, THE SAME WAS RIGHTLY TREATED TO BE THE CAPITAL RECEIPT AND CREDITED TO THE RESERVE ACCOUNT. THE LD. COUNSEL FOR THE ASSESSEE HAS FURTHER CONTENDED THAT THE ASSESSING OFFICER HAS MADE ADDITION SOLELY ON THE BASIS OF CONDITIONAL SURRENDER STATEMENT WHICH CANNOT BE RELIED ON, AS IT WAS CONDITIONAL ONE AND WAS NOT ACCEPTED IN TOTO. 11. THE LD. D.R., ON THE OTHER HAND, HAS PLACED RELIANCE UPON THE ORDER OF THE LD. CIT(A). 12. HAVING CAREFULLY EXAMINED THE ORDERS OF THE LOWER AUTHORITIES IN THE LIGHT OF THE RIVAL SUBMISSIONS, WE FIND THAT UNDISPUTEDLY THE ASSESSEE HAS ENTERED INTO AN AGREEMENT WITH GOLDEN ADA INC. HAVING ITS OFFICE AT 999, BRANNAN STREET, SAN FRANCISCO, CA 94103, USA, REPRESENTATIVE OFFICE OF GOLDEN ADA MOSCOW, RUSSIA AND GOLDEN ADA BELGIUM NV/ SHAKO REAL ESTATE, BELGIUM NV FOR A PERIOD OF FIVE (5) YEARS. IT IS ALSO AN UNDISPUTED FACT THAT ACCORDING TO THIS AGREEMENT, THE ASSESSEE WAS GIVEN EXCLUSIVE :- 14 -: BUSINESS RIGHTS TO EXPORT THE GOODS TO USSR IN THE NAME OF GADA ALONG WITH FACILITIES PROVIDED BY GADA, NAMELY, LETTER OF CREDIT, BANK GUARANTEE, COUNTER GUARANTEE ETC. THIS AGREEMENT WAS SIGNED BY SHRI. DEEPAK BABBAR, THE AUTHORIZED SIGNATORY OF THE ASSESSEE AND SHRI. RAJIV GOSAIN, THE AUTHORIZED SIGNATORY FOR GADA INC. AND ALSO FOR REPRESENTATIVE OFFICE OF GADA INC. IN MOSCOW AND GOLDEN ADA BELGIUM NV/ SHAKO REAL ESTATE, BELGIUM. THE COPY OF THIS AGREEMENT IS AVAILABLE AT PAGES 69 TO 71 OF THE COMPILATION OF THE ASSESSEE. ONE MORE ATTENDUM TO CONTRACT NO.101/95 WAS EXECUTED AND SIGNED BY SHRI. DEEPAK BABBAR AND SHRI. RAJIV GOSAIN AS AUTHORIZED SIGNATORY FOR THE RESPECTIVE PARTIES. THE ATTENDUM CONTRACT IS ALSO AVAILABLE AT PAGES 72 TO 74 OF THE COMPILATION OF THE ASSESSEE. IT IS ALSO WORTHWHILE TO MENTION HERE THAT SHRI. RAJIV GOSAIN WHO HAS SIGNED THIS AGREEMENT ON BEHALF OF THE GADA, USA AND MOSCOW AND BELGIUM IS SON OF SHRI. K. K. GOSAIN, PROMOTER OF THE ASSESSEE-COMPANY. 13. THE ESSENCE OF THIS AGREEMENT WAS THAT GADA AND ITS AFFILIATES WERE BOUND TO EXCLUSIVELY PURCHASE OF THEIR REQUIREMENTS FROM INDIA SOLELY FROM THE ASSESSEE-COMPANY AND THE ASSESSEE-COMPANY WAS ALSO BOUND TO DO BUSINESS ONLY WITH GADA FOR ITS EXPORTS TO RUSSIAN FEDERATION, BUT UNFORTUNATELY THIS AGREEMENT DID NOT MATERIALIZE AT THE OUTSET ITSELF BECAUSE THE USA COMPANY WENT INTO BANKRUPTCY AND THE ASSESSEE-COMPANY DID NOT DO ANY EXPORT BUSINESS FOR THE USA COMPANY AND ULTIMATELY THE ASSESSEE- COMPANY FILED A SUIT FOR DAMAGES AGAINST THE USA COMPANY BECAUSE OF NOT BEING ABLE TO DO ANY EXPORT BUSINESS ON ITS BEHALF. LATER ON, THE ASSESSEE- COMPANY ENTERED INTO AN AGREEMENT WITH SWISS COMPANY NAMELY M/S TANAIGA REAL ESTATE CORPORATION AND RECEIVED US $ 74900 AS COMPENSATION TOWARDS NON-COMPETE FEES AND US $ 100 AS BALANCE TOKEN AMOUNT TOWARDS DAMAGES, TOTALING TO AN AMOUNT OF US $ 75000 OR RS.32,51,697/-, HAVING AGREED NOT TO DO BUSINESS OF EXPORT OF ANY COMMODITIES FROM INDIA TO RUSSIAN FEDERATION FOR A PERIOD OF 7 YEARS FROM THE DATE OF AGREEMENT. :- 15 -: 14. THE ISSUE AROSE BEFORE THE ASSESSING OFFICER IS WHETHER THE RECEIPT OF THE SAID AMOUNT OF RS.32,51,697/- AS REVENUE RECEIPT OR CAPITAL RECEIPT. THE ASSESSING OFFICER HAS MADE DETAILED INVESTIGATION DURING THE COURSE OF ASSESSMENT PROCEEDINGS AND THE GLARING FACT NOTICED BY THE ASSESSING OFFICER WAS THAT THE INITIAL AGREEMENT FOR EXPORTING COMMODITIES TO RUSSIAN FEDERATION ARE EXECUTED BETWEEN THE ASSESSEE AND USA COMPANY, GADA FOR A PERIOD OF 10 YEARS WAS SIGNED BY THE SON OF PROMOTER OF THE ASSESSEE- COMPANY, SHRI. RAJIV GOSAIN. AFTER EXECUTION OF THIS AGREEMENT, THE ASSESSEE DID NOT EXPORT EVEN A SINGLE COMMODITY TO RUSSIAN FEDERATION, AS THE USA COMPANY WENT INTO BANKRUPTCY. THE LD. CIT(A) TOOK NOTE OF THIS FACT AND HAS OBSERVED THAT WHEN THE AGREEMENT WITH USA COMPANY WAS SIGNED BY THE SON OF THE PROMOTER OF THE ASSESSEE-COMPANY, IT IS IMPOSSIBLE THAT THE FINANCIAL CONDITION OF THE USA COMPANY WAS NOT KNOWN TO THE ASSESSEE-COMPANY. THE LD. CIT(A) ACCORDINGLY DOUBTED THE GENUINENESS OF SUCH AN AGREEMENT EXECUTED FOR NOT EXPORTING ANYTHING TO RUSSIAN FEDERATION, FOR WHICH THE ASSESSEE HAS BARGAINED WITH M/S TANAIGA REAL ESTATE CORPORATION AND RECEIVED A SUM OF RS.32,51,697/- AS NON-COMPETE FEES AND LOSS TO ITS COMMERCIAL RIGHTS. NOW THE QUESTION BEFORE US IS WHETHER THE ASSESSEE HAS ACQUIRED ANY COMMERCIAL RIGHT BY VIRTUE OF AGREEMENT EXECUTED BETWEEN THE ASSESSEE WITH USA COMPANY, AS THE ASSESSEE COULD NOT EXPORT EVEN A SINGLE COMMODITY TO THE RUSSIAN FEDERATION. THE LD. CIT(A) HAS ALSO TAKEN A NOTE OF THE FACT THAT THE ASSESSEE WAS NEITHER IN THE BUSINESS OF EXPORT NOR HAD ANY INFRASTRUCTURE TO DO BUSINESS AND THESE FINDINGS OF THE LD. CIT(A) GETS SUPPORT FROM THE INSPECTORS REPORT THAT NO REGISTERED OFFICE OF THE ASSESSEE-COMPANY ON THE ADDRESS MENTIONED BY THE ASSESSEE HAS BEEN FOUND. EVEN IN THE STATEMENT OF ITS DIRECTOR OF SHRI. DEEPAK BABBAR, IT HAS BEEN CLEARLY STATED IN RESPONSE TO QUESTION NO.2 AS NOTED BY THE LD. CIT(A) THAT THE COMPANY HAS NO BUSINESS ACTIVITIES SINCE 1997 MUCH BEFORE THE YEAR 1998 IN WHICH IT HAS :- 16 -: BEEN CLAIMED BY THE ASSESSEE COMPANY THAT IT HAS ENTERED INTO AN AGREEMENT WITH SWISS COMPANY FOR NOT DOING ANY BUSINESS TO RUSSIAN FEDERATION ON ACCOUNT OF WHICH, IT IS BEING CLAIMED THAT THE ASSESSEE COMPANY HAS RECEIVED A COMPENSATION OF RS.32,51,697/- AS NON-COMPLETE FEES. THE LD. CIT(A) ACCORDINGLY OBSERVED THAT A COLLUSION BETWEEN THE ASSESSEE COMPANY AND THE USA COMPANY CANNOT BE RULED OUT AND EVEN ON QUERY NO DOCUMENT HAS BEEN PRODUCED FROM THE USA COMPANY TO SHOW THAT SHRI. RAJIV GOSAIN WAS AUTHORIZED BY THEM AS BEING THEIR AUTHORIZED SIGNATORY. IT WAS ALSO OBSERVED BY THE LD. CIT(A) THAT DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER HAS RAISED CERTAIN QUERIES AND ASKED THE ASSESSEE TO FURNISH THE DETAILS OF USA COMPANY ALONG WITH NAME AND ADDRESS, BALANCE SHEET, ETC. BUT NOTHING WAS SUBMITTED BEFORE THE ASSESSING OFFICER AND HE ACCORDINGLY DOUBTED THE GENUINENESS OF THE USA COMPANY. THE LD. CIT(A) HAS ALSO OBSERVED THAT DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSEE COMPANY COULD NOT FILE ANY EVIDENCE TO SHOW THAT THE AMOUNT WAS PAID BY THE SWISS COMPANY, M/S TANAIGA REAL ESTATE CORPORATION. ON ENQUIRY, IT HAS BEEN SURFACED THAT THIS AMOUNT WAS DEBITED BY UBOCI TO WORLD TRADE CENTRE, NEW YORK ON 28.07.1999. THEREFORE, THE ORIGIN OF SOURCE OF FUND HAS BEEN FOUND TO BE FROM USA WHERE SHRI. RAJIV GOSAIN USED TO LIVE, BUT THIS PAYMENT BY SWISS COMPANY, M/S TANAIGA REAL ESTATE CORPORATION COULD NOT BE ESTABLISHED. 15. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSEE WAS ASKED TO PRODUCE SHRI. K. K. GOSAIN, PROMOTER OF THE ASSESSEE COMPANY, BUT HE WAS NOT PRODUCED. SHRI. DEEPAK BABBAR WAS PRODUCED AND IN HIS STATEMENT HE HAS CATEGORICALLY STATED THAT HE DID NOT KNOW MUCH ABOUT THE ACTIVITIES OF THE ASSESSEE COMPANY AND HE WAS THE ACCOUNTANT PRIOR TO BECOMING AS DIRECTOR. IT WAS ALSO DEPOSED BY HIM THAT THE AFFAIRS OF THE COMPANY WAS MANAGED BY SHRI. K. K. GOSAIN, FATHER OF SHRI. RAJIV GOSAIN WHO HAS SIGNED ON BEHALF OF THE USA COMPANY. THEREFORE, IT WAS :- 17 -: CONCLUDED BY THE LD. CIT(A) THAT SHRI. DEEPAK BABBAR WAS A DUMMY DIRECTOR OF THE ASSESSEE COMPANY AND HE HAS NO KNOWLEDGE OF THE AFFAIRS OF THE ASSESSEE COMPANY, AS ALL ITS AFFAIRS WERE MANAGED BY SHRI. K.K. GOSAIN AND HIS SON SHRI. RAJIV GOSAIN. WHEN THE ASSESSEE WAS CORNERED WITH ALL THESE FACTS COLLECTED BY THE ASSESSING OFFICER, THE ASSESSEE CAME FORWARD AND MADE A SURRENDER OF RS.32,51,697/- THROUGH ITS LETTER DATED 10.3.2003 THOUGH WITH CERTAIN CONDITIONS. ON THE BASIS OF THE SURRENDER STATEMENT, THE ASSESSING OFFICER HAS MADE ADDITION OF THIS AMOUNT OF RS.32,51,697/-. 16. BEFORE THE LD. CIT(A) AND BEFORE US ALSO THE LD. COUNSEL FOR THE ASSESSEE HAS TAKEN A PLEA THAT THE SURRENDER STATEMENT WAS CONDITIONAL AND THE SAME WAS NOT ACCEPTED IN TOTO, THEREFORE, THE SURRENDER MADE BY THE ASSESSEE IS NOT VALID. IT WAS FURTHER CONTENDED THAT WHILE MAKING A SURRENDER STATEMENT, IT HAS BEEN CLARIFIED IN THE SURRENDER LETTER THAT NEITHER INTEREST NOR PENALTY UNDER SECTION 271(1)(C) OF THE ACT WOULD BE LEVIABLE AGAINST THE ASSESSEE. IN THIS REGARD, WE ARE OF THE VIEW THAT THE ASSESSING OFFICER HAS NO POWER OR JURISDICTION TO ENTER INTO AN AGREEMENT WITH ANY OF THE ASSESSEE. HE HAS NO RIGHT TO WAIVE THE INTEREST OR PENALTY. HE HAS TO ACT IN ACCORDANCE WITH THE LAW. THEREFORE, WHERE THE ASSESSEE HAS SURRENDERED THE AFORESAID AMOUNT, THE ASSESSING OFFICER HAS TAXED THE SAME. MOREOVER, IT IS NOT A CASE OF VOLUNTARY SURRENDER WHERE THE ASSESSEE HAS CAME FORWARD AND MADE A SURRENDER STATEMENT. IT IS A CASE WHERE THE ASSESSING OFFICER HAS MADE DETAILED INVESTIGATION AND WHEN THE ASSESSEE WAS CORNERED, HE COME FORWARD WITH THE PROPOSAL OF SURRENDER. THEREFORE, THE CONTENTION OF THE ASSESSEE THAT IT WAS CONDITIONAL SURRENDER AND CANNOT BE ACCEPTED IN PART, CANNOT BE ACCEPTED. 17. KEEPING IN VIEW THE TOTALITY OF THE FACTS AND CIRCUMSTANCES OF THE CASE, WE ARE OF THE CONSIDERED OPINION THAT THE LOWER AUTHORITIES HAVE RIGHTLY DOUBTED THIS TRANSACTION AND TREATED IT TO BE SHAM. ACCORDINGLY WE :- 18 -: FIND NO INFIRMITY IN THE ORDER OF THE LD. CIT(A) WHO HAS RIGHTLY CONFIRMED THE ADDITION MADE BY THE ASSESSING OFFICER. 18. IN THE RESULT, APPEAL OF THE ASSESSEE STANDS DISMISSED. ORDER WAS PRONOUNCED IN THE OPEN COURT ON THE DATE MENTIONED ON THE CAPTIONED PAGE. SD/- SD/- [A. K. GARODIA] [SUNIL KUMAR YADAV] ACCOUNTANT MEMBER JUDICIAL MEMBER DATED:30 TH JULY, 2015 JJ:16-2007 COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT(A) 4. CIT 5. DR ASSISTANT REGISTRAR