AASIA BUSINESS VENTURES PVT. LTD., MUMBAI V. ITO 6(3)(4), MUMBAI

ITA 430/MUM/2011

• Counselvise Citation: 43019914 RSA 2011
• Duration Of Justice: 2 year(s) 9 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-11-2013
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 31-10-2013
• Assessment Year: 2007-2008
• Appeal Filed On: 17-01-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: JAVED AKHTAR
• Assessee Lawyers: S K MUTSADDI; KESHAV B BHUJLE
• Keywords: Onus to prove

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, MUMBAI BEFORE SHRI B.R. MITTAL (JM) & SHRI RAJENDRA (AM) I.T.A. NO. 430/MUM/2011 (ASSESSMENT YEAR : 2007-08) AASIA BUSINESS VENTURES PVT. LTD. HINDUJA HOUSE 171, DR. ANNIE BESANT ROAD WORLI, MUMBAI-400 016. ITO 6(3)(4) ROOM NO. 524, M.K. ROAD AAYAKAR BHAVAN MUMBAI-400 020. PAN/GIR NO. AAACG3698K (APPELLANT) .. (RESPONDENT) ASSESSEE BY : SHRI KESHAV B. BHUJLE & SHRI S.K.MUTSADDI DEPARTMENT BY : SHRI JAVED AKHTAR DATE OF HEARING : 31.10.2013 DATE OF PRONOUNCEMENT : 08.11.2013 O R D E R PER B.R. MITTAL (JM) : THE ASSESSEE HAS FILED THIS APPEAL FOR A.Y. 2007-0 8 AGAINST THE ORDER OF LEARNED CIT(A) DATED 20.10.2010. 2. THE ONLY GROUND IS AS TO WHETHER LEARNED CIT(A) HAS ERRED IN CONFIRMING THE ACTION OF THE ASSESSING OFFICER TO MAKE ADDITIO N OF RS. 3,04,38,400/- U/S. 41(1) READ WITH SECTION 28(IV) OF THE ACT BY TREATI NG ADVANCE AGAINST EXPORT RECEIVED FROM AMAS MAURITIUS LTD. BY THE ASSESSEE O N 24.1.1997 AS ITS INCOME BY TREATING THE SAID TRANSACTION AS SHAM TRANSACTIO N IN THE ASSESSMENT YEAR UNDER CONSIDERATION. 3. RELEVANT FACTS ARE THAT THE ASSESSEE IS PRESENTL Y ENGAGED IN GIVING ADVISORY SERVICES AND TRADED IN SHARES. EARLIER AS SESSEE WAS A TRADER IN SKO- SUPERIOR KEROSENE OIL. IT IMPORTED SKO AND WAS SELL ING THE SAME IN DOMESTIC MARKET. DURING THE COURSE OF ASSESSMENT PROCEEDINGS , THE ASSESSING OFFICER AASIA BUSINESS VENTURES PVT. LTD . 2 OBSERVED FROM THE BALANCE-SHEET AS ON 31.3.2007 THA T UNDER THE HEAD CURRENT LIABILITIES AN AMOUNT OF RS. 3,04,38,400/- IS REFL ECTED BEING ADVANCE AGAINST EXPORTS. ON AN INQUIRY, ASSESSEE STATED THAT THE SA ID AMOUNT OF RS. 3,04,38,400/- WAS RECEIVED AS AN ADVANCE AGAINST EX PORTS ON 24.1.1997 (USD 8,50,000) FROM M/S. AMAS MAURITIUS LTD. IN ORDER TO BUY GOODS FOR THE PURPOSE OF EXPORT. SUBSEQUENTLY, EXPORTS COULD NOT BE MADE AS THE REQUIRED GOODS COULD NOT BE IDENTIFIED AND BALANCE IS STILL DUE AND PAYABLE AS ON 31.1.2007. THE ASSESSEE ALSO FILED A CONFIRMATION F ROM THE PARTY BEFORE THE ASSESSING OFFICER. 4. THE ASSESSING OFFICER HAS STATED THAT THE ASSESS EE HAS NOT MADE ANY EXPORT IN LIEU OF ADVANCE RECEIVED EVEN AFTER TEN Y EARS OF RECEIPT OF ADVANCE HE HAS SUBMITTED THAT THE ASSESSEE WAS NO LONGER REQUI RED TO CARRY OUT EXPORT IN LIEU OF ADVANCE, NOR WAS THE AMOUNT REPAID TILL DAT E. THE ASSESSING OFFICER HAS STATED THAT AS PER FEMA NOTIFICATION NO. 23/RB-2000 DATED 3.5.2000 AND AS PER REGULATION 16, INTER-ALIA THE ASSESSEE IS REQUI RED TO ENSURE THAT THE SHIPMENT OF GOODS IS MADE WITHIN ONE YEAR FROM THE DATE OF RECEIPT OF ADVANCE PAYMENT. THE ASSESSEE HAS VIOLATED THE SAID REGULAT ION. HE HAS CONCLUDED THAT THE MONEY RECEIVED BY THE ASSESSEE WAS NOT FOR THE PURPOSE OF ANY EXPORT TO BE MADE TO M/S. AMAS MAURITIUS LTD. BUT FOR ITS OWN CONSUMPTION WHICH THE ASSESSEE IS NOT ABLE TO SUBSTANTIATE. THE ASSES SING OFFICER HAS FURTHER EXAMINED THE GENUINENESS OF THE TRANSACTION, CREDIT WORTHINESS OF THE PARTY I.E. M/S. AMAS MAURITIUS LTD. AND IDENTITY OF THE PARTY. THE ASSESSING OFFICER HAS STATED THAT THE ASSESSEE HAS FAILED TO DISCHARGE TH E ONUS TO PROVE THE IDENTITY OF THE PARTY. HE HAS ALSO STATED THAT THE ADVANCE R ECEIVED IN FOREIGN EXCHANGE WERE USED BY THE ASSESSEE FOR THE PURPOSE OTHER THA N FOR EXPORT TO THE ENTITY FROM WHOM ADVANCE HAD BEEN RECEIVED. THEREFORE ADVA NCE RECEIVED WAS NOT FOR THE PURPOSE OF ANY EXPORT AND DOUBTED THE GENUINENE SS OF THE TRANSACTION. BESIDES ABOVE, THE ASSESSING OFFICER HAS ALSO STATE D THAT THE ASSESSEE COULD NOT FURNISH BALANCE-SHEET FROM M/S. AMAS MAURITIUS LTD. TO ESTABLISH THAT AASIA BUSINESS VENTURES PVT. LTD . 3 LIABILITY STILL SUBSIST. THE ASSESSING OFFICER HAS ALSO STATED THAT M/S. AMAS MAURITIUS LTD. IS A 40% SHAREHOLDER IN THE ASSESSEE -COMPANY AND IT IS MORE SURPRISING THAT THE ASSESSEE IS UNABLE TO FURNISH T HE BALANCE SHEET OF ITS MAJORITY SHAREHOLDER I.E. M/S. AMAS MAURITIUS LTD. HE HAS CONCLUDED THAT BY NOT PRODUCING THE BALANCE-SHEET THE ASSESSEE HAS FA ILED TO DISCHARGE THE ONUS OF CREDITWORTHINESS OF THE PARTY. IN VIEW OF THE AB OVE THE ASSESSING OFFICER HAS CONCLUDED THAT THE ADVANCE AGAINST EXPORT AMOUNTING TO RS. 3,04,38,400/- IS TREATED AS CESSATION OF LIABILITY AND TAXED AS INCO ME U/S. 41(1) OF THE ACT AND ADDED BACK TO THE TOTAL INCOME OF THE ASSESSEE. IN THIS REGARD, THE ASSESSING OFFICER PLACED RELIANCE ON THE DECISION OF HON'BLE BOMBAY HIGH COURT IN THE CASE OF SOLID CONTAINERS LTD. VS. DCIT (308 ITR 417 ). BEING AGGRIEVED, THE ASSESSEE FILED THE APPEAL BEFORE LEARNED CIT(A). 5. LEARNED CIT(A) HAS STATED THAT HE HAS EXAMINED T HE DETAILS OF THE CASE. HE HAS STATED THAT THE ASSESSEE HAD SHOWN TO RECEIV E RS. 3,04,38,400/- FROM M/S. AMAS MAURITIUS LTD., A COMPANY REGISTERED IN M AURITIUS ON 24.1.1997 FOR THE PURPOSE OF EXPORT OF GOODS. HOWEVER, NO EXPORT HAS BEEN MADE BY THE ASSESSEE AGAINST ADVANCE RECEIVED. THAT THE ASSESSE E HAS NOT BEEN ABLE TO DETAIL THE GOODS THAT WERE TO BE EXPORTED. THAT NO DOCUMENTARY EVIDENCE HAS BEEN PRODUCED BY THE ASSESSEE TO SHOW OR PROVE THE EXPORT WAS INTENDED. HE HAS FURTHER STATED THAT IT ALSO TRANSPIRES THAT THE RE WAS NO FORMAL AGREEMENT BETWEEN THE ASSESSEE AND THE CONCERN ADVANCING THE AMOUNT. HE HAS FURTHER STATED THAT THE ASSESSEE HAS CLAIMED BEFORE THE ASS ESSING OFFICER THAT IT WAS PLANNING TO IMPORT ONIONS AND MARINE PRODUCTS FOR S UBSEQUENT EXPORT TO MAURITIUS WHICH INDICATED A CHANGE IN THE VERY NATU RE OF BUSINESS VENTURE CLAIMED TO HAVE BEEN UNDERTAKEN BY THE ASSESSEE. LE ARNED CIT(A) HAS STATED THAT THESE ACTIVITIES WAS NEVER ESTABLISHED BY THE ASSESSEE IN THE MEMORANDUM OF UNDERSTANDING AND AOA. HE HAS STATED THAT THE ASSESSEE HAS NOT BEEN ABLE TO ESTABLISH THE VERY REASON THAT IT HAS RECEIVED THE MONEY FROM AND THE ORIGIN OF THE MONEY. LEARNED CIT(A) AFTER C ONSIDERING THE REGULATION 16 OF FEMA DATED 3.5.2000, WHICH WE HAVE ALREADY ME NTIONED HEREINABOVE, AASIA BUSINESS VENTURES PVT. LTD . 4 HAS CONCLUDED THAT THE ASSESSEE HAS RECEIVED A CLEA R CUT BENEFIT BY WAY OF THE SAID ADVANCE FOR A TRADING LIABILITY. THIS AMOUNT I S NOT A NOTIONAL RECEIPT. THE ASSESSEE HAS NOT BEEN ABLE TO ESTABLISH THE TRADE I T HAD UNDERTAKEN OR WAS BEING UNDERTAKEN AND THAT THE LIABILITY EXISTS. LEA RNED CIT(A) HAS CONCLUDED THAT THE ASSESSING OFFICER HAS RIGHTLY HELD THAT TH E TRANSACTION WAS A SHAM TRANSACTION AND THEREFORE CONFIRMED THE ACTION OF T HE ASSESSING OFFICER FOR MAKING THE ADDITION BY INVOKING PROVISIONS OF SECTI ON 41(1) READ WITH SECTION 28(IV) OF THE ACT. HENCE THIS APPEAL BY THE ASSESSE E. 6. AT THE TIME OF HEARING, LEARNED AR BESIDES MAKIN G SUBMISSIONS AS MADE BEFORE THE AUTHORITIES BELOW SUBMITTED THAT THE LIA BILITY TO REFUND THE SAID AMOUNT STILL EXISTS IN THE BOOKS OF ACCOUNT OF THE ASSESSEE AND THE SAME HAS NOT BEEN WRITTEN OFF. THEREFORE IT CANNOT BE ADDED AS INCOME OF THE ASSESSEE U/S. 41(1) OR U/S. 28(IV) OF THE ACT AS IT HAS NOT BECOME MONEY OF THE ASSESSEE BECAUSE OF EFFLUX OF TIME. LEARNED AR SUBMITTED THA T A LETTER WRITTEN TO RBI VIDE LETTER DATED 27.12.2011 FOR REFUND OF THE SAID AMOUNT WITHOUT INTEREST OR EXCHANGE DIFFERENCE AND THE APPROVAL OF RBI IS AWAI TED. LEARNED AR FILED A COPY OF THE SAID LETTER TO SUBSTANTIATE ITS SUBMISS ION. HE FURTHER SUBMITTED THAT THE DECISION OF HON'BLE BOMBAY HIGH COURT IN THE CASE OF SOLID CONTAINERS LTD. (SUPRA) IS NOT APPLICABLE AS IN THE SAID CASE LOAN WHICH WAS TAKEN DURING THE PREVIOUS YEAR RELEVANT TO ASSESSME NT YEAR UNDER CONSIDERATION FOR BUSINESS PURPOSE WAS WRITTEN BACK AS A RESULT OF CONSENT TERMS ARRIVED AT BETWEEN THE ASSESSEE AND LENDER. I T WAS IN THAT CONTEXT IT WAS HELD THAT PROVISIONS OF SECTION 41(1) WERE APPLICAB LE. HE SUBMITTED THAT LIABILITY STILL EXISTS IN THE BOOKS AND THEREFORE I T CANNOT BE ADDED TO THE INCOME OF THE ASSESSEE. ON THE OTHER HAND, LEARNED DEPARTM ENTAL REPRESENTATIVE RELIED ON THE ORDER OF LEARNED CIT(A) AND SUBMITTED THAT CONSIDERING THE FACT THAT THE ADVANCE WAS RECEIVED IN 1997 AND THE GOODS ARE YET TO BE EXPORTED, THE SAID ADVANCE HAS TO BE TREATED AS INCOME OF THE ASSESSEE BY EFFLUX OF TIME AND AMOUNT IS TO BE ADDED U/S. 41(1) AND/OR 28(IV) OF THE ACT. LEARNED AR IN REJOINDER SUBMITTED THAT SIMILAR ISSUE HAD ALSO BEE N CONSIDERED BY ITAT, AASIA BUSINESS VENTURES PVT. LTD . 5 MUMBAI BENCH IN THE CASE OF M/S. JAYRAM HOLDINGS PV T. LTD. VS. ITO (ITA NO. 6914/MUM/2010 ORDER DATED 4.7.2012) AND FILED COPY OF THE SAID ORDER TO SUBSTANTIATE HIS SUBMISSION. 7. WE HAVE CAREFULLY CONSIDERED THE ORDERS OF THE A UTHORITIES BELOW AND SUBMISSIONS OF THE REPRESENTATIVE OF THE PARTIES. W E HAVE ALSO GONE THROUGH THE RELEVANT PAGES OF THE PAPER BOOK TO WHICH OUR A TTENTION WAS DRAWN AT THE TIME OF HEARING AND HAVE ALSO CONSIDERED THE CASES RELIED UPON BY THE ASSESSING OFFICER AS WELL AS REFERRED BY LEARNED AR (SUPRA). IT IS A FACT THAT THE ASSESSEE RECEIVED A SUM OF RS. 3,04,38,400/- FROM M /S. AMAS MAURITIUS LTD. ON 24.1.1997 AS AN ADVANCE FOR THE PURPOSE OF EXPOR T OF GOODS AND THE SAME HAS BEEN APPEARING IN THE BOOKS OF ACCOUNT OF THE A SSESSEE TILL DATE. IT IS ALSO FACT THAT THE ASSESSEE NEITHER HAS MADE EXPORT AGAI NST THE SAID ADVANCE NOR THE AMOUNT HAS BEEN RETURNED TILL DATE. MOREOVER, T HE ASSESSEE HAS ADMITTEDLY STOPPED EXPORT BUSINESS AND IS IN THE BUSINESS OF A DVISORY AS WELL AS IN SHARE DEALING. IT IS NOT IN DISPUTE THAT THE SAID AMOUNT IS SHOWN AS ADVANCE IN THE BALANCE SHEET OF THE ASSESSEE. THE SAID LIABILITY I S ALSO SHOWN AS ON 31.3.2007. THEREFORE THE LIABILITY HAS BEEN ACKNOWLEDGED BY TH E ASSESSEE. SINCE AMOUNT HAS NOT BEEN WRITTEN OFF BY THE ASSESSEE IN ITS BOO KS OF ACCOUNT, IT CANNOT BE SAID THAT THE LIABILITY HAS CEASED TO EXISTS. HON'B LE MADRAS HIGH COURT HAS HELD IN THE CASE OF CIT VS. TAMILNADU WAREHOUSING CORPOR ATION (292 ITR 310) THAT THE AMOUNT REPRESENTING LIABILITIES WHICH WERE SHOW N YEAR AFTER YEAR COULD NOT BE ADDED BACK U/S. 41(1) OF THE ACT, 1961. THE SAME VIEW HAS ALSO BEEN TAKEN BY HON'BLE P&H HIGH COURT IN THE CASE OF SMT. SITA DEVI JUNEJA (2010) TIOL 32 (P&H HIGH COURT IT). BOMBAY HIGH COURT HAS ALSO HELD IN THE CASE OF CHASE BRIGHT STEEL LTD. (177 ITR 128) THAT THE ISSUE OF L IMITATION IS NOT APPLICABLE FOR CESSATION OF LIABILITY FOR THE PURPOSE OF SECTION 4 1(1) OF THE INCOME TAX ACT. IN VIEW OF ABOVE, WE AGREE WITH LEARNED AR THAT LEARNE D CIT(A) AND ASSESSING OFFICER ARE NOT JUSTIFIED TO APPLY PROVISIONS OF SE CTION 41(1) OF THE ACT. WE ALSO OBSERVE THAT THE ASSESSING OFFICER HAS DOUBTED THE GENUINENESS OF THE TRANSACTION AS WELL AS CREDITWORTHINESS OF THE LEND ER/PAYEE. WE ARE OF THE AASIA BUSINESS VENTURES PVT. LTD . 6 CONSIDERED VIEW THAT SINCE THE SAID AMOUNT RECEIVED BY THE ASSESSEE IN JANUARY, 1997 AND THE SAME WAS APPEARING IN THE BOO KS OF ACCOUNT OF THE ASSESSEE, GENUINENESS OF THE TRANSACTION AS WELL AS CREDITWORTHINESS OF THE PARTY COULD NOT BE CONSIDERED IN THE ASSESSMENT YEA R UNDER CONSIDERATION FOR MAKING THE SAID ADDITION U/S. 41(1) READ WITH SECTI ON 28(IV) OF THE ACT. 8. BE THAT AS IT MAY, IT IS THE FACT THAT THE ASSES SEE HAS NOT WRITTEN BACK THE SAID AMOUNT TO ITS PROFIT AND LOSS ACCOUNT, WE ARE OF THE CONSIDERED VIEW THAT THE PROVISIONS OF SECTION 28(IV) WHICH PROVIDE S VALUE OF ANY BENEFIT OR PERQUISITE, WHETHER CONVERTIBLE INTO MONEY OR NOT, ARISING FROM BUSINESS OR THE EXERCISE OF A PROFESSION SHALL BE CHARGEABLE TO INC OME TAX UNDER THE HEAD PROFIT AND GAINS OF BUSINESS OR PROFESSION COULD NOT BE APPLIED AS THE SAID BENEFIT HAS NOT ARISEN TO THE ASSESSEE BECAUSE THE ASSESSEE IS SHOWING THE SAID AMOUNT AS ITS LIABILITY IN THE BALANCE-SHEET YEAR A FTER YEAR. THEREFORE, WE ARE OF THE CONSIDERED VIEW THAT THE SAID AMOUNT CANNOT BE ADDED AS INCOME OF THE ASSESSEE U/S. 28(IV) OF THE ACT. 9. WE MAY ALSO STATE THAT ON AND IDENTICAL FACTS SI MILAR ISSUE HAS ALSO BEEN CONSIDERED BY THE ITAT, MUMBAI BENCH IN THE CASE OF M/S. JAYRAM HOLDINGS PVT. LTD. (SUPRA) AND THE TRIBUNAL HAS HELD THAT TH E PROVISIONS OF SECTION 41(1) AND/OR SECTION 28(IV) OF THE ACT CANNOT BE APPLIED TO MAKE THE SAID ADDITION OF ADVANCE RECEIVED BY THE ASSESSEE IN THAT CASE IN A. Y. 1997-98 IF THE AMOUNT WAS NOT WRITTEN OFF AND THE LIABILITY STILL SUBSIST . THE DECISION OF ITAT DATED 4.7.2012 SQUARELY APPLY TO THE FACTS OF THE CASE UN DER CONSIDERATION BEFORE US. 10. HENCE, IN VIEW OF ABOVE, THE GROUNDS OF APPE AL TAKEN BY THE ASSESSEE ARE ALLOWED BY DELETING THE ADDITION MADE BY THE AUTHOR ITIES BELOW. 11. BEFORE WE PART WITH THIS APPEAL, WE MAY STATE T HAT IF THE ASSESSING OFFICER WAS OF THE VIEW THAT THE ASSESSEE HAS VIOLA TED PROVISIONS OF FEMA BY NOT MAKING THE EXPORT WITHIN THE PERIOD OF ONE YEAR AS PER REGULATION 16 OF THE AASIA BUSINESS VENTURES PVT. LTD . 7 FEMA REGULATION DATED 3.5.2000 AND THE SAID TRANSAC TION WAS A SHAM TRANSACTION IN THE GUISE OF RECEIVING ADVANCE FOR M AKING EXPORT, THE ASSESSING OFFICER SHOULD HAVE TAKEN UP THE MATTER WITH RBI TO MAKE AN INQUIRY IN THIS RESPECT. 12. IN VIEW OF THE ABOVE GROUND OF APPEAL TAKEN BY THE ASSESSEE IS ALLOWED. 13. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWE D. ORDER PRONOUNCED ON 8 TH DAY OF NOVEMBER, 2013. SD/- (RAJENDRA) ACCOUNTANT MEMBER SD/- (B.R. MITTAL) JUDICIAL MEMBER MUMBAI; DATED : 08/11/2013 COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT. 3. THE CIT(A) 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. BY ORDER, //TRUE COPY// ( ( ( ( DY./ASSTT. REGISTRAR) ITAT, MUMBAI PS