DCIT 10(3), MUMBAI V. ACCUTEST RESEARCH LABORATORIES (I) P.LTD, NAVI MUMBAI

ITA 5077/MUM/2013

• Counselvise Citation: [2019] 118 COUNSELVISE.COM (IT) 7667 (ITAT-MUMBAI)
• Duration Of Justice: 5 year(s) 6 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-01-2019
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 11-01-2015
• Assessment Year: 2009-2010
• Appeal Filed On: 05-07-2013
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Assessee Lawyers: IN CIRCUMSTANCES OF CA SE
• Keywords: Income from undisclosed sources; Additional evidence; Corroborative evidences; Valuation report; Onus to prove
• Section: 142(1); 115JB; 143(1); 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, MUMBAI BEFORE SHRI R. C. SHARMA , AM AND SHRI AMARJIT SINGH, JM / I .T.A. NO. 5077 / MUM/ 201 3 ( / ASSESSMENT YEAR: 20 09 - 10 ) THE DY. CIT 15(1)(1) ROOM NO. 470, 4 TH FLOOR, AAYAKAR BHAVAN, MAHARSHI KARVE ROAD, MUMBAI - 400020 . / VS. M/S. ACCUTEST RESEARCH LABORATORIES (INDIA) PVT. LTD. PLOT NO. A - 31, MIDC, TTC INDUSTRIES AREA, KOPAR KHAIRANE, NAVI MUMBAI - 400709. ./ ./ PAN/GIR NO. : AADCA 0798 B ( / APPE LLANT ) .. ( / RESPONDENT ) / DATE OF HEARING : 21 . 12 .201 8 / DATE OF PRONOUNCE MENT : 09. 01 . 201 9 / O R D E R PER AMARJIT SINGH, J M: THE REVENUE HAS FILED THE PRESENT APPEAL AGAINST THE ORDER DATED 02 . 0 4 .201 3 PASSED BY THE COMMISSIONER OF INCOME TAX (APPEALS) - 22 , MUMBAI [HEREINAFTE R REFERRED TO AS THE CIT(A)] RELEV ANT TO THE A.Y. 20 09 - 1 0 . 2 . THE REVENUE HAS RAISED THE FOLLOWING GROUNDS: - 1. 'ON THE FADS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED DELETING THE ADDITION OF RS.14,73,73,000/ - U/S, 6S OF THE ACT. WITHOUT CONSIDERING THE FACT THAT THE ASSESSEE FAILED REVENUE BY : SHRI R. P. MEENA (DR) ASSESSEE BY: SHRI JITENDRA JAIN & RAVIKANT PATHAK (AR) ITA NO. 5077 /M/201 3 A.Y.2009 - 10 2 TO PROVE THE IDENTITY, CREDIT WORTHINESS AND GENUINENESS OF TRANSACTION EVEN THOUGH THE SUBMISSION OF THE ASSESSES WAS DULY CONSIDERED AND FOUND UNSATISFACTORY DURING THE COURSE OF ASSESSMENT PROCEEDING?' 2. ''ON THE FACTS AND I N THE CIRCUMSTANCE S OF THE CASE AND IN LAW, THE I D. CI T'(A) FAILED TO APPRECIATE THE FACT THAT THOUGH THE SHARES IN THE BOOKS OF THE ASSESSES WERE VALUED AT RS.762/ - PER SHARE, YET ALLOTMENT WAS MADE TO THE INVESTORS AT A RALE OF RS.1280/ - PER SHARE, CASTI NG A DOUBT ON THE GENUINENESS OF TRANSACTION.' 3. 'ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN ADMITTING THE ADDITIONAL DOCUMENTS AS EVIDENCE UNDER RULE 46A OF IT RULES, IGNORING THAT THESE DOCUMENTS WERE NOT SUB MITTED BEFORE THE ASSESSING OFFICER DURING THE ASSESSMENT PROCEEDINGS, EVEN THOUGH SUFFICIENT OPPORTUNITY WAS GIVEN TO THE ASSESSEE TO PRODUCE THE EVIDENCES AND THE ASSESSING OFFICER HAD NEITHER REFUSED TO ADMIT THESE DOCUMENTS NOR PREVENTED THE ASSESSEE B Y SUFFICIENT CAUSE FROM PRODUCING THEM. FURTHER, THE LD. CIT(A) HAS ALSO IGNORED THE DECISION OF HON'BLE ALLAHABAD HIGH COURT IN THE CASE OF RAM PRASAD SHARMA VS. CIT (1979) 119 ITR 867, WHEREIN THE HON'BLE HIGH COURT HAS UPHELD THE ORDER OF THE LD. APPELL ATE ASSISTANT COMMISSIONER AND THE HON'BLE TRIBUNAL IN REFUSING TO GIVE PERMISSION TO ADDUCE FRESH EVIDENCE.' 4. 'THE APPELLANT PRAYS THAT THE ORDER OF CIT(A) ON THE ABOVE GROUND BE SET ASIDE AND THAT OF THE ASSESSING OFFICER BE RESTORED', 5. 'THE APPE LLANT CRAVES LEAVE TO ADD, AMEND OR ALTER ANY GROUNDS OR ADD NEW GROUNDS OR ADD A NEW GROUND OF APPEAL, WHICH MAY BE NECESSARY, AT ANY TIME BEFORE OR AT THE LIME OF HEARING OF APPEAL. 3 . THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE F ILED ITS RETURN OF INCOME ON 30 . 09 .20 09 DECLARING TOTAL INCOME TO THE TUNE OF RS.3,34,22,533/ - . THE RETURN WAS PROCESSED U/S 143(1) OF THE ACT. THE CASE WAS SELECTED FOR SCRUTINY, THEREFORE , NOTICES U/S 143(2) & 142(1) OF THE ACT WERE ISSUED AND SERVED UPON THE ASSESSEE. THE ASSESSEE IS ENGAGED IN THE BUSINESS OF SCIENTIFIC & ANALYTICAL RESEARCH LABORATORY FORMULATION DEVELOPMENT CLINICAL TRIAL. DURING THE YEAR UNDER CONSIDERATION, THE ASSESSEE HAS SHOWN THE INCOME FROM SERVICES TO THE TUNE OF ITA NO. 5077 /M/201 3 A.Y.2009 - 10 3 RS.64,78,78,000/ - AND OTHER R ELATED INCOME TO THE TUNE OF RS.80,38,000/ - AND NET PROFIT WAS COMPUTED TO THE TUNE O F RS.3,59,41,000/ - . IN THE YEAR, THE ASSESSEE RECEIVED THE SUM OF RS.11,17,44,000/ - FROM M/S. AUREOUS SOUTH ASIA FUND LIC (ASAFL) AND RECEIVED A SUM OF RS.3,59,29,000 FROM M/S.AUREOUS OFFSHORE INDIA OPPORTUNITY FUND (AOIOF) AS SHARE APPLICATION MONEY AND THE SHARES WERE ALLOTTED TO THEM AT A SUBSTANTIAL PREMIUM TO THE TUNE OF RS.14,73,73,000/ - . THE ASSESSEE COMPANYS NET WORTH PRIOR TO ISSUE OF SHARES TO THESE COMPANIES WAS TO THE TUNE OF RS.14,70,70,820/ - AS CERTIFIED BY THE MANAGEMENT OF THE COMPANY IN ITS ANNEXURE - B TO VALUATION REPORT. SO THE AMOUNT WAS RECEIVED BY THE ASSESSEE COMPANY WAS MORE THAN THE NET WORTH OF THE COMPANY AS CERTIFIE D BY THE MANAGEMENT. THEREFORE N ECESSARY QUESTION WAS ASKED IN VIEW OF THE QUESTIONNAIRE DATED 20.10.2011 AND FINDING NO SUFFICIENT REPLY , THE AMOUNT TO THE TUNE OF RS.14,73,73,000/ - WAS TRE ATED AS INCOME OF THE ASSESSEE AND THE TOTAL INCOME OF THE ASSESSEE WAS ASSESSED TO THE TUNE OF RS .18,07,95,533/ - AND BOOK PROFIT U/S 115JB OF THE ACT WAS ASSESSED TO THE TUNE OF RS.3,61,79,793/ - . FEELING AGGRIEVED, THE ASSESSEE FILED AN APPEAL BEFORE THE CIT(A) WHO ALLOWED THE CLAIM OF THE ASSESSEE, THEREFORE, THE REVENUE HAS FILED THE PRESENT APPEAL BEFORE US. 4. ALL THE ISSUES ARE INTER - CONNECTED, THEREFORE, ARE BEING TAKEN UP TOGETHER FOR ADJUDICATION. T HE REVENUE HAS CHALLENGED THE DELETION OF THE ADDITION OF RS. 11,73,73,000/ - U/S 68 OF THE ACT. THE LD. REPRESENTATIVE OF THE REVENUE HAS ARGUED THA T THE ASSESSEE HAS FAILED TO PROVE THE IDENTITY, CREDITWORTHINESS AND GENUINENESS OF THE TRANSACTION BUT THE CIT(A) HAS WRONGLY ALLOWED THE CLAIM OF THE ASSESSEE, THEREFORE, THE FINDING OF THE CIT(A) IS WRONG AGAINST LAW AND FACTS AND IS LIABLE TO BE SET A SIDE. IT IS ITA NO. 5077 /M/201 3 A.Y.2009 - 10 4 ARGUED THAT THE VALUE OF THE SHARES IN THE BOOKS OF ACCOUNT OF THE ASSESSEE WAS TO THE TUNE OF RS.762/ - PER SHARE BUT THE ASSESSEE ALLOTTED THE SHARE TO THE INVESTOR @ 1280 PER SHARE CASTING DOUBT ON THE GENUINENESS OF THE TRANSACTION , THEREFO RE, THE FINDING OF THE CIT(A) IS NOT JUSTIFIABLE AND IS LIABLE TO BE SET ASIDE. IN SUPPORT OF THESE CONTENTION AND THE LD. REPRESENTATIVE OF THE DEPARTMENT HAS PLACED RELIANCE UPON THE DECISION HONBLE ITAT IN THE CASE OF IN ITA. NO.4520/DEL/2009 AND 613/D EL/2013 DATED 28.03.2018 AND M/S. PRATIK SYNTEX PRIVATE LTD. VS. ITO IN ITA. NO. 6690/M/2016 DATED 11.05.2018 AND CIT VS. YOUTH CONSTRUCTION P. LTD. (2014) 44 TAXMANN.COM 364 (DELHI), N. TARIKA PROPERTY INVEST P. LTD. VS. CIT (2014) 51 TAXMANN.COM 387 (SC) ETC. HOWEVER, ON THE OTHER HAND, THE LD. REPRESENTATIVE OF THE ASSESSEE HAS STRONGLY RELIED UPON THE ORDER PASSED BY THE CIT(A) IN QUESTION. BEFORE GOING FURTHER, WE DEEMED IT NECESSARY TO ADVERT THE FINDING OF THE CIT(A) ON RECORD.: - 6.1 I HAVE GONE THR OUGH THE ASSESSMENT ORDER AND THE WRITTEN SUBMISSION FILED BY THE APPELLANT TOGETHER WITH THE PAPER - BOOK CONTAINING EVIDENCES RELIED UPON BY THE APPELLANT. FROM THE ORDER OF THE AO IT IS OBSERVED THAT THE ISSUES DISPUTED BY THE AO FOR MAKING ADDITION IN TH E ASSESSMENT ORDER WERE FOLLOWING: (I) NAME S ADDRESS OF THE DIRECTORS THROUGH WHOM THE FOREIGN DIRECT INVESTMENT (FDI) DURING THE YEAR IS RECEIVED ARE NOT GIVEN (II)THE ASSESSEE COMPANY IS IN RECEIPT OF FUNDS, HOWEVER, NO DETAILS OF FOREIGN TRAVELLING DON E BY THE MANAGEMENT TO MAURITIUS IN ORDER TO GEL FDI WERE GIVEN. (III)THE NATURE OF BUSINESS AND HIERARCHY OF THE COMPANY MANAGEMENT OF THE MAURITIUS COMPANIES FROM WHICH FDI HAS BEEN RECEIVED ARE NOT EXPLAINED (IV)NAME AND ADDRESS OF MEDIATORS THROUGH WH OM THE SAID FDI WAS OBTAINED ARE NOT GIVEN. (V)COPY OF VALUATION REPORT BASED ON WHICH THE SHARE PREMIUM WAS ITA NO. 5077 /M/201 3 A.Y.2009 - 10 5 DETERMINED ARE NOT EXPLAINED PROPERLY. (VI) NO DOCUMENTS HAVE BEEN FILED BEFORE RBI FOR OBTAINING PERMISSION. (VII) NOT JUSTIFYING THE GENUINENESS AND CREDITWORTHINESS OF THE PARTY FROM WHOM THE FDI WAS RECEIVED, (VIII)NO DETAILS WAS SUBMITTED EXCEPT THE REGISTRATION CERTIFICATE WITH SEBI TO SUBSTANTIATE THE GENUINENESS OF THE TRANSACTION. (IX) MEMORANDUM OF UNDERSTANDING/ARTICLES OF ASSOCIATION ALO NGWITH REGISTRATION CERTIFICATE ARE NOT GIVEN. 6.2 DURING THE COURSE OF APPELLATE PROCEEDING, THE APPELLANT MADE DETAILED SUBMISSION ON THE ABOVE ISSUES DISPUTED BY THE AO WHICH ARE AS UNDER (I) THE TRANSACTION HAS BEEN MEDIATED AND CO - ORDINAT ED BY THE NOMINEE DIRECTOR SHRI NILESH MEHTA, WHO WAS FAMILIAR WITH THE BUSINESS OF THE APPELLANT BEING APPOINTED AS AN ADDITIONAL DIRECTOR IN THE APPELLANT COMPANY SINCE 2006 AND SECRETARY OF THE APPELLANT COMPANY SHRI PRAMOD DUBEY (II) THE APPELLAN T WAS APPROACHED BY THE PE'S THROUGH PERSONNEL OF AITPL (I.E. SHRI SUJIT TAM BAT) WHO HAS SUBSCRIBED TO THE DEBENTURES OF THE APPELLANT IN 2006 (III) THE AITPL HAD ACCESS TO THE FINANCIAL PROSPECTS OF THE APPELLANT THROUGH NOMINEE DIRECTOR, THUS THE PE 'S DID NOT CONDUCT THE DUE DILIGENCE SEPARATELY FOR THIS TRANSACTION AND NO FOREIGN TRAVELLING HAD TAKEN PLACE BY THE MANAGEMENT OF THE APPELLANT COMPANY. (IV) THE NATURE OF BUSINESS AND HIERARCHY OF ASAF AND AO1OF ARE DISCUSSED ABOVE, (V) COPY OF VALUATION REPORT OF P G JOSHI & CO. (CHARTERED ACCOUNTANTS) WAS FILED BEFORE THE AO THE SHARES ARE VALUED AT RS.762 PER SHARE, HOWEVER, THE APPELLANT HAS RECEIVED RS.1,280/ - FOR EACH SHARE AS THE SAME WAS MUTUALLY AGREED BETWEEN THE APPELLANT AND PEF'S KEEPING IN VIEW THE FUTURE PROSPECTS OF THE COMPANY'S BUSINESS AND ITS GROWTH AND THE CONTROLLING INTEREST .(VI)_THE ASAF AND AOIOF ARE APPROVED BY THE RBI TO MAKE INVESTMENT IN INDIAN COMPANIES' (VII) THE APPELLANT FILED FOLLOWING DOCUMENTS T O PROVE T HE IDENTITY AND CREDITWORTHINESS OF THE PARTIES AND GENUINENESS OF THE TRANSACTION, WHICH ARE AS UNDER . (A) PAN OF ASAF AND AOIOF ITA NO. 5077 /M/201 3 A.Y.2009 - 10 6 (B) REGISTRATION CERTIFICATES OF ASAF AND AOIOF WITH SEBL. (C) CERTIFICATES OF INCORPORATION OF ASAF AND AOIO F (D) APPROVAL OF RBL TO ASAF AND AOIDF FOR MAKING INVESTMENTS IN INDIA. (E) ACKNOWLEDGEMENT OF INCOME - TAX RETURN FILED BY THE ASAF ARID AOIOF FOMHEAY.2011 - 12. (F) FOREIGN INWARD REMITTANCES CERTIFICATES FOR RECEIPTS OF MONEY. THE APPELLANT ALSO FILED A REPORT WHICH IS AVAILABLE IN THE PUBLIC DOMAIN 'COMMON WEALTH SECRETARIAL - COMMONWEALTH FINANCE MINISTERS MEETING' DOWNLOADED FROM 'WWW.THE COMMONWEALTH.ORG' WHICH SHOWS THAT THE EQUITY CAPITAL OF THE ASAF AND AOIOF IS USD 85 MILLION AND USD 28 MILLION RESPECTIVELY AND INVESTMENT MADE BY THEM IN THE APPELLANT COMPANY IS ONLY USD 2 67 MILLIONS AND USD O.S4 MILLION WHICH IS ONLY 3 15% AND 2.98% OF SHARE CAPITAL OF THE ASAF AND AOIOF RESPECTIVELY THE APPELLANT ALSO SUBMITTED RELEVANT EXTRACT OF AUDITED FINANCIAL STATEMENT FOR YEAR ENDED 31.03.2007 WHICH SHOWS THAT DEBENTURES HAS BEEN SUBSCRIBED BY THE ASSOCIATE ENTITIES OF THE PEF'S IN F.Y.20G6 - Q7, COPY OF BOARD RESOLUTION FOR ALLOTTING EQUITY SHARES TO AUREOS OFFSHORE INDIA OPPORTUNITIES FUND UL C (AOIOF) AND AUREOS SOUTH ASIA FUND LLC (ASAF), COPY OF FORM 2 FILED WITH REGISTRAR OF COMPANIES FOR ALLOTMENT OF EQUITY SHARES TO AOIOF AND ASAF HAVE BEEN ALSO FILED. 7.1 I HAVE PURSUED THE D ETAILS SUPPORTING EVIDENCES FILED ALONGWITH THE DETAILED WRITTE N SUBMISSION. THERE IS NO DISPUTE THAT WHENEVER AN ASSESSEE IS IN RECEIPTS OF FUNDS EITHER BY WAY OF LOANS AND ADVANCES OR BY WAY OF SHARE CAPITAL. SECTION 68 OF THE I T. ACT CASTS AN OBLIGATION ON THE ASSESSEE TO PROVE THE IDENTITY AND CREDITWORTHINESS OF THE PARTIES FROM WHOM THE FUNDS HAS BEEN RECEIVED AND THE GENUINENESS OF THE TRANSACTION. THE ONUS LIES ON THE ASSESSEE TO PROVE THE IDENTITY AND CREDITWORTHINESS OF THE PARTIES FROM WHOM THE FUNDS HAS BEEN RECEIVED AND THE GENUINENESS OF THE TRANSACTION AND IF THE AO IS NOT SATISFIED WITH THE EXPLANATION FILED BY THE ASSESSES, THEN, THE AO CAN MAKE ADDITION U/S 68 OF THE L.T. ACT, KEEPING THE LEGAL POSITION IN MIND REGARDING THE SEC. 68 OF THE I T ACT ALL THE DOCUMENTS FILED BY THE AR OF THE APPELLANT COM PANY IN ORDER TO DETERMINE T HE IDENTITY AND CREDITWORTHINESS OF THE PEFS AND GENUINENESS OF THE TRANSACTION HAS BEEN EXAMINED. FROM THE ASSESSMENT ORDER IT IS SEEN (HAT M ITA NO. 5077 /M/201 3 A.Y.2009 - 10 7 ORDER TO PROVE THE IDENTITY OF THE TRANSACTION, THE APPELLANT HAD FILED FOLLOWING DET AILS BEFORE THE AO: (I) PAN OF ASAF AND AOIOF (II) REGISTRATION CERTIFICATES OF ASAF AND AOIOF WITH SEBI (LII) CERTIFICATES OF INCORPORATION OF ASAF AND AOIOF (V) APPROVAL OF RBI TO ASAF AND AOIOF FOR MAKING INVESTMENTS IN INDIA. (VI) ACKNOWLEDGEMENT OF INCOME - TAX RETURN FILED BY THE ASAF AND AOIOF FOR A.Y.2011 - 12. IT IS SEEN THAT THE APPELLANT HAS FILED ALL THE ABOVE DETAILS BEFORE THE AO VIDE ITS LETTER DATED 11.11.2011 AND 09.12.2011. THE AO HAS NEITHER RECORDED ANY VALID REASON NOR BROUGHT ON RECORD ANY EVIDENCE AS TO WHY THE ABOVE DOCUMENTS WAS NOT SUFFICIENT ENOUGH TO PROVE THE IDENTITY OF THE PEF'S IT SEEMS THAT THE AO HAS IGNORED THE ABOVE DOCUMENTARY EVIDENCE AND I AM OF THE OPINION THAT THE APPELLANT HAS PROVED THE IDENTITY OF THE PEF'S BY MERELY CONTAINING THE AO'S OBSERVATION WITH THE SUBMISSION OF THE ASSESSES THAT THE INFORMATION ABOUT THE PEF'S ARE ALSO AVAILABLE IN THE PUBLIC DOMAIN DOES NOT PROVE THE CONTENTION OF THE ASSESSES, IS NOT ACCEPTED BECAUSE THE APPELLANT HAS S UBSTANTIATED ITS CLAIM BY FILING ALL THE DOCUMENTS IN SUPPORT OF ITS CONTENTION AND ALSO TO PROVE THE IDENTITY OF THE PEF'S 7.2 REGARDING THE GENUINENESS OF THE TRANSACTION IT IS SEEN THAT THE SHARE APPLICATION MONEY HAS BEEN RECEIVED THROUGH THE STAN DARD CHARTERED BANK, FORT BRANCH AND THE COPIES OF THE FOREIGN REMITTANCES CERTIFICATES WERE FILED BEFORE THE AO. THE SAID AMOUNT OF SHARE APPLICATION MONEY HAS BEEN DEPOSITED IN ACCOUNT MAINTAINED BY THE APPELLANT WITH THE SARASWAT BANK THE REMITTANCES OF THE APPELLANT ARE DULY SUPPORTED BY THE CERTIFICATE ISSUED BY THE STANDARD CHARTERED BANK, WHICH IS A REPUTED BANK AT INTERNATIONAL LEVEL AND THE AMOUNT SO RECEIVED HAS BEEN DULY DEPOSITED IN APPELLANT BANK ACCOUNT. THE CLAIM OF THE APPELLANT CANNOT BE RE GARDED AS GENUINE TRANSACTION BY THE AO IS NOT ACCEPTED IN MY OPINION, THE APPELLANT HAS FULFILLED ITS OBLIGATION BY SHOWING THE GENUINENESS OF THE TRANSACTION AND THE SAME CANNOT BE DOUBTED, 7.3 REGARDING THE CREDITWORTHINESS OF THE PEF'S, I AM OF THE OPI NION THAT THE SUFFICIENT EVIDENCES HAVE BEEN PUT ON RECORD BY THE APPELLANT AS SUBMITTED BY THE APPELLANT, THESE PEF'S WERE FORMED/INCORPORATED WITH THE SOLE OBJECT OF MAKING INVESTMENTS IN GROWING INDUSTRIES IN DEVELOPING COUNTRIES AND INDIA IS ONE OF ITA NO. 5077 /M/201 3 A.Y.2009 - 10 8 THE M AND THE PHARMA INDUSTRY IS A FAST GROWING INDUSTRY. IN THE REPORT FILED AVAILABLE IN PUBLIC DOMAIN IT IS SEEN THAT INVESTMENTS MADE BY ASAF AND AOIOF IT IS CLEARLY SHOWN THAT THE APPELLANT COMPANY'S CLAIM IS REFLECTED IN THE SAID REPORT WITH RESPECT TO G ENUINENESS OF THE TRANSACTION AS THE INVESTOR IN THEIR REPORT HAS CATEGORICALLY STATED THAT THEY HAVE INVESTED IN THE APPELLANT COMPANY IN VIEW OI THE ABOVE FACTS, 1 AM OF THE OPINION THAT THE CREDITWORTHINESS OF THE PEF'S WAS WELL ESTABLISHED AND THE INVE STMENT MADE BY THE TWO ENTITIES IN THE SHARE CAPITAL ARE GENUINE. IN LIGHT OF THE ABOVE, I AM OF THE VIEW THAT THE APPELLANT HAS DISCHARGED ITS ONUS TO PROVE THE IDENTITY, GENUINENESS AND CREDITWORTHINESS OF ASAF AND AOIOF AND THE TRANSACTION OF THE APPELL ANT LE, RECEIPT OF SHARE CAPITAL CANNOT BE DOUBTED. THEREFORE, THE ADDITION MADE BY THE AO AMOUNTING TO RS.14,73,73,000/ - IS HEREBY DELETED. 5 . AGAINST THE ABOVE ORDER OF LD. CIT(A), THE REVE NUE IS FURTHER APPEAL BEFORE US . IN ADDITION TO CHALLENGING THE ACTION OF CIT(A) FOR DELETING THE ADDITION OF RS.14.73 CRORES MADE U/S 80 OF THE ACT, THE REVENUE HAS TAKEN THE SPECIFIC GROUND WITH REGARD TO THE VIOLATION OF RULE 46A OF THE A CT. IT WAS ARGUED THAT BY LD. DR , THE CIT(A) HAS ADMITTED THE ADDITIONAL EVIDEN CE UNDER RULE 46A IGNORING THE FAC T THAT THESE DOCUMENTS WERE NOT SUBMITTED BEFORE AO DURING THE ASSESSMENT PROCEEDINGS, EVEN THOUGH SUFFICIENT OPPORTUNITY WAS GIVEN TO THE ASSE SSEE TO PRODUCE THE EVIDENCE . FROM THE RECORD WE FOUND THAT DURING THE COURSE O F ASSESSMENT PROCEEDING , THE AO HAS ASKED FOLLOWING QUERIES. THE RESPECTIVE REPL Y GIVEN BY THE ASSESSEES AND ASKED OF THE AO ARE AS UNDER: SR. QUESTION ASSESSEES REPLY REMARK ITA NO. 5077 /M/201 3 A.Y.2009 - 10 9 NO. 1 NAME & ADDRESS OF THE DIRECTORS THROUGH WHOM THE FOREIGN DIRECT INVESTM ENT (FDI) DURING THE YEAR IS RECEIVED. THESE COMPANIES ARE BASED IN MAURITIUS AND REGISTERED WITH SEBI AS FVCL. THERE IS NO MEDIATOR. THE ASSESSEE WAS ASKED THE NAME & ADDRESS OF THE DIRECTORS THROUGH WHOM THE FDI IS RECEIVED. THE ASSESSEE HAS REMAINED SIL ENT WITH REFERENCE TO THAT AND HAS NOT OFFERED ANY EXPLANATION PERTAINING TO THE NAME & ADDRESSES OF THE DIRECTORS. 2 DETAILS OF FOREIGN TRAVELLING DONE BY THE MANAGEMENT TO MAURITIUS IN ORDER TO GET THE FDI NO FOREIGN TRAVELLING IS DONE BY THE MANAGEMENT THE ASSESSEE COMPANY IS IN RECEIPT OF FUNDS, WHICH IS MORE THAN THE NAV OF THE COMPANY HAS NOT CARRIED OUT ANY TRAVELLING BY MEMBERS OF TOP MANAGEMENT OF THE COMPANY TO CHECK OUT THE ANTECEDENTS AND BACKGROUND OF THE OWNERS OF THE INVESTING, FUNDS AND ITS PROMOTERS AND DIRECTORS. 3 NATURE OF BUSINESS AND HIERARCHY OF THE COMPANY MANAGEMENT OF THE MAURITIUS COMPANIES FROM WHICH FDI HAS BEEN RECEIVED COMPANY HAS KYC AND REGISTRATION CERTIFICATION OF SEBI AND DO NOT HAVE DETAILS ABOUT HIERARCHY OF THE COMPAN Y MANAGEMENT THE ASSESSEE COMPANY HAS RECEIVED SUBSTANTIAL PORTION OF MONEY FROM THESE TWO FUNDS AND IT IS SURPRISING TO NOTE THAT THEY ARE NOT AWARE OF THE HIERARCHY OF THE COMPANIES MANAGEMENT AND THEY ARE NOT IN A POSITION TO GATHER THE SAME FROM THE CO MPANY WHICH HOLDS MAJORITY AND SUBSTANTIAL STAKE IN THE ASSESSEE COMPANY. 4 NATURE & ADDRESS OF MEDIATORS THROUGH WHOM THE SAID FDI IS OBTAINED THE PARTIES HAVE APPROACHED FOR INVESTMENT DIRECTLY AND NO MEDIATOR IS INVOLVED IN THE PROCESS OF FDI. THE ASSE SSEE COMPANY CLAIMS THAT THEY ARE IN RECEIPT OF THESE FUNDS DIRECTLY WITHOUT ANY MEDIATOR WHEREAS, IN RESPONSE TO QUERIES RAISED IN SR.NO.1, 2 AND 3, THE COMPANY HAS NOT REVEALED THE NAME OF ANY SINGLE PERSON, WHO HAS CONTACTED THE ASSESSEE COMPANY AND CAR RIED OUT THE ITA NO. 5077 /M/201 3 A.Y.2009 - 10 10 INVESTMENT IN THE ASSESSMENT COMPANY IN SPITE OF AMPLE OPPORTUNITY BEING GIVEN TO THE ASSESSEE TO FURNISH THE SAID DETAILS. 5 COPY OF VALUATION REPORT BASED ON WHICH THE SHARE PREMIUM IS DETERMINED SHARES WERE ALLOTTED AT PRICE OF RS.1,280 PE R SHARE AS AGAINST THE VALUATION CARRIED OUT BY P.G. JOSHI AND COMPANY OF RS.762. THE ASSESSEE COMPANY HAS SIMPLY STATED THAT IT IS PURELY A COMMERCIAL ARRANGEMENT, WHICH CLEARLY SHOWS THE ASSESSEE HAS COLLECTED SUBSTANTIAL AMOUNT BY WAY OF ARRANGEMENT THR OUGH FDI. 6 DOCUMENTS SUBMITTED BEFORE RBI FOR OBTAINING PERMISSION. THE INVESTMENT RECEIVED FROM FCBI FALLS UNDER THE AUTOMATIC ROUTE THE ASSESSEE COMPANY I ITS ALL REPLY HAS NOT SUBSTANTIATED WITH SUPPORTING EVIDENCES, THE GENUINENESS OF THE RECEIPT OF FDI. HAS ONLY SUBMITTED A LETTER THAT IT IS UNDER THE AUTOMATIC ROUTE AND NOT SUBMITTED ANY DOCUMENTS THAT ARE SUBMITTED TO RBI 7 JUSTIFY THE GENUINENESS AND CREDIT WORTHINESS OF THE PARTY FROM WHOM THE FDI IS RECEIVED. KYC DOCUMENTS OF PARTIES ARE ATTACH ED NO DETAILS IS SUBMITTED EXCEPT THE REGISTRATION CERTIFICATE WITH SEBI TO SUBSTANTIATE THAT THE SAID AMOUNT RECEIVED IS NOT AN ARRANGEMENT BUT A GENUINE TRANSACTION. 8 MEMORANDUM OF UNDERSTANDING ARTICLES OF ASSOCIATION OF THE COMPANY ALONGWITH REGISTRA TION CERTIFICATE ATTACHED HEREWITH FOR YOUR KIND REFERENCE THE MOU AND AOA ATTACHED IS OF THE ASSESSEE COMPANY AND NOT OF THE FUNDS, WHICH WERE CALLED FOR IT IS CLEAR FROM THE ABOVE TABLE THAT THE AO HAS ASKED VARIOUS INFORMATIONS WITH REGARD TO THE NAME AND ADDRESS OF THE DIRECTORS THROUGH WHOM THE FOREIGN DIRECT INVESTMENT (FDI) WAS RECEIVED . HOWEVER, THE ASSESSEE HAS REPLY THAT THERE IS NO MEDIATOR. HOWEVER, ITA NO. 5077 /M/201 3 A.Y.2009 - 10 11 THE CIT(A) IN HIS APPELLATE ORDER AT PARA 5.2 AS STATED THE PARTIES WHO APPROACHED THE ASSESSEE COMPANY AND THE NAME OF THE RESPECTIVE PERSONS NAMELY SUJIT TAMBAT, MS. SANGEETA MODI AND NOMINEE DIRECTOR SHRI NILESH MEHTA. IT WAS FURTHER OBSERVED THAT THE TRANSACTION OF TAKING SHARE CAPITAL WAS CO - ORDINATED BY THE SECRETARY OF THE APPELLANT COMPANY S HRI PRAMOD DUBEY AND PROMOTERS OF THE APPELLANT COMPANY DR. SATISH SAWANT AND DR. SANTOSH JOSHI. HOWEVER, THE FINDING OF THE AO IS CONTRARY, WHEREIN THE ASSESSEE HAS NOT STATED NAME OF THE ANY PERSONS SO AS TO ALLOW TOMAKE FOR FURTHER INQUIRY. UNDER RULE 4 6A CIT(A) IS REQUIRED TO GIVE OPPORTUNITY T O THE AO IF ANY NEW EVIDENCE OR ADDITIONAL EVIDENCE HAS FILED BEFORE HIM. IN THIS CASE, WE FOUND THAT THE ADDITIONAL EVIDENCE HAS BEEN FILED BEFORE THE CIT(A), FOR WHICH REMAND REPORT SHOULD BE ASKED FROM THE AO. THE CIT(A) HAS NEITHER ASKED FOR REMAND REPORT NOR ANY COMMENTS FROM THE AO. WE ALSO FOUND THAT THE AMOUNT OF SHARE CAPITAL ACCEPTED BY THE ASSESSEE COMPANY WAS MUCH MORE THAN ITS NET WORT H, FOR WHICH NO JUSTIFICATION WAS GIVEN BY CIT(A). 6. FROM THE RECOR D, WE FOUND THAT VIDE ORDER - SHEET NOTED DATED 24.11.2011, THE AO HAS ASKED THE ASSESSEE TO ESTABLISH THE IDENTIFY, CAPACITY AND GENUINENESS OF PERSONS INVESTING ALLOW THE ASSESSEE COMPANY AND THUS FINAL OPPORTUNITY WAS GRANTED TO THE ASSESSEE IN THIS REGAR D. IN R ESPONSE TO THE LETTER , ASSESSEE COMPANY HAS FILE D LETTER DATED 09.12.2011 AND ENCLOSED ONLY THE PRINT OUTS TAKEN OUT FROM THE WEBSITES OF THE FUNDS THAT HAVE INVESTED IN THE ASSESSEE COMPANY AND ITA NO. 5077 /M/201 3 A.Y.2009 - 10 12 CONTENDED THAT IT IS NOT FOR THE ASSESSEE TO ESTABLISH BUT IT IS FOR THE DEPARTMENT TO ENQUIRE WITH THE INVESTORS ABOUT THE CAPACITY TO INTRODUCE THE AMOUNT IN THE SHARES. THE AO FURTHER OBSERVED THAT THE ASSESSEE COMPANY HAS NOT SUBMITTED ANY OTHER DOCUMENTATION SUCH AS COPIES OF RESOLUTIONS, BOARD MEETINGS, NAME OF THE PERSONNEL WITH WHOM THEY ARE MEETING FOR INVESTMENTS, WHICH IS WORTH MORE THAN THE NET WORTH OF THE COMPANY NOR T HE ASSESSEE HAS SUBMITTED COPIES OF P&L ACCOUNT, BALANCE - SHEET AND ANNUAL ACCOUNTS OF THE FUNDS TO ESTABLISH THE CAPACITY OF THE S AID FUNDS INVESTING IN THE ASSESSEE COMPANY. UNDER THESE CIRCUMSTANCES, THE AO OBSERVED THAT THE NO WILL COME OVERNIGHT WITHOUT DISCUSSIONS AND MEETINGS, PRESENTATIONS PROPOSALS ETC. AND I NVEST IN A THIRD COMPANY SUCH A HUGE AMOUNT NOR WILL A COMPANY WHICH THE SUBSTANTIAL CAPITAL IS BEING INVESTED ALLOW SUCH AN INVESTMENT FROM STRANGERS WITHOUT MAKING DUE DILIGENCE OF THE INVESTING, ESPECIALLY IN VIEW OF THE FACT THAT THE COMPANY WHICH REQUIRES THE APPROVAL OF OTHER SHAREHOLDERS BEFORE ALLOWING ANY FURTHER INVESTMENT EVEN FROM EXISTING SHAREHOLDERS LEAVE ALONE A THIRD PARTY FOREIGN INVESTOR INVESTING IN THE COMPANY FOR THE FIRST TIME. ACCORDINGLY, THE AO HELD THAT: - SINCE THE ASSESSEE COMPANY HAS REMAINED SILENT WITHOUT DIVULGING THE MODUS OPERANDI AND THE NAMES THROUGH WHOM THE INVESTMENT IS RECEIVED, AND ALSO FAILED TO ESTABLISH THE GENUINENESS OF THE INVESTMENT AND THE CREDIT WORTHINESS OF THE INVESTOR, THE SAID AMOUNT OF RS.14,73,73,000/ - IS TREATED AS ASSESSEES OWN INCOME FROM UNDISCLOSED SOURCES AND ACCORDINGLY, ADDED TO THE TOTAL INCOME OF THE ASSESSEE. ITA NO. 5077 /M/201 3 A.Y.2009 - 10 13 7. SINCE THE CIT(A) HAS ACCEPTED ADDITIONAL EVIDENCE DURING THE COURSE OF APPELLATE PROCEEDING WITHOUT GIVING AN OPPORTUNITY OF THE AO TO FORWARD HIS COMMENTS AND MAKING FURTHER ENQUIRY, IN THE FITNES S OF T HINGS WE RESTORE THE MATTER BACK TO THE FILE OF THE AO FOR DECIDING AFRESH AFTER CONSIDERING THE ADDITIONAL EVIDENCE SO FILED BY THE ASSESSEE WHICH HAS BEEN DULY MENTIONED BY THE CIT(A) IN HIS ORDER. 8 . IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS HEREBY ORDERED TO BE ALLOWED FOR STATISTICAL PURPOSE . ORDER PRONOUNCED IN THE OPEN COURT ON 09.01 . 201 9 . SD/ - SD/ - ( R. C. SHARMA ) (AMARJIT SINGH) / ACCOUNTANT MEMBER / JUDICIAL MEMBER MUMBAI; DATED : 09. 01 . 2019 . VIJAY / 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