ACIT, New Delhi V. M/s. Russian Technology Centre (P) Ltd., New Delhi

ITA 5263/DEL/2013

• Counselvise Citation: [2018] 121 COUNSELVISE.COM (IT) 5717 (ITAT-DELHI)
• Duration Of Justice: 4 year(s) 9 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-06-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: F
• Next Hearing Date: 03-07-2017
• Assessment Year: 2010-2011
• Appeal Filed On: 19-09-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ATIQ AHMED SR
• Keywords: Unexplained cash credit; Search and seizure; Deemed to accrue or arise in india; Capital receipt
• Section: 143(3); 68; 37; 28

Judgement Text

IN THE INCOME-TAX APPELLATE TRIBUNAL, DELHI BENCH F, NEW DELHI BEFORE : SHRI H.S. SIDHU, JUDICIAL MEMBER AND SHRI L.P. SAHU, ACCOUNTANT MEMBER ITA NO. 5263/DEL./2013 ASSESSMENT YEAR: 2010-11 ACIT, CENTRAL CIRCLE - 13, NEW DELHI. (APPELLANT) VS. RUSSIAN TECHNOLOGY CENTRE (P) LTD., A-1/20, SAFDURJUNG ENCLAVE, NEW DELHI.(PAN-AACCR7102D) (RESPONDENT) C.O. NO. 139/DEL./2017 (ITA NO. 5263/DEL./2013) ASSESSMENT YEAR: 2010-11 RUSSIAN TECHNOLOGY CENTRE (P) LTD., A-1/20, SAFDURJUNG ENCLAVE, NEW DELHI. (APPELLANT) VS. ACIT, CENTRAL CIRCLE - 13, NEW DELHI. (RESPONDENT) ASSESSEE BY SH. AJAY WADHWA, ADVOCATE REVENUE BY SH. ATIQ AHMED, SR. AR ORDER PER L.P. SAHU, A.M.: THE REVENUE HAS FILED THE APPEAL AGAINST THE ORDER OF LD. CIT(A)-I, NEW DELHI DATED 26.07.2013 FOR THE ASSESSMENT YEAR 2010 -11 ON THE FOLLOWING GROUNDS: 1. THE ORDER OF LD. CIT(A) IS NOT CORRECT IN LAW AND FACTS. 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE L D. CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS.99,14,000/- MADE BY A.O. ON ACCOUNT OF SHARE CAPITAL AS UNEXPLAINED CREDIT. DATE OF HEARING 19.06.2018 DATE OF PRONOUNCEMENT 25 .06.2018 ITA NO. 5263/DEL./2013 & CO NO. 139/DEL./2017 2 THE ASSESSEE HAS ALSO FILED A CROSS OBJECTION ON TH E FOLLOWING GROUNDS: 1. THAT THE ORDER UNDER SECTION 143(3) OF THE INCOM E TAX ACT, 1961 DATED 04.12.2012 PASSED BY THE LD. ASSESSING OFFICER IS B AD ON FACTS AND IN LAW. 2. THAT THE LD. COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED IN LAW IN UPHOLDING THE DISALLOWANCE OF ADVANCES WRITTEN OFF OF RS. 9,04,426/- MADE BY THE LD. ASSESSING OFFICER DESPITE OF THE FACT TH AT THE ADVANCES WERE GIVEN IN ORDINARY COURSE OF BUSINESS AND THE SAME I S ALLOWABLE EITHER AS TRADING LOSS UNDER SECTION 28 OF THE ACT, OR AS A N ORMAL BUSINESS LOSS UNDER SECTION 37 OF THE ACT. 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E FILED RETURN OF INCOME ON 15.10.2010 DECLARING TOTAL LOSS OF RS.8,72,847/-. I N THE ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER OBSERVED THAT TH E ASSESSEE HAS INCREASED HIS PAID UP CAPITAL BY RS.99,14,000/- DURING THE YE AR UNDER CONSIDERATION. THE ASSESSEE WAS ASKED TO JUSTIFY THE SAME VIDE QUESTIO NNAIRE DATED 18.01.2012, IN RESPONSE TO WHICH, THE ASSESSEE VIDE REPLY DATED 15.11.2012 SUBMITTED THAT THE SHARE APPLICATION MONEY WAS RECEIVED FROM FOLLO WING FIVE PARTIES : (I). RUSSIAN TECHNOLOGY CENTRE HOLDINGS LTD. (II). M/S. SPECIAL TRANSPORT MASHINOSTROITELNY (III). M/S. KURGANSHKY MASHINOSTROITERLNY ZAVOD (IV)_. MUROMSKY MASHINOSTROITELNY ZAVOD (V). PROTEX TRADING COMPANY LTD. HE ALSO SUBMITTED OTHER DETAILS SUCH AS NUMBER OF E QUITY SHARES ISSUED AND VALUE IN INDIAN RUPEES AS UNDER : S.NO. NAME AND ADDRESS OF THE SHARE HOLDERS NUMBER OF EQUITY SHARES ISSUED OF RS.10/- EACH RUPEE EQUIVALENT 1. RUSSIAN TECHNOLOGY CENTRE HOLDINGS LTD., TRIDENT CHAMBERS, WICKHAMS CAY, 941533 9415330 ITA NO. 5263/DEL./2013 & CO NO. 139/DEL./2017 3 PO BOX 146 ROAD TOWN TORTOLA BVI 2 PROTEX TRADING COMPANY LTD., 301 AARTI CHAMBERS, VICTORIA MAHE, REPUBLIC SEYCHELLES 49570 495700 3. MUROMSKY MASHINOSTROITELNY ZAVOD, MUROM 602200 99 990 4. SPECIAL TRANSPORT MASHINOSTROITELNY, 42 SHEPKINA STREET, MOSCOW 129857 99 990 5. KURGANSHKY MASHINOSTROITELNY ZAVOD, 17 STREET KURGAN-640631 MASHINOSTROITELNY 99 990 TOTAL 9,91,400 99,14,000 THE ASSESSING OFFICER EXAMINED THE DETAILS AND NOTI CED THAT THE DETAILS NEITHER PROVE THE CREDITWORTHINESS OF THE INVESTORS NOR THE GENUINENESS OF THE TRANSACTIONS. THE ASSESSING OFFICER DOUBTED THE CRE DITWORTHINESS OF THE INVESTORS AND NOTED THAT COMPLETE DETAILS OF THE IN VESTORS HAVE NOT BEEN FILED BY THE ASSESSEE. HE ALSO NOTED THAT ALL FUNDS HAVE BEEN INVESTED BY THE FOREIGN COMPANIES/ENTITIES. THEREFORE, FOR WANT OF INCOMPLE TE DETAILS, THE AO TREATED IT AS UNEXPLAINED MONEY AND ADDED TO THE INCOME OF THE ASSESSEE. 3. THE ASSESSING OFFICER FURTHER OBSERVED THAT THE ASSESSEE HAS WRITTEN OFF ADVANCES TO THE EXTENT OF RS.9,04,426/- DURING THE YEAR. THE ASSESSEE WAS ASKED TO JUSTIFY THE SAME. IN RESPONSE, THE ASSESSE E SUBMITTED REPLY ON 04.12.2012 WHICH READS AS UNDER : 'DETAILS OF ADVANCES -WRITTEN OFF - A) RISING STAR ELECTRONICS: RS.9,04,426/-. THE COMP ANY HAD GIVEN ADVANCE TO M/S RISING STAR ELECTRONICS, 53 #-6, INNACIYAR ' PURAM, PONNAGARAM MAIN ROAD, TAMIL NADU-628002 FOR SPECIFIC PROJECTS ( DEVELOPMENT OF BEDSIDE PANEL). HOWEVER, DESPITE REPEATED EFFORTS F ROM COMPANY'S SIDE, NEITHER THE PROTOCOL/PRODUCT WAS GIVEN TO THE COMPA NY, NOR THE MONEY REFUNDED IN LIGHT OF THIS, THE COMPANY HAD NO OPTIO N BUT TO WRITE OFF THIS AMOUNT LYING IN THE BOOKS. ITA NO. 5263/DEL./2013 & CO NO. 139/DEL./2017 4 LEDGERS ARE ATTACHED TO PROVE THAT THE MONEY WAS PA ID DURING FY 2007- 08 TO F 2008-09 MONEY WAS PAID BY ACCOUNT PAYEE CHEQUES / LEGAL TEN DER. MONEY WAS ADVANCED DURING ORDINARY COURSE OF BUSINESS. ABOVE WRITING OFF WAS IN ORDINARY COURSE OF BUSINES S, AND THE SAME BE ALLOWED EITHER UNDER SECTION 28 AS TRADING LOSS OR UNDER SECTION 37 AS NORMAL BUSINESS LOSS. RELIANCE MUST BE PLACED ON (SYNOPSIS ATTACHED) INCOME TAX OFFICER VS. ASHOK KUMAR LALIT KUMAR ITA 4365/AHD/1990 BOMBAY FILM LAB PRIVATE LIMITED (1982) BY BOMBAY TR IBUNAL CIT VS. ROHTAS INDUSTRY LIMITED CALCUTTA HIGH COU RT CIT VS. EQITORIAL PVT. LTD. CIT VS. AHDULLA BHAI ABDULADOR (1961) 41 ITR 545 (SC ) THE ASSESSING OFFICER DID NOT ACCEPT THE SUBMISSION S OF THE ASSESSEE AND OBSERVED THAT PRIMARY CONDITIONS FOR AN AMOUNT WRIT TEN OFF TO BE ALLOWED AS EXPENSE IS THAT IT SHOULD HAVE BEEN SHOWN AS AN INC OME IN THE RELEVANT FINANCIAL YEAR OR EARLIER FINANCIAL YEAR. HE, THERE FORE, OBSERVED THAT IT WAS AN ADVANCE AS ADMITTED BY THE ASSESSEE HIMSELF. HE, TH EREFORE, DISALLOWED THE CLAIM OF ASSESSEE AND ADDED THE SAME TO THE INCOME OF THE ASSESSEE. 4. IN APPEAL, THE ASSESSEE MADE DETAILED WRITTEN SU BMISSIONS BEFORE THE LD. CIT(A), WHO AFTER CONSIDERING THE SUBMISSIONS OF TH E ASSESSEE AND RELYING ON ASSESSEES OWN CASE IN ITA NO. 4932, 4933. 5390 AND 5391/DEL./2011, OF COORDINATE BENCH, ALLOWED THE APPEAL OF THE ASSESS EE IN RESPECT OF ADDITION MADE U/S. 68 OF RS.99,14,000/-. HE HOWEVER, SUSTAIN ED THE ADDITION OF RS.9,04,426/- AS ADVANCE WRITTEN OFF. AGGRIEVED, T HE REVENUE IS IN APPEAL FOR DELETION OF ADDITION U/S. 68 AND THE ASSESSEE IS IN CROSS OBJECTION AGAINST SUSTENANCE OF ADDITION OF RS.9,04,426/-. ITA NO. 5263/DEL./2013 & CO NO. 139/DEL./2017 5 5. THE LD. DR RELIED ON THE ORDER OF THE ASSESSING OFFICER AND SUBMITTED THAT THE ASSESSING OFFICER HAS RIGHTLY MADE THE ADD ITION IN RESPECT OF SHARE CAPITAL U/S. 68 AND IN RESPECT OF WRITTEN OFF ADVAN CES. THE LD. CIT(A) HAS GIVEN NO GOOD REASONS IN THE IMPUGNED TO DELETE THE ADDIT ION MADE U/S. 68 OF THE ACT. 6. ON THE OTHER HAND, THE LD. AR OF THE ASSESSEE SU BMITTED A WRITTEN SYNOPSIS WHICH IS PLACED ON RECORD. 7. WE HAVE HEARD BOTH THE PARTIES AND HAVE CONSIDER ED THE WRITTEN SYNOPSIS SUBMITTED BY THE LD. AR AND THE PAPER BOOK . IN RESPECT OF THE APPEAL OF THE REVENUE, WE FIND THAT THE LD. CIT(A) HAS DEC IDED THE ISSUE OF ADDITION U/S. 68 IN RIGHT PERSPECTIVE AFTER FOLLOWING THE DE CISION OF ITAT IN ASSESSEES OWN CASE (SUPRA). THE FINDINGS REACHED BY THE LD. C IT(A) READ AS UNDER : I HAVE CONSIDERED THE ASSESSMENT ORDER AND THE SUB MISSIONS FILED BY THE APPELLANT. HONBLE ITAT, DELHI VIDE ITS ORDE R DATED 12.04.2013 IN APPELANTS OWN CASE IN ITA NOS.4932, 4933, 5390 & 5 391/DEL/2011 HAVE HELD AS UNDER : THE AVAILABILITY OF BALANCE SHEET, CERTIFICATE OF I NCORPORATION, CONFIRMATIONS AND CERTIFICATES OF GOOD STANDING ETC . FILED BY THE ASSESSEE IN RESPECT OF SHAREHOLDERS ESTABLISH THAT THEY ARE NON- RESIDENT ENTITIES HAVING INDEPENDENT AND LEGAL EXIS TENCE. THE MONEYS HAVE COME TO ASSESSEE THROUGH BANKING CHANNE LS AS IS EVIDENT FROM F1RC, WHICH ALSO MENTIONS THE PURPOSE OF REMITTANCE AND ALSO THE PARTICULARS OF THE REMITTING BANK. FIP B APPROVAL THAT TOO WITH A LIBERTY TO COLLECT SHARE CAPITAL UP TO 6 00 CRORES AND ROC COMPLIANCE ETC. CLEARLY INDICATE THE STAND OF THE A SSESSEE. IN OUR CONSIDERED VIEW, THE PLETHORA OF THE EVIDENCE FILED BY THE ASSESSEE AMOUNTS TO DISCHARGE OF PRIMARY BURDEN CAST ON THE ASSESSEE IN TERMS OF SEC.68 OF THE I.T. ACT FOR IDENTITY AND CRE DITWORTHINESS OF THE CREDITORS AND GENUINENESS OF TRANSACTION.' ITA NO. 5263/DEL./2013 & CO NO. 139/DEL./2017 6 AND 'TAKING INTO CONSIDERATION OF ALL THE ABOVE, WE FIND MERIT IN THE ARGUMENT OF THE ID. COUNSEL FOR THE ASSESSEE THAT T HE PRIMARY BURDEN CAST ON THE ASSESSEE WAS DULY DISCHARGED. THE ISSUE OF PRIMARY ONUS IS TO BE WEIGHED ON THE SCALE OF EVIDE NCE AVAILABLE ON THE RECORD AND THE DISCHARGE OF BURDEN BY THE ASSES SEE IS ALSO TO BE DECIDED ON THE BASIS OF DOCUMENTS FILED BY THE ASSE SSEE AND FACTS AND CIRCUMSTANCES OF EACH CASE AND ON THAT BASIS A REASONABLE VIEW IS TO BE TAKEN AS TO WHETHER THE ASSESSEE HAS DISCH ARGED THE PRIMARY ONUS OF ESTABLISHING THE IDENTITY OF SHARE APPLICAN T, ITS CREDITWORTHINESS AND GENUINENESS OF THE TRANSACTION . FROM THE DOCUMENTS FILED DURING THE COURSE OF ASSESSMENT AND BEFORE CIT(A), THE INDEPENDENT EXISTENCE OF THE SHARE APPLICANTS I N RUSSIA IS CLEARLY ESTABLISHED. THE ASSESSEE'S APPLICATION TO FIPB FOR RAISING THE CAPITAL CONTAINS ALL THE RELEVANT DETAILS WHICH IS FAVOURABLY ACCEPTED BY THE BOARD, PARTICULARLY BY ALLOWING THE ASSESSEE TO RAISE FURTHER THE CAPITAL WITHOUT APPROACHING THE FIPB. TH E TRANSACTIONS ARE THROUGH BANKING CHANNELS. THUS THE GAMUT OF EVID ENCE DOES NOT LEAVE ANY DOUBT IN THE DISCHARGE OF PRIMARY BURDEN OF THE ASSESSEE. ON THE ISSUE CBDT CIRCULAR AND FINLAY CORPORATION J UDGMENT (SUPRA) ALSO WE ARE IN AGREEMENT WITH THE ID. COUNS EL FOR THE ASSESSEE THAT IN THESE CIRCUMSTANCES OF THE CASE MO NEYS REMITTED BY NON-RESIDENTS THROUGH BANKING CHANNEL OUTSIDE INDIA HAS TO BE HELD AS CAPITAL RECEIPTS, NOT EXIGIBLE TO TAX AND CANNOT BE TREATED AS DEEMED INCOME ON THE FICTIONS CREATED BY SECTIONS 6 8 AND 69 OF THE ACT.' 4.3 THE APPELLANT'S CLAIMS WITH REGARD TO THE SU BSCRIPTION OF SHARE CAPITAL ARE DULY SUPPORTED BY NECESSARY EVIDENCE. O N THE OTHER HAND, THERE IS NO EVIDENCE WITH THE REVENUE TO INDICATE THAT TH E SHARE CAPITAL SUBSCRIBED / LOANS RAISED IS NOT GENUINE. EVEN IN T HE SEARCH AND SEIZURE CONDUCTED ON THE APPELLANT, NO SUCH EVIDENCE COULD BE UNEARTHED. IN VIEW OF THE ABOVE, AND IN VIEW OF THE RULING OF THE HON' BLE ITAT IN APPELLANT'S OWN CASE CITED ABOVE, THE ADDITION OF SHARE CAPITAL OF RS.99,14,000/- AS UNEXPLAINED CREDITS IS NOT LEGALLY SUSTAINABLE AND IS DELETED. THE DECISION OF ITAT HAS FURTHER BEEN CONFIRMED BY HONBLE JURISDICTIONAL HIGH COURT IN ITA NOS. 547, 549 AND 555/2013 DATED 15.12.2016. THERE BEING ITA NO. 5263/DEL./2013 & CO NO. 139/DEL./2017 7 NO CHANGE IN THE FACTS AND CIRCUMSTANCES OF THE CAS E, AND FOR WANT OF ANY CONTRARY MATERIAL ON RECORD, WE HAVE NO REASON TO T AKE A CONTRARY VIEW AS ADOPTED BY THE COORDINATE BENCH IN THE ABOVE DECISI ON OF ASSESSEE ITSELF. WE, THEREFORE, FIND NO INFIRMITY IN THE CONCLUSION REAC HED BY THE LD. CIT(A) ON THIS COUNT. ACCORDINGLY, THE APPEAL OF THE REVENUE DESER VES TO FAIL. 8. ADVERTING TO THE CROSS OBJECTION OF THE ASSESSEE , WE FIND THAT THOUGH THE ASSESSEE HAD FILED A WRITTEN SYNOPSIS BEFORE US, BU T DURING THE COURSE OF HEARING, THE LD. COUNSEL FOR THE ASSESSEE CANDIDLY ADMITTED THE ADDITION MADE ON ACCOUNT OF WRITTEN OFF ADVANCES OF RS.9,04,426/- AND THEREFORE, HE ABSTAINED TO MAKE ANY FURTHER ARGUMENTS ON THIS ISS UE IN ITS CROSS OBJECTION. WE, THEREFORE, FIND NO MERIT IN THE CROSS OBJECTION OF THE ASSESSEE, ARE INCLINED TO ENDORSE THE VIEW TAKEN BY THE LD. CIT(A) ON THIS COUNT TOO. ACCORDINGLY, THE CROSS-OBJECTION OF THE ASSESSEE ALSO DESERVES TO BE DISMISSED. 9. IN THE RESULT, THE APPEAL OF THE REVENUE AS WELL AS CROSS OBJECTION OF THE ASSESSEE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 25 TH JUNE, 2018 SD/- SD/- (H.S. SIDHU) (L.P . SAHU) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 25 TH JUNE, 2018 *AKS* COPY OF ORDER FORWARDED TO: (1) THE APPELLANT (2) THE RESPONDENT (3) COMMISSIONER (4) CIT(A) (5) DEPARTMENTAL REPRESENTATIVE (6) GUARD FILE BY ORDER ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL DELHI BENCHES, NEW DELHI