DCIT CIR 6(3)(2), MUMBAI V. EQUIFAX CREDIT INFORMATION SERVICES P.LTD, MUMBAI

ITA 640/MUM/2016

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 6185 (ITAT-MUMBAI)
• Duration Of Justice: 4 year(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-02-2020
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: Not Allotted
• Assessment Year: 2011-2012
• Appeal Filed On: 08-02-2016
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: R MANJUNATHA SWAMY; AMIT PRATAP SINGH
• Keywords: Unexplained cash credit; Depreciation; Business expenditure; Onus to prove
• Section: 43B; 201; 13; 68

Judgement Text

T HE INCOME TAX APPELLATE TRIBUNAL E BENCH, MUMBAI BEFORE SHRI SHAMIM YAHYA ( A M) & SHRI RAVISH SOOD (JM) I.T.A. NO. 640 /MUM/ 201 6 (ASSESSMENT YEAR 20 11 - 12 ) I.T.A. NO. 2345/MUM/2017 (ASSESSMENT YEAR 2012 - 13) DCIT - 6(3)(2)/ ACIT - 6(2)(2) AAYAKAR BHAV AN ROOM NO. 522 & 563 5 TH FLOOR M.K. ROAD MUMBAI - 400 020. V S . M/S. EQUIFAX CREDIT INFORMATION SERVICES PVT. LTD. UNIT NO. 931, 3 RD FLOOR BUILDING NO. 9, SOILITARE ANDHERI EAST MUMBAI - 400 093. PAN : AACCE0474F ( APPELLANT ) ( RESPONDENT ) ASSESSEE BY SHRI NIRAJ SHETH DEPARTMENT BY SHRI R. MANJUNATHA SWAMY & SHRI AMIT PRATAP SINGH DATE OF HEARING 13 . 12 . 201 9 DATE OF PRONOUNCEMENT 10.02 . 20 20 O R D E R PER SHAMIM YAHYA (AM) : - THESE ARE APPEALS BY THE REVENUE AGAINST RESPECTIVE ORDERS OF LEARNED CIT(A) FOR A.Y. 2011 - 12 AND 2012 - 13. SINCE THE ISSUES ARE COMMON AND CONNECTED AND APPEALS WERE HEARD TOGETHER, THESE ARE BEING DISPOSED OF BY THIS COMMON ORDER, FOR THE SAKE OF CONVENIENCE. 2. ONE COMMON ISSUE RAISED RELATES TO DISALLOWANCE OF BUSINESS LOSS ON THE GROUND THAT BUSINESS WAS NOT ACTUALLY STARTED ON COMMERCIAL BASIS. FOLLOWING BUSINESS LOSSES HAVE BEEN DISALLOWED : - A.Y. 2011 - 12 RS. 23,73,63,528/ - A.Y. 2012 - 13 RS. 26,51,64,476/ - 3. SINCE FACTS ARE IDENTICAL WE ARE REFERRING TO THE FACTS AND FIGURES FOR A.Y. 2011 - 12. M/S. EQUIFAX CREDIT INFORMATION SERVICES PVT. LTD. 2 4. ON THIS ISSUE ASSESSING OFFICER ISSUED A QUESTIONNAIRE TO THE ASSESSEE REFERRING THAT THE ASSESSEE HAS SHOWN TAXABLE LOSS OF RS. 21,72,74,139/ - . THAT THE PROFIT AND LOSS ACCOUNT SHOWED INCOME FROM SERVICE FOR A VERY NEGLIGIBLE AMOUNT HENCE, THE ASSESSING OFFICER HELD THE SAME IS A COLO RABLE DEVICE. THE ASSESSEE RESPONDED AS UNDER : - THE COMPANY WAS GRANTED THE CERTIFICATE OF REGISTRATION (COR) ON MARCH 26, 2010 BY THE RESERVE BANK OF INDIA (RBI). ONE OF THE CON DITIONS IMPOSED BY RBI WAS THAT THE COMPANY SHOULD COMMENCE THE BUSINESS OF CREDIT INFORMATION WITHIN SIX MONTHS. IN COMPLIANCE WITH THE ABOVE, THE COMPANY COMMENCED THE BUSINESS OF CREDIT INFORMATION ON SEP 2, 2010. AFTER RECEIVING COR FROM RBI IN MARCH 26 , 2 010, THE COMPANY STARTED THE PROCESS TO ENROLL LENDERS (BANKS/FINANCIAL INSTITUTIONS) AS OUR MEMBERS WHO CONTRIBUTE SUCH CREDIT INFORMATION TO THE DATABASE. THE COMPANY COMMENCED THE BUSINESS OF CREDIT INFORMATION (I. E. SEP 2, 2010), IT HAD 27 SUCH M EMBERS WHO WERE PROVIDING CREDIT INFORMATION TO ITS AND HAD NEARLY 18 MILLION RECORDS IN OUR CREDIT INFORMATION DATABASE. IT IS PERTINENT HERE TO MENTION ABOUT THE NATURE OF OUR BUSINESS I.E. CREDIT INFORMATION BUSINESS. THE COMPANY COLLECTS CREDIT INFORM ATION (INFORMATION ABOUT CREDIT WORTHINESS WHICH INCLUDES NATURE AND AMOUNT OF BORROWINGS BY INDIVIDUAL WHO ARE BORROWERS OF BANKS AND OTHER FINANCIAL INSTITUTIONS) AND BUILD DATABASE OF CREDIT INFORMATION AND PROVIDE PRODUCTS/SERVICES PERTAINING TO SUCH C REDIT INFORMATION TO SUCH LENDERS AND OTHER SPECIFIED USERS AS PERMITTED UNDER THE LAW. THE CREDIT INFORMATION INDUSTRY IN INDIA IS OF RECENT ORIGIN. TILL THE YEAR 2010, THE MARKET ONLY HAD ONE PLAYER VIS. CREDIT INFORMATION BUREAU INDIA LIMITED (CIBIL). RBI ISSUED COR TO THREE OTHER PLAYERS IN 2010 AND ONE OF THEM IS THIS COMPANY. SINCE, CIBIL HAD A MONOPOLY SITUATION TILL THE YEAR 2010 AND HAD THE ADVANTAGE OF COLLECTING CREDIT INFORMATION FROM VARIOUS LENDERS OVER A PERIOD OF 5 - 6 YEARS BEFORE 2010, THE NEW PLAYERS WOULD NATURALLY FIND IT DIFFICULT TO ENTICE CUSTOMERS TO USE THE NEW PLAYERS AND HENCE THE REVENUE GENERATION WAS SLOW IN THE INITIAL PERIOD THIS IS INHERENT IN THE NATURE OF THIS INDUSTRY AND HENCE THE REVENUE GENERATION WAS SLOW IN THE INITIA L PERIOD. THUS, WE HUMBLY SUBMIT THAT IT IS NOT A COLOURABLE DEVICE TO SHOW START OF BUSINESS IN THE YEAR 2010 - 11 WITH THE INTENTION OF CLAIMING EXPENDITURE AS PURPORTED IN YOUR REQUEST FOR INFORMATION GIVEN TO US. IT IS ALSO PERTINENT TO NOTE HERE THAT WHILE FILING THE INCOME TAX RETURN FOR THE FY 2009 - 10 (AY 2010 - 11) WE HAD OURSELVES DISALLOWED SIGNIFICANT PORTION OF EXPENDITURE INCURRED IN THE FY 2009 - 10 SINCE WE HAD NOT COMMENCED THE BUSINESS OF CREDIT INFORMATION AS AT THE END OF FY 2009 - 10. M/S. EQUIFAX CREDIT INFORMATION SERVICES PVT. LTD. 3 5. H OWEVER THE ASSESSING OFFICER WAS NOT CONVINCED. HE HELD THAT THE ASSESSEE HAD NOT GIVEN ANY REPORT DURING THE YEAR , THAT THE ASSESSEES BUSINESS WAS TO PROVIDE CREDIT REPORT. THEREFORE HE HELD EVEN IF THE ASSESSEE MIGHT HAVE RECEIVED RBI LICENSE TO COMMENC E THE BUSINESS AND BUSINESS WAS NOT ACTUALLY COMMENCED. HENCE, HE DISALLOWED THE ABOVE CLAIM. 6. UPON ASSESSEES APPEAL LEARNED CIT(A) ELABORATELY CONSIDERED THE ISSUE AND CONCLUDED AS UNDER : THUS IT IS SEEN THAT THE APPELLANT IS ENTITLED FOR DEDU CTION OF EXPENSES OF RS.23,73,63,528/ - FOR THE REASON MENTIONED BELOW : - T HE BUSINESS OF THE APPELLANT WAS SET - UP ON 1 APRIL 2010 AS ON THAT DATE THE APPELLANT HAD REGULATORY APPROVAL, INFRASTRUCTURE, CAPITAL AND PERSONNEL AVAILABLE TO ENABLE IT COMM ENCE BUSINESS. T HE GRANT OF COR BY RBI ON 26 MARCH 2010 ITSELF INDICATES THAT THE APPELLANT'S BUSINESS WAS SET - UP ON THAT DATE SINCE THE RBI BEFORE GRANTING THE REGISTRATION IS REQUIRED TO BE SATISFIED BY INSPECTION OF RECORDS OR BOOKS OF SUCH COMPANY OR OTHERWISE THAT MINIMUM CAPITAL REQUIREMENT CONDITION IS MET. FURTHER, THE ENTITY (BEING THE APPELLANT HERE) SEEKING REGISTRATION WITH THE RBI IS REQUIRED TO MAKE AN APPLICATION IN PRESCRIBED FORM WHICH INTER ALIA REQUIRES DISCLOSURE ABOUT THE DET AILS OF INFRASTRUCTURE (SUCH AS TECHNOLOGY, SECURITY, FACILITIES FOR HOSTING THE DATA CENTRE, ETC) AND PARTICULARS OF DIRECTORS/KEY MANAGEMENT PEOPLE WHO HAVE THE NECESSARY EXPERIENCE TO CARRY ON THE BUSINESS. THE BUSINESS OF DMAS AND CREDIT INFORMATI ON ARE INTERCONNECTED AND INTERLACED AND HENCE SINCE THE BUSINESS OF DMAS WAS SETUP ON 1 APRIL 2010, THE EXPENDITURE FOR THE INTERLACED BUSINESS I.E. CREDIT INFORMATION SERVICES IS ALSO ALLOWABLE EXPENDITURE FOR THE YEAR UNDER CONSIDERATION. 7. AGAINST T HE ABOVE ORDER THE REVENUE IS IN APPEAL BEFORE US. 8. WE HAVE HEARD BOTH THE COUNSEL AND PERUSED THE RECORDS. LEARNED DEPARTMENTAL REPRESENTATIVE RELIED UPON THE ORDER OF THE ASSESSING OFFICER. 9. PER CONTRA, LEARNED COUNSEL OF THE ASSESSEE SUBMITTED THA T THE ASSESSEE HAS DULY COMMENCED THE BUSINESS. HE SUBMITTED THAT THE ASSESSEE HAS OBTAINED ALL REGULATORY APPROVAL, INFRASTRUCTURE, CAPITAL AND PERSONNEL WERE M/S. EQUIFAX CREDIT INFORMATION SERVICES PVT. LTD. 4 MADE AVAILABLE TO COMMENCE THE BUSINESS. THE RBI HAS DULY GRANTED PERMISSION I.E. COR DATED 26.3 .2010. HE CONTENDED THAT THE SAID PERMISSION IS GRANTED ONLY AFTER SATISFACTION AND INSPECTION OF RECORDS OR BOOKS. THE BUSINESS OF DMAS AND CREDIT INFORMATION ARE INTERCONNECTED AND INTERLACED AND HENCE SINCE THE BUSINESS OF DMAS WAS SET UP ON 1.4.2010, T HE EXPENDITURE FOR THE INTERLACED BUSINESS I.E. CREDIT INFORMATION SERVICES IS ALSO ALLOWABLE EXPENDITURE FOR THE YEAR UNDER CONSIDERATION. 10. LEARNED COUNSEL OF THE ASSESSEE HAS ALSO REFERRED TO THE DECISION OF ITAT DELHI BENCH IN THE CASE OF GNG STOCK HOLDINGS (P) LTD. (12 TAXAMNN.COM 376) FOR THE PROPOSITION THAT THE ASSESSEES BUSINESS WAS SET UP AS SOON AS THE ASSESSEE WAS ADMITTED BY NSE FOR TRADING MEMBERSHIP AND ASSESSEES BUSINESS WAS READY TO COMMENCE ON DAY WHEN IT GOT PROVISIONAL REGISTRATIO N FROM NSE AND IT WAS HELD THAT THE ASSESSEE WAS ENTITLED TO DEDUCTION OF ADMISSIBLE BUSINESS EXPENDITURE INCURRED BY IT FROM THE SAID DATE. 11. PER CONTRA LEARNED DEPARTMENTAL REPRESENTATIVE HAS RELIED UPON THE DECISIONS, WHEREIN DEPRECIATION WAS DENIE D ON MACHINE AND EQUIPMENT FOR NON USER. 12. UPON CAREFUL CONSIDERATION, WE FIND THAT THE ASSESSEE HAS DULY COMMENCED THE BUSINESS AFTER NECESSARY REGULATORY APPROVAL RECEIVED FROM RBI. THE ASSESSEE WAS INTER ALIA ALSO ENGAGED IN PROVIDING CREDIT RISK IN FORMATION. T HE ASSESSING OFFICER HAS NOT DISPUTED TH E S E ASPECT S. HE IS ONLY DRAWING ADVERSE INFERENCE THAT THE ASSESSEE HAS NOT ABLE TO SUBMIT CREDIT REPORT TO ANY CUSTOMER DURING THE PERIOD AND HAS NOT SHOWN ANY INCOME THEREFROM. IN OUR CONSIDERED OPINION WHEN THE BUSINESS HAS BEEN SET UP AND OPERATION DULY COMMENCED AFTER DUE APPROVAL OF RBI, THE ASSESSING OFFICER CANNOT DENY THE ASPECT OF COMMENCEMENT OF BUSINESS ONLY ON THE GROUND THAT INCOME FROM CREDIT REPORT IS NOT SHOWN. IN OUR CONSIDERED OPINION TH ERE IS NO LAW THAT IN BUSINESS DULY INCURRED BUSINESS EXPENDITURE CANNOT BE ALLOWED IF LITTLE I NCOME HAS BEEN EARNED. WE FIND THAT LEARNED CIT(A) HAS VERY ELABORATELY M/S. EQUIFAX CREDIT INFORMATION SERVICES PVT. LTD. 5 CONSIDERED HIS ASPECT. HE HELD THAT BUSINESS HAS BEEN SET UP THE ASSESSEE HAD DULY SHOWN THAT CAPITAL, REGULATORY PERMISSION , AVAILABLE INFRASTRUCTURE, EMPLOYEES ARE ALL AVAILABLE AND IN PLACE . IN THESE CIRC UMSTANCES THE ASSESSING OFFICER IS INCORRECT THAT THE ASSESSEE HAS ADOPTED COLORABL E DEVICE . 13. IN OUR CONSIDERED OP I NION THERE IS NO INFIRMITY IN THE ORDER OF LEARNED CIT(A), HENCE, WE UPHOLD THE SAME. 14. ANOTHER COMMON ISSUE RAISED IS THAT LEARNED CIT(A) ERRED IN DELETING THE DISALLOWANCE OF PAYMENT TO RELATED PARTY U/S. 40A(2)(B) OF THE ACT. 15. THE ASSESSING OFFICER HAS MADE DISA LLOWANCE U/S. 40A(2)(B) OF THE ACT FOR THE PAYMENTS MADE TO M/S. EQUIFAX SOFTWARE SYSTEMS PVT. LTD. THESE PAYMENTS WERE WITH REGARD TO HARDWARE AND SOFTWARE MAINTENANCE, HOSTING CHARGES AND PROFESSIONAL FEES. THE ASSESSING OFFICER HAS DISALLOWED THE SAME FINDING THEM TO BE EXCESSIVE AND UNREASONABLE. 16. UPON ASSESSEES APPEAL IN THIS REGARD, LEARNED CIT(A) REFERRED TO THE PROVISIONS OF SECTION U/S. 40A(2)(B) OF THE ACT. HE FOUND THAT THE SAID PROVISIONS ARE NOT ATTRACTED AS IN THE IMPUGNED ASSESSMENT YE AR AS THE SAID PARTY WAS NOT FALLING UNDER THE PROVISIONS OF SECTION 40A(2)(B) OF THE ACT. LEARNED CIT(A) HAS HELD AS UNDER : - IT IS SEEN THAT THE RELATED PARTIES FOR THE COMPANY INTER A/Z'ACOVER THE FOLLOWING: '...... A COMPANY, FIRM, ASSOCIATION OF PE RSONS OR HINDU UNDIVIDED FAMILY HAVING A SUBSTANTIAL INTEREST IN THE BUSINESS OR PROFESSION OF THE ASSESSEE OR ANY DIRECTOR, PARTNER OR MEMBER OF SUCH COMPANY, FIRM, ASSOCIATION OR FAMILY, OR ANY RELATIVE OF SUCH DIRECTOR, PARTNER OR MEMBER OR ANY OTHER CO MPANY EARNING ON BUSINESS OR PROFESSION IN WHICH THE FIRST MENTIONED COMPANY HAS SUBSTANTIAL INTEREST' THE UNDERLINED PORTION HAS BEEN INSERTED BY THE FINANCE ACT 2012 W.E.F 1 . 4 . 2013 AND THE SAME WAS NOT APPLICABLE FOR THE ASSESSMENT YEARS PRIOR TO 1 APR IL 2013. M/S. EQUIFAX CREDIT INFORMATION SERVICES PVT. LTD. 6 THUS, IT IS SEEN THAT ESS WAS NOT A RELATED PARTY OF THE APPELLANT DURING THE YEAR UNDER CONSIDERATION. THOUGH EFX HOLDING LIMITED (EFX) IS A COMMON SHAREHOLDER HOLDING 49 PERCENT STAKE IN THE APPELLANT AND 100 PERCENT IN ESS, THE PROVISIONS OF S ECTION 40A(2)(B) OF THE ACT WERE AMENDED ONLY WITH EFFECT FROM 1 APRIL 2013 TO PROVIDE THAT TWO COMPANIES SHALL BE RELATED TO EACH OTHER IF A COMMON SHAREHOLDER HOLDS SUBSTANTIAL INTEREST IN BOTH THE COMPANIES. AS THE ASSESSMENT ORDER RELATES TO AY 2011 - 12 , THE PROVISIONS THAT WERE INSERTED WITH EFFECT FROM 1 APRIL 2013 CANNOT BE APPLIED TO THE SAID YEAR. 17. AGAINST THIS ORDER THE REVENUE IS IN APPEAL BEFORE US. 18. IT IS THE CONTENTION OF THE REVENUE THAT THE SAID PARTY IS RELATED PARTY IN AS MUCH AS I N THE NOTES OF FINANCIAL STATEMENT THE SAID PARTY HAS BEEN SAID TO BE RELATED PARTY. HOWEVER LEARNED COUNSEL OF THE ASSESSEE SUBMITTED THAT MENTIONING IN THE NOTES OF ACCOUNT RELATED PARTY AND RELATED PARTY IN SECTION 40A(2)(B) OF THE ACT ARE TWO DIFFE RENT ASPECTS. HE SUBMITTED THAT ON MERITS IT HAS NOT AT ALL BEING DISPUTED THAT THE SAID PARTY IS NOT A RELATED PARTY AS PER THE EXT A NT OF PROVISIONS OF SECTION 40A(2)(B) OF THE ACT. UPON CAREFUL CONSIDERATION, W E F I ND COGENCY IN THE ABOVE SUBMISSION OF LE ARNED COUNSEL OF THE ASSESSEE BUT WE NOTE THAT THIS ASPECT THAT THE SAID PARTY IS NOT RELATED PARTY U/S. 40A(2)(B) WAS NEVER SUBMITTED BY THE ASSESSEE BEFORE THE ASSESSING OFFICER. IN FACT WHEN THE ASSESSING OFFICER ISSUED A QUESTIONNAIRE IN THIS REGARD, THE ASSESSEE HAS ONLY EXPLAIN ED THE BUSINESS EXIGENCY OF EXPENDITURE. IT HAD NEVER EXPLAINED THAT THE SAID PARTY IS NOT FALLING UNDER SECTION 40A(2)(B) . 19. NOW, LEARNED CIT(A)S FACTUAL FINDING THAT THE ASSESSEE WAS NOT HOLDING SPECIFIC STAKE IN THE SAID PARTY AND HENCE IT WAS NOT FALLING U/S. 40A(2)(B) HAS NOT BEEN EXAMINED BY THE ASSESSING OFFICER. IN OUR CONSIDERED OPINION INTEREST OF JUSTICE WILL BE SERVED IN THIS ASPECT IF WE REMIT THIS ISSUE TO THE FILE OF THE ASSESSING OFFICER FOR FACTUAL VERIFICA TION. ACCORDINGLY THE ISSU E STANDS REMITTED . 20. ANOTHER ISSUE RAISED IS THAT LEARNED CIT(A) ERRED IN DISALLOWANCE OF BONUS. M/S. EQUIFAX CREDIT INFORMATION SERVICES PVT. LTD. 7 21. AFTER DISALLOWING BUSINESS LOSS THE ASSESSING OFFICER WITHOUT PREJUDICE HAS ALSO HELD THAT BONUS IS SHOWN TO BE PAYABLE UNDER THE HEAD SUNDRY CREDIT. THAT THE ASSESSEE HAS NOT SUBMITTED AUDITED REPORT THAT THE PAYMENT HAS BEEN MADE BEFORE THE DUE DATE OF FILING THE RETURN. HENCE , HE DISALLOWED BONUS PAYMENT U/S. 43B OF THE ACT. HE ALSO HELD THAT THERE IS NO JUSTIFICATION FOR T HE PAYMENT OF BONUS IN ADDITION TO HEFTY SALARY PAID TO THE EMPLOYEES. 22. UPON ASSESSEES APPEAL LEARNED CIT(A) NOTED THAT THE TAX AUDIT WAS NOT CONDUCTED AS THE ASSESSEES TURNOVER WAS NOT REQUIRING TAX AUDIT. HE ALSO NOTED THE EXTRACT OF BANK STATEMEN T EVIDENCING THAT THE PAYMENT OF BONUS OF RS. 1 , 72,33,694/ - WAS MADE BEFORE THE DUE DATE OF FILING THE RETURN OF INCOME. FURTHERMORE, LEARNED CIT(A) ALSO HELD THAT THE ASSESSEE WAS JUSTIFIED IN PAYING BONUS AS THE ASSESSEE WAS OPERATING IN A VERY COMPETITI VE FIELD. THAT WHEN GOVERNMENT OWNED PUBLIC SECTOR BANKS ALSO HOLD A SUBSTANTIAL STAKE IN THE ASSESSEE COMPANY , THE ASSESSEE - COMPANY HAS TO ADHERE TO VERY STRINGENT CORPORATE GOVERNANCE NORMS. HE ALSO HELD THAT THERE WERE VARIOUS JUDICIAL DISCUSSIONS THAT THE AUTHORITIES CANNOT SIT INTO THE SHOES OF THE BUSINESSMAN. HENCE, HE DELETED THE DISALLOWANCE. 23. WE HAVE HEARD BOTH THE COUNSEL AND PERUSED THE RECORDS. IT TRANSPIRES THAT LEARNED CIT(A) HAS GIVEN FACTUAL FINDING THAT IMPUGNED PAYME NT HAVE BEEN DONE BEFORE THE DUE DATE . T HIS HAS NOT BEEN DISPUTED BY THE REVENUE. FURTHERMORE, LEARNED CIT(A) IS CORRECT IN HOLDING THAT THE ASSESSING OFFICER IS NOT JUSTIFIED IN S I T T ING IN THE SHOES OF BUSINESSMAN AND DECIDING WHETHER THE ASSESSEES EMPLO YEE S ARE DESERVING BONUS OR NOT. I N OUR CONSIDERED OPINION THERE IS NO INFIRMITY IN THE ORDER OF LEARNED CIT(A) IN THIS REGARD. HENCE, WE UPHOLD THE SAME. 24. ONE ISSUE RAISED FOR A.Y. 2011 - 12 IS THAT LEARNED CIT(A) ERRED IN DELETING ADDITION OF SHARE CAP ITAL U/S. 68 OF THE ACT. M/S. EQUIFAX CREDIT INFORMATION SERVICES PVT. LTD. 8 25. ON THIS ISSUE THE ASSESSING OFFICER NOTED THAT DURING THE YEAR, THE ASSESSEE COMPANY'S ISSUED CAPITAL HAD INCREASED BY RS. 25 CRORES, OF WHICH RS. 12.25 CRORES HAD BEEN SUBSCRIBED BY RELATED PARTY EFX HOLDINGS LTD. HENCE, TH E ASSESSEE WAS ASKED TO SUBMIT PARTYWISE DETAILS CONTAINING NAME, ADDRESS, PAN, AMOUNT, AND SUBSTANTIATE THE IDENTITY & CREDIT WORTHINESS OF ALL SUCH PARTIES AND ALSO THE GENUINENESS OF TRANSACTIONS. IN THIS REGARD, THE ASSESSEE WAS ASKED TO SUBMIT THE COP IES OF I.T. RETURN, COMPUTATION, COMPLETE BALANCE SHEET SET & BANK STATEMENT OF ALL THE PARTIES SHOWING THE SOURCE/ULTIMATE SOURCE OF INVESTMENTS . IN RESPONSE, THE ASSESSEE VIDE LETTER DATED 05.03.2014 STATED AS UNDER : - PLEASE FIND ATTACHED THE STATEMEN T OF INCREASE IN SHARE CAPITAL SHOWING THE NAME AND ADDRESS OF THE SHAREHOLDER, NUMBER OF SHARES HELD AND THEIR PAN. ALL THESE EXCEPT EFX HOLDINGS LTD. ARE PUBLIC FINANCIAL INSTITUTIONS OR NBFCS WHOSE FINANCIAL DATA IS AVAILABLE IN PUBLIC DOMAIN IN INDIA. IN CASE OF EFX HOLDINGS WE REQUIRE A SPECIFIC NOTICE FOR THE DETAILS FROM THE DEPARTMENT FOR THEM TO GIVE US THE REQUIRED INFORMATION. 26. CONSIDERING THE ABOVE THE ASSESSING OFFICER HELD THAT PARTY FROM WHOM THE ASSESSEE HAS RECEIVED SHARE CAPITAL IS RE LATED PARTY. HE FOUND THAT THE SAID PARTY WAS CLOSELY RELATED TO THE ASSESSEE - COMPANY AND THEREFORE HE FOUND THAT THE ASSESSEES CONTENTION THAT IT NEEDS SPECIFIC NOTICE FROM THE DEPARTMENT FOR THEM TO REQUIRE INFORMATION DOES NOT HOLD IN MERIT. HE HELD TH AT IT IS ASSESSEES ONUS TO PROVE THE IDENTITY OF PERSON, CREDITWORTHINESS OF PERSON AND GENUINENESS OF TRANSACTION. HE ALSO FOUND THAT THE ADDRESS OF THE SAID PARTY WAS IN MAURITIUS. THE ASSESSING OFFICER DREW ADVERSE INFERENCE THAT ASSESSEE IS NOT GIVING FINANCIALS AND SHARE CAPITAL IS ROUTED THROUGH MAURITIUS. ACCORDINGLY, ENTIRE AMOUNT OF RS. 12.25 CRORES WAS CONSIDERED AS UNEXPLAINED CASH CREDIT. 27. UPON ASSESSEES APPEAL LEARNED CIT(A) FOUND THAT THE ASSESSEE HAS RIGHTLY REQUESTED THE ASSESSING OFFI CER TO GIVE NOTICE FOR THE FINANCIALS OF THE PARTY AND THE ASSESSING OFFICER HAS NOT ISSUED ANY NOTICE. HE ALSO FOUND THAT T HE RBI HAD GRANTED APPROVAL WHICH ITSELF PROVED THE CREDITWORTHINESS OF THE M/S. EQUIFAX CREDIT INFORMATION SERVICES PVT. LTD. 9 SHARE CAPITAL . HE ALSO NOTED THAT THE RBIS AUTHORIZATIO N IS ALSO NEEDED. FURTHERMORE, HE ALSO REFERRED TO THE DECISION OF HON'BLE APEX COURT IN CIT VS. STELLER INVESTMENTS LTD. (251 ITR 263) AND LOVELY EXP E RTS (172 TAXMAN 44) AND HELD THAT THE IDENTITY OF THE SHAREHOLDER ALONE IS REQUIRED TO BE PROVED. 28. A GAINST THIS ORDER, THE REVENUE IS IN APPEAL BEFORE US. 29. LEARNED DEPARTMENTAL REPRESENTATIVE SUBMITTED THAT THE ASSESSEE HAS NOT GIVEN INFORMATION REGARDING CREDITWORTHINESS OF THE CONCERNED PARTY. HE REFERRED TO SEVERAL DECISIONS INCLUDING THE DECISION OF HON'BLE APEX COURT IN THE CASE OF NRA IRON & STEEL (P) LTD. (103 TAXMANN.COM 48). HE SUBMITTED THAT IT IS INCUMBENT UPON THE ASSESSEE TO PROVE CREDITWO R THINESS, IDENTITY AND GENUINENESS OF THE SHAREHOLDERS. HE PLACED RELIANCE UPON CATENA OF SEVERAL OTH ER CASE LAWS FOR THE PROPOSITION THAT ABSENCE OF CREDITWORTHINESS OF THE SHAREHOLDERS CAN BE REASONABLE BASIS FOR ADDITION U/S. 68 OF THE ACT. 30. PER CONTRA, LEARNED COUNSEL OF THE ASSESSEE SUPPORTED THE FINDINGS OF LEARNED CIT(A). HE SUBMITTED THAT ASSE SSEE HAS DISCHARGED ITS ONUS. HE FURTHER SUBMITTED THAT CASE LAWS REFERRED BY LEARNED DEPARTMENTAL REPRESENTATIVE ARE IN A DIFFERENT CONTEXT . 31. UPON CAREFUL CONSIDERATION, WE FIND THAT IT IS UNDISPUTED THAT THE ASSESSING OFFICER HAD ASKED FOR THE FIN ANCIAL STAT EMENT OF SHAREHOLDER . IT WAS ESSENTIAL TO EXAMINE CREDITWORTHINESS OF THE PARTY. THE ASSESSEE HAD ASK ED THE ASSESSING OFFICER TO ISSUE NOTICE IN THIS REGARD BUT THE ASSESSING OFFICER HAS NOT ISSUED THE SAME. LEARNED CIT(A) ALSO HAD FOUND FAULT WITH THE ASS ESSING OFFICER IN NOT ISSUING NOTICE. IN THIS REGARD, WE NOTE THAT IT IS SETTLED LAW THAT POWE RS AND DUTY OF LEARNED CIT(A) ARE CO - TERMINUS WITH THAT OF THE ASSESSING OFFICER. IF THE ASSESSING OFFICER HAS FAILED TO ISSUE NOTICE S WHICH ARE CRUCIAL , I T WAS INCUMBENT UPON LEARNED CIT(A) TO HIMSELF ASK FOR THE FINANCIAL AND GIVE FINDINGS ABOUT THE SAME. WE FIND THAT IN ABSENCE OF FINANCIAL STATEMENT , ONLY RBI APPROVAL ALONE CANNOT BE SAID TO HAVE FULLY PROVED CREDITWORTHINESS OF THE M/S. EQUIFAX CREDIT INFORMATION SERVICES PVT. LTD. 10 PARTY. IT IS SETTLED LAW TH AT THE INCOME TAX OFFICER IS ENTITLED TO MAKE NECESSARY EXAMINATION, WHICH IS CONSIDERED NECESSARY UNDER THE PROVISIONS OF INCOME TAX LAW. FURTHERMORE HON'BLE APEX COURT IN THE CASE OF KAPOOR CHAND SHRIMAL (131 ITR 451) HAS EXPOUNDED THAT IT IS THE DUTY OF THE APPELLATE AUTHORITY TO CORRECT THE ERROR IN THE ORDER OF THE AUTHORITY BELOW AND REMIT THE MATTER FOR RECONSIDERATION WITH OR WITHOUT DIRECTION UNLESS PRO HIBITED BY LAW. ACCORDINGLY, IN THE INTEREST OF JUSTICE, WE REMIT THIS ISSUE TO THE FILE OF THE AS SESSING OFFICER. THE ASSESSING OFFICER IS DIRECTED TO ISSUE REQUISITE NOTICE AND CONSIDER THE ISSUE DENOVO . THE ASSESSEE IS ALSO DIRECTED TO COOPERATE WITH THE ASSESSING OFFICER. ACCORDINGLY, THE ASSESSING OFFICER SHALL CONSIDER THIS ISSUE DENOVO. 32. IN T HE RESULT, THESE APPEALS ARE PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER HAS BE EN PRONOUNCED IN THE COURT ON 10.02.2020 SD/ - SD/ - ( RAVISH SOOD ) (SH A MIM YAHYA ) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; DATED : 10 / 02 / 20 20 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// ( ASSISTANT REGISTRAR ) PS ITAT, MUMBAI