ACIT CIR 6(1), MUMBAI V. INX RECRUITMENT SERVIOCES P.LTD, MUMBAI

ITA 6463/MUM/2011

• Counselvise Citation: [2015] 134 COUNSELVISE.COM (IT) 2221 (ITAT-MUMBAI)
• Duration Of Justice: 4 year(s) 2 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-12-2015
• Appeal Filed By: Department
• Bench Allotted: I
• Next Hearing Date: 08-10-2015
• Assessment Year: 2008-2009
• Appeal Filed On: 22-09-2011
• Court: TRIBUNAL
• Assessee Lawyers: J D MISTRY
• Keywords: Unexplained cash credit; Source of fund
• Section: 133(6); 68

Judgement Text

IN THE INCO ME TAX APPELLATE TRIBUNAL I BENCH, MUMBAI BEFORE SHRI D. KARUNAKARA RAO, ACCOUNTANT MEMBER AND SHRI SANDEEP GOSAIN, JUDICIAL MEMBER I.T.A. NO. 6463/M/2011 (ASSESSMENT YEAR : 2008 - 2009 ) ACIT, CIRCLE 6(1), R.NO.506, 5 TH FLOOR, AAYAKAR BHAVAN, M.K. ROAD, MUMBAI - 20. / VS. M/S. INX RECRUITMENT SERVICES PVT LTD., BLOCK NO.16, UNIT 15B PHONEX MILLS COMPOUND, 462 SENAPATI BAPAT MARG, MUMBAI - 400 013. ./ PAN : AABC16307A ( / APPELLANT) .. ( / RESPONDENT ) / APPELLANT BY : SHRI G.M. DOSS, CIT - DR / RESPONDENT BY : SHRI J.D. MISTRY / DATE OF HEARING : 08.10.2015 / DATE OF PRONOUNCEMENT : 08 .12.2015 / O R D E R PER D. KARUNAKARA RAO, AM: THIS APPEAL FILED BY THE REVENUE ON 22.9.2011 IS AGAINST THE ORDER OF THE CIT (A) - 14, MUMBAI DATED 11.1.2011 FOR THE ASSESSMENT YEAR 2008 - 2009. IN THIS APPEAL, REVENUE RAISED THE FOLLOWING SOLITARY GROUND WHICH READS AS UNDER: ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE CIT (A) ERRED IN DELETING (SIC) THE ADDITION OF RS. 41.22 CRS U/S 68 OF THE IT ACT, 1961 WITHOUT APPRECIATING THE FACT THAT THE ASSESSEE FAILED TO ESTABLISH NO T ONLY THE REAL SOURCE AND GENUINENESS OF LOCAL FUNDING THROUGH GROUP COMPANIES BUT ALSO THE NECESSITY OF INVOLVING SEVERAL COMPANIES IN THIS EXERCISE AND THEREFORE, FAILED TO SATISFACTORILY EXPLAIN THE NATURE AND SOURCE OF LOCAL FUNDING. 2. BRIEFLY STATED RELEVANT FACTS ARE THAT THE ASSESSEE FILED THE RETURN OF INCOME DECLARING THE TOTAL INCOME OF RS 2.23 CR (ROUNDED OF) ON 30. 9.09. DURING THE SCRUTINY ASSESSMENT PROCEEDINGS, AO NOTED FROM THE FINANCIAL STATEMENTS THAT THE ASSESSEE RECEIVED L OAN OF RS 41.22 CR FROM TIARA COMTRADE P LTD IN THE YEAR UNDER CONSIDERATION. AO CONDUCTED DEEP ENQUIRES ON THE SAID LOAN TRANSACTION AND INVOKED THE PROVISIONS OF SECTION 133(6) BY ISSUING LETTERS TO THE TIARA AND THE GROUP COMPANIES OF THE RELIANCE GROUP (RELIANCE GAS P LTD, RELIANCE EXTRUSION P LTD 2 RELIANCE EXPLORATION P LTD AND ORNATE TRADERS P LTD). AO ALSO EXAMINED THE FINANCIAL STATEMENTS AND BUSINESS ACTIVITIES OF THE SAID COMPANIES AND CAME TO THE CONCLUSION THAT THE SAID COMPANIES ARE MERE CONDUIT S BEFORE THE SAID SUMS REACH THE FINAL DESTINATION OF INX MEDIA LTD. AO HELD THE SAID COMPANIES HAVE NOT UNDERTAK EN ANY BUSINESS AND THE RETURNS OF THE SAID COMPANIES ARE UNIFORMLY NIL. AO TOOK OBJECTION TO THE FACT OF INVOLVING VARIOUS COMPANIES. THEREFOR E, AO INVOKED THE PROVISIONS OF SECTIO N 68 OF THE ACT AND MADE ADDITION OF RS 41.22 CR. OTHERWISE, THE ASSESSEE SUBMITTED THE DETAILS OF BANK ACCOUNTS, PAN, COPY OF THE RETURN OF INCOME OF THE TIARA - THE LOAN CREDITOR, COPY OF THE WRITTEN AGREEMENT BETWEEN THE PARTIES, DETAILS OF GIVING LOANS TO THE INX MEDIA GROUP COMPANY ETC. 3. DURING THE FIRST APPELLATE PROCEEDINGS, ASSESSEE SUBMITTED THAT THE ASSESSEE DETAILS ON THE IDENTITY, CREDITWORTHINESS, GENUINENESS OF THE TRANSACTION AND VARIOUS DOCUMENTS IN ORD ER TO SUBSTANTIATE THE SAID CONDITIONS OF SECTION 68 OF THE ACT. IN VIEW OF THE VOLUMINOUS INFORMATION FILED BEFORE HIM, THERE IS NO FAILURE ON PART OF THE ASSESSEE IN DISCHARGE OF PRIMARY ONUS FROM HIS SIDE AND PRAYED FOR DELETING THE ADDITION MADE BY THE AO ON THE BASIS OF SUSPICION. CIT(A) CONSIDERED THE SAME AND GAVE ELABORATE DISCUSSION ON THE SAID SUBMISSIONS AND THE EVIDENCES AS EVIDENT FROM PARA 3 AND ITS SUB PARAGRAPHS OF HIS ORDER. THERE IS DISCUSSION ON THE FACTS OF MAKING DOUBLE ADDITION OF THE SAME AMOUNT IN THE HANDS OF THE ASSESSEE AND THE INX MEDIA TOO. EVENTUALLY, THE CIT(A) GRANTED RELIEF TO THE ASSESSEE AND THE DISCUSSION IN SUBPARA 3.11 TO 3.13 OF HIS ORDER IS RELEVANT. AGGRIEVED WITH THE SAID ORDER OF THE CIT(A) , THE R EVENUE IS IN APPEAL BEFORE US WITH THE SOLITARY GROUND EXTRACTED ABOVE. PROCEEDINGS BEFORE THE TRIBUNAL 4. SRI JAHANGIR MISTRY, LD COUNSEL FOR THE ASSESSEE , AT THE OUTSET SUBMITTED THAT THE ADDITION OF RS 41.22 CR MADE U/S 68 OF THE ACT IS THE CORE ISSUE . IN THIS REGARD, LD COUNSEL SUBMITTED T HAT IDENTITY, CREDITWORTHINESS AND GENUINENESS OF TRANSACTION WERE PROVED BY THE ASSESSEE IN THE ASSESSMENT PROCEEDINGS. ASSESSEE DISCHARGED THE PRIMARY ONUS ON ALL THE INGREDIENTS OF THE SAID SECTION 68 OF THE ACT. HOWEVER, AO SUSPECTE D WITHOUT ANY BASIS THE TRANSACTIONS AND PROCEEDED TO MAKE ADDITION. ON TOP OF IT, AO ADDED THE SAME AMOUNT AS UNEXPLAINED CASH CREDIT, WHEN 3 THE SAID ADDITION WAS ALREAD Y IN THE HANDS OF THE COMPANY ( INX MEDIA P LTD). THUS, AS PER THE ASSESSEE, IT IS CASE OF DOUBLE ADDITION AND THEREFORE, THE SAME SHOULD BE DELETED AS DONE BY THE CIT(A) IN THE FIRST APPELLATE PROCEEDINGS. 5. ON FACTS, SRI J MISTRY SUBMITTED THAT THE ASSESSEE RECEIVED CONVERTIBLE LOAN RS 41.22 CR FROM TIARA COMTRADE P LTD (IN SHORT TIARA )AS PER THE WRITTEN AGREEMENT BETWEEN THEM. TIARA GOT THE SAID FUNDS FROM FOUR OF THE COMPANIES OF THE RELIANCE GROUP. RELIAN CE GROUP (IE RELIANCE GAS P LTD; RELIANCE EXTRUSION P LTD ; RELIANCE EXPLORATION P LRD AND ORNATE TRADERS P LTD) IS THE ORIGINAL SOURCE OF FUNDS FOR TIARA AND IN TURN TO THE ASSESSEE UNDER CONSIDERATION. IN THIS REGARD, LD COUNSEL SUBMITTED THAT THE CIT (A) DELETED THE ADDITION APPRECIATING THE EVIDENCE PLACED BEF ORE THE AO. THE EVIDENCE INCLUDE S (I) THE CONFIRMATION LETTERS FROM THE CREDITOR - TIARA; (II) BALANCE S HEET AND THE P&L ACCOUNTS OF THE CREDITOR AND (III) THE WRITTEN AGREEMENTS BETWEEN THE PARTIES. HE ALSO SUBMITTED THE SAID LOAN IS CONVERTIBLE INTO EQUIT Y AND THEREFORE, THERE IS NO REQUIREMENT OF THE SECURITIES OR PAYMENT OF INTEREST. SINCE THE SAID SUM IS FINALLY ASSESSED IN THE HANDS OF THE ULTIMATE BENEFICIARY (INX MEDIA P LTD), THE PRESENT ADDITION MADE IN THE HANDS OF THE ASSESSEE CONSTITUTES DOUBLE ADDITION AND, ON THIS GROUND ALONE, THE ORDER OF CIT(A) SHOULD BE UPHELD. HE HEAVILY RELIED ON THE ORDER OF THE CIT(A). DECISION OF THE TRIBUNAL 6. PER CONTRA , LD DR FOR THE REVENUE READ OUT THE ARGUMENT FILLED GROUND OF THE REVENUE AND RELIED ON THE ORD ER OF THE AO. AS PER THE LD DR, WHEN THE LOAN TRANSACTIONS PASS THROUGH MULTIPLE LAYERS OF THE COMPANIES BEFORE IT REACHES THE ULTIMATE BENEFICIARY, THE SAID TRANSACTIONS FALL WITHIN THE MISCHIEF OF THE PROVISIONS OF SECTION 68 OF THE ACT. OTHERWISE, WITHO UT CONCEDING, HE ADMITTED THAT THE SAID AMOUNT WAS ADDED AS UNEXPLAINED INCOME OF ANOTHER ASSESSEE - INX MEDIA LTD (IN SHORT - INX MEDIA). THIS COMPANY IS THE DESTINATION POINT FOR THE SAID FUNDS OF RS 41.22 CR. 7. WE HEARD BOTH THE PARTIES AND PERUSED THE ORDERS OF THE REVENUE. THE ISSUE RAISED BY THE REVENUE IN THIS APPEALS REVOLVES AROUND (I) REAL SOURCE OF CREDIT; (II ) GENUINENESS OF LOCAL FUNDING; AND (III) NECESSITY OF INVOLVING SEVERAL COMPANY TO 4 TRANSFER THE FUNDS FROM RELIANCE GROUP COMPANIES (ORIG INAL SOURCE OF FUNDS) TO INX MEDIA (FINAL DESTINATION OF FUNDS). THERE IS NO DISPUTE ON THIS FACT. FURTHER, THERE IS NO DISPUTE ON THE INVOLVEMENT OF VARIOUS COMPANIES BY BOTH THE SIDES IE RELIANCE GROUND AND INX MEDIA GROUP. FURTHER, WE FIND THAT THE SAID SUM OF RS 41.22 CR IS FINALLY ASSESSED TO TAX AGAIN U/S 68 OF THE ACT IN THE HANDS OF THE INX MEDIA. AS SEEN FROM THE GROUND OF THE REVENUE, THERE IS NO DISPUTE ON THE IDENTITY AND CREDIT WORTHINESS OF THE CREDITOR TIARA WHO UNDISPUTEDLY CONFIRMED THE T RANSACTION BY FILING THE WRITTEN CONFIRMATION. IT IS NOT THE CASE OF THE REVENUE THAT THE RELIANCE GROUP IS NOT CREDITWORTHY FOR THE SAID SUM OF RS 41.22 CR. REGARDING THE ISSUE OF GENUINENESS OF THE TRANSACTIONS, AO HAS NOT MADE OUT WITH ANY EVIDENCE THAT THE TRANSACTION INVOLVED IS NOT GENUINE. HE MERELY SUSPECTS THAT, WITH MULTIPLE LAYERS OF THE COMPANIES BETWEEN THE RELIANCE GROUP AND THE INX MEDIA GROUP, THE TRANSACTION IS STRAIGHT FORWARD AND THEREFORE, IT FALLS IN THE AMBIT OF THE PROVISIONS OF SECTI ON 68 OF THE ACT. 8. FURTHER, WE PERUSED THE ORDER OF THE CIT(A) AND CONTENTS OF THE PARAGRAPHS 3.11 AND 3.13 ARE RELEVANT. PARA 3.12 MERELY DISTINGUISHES THE CASE LAWS CITED BY THE AO. THE SAID PARA 3.11 AND 3.13 READ AS UNDER: 3.11. I HAVE CONSIDERED THE ABOVE SUBMISSIONS OF THE APPELLANT. THE ASSESSING OFFICERS DECISION IS BASED MAINLY ON THE FACT THAT THE SOURCE OF THE FUNDS IN THE HANDS OF TIARA COMTRADE (P) LTD WAS IN TURN THELOAN AMOUNT FROM FOUR RELIANCE GROUP COMPANIES. ALSO, THE LOAN TAKEN B Y THE APPELLANT WAS FURTHER ADVANCED AS LOAN TO INDRANI INCON (P) LTD. THE APPELLANT HAD GIVEN THE LENDER, THE RIGHT TO CONVERT THE SAID LOAN INTO SHARES AT ANY POINT OF TIME AND THE LOAN WAS GIVEN BY TIARA COMTRADE (P) LTD WITHOUT ANY SECURITY OR INTERES T. THE LENDER ALSO WAS GIVEN RIGHT NOT TO ACCEPT THE REPAYMENT OF LOAN (AND APPARENTLY CONVERT IT INTO SHARES). HOWEVER, THESE FACTORS ARE IRRELEVANT TO THE ISSUE UNDER CONSIDERATION IF THE LENDER EXISTS, IS IDENTIFIED BY THE APPELLANT AND ALSO THE LOAN IS CONFIRMED BY THE LENDER AS ARE THE FACTS IN THIS CASE. IF AT ALL THE ASSESSING OFFICER MAKES ANY ADDITION U/S 68 OF THE ACT, HE SHOULD PROVE THAT THE TRANSACTION IS BOGUS AND ASSESSEES OWN UN - ACCOUNTED FUNDS HAVE BEEN INTRODUCED IN THE FORM OF LOAN. IN THE CASE OF THE APPELLANT, NO SUCH FACTS HAVE BEEN PROVED. IN FACT, THE ASSESSING OFFICER HAS TRACED OUT EVEN THE SOURCE OF THE SOURCE AND FOUND THAT ORIGINAL FUNDS HAVE COME FROM RELIANCE GROUP OF COMPANIES. 3.12.......... 3.13. I ALSO AGREE THAT IN V IEW OF THE DECISIONS CITED BY THE APPELLANT, THE ADDITION MADE BY THE ASSESSING OFFICER U/S 68 OF THE ACT DESERVES TO BE DELETED. THE APPELLANT HAS SUPPLIED ALL THE NECESSARY DETAILS TO THE ASSESSING OFFICER IE COPIES OF ACOIUNTS, RETURN OF INCOME OF THE LENDER, PAN AND ADDRESS OF THE LENDER. ALSO THE ENQUIRIES WERE CONDUCTED BY THE ASSESSING OFFICER AND SOURCE OF SOURCE WAS ALSO TRACED OUT BY HER. ANY ADDITION U/S 68 CANNOT BE MADE ON THE BASIS OF SUSPICION OR SPECULATION. IT IS A FACT THAT THE APPELLA NT TOOK A GENUINE LOAN FROM TIARA COMRADE (P) LTD FOR GIVING LOAN 5 TO INDRANI INCON (P) LTD. ALSO, IT WAS FOUND BY THE ASSESSING OFFICER THAT TIARA COMTRADE HAD IN TURN TAKEN LOAN FROM THE COMPANIES OF RELIANCE GROUP. THEREFORE, THERE CAN BE NO CASE FOR A NY ADDITION U/S 68 OF THE ACT. HENCE, THE ADDITION OF RS. 41.22 CRS IS DELETED. 9. WE FIND THAT THE A SSESSEE FURNISHED VALUABLE INFORM MATION ON THE IDENTITY OF THE CREDITOR BY FILING THE COPY OF THE RETURN OF INCOME OF TIARA AND AO PROCURED VALUABLE INFO RMATION RELATING TO OTHER COMPANIES OF THE RELIANCE GROUP EVIDENCING THE TRANSFER FUNDS TO THE TIARA AND IN TURN TO THE ASSESSEE. THESE AMOUNT S ARE EVENTUALLY TRANSFERRED TO THE INX MEDIA RELATED COMPANIES. CONFIRMATION LETTERS, FINANCIAL STATEMENTS OF REL ATED COMPANIES, RELATED BANK STATEMENTS ARE FURNISHED. FROM THE ABOVE FACTS, THE DISCUSSION GIVEN ABOVE AND THE CONTENTS OF 3.11 AND 1.13, WE FIND THE ASSESSEE IS COMPANY HAS NOT DONE ANY BUSINESS TO EARN THE UNEXPLAINED INCOME OF RS 41.22 CR FOR TAXATION IN ITS HANDS. IT IS APPROPRIATE TO TAX THE SAME EITHER HANDS OF THE ORIGINAL GIVER, THE SOURCE OF SOURCE, OR IN THE HANDS OF THE RECEIVER INX MEDIA, IF CONDITIONS SPECIFIED IN THE STATUTE ARE VIOLATED. IT IS SETTLED PROPOSITION IN LAW THAT THE SUSPICIOUS N ESS CANNOT BE THE GROUND FOR INVOKING THE PROVISIONS OF SECTION 68 OF THE ACT. HOW THE NIL INCOME COMPANIES LIKE THE PRESENT ASSESSEE, WHO HAS NOT DONE ANY BUSINESS ACTIVITIES, SHALL EARN THE UNEXPLAINED INCOME FOR MAKING ADDITION AS DONE BY THE AO IN THIS CASE ? WE DO NOT AGREE WITH THE DECISION OF THE AO IN DOUBLY TAXING THE SAID AMOUNT ON MULTIPLE HANDS ON SUBSTANTIVE BASIS. CONSIDERING THE ABOVE, WE ARE OF THE VIEW THAT THE FINAL CONCLUSION OF THE CIT(A) APPEARS FAIR AND REASONABLE. THEREFORE, IT DOES NO T CALL FOR ANY INTERFERENCE. ACCORDINGLY, THE SOLITARY GROUND RAISED BY THE R EVENUE IS DISMISSED. 10. IN RESULT, THE APPEAL OF THE REVENUE IS DISMISSED . ORDER PRONOUNCED IN THE OPEN COURT ON 8 T H DECEMBER, 2015. S D / - S D / - ( SANDEEP GOSAIN ) (D. KARUNAKARA RAO) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; 8 /12/2015 . . ./ OKK , SR. PS 6 / 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 . //TRUE COPY// / BY ORDER, / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI