THREADNEEDLE INVESTMENT FUND ICVC ASIA FUND, MUMBAI V. ASSDIT (IT) 2(2), MUMBAI

ITA 8016/MUM/2011

• Counselvise Citation: [2012] 119 COUNSELVISE.COM (IT) 9500 (ITAT-MUMBAI)
• Duration Of Justice: 11 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-11-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: L
• Next Hearing Date: 19-11-2012
• Assessment Year: 2008-2009
• Appeal Filed On: 29-11-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: PARAG VYAS
• Keywords: Unexplained investment; Additional evidence
• Section: 143(3); 69

Judgement Text

ITA NO.8016 OF 2011 THREADNEEDLE INVESTMENT FUND IC VC ASIA FUND MUMBAI PAGE 1 OF 8 IN THE INCOME TAX APPELLATE TRIBUNAL 'L ' BENCH, MUMBAI BEFORE SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER AND SHRI VIJAY PAL RAO, JUDICIAL MEMBER ITA NO.8016/MUM/2011 (ASSESSMENT YEAR: 2008-09) THREADNEEDLE INVESTMENT FUND ICVC ASIA FUND, C/O PRICEWATERHOUSE COOPERS (P) LTD, PWC HOUSE, PLOT NO.18/A GURU NANAK ROAD (STATION ROAD), BANDRA (WEST), MUMBAI 400 050 PAN: AACCT 5709 L VS. ASSTT. DIT (IT) 2(2) SCINDIA HOUSE, BALLARD ESTATE, MUMBAI 400038 (APPELLANT) (RESPONDENT) ASSESSEE BY: SHRI PARAG VYAS DEPARTMENT BY: SHRI MAHESH KUMAR, CIT(DR) DATE OF HEARING: 19/11/2012 DATE OF PRONOUNCEMENT: 27/11/2012 O R D E R PER B. RAMAKOTAIAH, A.M. THIS IS ASSESSEES APPEAL AGAINST THE ORDER OF AO W HICH WAS II PURSUANCE OF ORDER OF THE DRP-II MUMBAI UNDER SECTI ON 143(3) R.W. SECTION 144C(13) OF THE I.T. ACT. 2. BRIEFLY STATED, ASSESSEE A FOREIGN COMPANY IS IN TH E BUSINESS OF FIIS/SUB ACCOUNT (INVESTMENT IN INDIAN CAPITAL M ARKET). IT FILED RETURN OF INCOME DECLARING A TOTAL INCOME AT ` .40,95,670/-. BEING A NON RESIDENT CORPORATE ENTITY, ASSESSEE IS REGISTER ED WITH THE STOCK EXCHANGE BOARD OF INDIA (SEBI) AS A SUB ACCOUNT HOL DER UNDER THE FII THREADNEEDLE INVESTMENT FUND ICVC ASIA FUND FOR CARRYING OUT INVESTMENT ACTIVITY IN INDIAN MARKET. DURING TH E COURSE OF THE ASSESSMENT PROCEEDINGS AO ASKED ASSESSEE TO RECONCI LE THE AIR DATA PROVIDED BY THE BOMBAY STOCK EXCHANGE (BSE) OF VARIOUS ITA NO.8016 OF 2011 THREADNEEDLE INVESTMENT FUND IC VC ASIA FUND MUMBAI PAGE 2 OF 8 TRANSACTIONS REFLECTED IN ASSESSEES NAME. A COPY O F THE DATA WAS GIVEN TO ASSESSEE AND ASSESSEE WAS ASKED TO RECONCI LE THE SAME. AO GAVE TWO WEEKS OF TIME TO RECONCILE THE DATA JUS T BEFORE THE PROPOSED DRAFT ORDER WAS FINALISED. IT WAS ASSESSEE S CONTENTION THAT THE TRANSACTION REPORTED BY AIR DOES NOT PERTAIN TO ASSESSEE AND MOREOVER THE DETAILS FURNISHED BY THE AIR DO NOT IN DICATE ANY SPECIFIC INFORMATION WITH REFERENCE TO THE CONTACT NUMBER, SCRIP NAME, QUANTITY ETC.. ASSESSEE PLEADED ITS INABILITY TO RECONCILE THE TRANSACTIONS ON ONE-TO-ONE BASIS IN THE ABSENCE OF COMPLETE DETAILS. IT FURTHER SUBMITTED VIDE LETTER DATED 7.12.2010 TH AT ASSESSEES TOTAL TRANSACTIONS DURING THE YEAR WAS TO THE TUNE OF ` .66.37 CRORES AS PER THE CONTRACTS AND THE TRANSACTIONS REFLECTED IN THE AIR INFORMATION WAS ONLY ` .11,32,38,770/- AND FURNISHED ITS CONTRACT NOTES AND DETAILS AS PER THE BOOKS OF ACCOUNT OF AS SESSEE. AT THE SAME TIME ASSESSEE ALSO ASKED BSE FOR CLARIFYING TH E TRANSACTIONS REPORTED IN ITS NAME. AO IN PARA 5.6 OF THE ORDER W ITHOUT REFERRING TO THE EXPLANATIONS OF ASSESSEE OR EXAMINING THE NA TURE OF THE DETAILS CAME TO A CONCLUSION THAT ASSESSEE MADE INV ESTMENT IN THE SCRIP STEEL AUTHORITY OF INDIA OF 485909 SHARES V ALUED AT ` .11,32,38,770/- ON 17.12.2007 AND AS THIS TRANSACTI ON WAS NOT RECONCILED OR EXPLAINED, THE AMOUNT WAS TREATED AS UNEXPLAINED INVESTMENT UNDER SECTION 69 AND TAXED AT THE RATE O F 40%. 3. ASSESSEE FILED FURTHER DETAILS BEFORE THE DRP EXPLA INING THAT THE TRANSACTIONS WERE NOT ENTERED ON BEHALF OF ASSE SSEE AND THE BROKER M/S CREDIT SUISSE HAS UNDERTAKEN THE TRANSAC TIONS ON BEHALF OF THE FIVE OTHER FUNDS WHICH ARE UNDER THE CONTROL OF THREADNEEDLE ASSET MANAGEMENT LTD AND FILED CONFIRM ATIONS OF TRADES BY M/S CREDIT SUISSE BEFORE THE DRP. IT ALSO FILED LETTER FROM THE CUSTODIAN (NSDL) INDICATING THAT THE TRANSACTIO N DOES NOT PERTAIN TO ASSESSEE. IT ALSO FILED LETTERS FROM OTH ER BROKERS THAT THEY HAVE NO TRANSACTIONS IN STEEL AUTHORITY OF INDIA SHARES ON BEHALF OF ITA NO.8016 OF 2011 THREADNEEDLE INVESTMENT FUND IC VC ASIA FUND MUMBAI PAGE 3 OF 8 ASSESSEE. ASSESSEE ALSO PLACED THE PAN NOS. OF THE OTHER FUNDS AND RELEVANT TRADES ENTERED IN ON BEHALF OF THEM BY THR EADNEEDLE ASSET MANAGEMENT LTD ON THE GIVEN DAY AND THE RECONCILIAT ION OF TRANSACTIONS ACCOUNTED BY THEM, EVEN THOUGH ASSESSE E IS NOT INVOLVED IN THE TRANSACTIONS. IT EXPLAINED TO THE D RP THAT THE AIR INFORMATION STATED TO BE BELONGING TO ASSESSEE DOES NOT PERTAIN TO IT. THE DRP HOWEVER, DID NOT AGREE WITH ASSESSEE A) THA T THE TIME PROVIDED BY AO OF TWO WEEKS IS REASONABLE B) THAT A SSESSEE DID NOT RECONCILE THE TRANSACTIONS PROPERLY C) ASSESSEE DID NOT PLEAD FOR ADMISSION OF ADDITIONAL EVIDENCE AND ALSO D) DID NO T EXPLAIN WHY PAN OF ASSESSEE HAS BEEN CONTINUOUSLY USED BY THREA DNEEDLE ASSET MANAGEMENT LTD. IT WAS ALSO NOTED THAT WHEN THE OPP ORTUNITY WAS GIVEN BY THE DRP ON 21.07.2011 POSTING THE CASE ON 5.8.2011 NO REPLY WAS RECEIVED AND FURTHER WHEN THE CASE WAS FI XED ON 16.09.2011, NONE APPEARED ON BEHALF OF ASSESSEE. TH EREFORE, THE DRP REJECTED THE DOCUMENTS FILED AS PHOTOCOPIES AND UNAUTHENTICATED AND CONFIRMED THE DRAFT ORDER OF AO . 4. THE LEARNED COUNSEL SUBMITTED THAT THE ADDITION UND ER SECTION 69 IS NOT WARRANTED AS THESE TRANSACTIONS A RE NOT BUY TRANSACTIONS BUT ARE SOLD TRANSACTIONS IN THE STO CK EXCHANGE BY THE BROKER M/S CREDIT SUISSE LTD. THREADNEEDLE ASSE T MANAGEMENT LTD ENTERED THESE TRANSACTIONS ON BEHALF OF FIVE OT HER FUNDS DETAILED IN PAGE 6 OF THE DRP ORDER AND ASSESSEE IS ABLE TO FURNISH THE CONFIRMATION FROM M/S CREDIT SUISSE WITH REFERENCE TO THE VARIOUS TRANSACTIONS AND REFERRED TO VARIOUS RECONCILIATION S PLACED IN THE PAPER BOOK. IT WAS HIS CONTENTION THAT THE BSE INFO RMATION THROUGH THE AIR DOES NOT CONTAIN ANY DETAILS OF ASSESSEE TR ANSACTIONS, THEREFORE, THEY COULD NOT RECONCILE BEFORE AO IN TH E 14 DAYS TIME GIVEN TO IT AND FURTHER BEFORE THE DRP AFTER INQUIR Y FROM BSE, THE NECESSARY DETAILS WERE ALSO FURNISHED WHICH WERE RE JECTED BY THE DRP WITHOUT GIVING ANY OPPORTUNITY. ITA NO.8016 OF 2011 THREADNEEDLE INVESTMENT FUND IC VC ASIA FUND MUMBAI PAGE 4 OF 8 5. WITH REFERENCE TO THE OBSERVATION THAT ASSESSEE DID NOT REPLY, ASSESSEE PLACED ON RECORD, COPY OF THE LETTER ADDRE SSED TO THE DRP DATED 25.07.2011 FILED ON 29.07.2011 WHICH WAS NOT CONSIDERED BY THE DRP. A CONFIRMATION FROM THREADNEEDLE ASSET MAN AGEMENT LTD THAT THE PAN OF THREADNEEDLE INVESTMENT FUNDS ICVC ASIA FUNDS AACCT 5709 L ( ASSESSEE) HAS NOT BEEN USED OR QUOTE D FOR EXECUTING ANY OF THE TRADES AS MENTIONED IN THE AIR REPORT. THE DETAILS CONTAINED IN AIR PERTAINING TO THE POWER G RID CORPORATION OF INDIA SHARES HAVE ALREADY BEEN MATCHED WITH THE DE TAILS IN THE TAX RETURN DURING THE COURSE OF THE ASSESSMENT PROCEEDI NGS. FURTHER IT WAS ALSO ARGUED THAT THE POSTING OF CASE ON 16.03.2 011 BY THE DRP HAS NOT BEEN COMMUNICATED TO ASSESSEE, THEREFORE, T HERE IS NO ATTENDANCE BEFORE THE DRP. IT WAS SUBMITTED THAT TH E DRP DID NOT GIVE ANY OPPORTUNITY TO ASSESSEE NOR EXAMINED THE D ETAILS FILED BEFORE THEM AND REQUESTED FOR SETTING ASIDE THE ORD ERS AND RESTORING THE ISSUE TO AO FOR FRESH EXAMINATION. 6. THE LEARNED CIT (DR) HOWEVER, REITERATED THE ARGUME NTS OF AO AND THE CIT (A). WHEN SPECIFICALLY ASKED WHETHER TH E TRANSACTIONS PERTAIN TO THE INVESTMENT OR SALE OF SHARES, HE FAI RLY ADMITTED THAT THIS CAN BE EXAMINED BY AO AFRESH. 7. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND THE DO CUMENTS ON RECORD. WE ARE OF THE OPINION THAT THE MATTER RE QUIRES RE- EXAMINATION BY AO FOR THE FOLLOWING REASONS: A) IT IS TRUE THAT AFTER RECEIPT OF AIR INFORMATION AS SESSEE WAS GIVEN ONLY 14 DAYS TIME TO RECONCILE. WE HAVE SEEN THE AI R INFORMATION. AS FAR AS THE FIRST TRANSACTION IN THE AIR IT IS WITH REFERENCE TO THE PAN NO.AACCT 5709 L PERTAIN TO THE THREADNEEDLE INVESTMENT ICVC ASIA FUND WITH TAX TY PE- AIR TXN CODE- 005 FOR ACQUIRING SHARES OF ` .1.00 LAKH AND ABOVE. THIS INFORMATION PERTAINS TO THE POWER GRID CORPOR ATION OF INDIA ITA NO.8016 OF 2011 THREADNEEDLE INVESTMENT FUND IC VC ASIA FUND MUMBAI PAGE 5 OF 8 LTD WAS RECONCILED BY ASSESSEE ON WHICH THERE IS N O OBJECTION. THE BALANCE OF THE TRANSACTIONS RUNNING FROM NO.1 T O 64 ARE REPORTED BY TAX TYPE N-CIB AND TXN CODE 321 GIV ING NAME AND ADDRESS OF THE INVESTORS AND PERSONS WHO HAVE BEEN ENTERED INTO SHARE TRANSACTIONS OF ` .20,000 AND ABOVE. UNDER THIS HEAD THERE ARE 64 TRANSACTIONS ON17.12.2007 IN WHICH THE BOMB AY STOCK EXCHANGE LTD WAS REPORTED BOTH IN THE NAME OF THE SCRIP AS WELL AS TAX FILER ADDRESS. ON THE BASIS OF THIS AIR INFO RMATION THE TOTAL TRANSACTIONS OF THE ABOVE 64 NOS. COMING TO ` .11,32,38,770 WAS TAKEN AS INVESTMENT BY ASSESSEE AND ASKED TO RE CONCILE. ASSESSEE PLEADED ITS INABILITY TO RECONCILE BECAUSE IT DOES NOT CONTAIN ANY DETAILS EITHER OF THE SCRIP NAME OR OF THE CONTRACT NAME OR TRANSACTION NO. OF THE BSE. THIS DOCUMENT O F AIR SIMPLY INFORMS THAT THE TAX FILER ADDRESS IS BSE AN D THE TRANSACTION PERTAINS TO THE BSE. IN THE ABSENCE OF ANY DETAILS ASSESSEE NATURALLY COULD NOT RECONCILE THE TRANSACT IONS. THEREFORE, THE OBJECTION NO.1 RAISED BEFORE THE DRP THAT ASSESSEE WAS NOT GIVEN SUFFICIENT OPPORTUNITY HAS T O BE UPHELD. B) BEFORE THE DRP, ASSESSEE FILED DETAILS OBTAINED BY WRITING TO THE BSE ABOUT THESE TRANSACTIONS WHICH PERTAIN TO SHARE OF STEEL AUTHORITY OF INDIA LTD BY M/S CREDIT SUISSE LTD. IT ALSO FILED LETTERS FROM OTHER BROKERS WITH WHOM IT IS TRANSACT ING THAT THERE ARE NO TRANSACTIONS OF SAIL AT THE RELEVANT POINT O F TIME. IT ALSO FILED CONFIRMATION LETTER FROM THE CUSTODIAN THAT N O SUCH TRANSACTIONS WERE UNDERTAKEN BY THE ASSESSEE FUND. EVEN THOUGH IT IS NOT PERTAINING TO ASSESSEE, ASSESSEE H AD OBTAINED COMPLETE DETAILS TRANSACTION-WISE IN ANNEXURE A & B OF CREDIT SUISSE SECURITIES INDIA (P) LTD AND FILED VIDE LETT ER DATED 20.05.2011 WHICH WAS ADDRESSED TO M/S THREADNEEDLE ASSET MANAGEMENT LTD. THESE DETAILS WERE REJECTED BY THE DRP ON THE REASON THAT THESE DOCUMENTS ARE NOT AUTHENTICATED. WE ARE ITA NO.8016 OF 2011 THREADNEEDLE INVESTMENT FUND IC VC ASIA FUND MUMBAI PAGE 6 OF 8 UNABLE TO UNDERSTAND THE STAND OF THE DRP. JUST BEC AUSE AN AIR REPORT WAS GENERATED INDICATING THE PAN NO. OF ASSE SSEE, THE ONUS DOES NOT SHIFT COMPLETELY TO ASSESSEE. IT IS T HE RESPONSIBILITY OF AO TO EXAMINE COMPLETE DETAILS BE FORE ASKING FOR RECONCILIATION AND WHETHER THE TRANSACTIONS WER E INDEED UNDERTAKEN OR NOT. THE AIR REPORT ALSO DOES NOT CON TAIN ANY AUTHENTICATION BUT SINCE IT IS GENERATED BY THE DEP ARTMENT, CREDIT WAS GIVEN BY AO AND DRP ABOUT ITS AUTHENTICI TY. ASSESSEE AFTER OBTAINING THE DETAILS AND MAKING EFFORTS TO R ECONCILE FILED THE DOCUMENTS ON RECORD DULY CERTIFIED AS TRUE COP Y BEFORE THE DRP. WHAT FURTHER AUTHENTICATION WAS REQUIRED COULD NOT BE UNDERSTOOD. IN OUR VIEW, THE DRP SHOULD HAVE EXAMIN ED THE TRANSACTIONS, WHICH COULD NOT BE DONE BEFORE AO DUE TO LACK OF TIME AND DETAILS. C) AS SEEN FROM THE FINDINGS ON RECORD, IT IS NOT CLEA R WHETHER THE TRANSACTION IS A PURCHASE OR SALE. AS MENTIONED EAR LIER IN BOTH THE PLACES OF TRANSACTIONS IT IS MENTIONED BSE LTD, AS THE SCRIP TRANSACTED AND THE ADDRESS OF THE PERSON TRANSACTED . AS FAR AS THE TAX TYPE AIR TXN CODE 005 IS CONCERNED, ASSESSE ES PAN AND ADDRESS WAS CLEARLY MENTIONED INCLUDING POWER GRID CORPORATION OF INDIA AS NAME OF THE SCRIP. THIS SCRIP DETAILS W ERE TOTALLY RECONCILED BY ASSESSEE WITHOUT ANY PROBLEM. HOWEVER , THE BALANCE OF THE 64 TRANSACTIONS STATED TO BE OF ASSE SSEE REPORTED WITH SAME PAN NO. AND ADDRESS COULD NOT BE RECONCIL ED AS THERE ARE NO DETAILS OF THESE TRANSACTIONS EXCEPT THE DAT E AND AMOUNT. WHETHER THESE ARE PURCHASE OR SALE TRANSACTIONS ALS O COULD NOT BE VERIFIED FROM AIR REPORT. WITHOUT EVEN EXAMINING THE NATURE OF TRANSACTION, AO CAME TO A CONCLUSION THAT THE TR ANSACTION WAS AN INVESTMENT IN SAIL ON 17.12.2007 OF ASSESSEE WHI CH WAS UNEXPLAINED. NOW THE DATA AVAILABLE ON RECORD INDI CATE THAT THESE ARE NOT PURCHASE TRANSACTIONS BUT SALE TRANSA CTIONS BY ITA NO.8016 OF 2011 THREADNEEDLE INVESTMENT FUND IC VC ASIA FUND MUMBAI PAGE 7 OF 8 M/S CREDIT SUISSE LTD ON BEHALF OF VARIOUS OTHER FU NDS BEING MANAGED BY THREADNEEDLE ASSET MANAGEMENT LTD. ONCE THESE ARE SALE TRANSACTIONS, PROVISIONS OF SECTION 69 DOE S NOT APPLY, WHICH CAN BE INVOKED FOR UNEXPLAINED INVESTMENT. IT IS NOT CASE OF AO THAT ASSESSEE PURCHASED OUTSIDE BOOKS SO AS T O SELL ON 17- 12-2007. THEREFORE, ON THAT GROUND THE ADDITION PER SE CANNOT BE SUSTAINED. 8. IN VIEW OF THE ABOVE, WE ARE OF THE OPINION THAT TH E MATTER REQUIRE RE-EXAMINATION BY AO BY GIVING DUE OPPORTUN ITY TO ASSESSEE. AO IS DIRECTED TO EXAMINE THE TRANSACTION REPORT OF AIR ON 17.12.2007, FOR WHICH HE CAN OBTAIN FRESH DETAILS F ROM THE BSE, THE BROKERS INVOLVED, CUSTODIANS AS ALL THE RELEVANT IN FORMATION WHICH WILL BE DULY AVAILABLE WITH THE RELEVANT AUTHORITIE S INCLUDING THE CUSTODIANS OF FIIS. FURTHER THE DETAILS FILED BY AS SESSEE WITH REFERENCE TO VARIOUS RECONCILIATIONS INCLUDING THE PAN NOS. GIVEN BY THE RESPECTIVE INVESTMENT FUNDS ARE TO BE EXAMINED AS THIS INFORMATION WAS NOT FILED BEFORE AO AND THE DRP SIM PLY REJECTED THE SAME. AO ALSO CAN EXAMINE WHY ASSESSEES PAN WAS UT ILIZED. AO CAN EXAMINE WHEN THE SAID SCRIPS IN SAIL WERE PURCH ASED BY THE RELEVANT FIIS AND WHETHER THE TRANSACTIONS WERE REP ORTED IN THE RESPECTIVE FUNDS. UNLESS COMPLETE INQUIRY WAS COND UCTED, IT IS NOT PROPER ON THE PART OF AO TO MAKE AN ASSESSMENT OF S ALE OF TRANSACTIONS AS INVESTMENT, AS IS DONE IN THIS CASE . THEREFORE, FOR PROPER EXAMINATION AND COMING TO A CONCLUSION ON FA CTS, THE ORDERS OF THE DRP-II AND THE ORDER OF AO IN THIS REGARD AR E SET ASIDE AND THE ASSESSMENT IS RESTORED TO THE FILE OF AO FOR FR ESH CONSIDERATION. NEEDLESS TO SAY, ASSESSEE SHOULD BE GIVEN DUE AND P ROPER OPPORTUNITY. ASSESSEE IS ALSO DIRECTED TO FURNISH T HE DETAILS FILED BEFORE THE DRP TO AO AND EXPLAIN THE TRANSACTIONS. WITH THESE DIRECTIONS, THE GROUNDS ARE CONSIDERED ALLOWED. ITA NO.8016 OF 2011 THREADNEEDLE INVESTMENT FUND IC VC ASIA FUND MUMBAI PAGE 8 OF 8 9. IN THE RESULT APPEAL FILED BY ASSESSEE IS ALLOWED F OR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 27 TH NOVEMBER, 2012. SD/- SD/- ( VIJAY PAL RAO ) (B. RAMAKOTAIAH) JUDICIAL MEMBE R ACCOUNTANT MEMBER MUMBAI, DATED 27 TH NOVEMBER, 2012. VNODAN/SPS COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CONCERNED CIT(A) 4. THE CONCERNED CIT 5. THE DR, L BENCH, ITAT, MUMBAI BY ORDER ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCHES, MUMBAI