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2017 (10) TMI 1146 - AT - Income TaxAddition with respect to amount received from one M/s. IL&FS Transportation Network Ltd. - assessee had claimed it as a security deposit in pursuance to an MOU, against which services were to be performed - AO had disagreed and concluded that it was in the nature of an amount owned by the assessee itself - CIT(A) has allowed relief to the extent amount has been repaid, and he has not touched upon the nature of the credit at the time of its receipt - whether there is enough justification to say that the amount has been received for which assessee has a liability to either repay or render the services as envisaged in the MOU. Held that - Whether or not the said plea is tenable is relevant to decide the fate of the impugned sum of ₹ 40,00,000/-, but the same has not been addressed by the CIT(A). So far as the source of the credit is concerned, there is no dispute, and the only dispute is with regard to the nature of the amount and, in our considered opinion, the onus to prove the nature of impugned credit is entirely on the assessee. In our considered opinion, it would be in the fitness of things that the assessee is allowed an opportunity to demonstrate with positive evidence that with respect to the sum of ₹ 40,00,000/-, the liability to repay M/s. IL&FS Transportation Network Ltd. continues inspite of the fact that the arrangement envisaged in the Agreement (Memorandum of Understanding) dated 18.04.2008 has not fructified, a fact which is not in dispute. Since the aforesaid aspect requires a factual appreciation of the state of affairs, we deem it proper to restore the matter back to the file of the CIT(A). It is directed that the CIT(A) shall examine the aforesaid aspect on the basis of the material and evidence that the assessee may submit before him. Accordingly, the issue relating to assessability of sum is restored back to the file of the CIT(A) to be decided after hearing the assessee and as per law.
Issues Involved:
1. Sustenance of addition of ?40,00,000/- made by the Assessing Officer with respect to the amount received from M/s. IL&FS Transportation Network Ltd. Detailed Analysis: Background of the Case: The assessee, a company part of the Flemingo/Bermaco group, was subjected to a search and seizure action under section 132(1) of the Income Tax Act, 1961. Consequently, an assessment was made under section 153C r.w.s. 143(3) for the Assessment Year 2009-10. The Assessing Officer scrutinized the funds received by the assessee, particularly ?20,00,00,000/- from M/s. IL&FS Transportation Network Ltd. and ?2,50,00,000/- from M/s. Utility Energy Tech and Engineers Pvt. Ltd. Assessing Officer’s Findings: The Assessing Officer concluded that the funds received were in the nature of revenue receipts, liable to be taxed as income. He noted that the amounts were either transferred to other associate concerns or used for share trading, and the purposes stated in the agreements were not fulfilled. Thus, he assessed the amounts as revenue receipts for professional services or consultancy rendered by the assessee. CIT(A)’s Decision: The CIT(A) deleted the addition of ?2,50,00,000/- from M/s. Utility Energy Tech and Engineers Pvt. Ltd. and ?19,60,00,000/- out of ?20,00,00,000/- from M/s. IL&FS Transportation Network Ltd. The CIT(A) sustained the addition of ?40,00,000/- on the grounds that it was not repaid by the assessee. Assessee’s Argument: The assessee contended that once the CIT(A) disagreed with the principal plea of the Assessing Officer regarding the nature of the amount received from M/s. IL&FS Transportation Network Ltd., there was no justification to sustain the addition of ?40,00,000/- merely because it was not repaid. The liability of ?40,00,000/- was reflected as a refundable security deposit in the Balance-sheet. The assessee argued that the onus under Sec. 68 of the Act was to demonstrate the identity, creditworthiness, and genuineness of the transactions, which was satisfactorily done. Revenue’s Argument: The Revenue defended the CIT(A)’s decision, stating that the amount of ?40,00,000/- remained unpaid and, therefore, was of the nature inferred by the Assessing Officer. The Revenue pointed out that none of the obligations set out in the Agreement with M/s. IL&FS Transportation Network Ltd. were carried out by the assessee. Tribunal’s Observations: The Tribunal noted that the CIT(A) allowed relief based on the repayment of the amounts and did not address the nature of the credit at the time of its receipt. The Tribunal emphasized that the onus to prove the nature of the impugned credit was on the assessee. It was observed that the CIT(A) had not adequately addressed whether the liability to repay the ?40,00,000/- continued despite the arrangement envisaged in the Agreement not fructifying. Decision: The Tribunal restored the matter back to the file of the CIT(A) to examine whether the liability to repay the ?40,00,000/- continued. The CIT(A) was directed to decide the issue after hearing the assessee and considering the material and evidence submitted. Conclusion: The appeal of the assessee was treated as allowed for statistical purposes, with the issue relating to the assessability of ?40,00,000/- being remanded to the CIT(A) for a fresh decision.
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