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TMI Blog2015 (8) TMI 129X X X X Extracts X X X X X X X X Extracts X X X X ..... ed the assessee to furnish the details of USA company along with name and address, balance sheet, etc. But nothing was submitted before the Assessing Officer and he accordingly doubted the genuineness of the USA Company. It was concluded by the ld. CIT(A) that Shri. Deepak Babbar was a dummy Director of the assessee company and he has no knowledge of the affairs of the assessee company, as all its affairs were managed by Shri. K.K. Gosain and his son Shri. Rajiv Gosain. When the assessee was cornered with all these facts collected by the Assessing Officer, the assessee came forward and made a surrender of ₹ 32,51,697/- through its letter dated 10.3.2003 though with certain conditions. On the basis of the surrender statement, the Assessing Officer has made addition of this amount of ₹ 32,51,697/-. Assessing Officer has no power or jurisdiction to enter into an agreement with any of the assessee. He has no right to waive the interest or penalty. He has to act in accordance with the law. Therefore, where the assessee has surrendered the aforesaid amount, the Assessing Officer has taxed the same. Moreover, it is not a case of voluntary surrender where the assessee has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the assessee have been deliberately removed/concealed and manipulated by the revenue authorities, as is clearly evidenced by reference to the findings contained in the impugned order. The order passed by CIT (A) is based on facts that have been deliberately falsified and manipulated by the removal of crucial documents to support the findings therein and is thus liable to be seen aside on this ground alone. 2. Though various grounds are raised, but they all relate to the nature of receipt received by the assessee on account of Non-compete Fee. 3. The facts in brief borne from the record are that during the course of assessment proceedings, it was noticed by the Assessing Officer that the assessee has received a sum of ₹ 32,51,697/- as compensation in convertible foreign exchange, but this amount was not offered to tax, as it was treated to be capital receipt in view of the decision of the Hon'ble Supreme Court in the case of Oberoi Hotels (P) Ltd. Vs. CIT 103 Taxman 236 (SC). The Assessing Officer had made necessary enquiries with regard to the nature of receipts and the circumstances under which it was received. Complete details, as sought by the Assessing Offi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n its name. Further, GADA also agreed to underwrite any damages, losses including expected profit suffered by the appellant through securitization of all transactions through GADA. The assessee put all its sources in the business, but however, unfortunately, GADA failed to issue letter of credit to the assessee and, therefore, no export performance could take place. Also, due to financial crisis in the US, GADA suffered several financial setback and was ultimately declared bankrupt. Assessee filed a suit against the GADA for the non-performance of the contract but later on withdrew the suit on account of cost and time factor. 6. In the year 1998, the assessee came in contact with one M/s Tanaiga Real Estate Corporation, having its registered office at Road Town, Pases Estate, Tortilla, Switzerland (hereinafter referred in short as TANAIGA ), who was interested in exporting its goods to USSR. However, the buyers in USSR were still interested in buying the goods only through GADA. In order to procure the business, TANAIGA entered into an agreement with the assessee and GADA to purchase the rights of the assessee-company to export the goods in the name of GADA for the balance peri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Assessing Officer during the course of assessment proceedings in which Shri. Deepak Babbar, who was signatory in both the agreements on behalf of the assessee-company, has deposed that he was an Accountant with M/s Tech. Trusion System Services (P) Ltd. and this company was under liquidation since financial year 1993-2000 and Shri. K.K. Gosain and Shri. C. Kumar were Directors of the said company. In response to the nature of agreement and receipts, Shri. Deepak Babbar has deposed that he was an Accountant and he has signed the agreement as authorized signatory on behalf of the then Directors and during September, 1995, the Directors of M/s Tech. Trusion System Services Pvt. Ltd. were Shri. Krishan Kumar Gosain and his wife Smt. Beena Gosain and the facts of the matter, as regards to the payments, Indian representatives and terms of the agreements, are in the knowledge of these persons. Therefore, no authorized person of the company was appeared to state the nature of agreement and receipt despite various opportunities afforded by the Assessing Officer. The ld. CIT(A) has also observed that the Assessing Officer has asked the assessee to furnish the details of other partie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assesses company, initially it tried to pursue a suit filed for damage against the USA Company because of not being able to do any export business, on its behalf but thereafter, realizing that such action taken by him against the USA Company would be a fruitless exercise, it claimed to have entered into another agreement on 10.12.1988 with .the Swiss company named M/s Tanagia Real Estate Corporation, a company registered under the aims of British Virgin island. As mentioned in this agreement, assesses company agreed not to do the business of expert of any commodities from India to Russian Federation for a period of seven years from the data of agreement, subject to its receipt of US $ 74900 as compensation towards non-compete fees and US $ 100 as balance token amount towards damages, total amount being US $ 75000 or ₹ 32,51,897/-, This amount has been found to be credited in the bank account of the assessed company on 28.07.1999 i.e. during the financial year relating to the assessment year under consideration. In the return of income filed for the assessment year under consideration, it has been claimed by the assesses company that the above mentioned amount of &# ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it can be believed that a foreign company would enter into an agreement with it for not doing such business that did not exist at all and pay a hefty sum of ₹ 32,51,697/-. Therefore, facts of the case of the case of the assesses, is totally different than the facts of the case of M/s Oberoi Hotlb (P) Ltd. (supra) cited by it. Unlike, the Oberoi Hotels (P) Ltd., which was operating and managing hotels and getting a fee, the assesses company has neither done any export business, whatsoever, prior to the agreement in question nor was in receipt of any export income. Even the agreement entered into with USA Company has been found to be of doubtful nature because no activity of the assessee company has been started after making of this agreement. It is quite strange that no enquiry was made by the assesses company about the financial condition of the said company before entering into an agreement with them and the claim of the assesses that the USA Company went into bankruptcy just, after entering into the agreement with them is not found to be convincing at all specially when, no evidence about its bankruptcy as called for by the AO has been filed. It is also quite interesting th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... w that this amount was paid by the Swiss Company M/s Tanaiga. On enquiry by the A.O, it has only been stated that this amount was remitted by UBOCI to World Trade Centre, New York on 28.07.1999. Therefore, the origin of the source of fund has been found to be from USA where Sri Rajiv Gosain used to live but its payment by the Swiss Company M/s Tanaiga could not be established. Even the director of the assessee-company Sri Deepak Babbar whose statement was recorded at the time of assessment is nothing but a dummy director because on going through his statement as reproduced in para No. 6.6 (page no 17 to 20), it is very clear that he did not know much about the activities of the assesses company and admittedly, he was an accountant of this company prior to becoming the director. It has also been stated by him that he is not in receipt of any kind of remuneration from the assesses company and he is in this company because he is sentimentally attached to Sri K.K. Gosain. Though father of Sri Rajiv Gosain, Sri K.K. Gosain is promoter of the assesses company and all its affairs are being managed by Sri K.K, Gosain and his son Shri. Rajiv Gosain but they do not hold any official post in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... M/s Tanaiga Real Estate Corporation, the assessee has surrendered its right to supply or export any product to another entity whether in USA or elsewhere and the consideration of a lump sum amount of US $ 75000 as overall and final consideration to be paid on or before 31.7.1999 as compensation towards non-compete fees and loss of source of income. He has also invited our attention to the noncompete fee agreement at page 89 of the compilation of the assessee that Tanaiga has purchased the rights and claims of TTS on an as is where is basis and there shall be no liability of any nature whatsoever on TTS by reason of the claims being disallowed in the bankruptcy Court for lack of sufficient evidence, or any other reason. Since the assessee has received the aforesaid amount on account of sale of his right to export in USSR and other countries, the same was rightly treated to be the capital receipt and credited to the reserve account. The ld. counsel for the assessee has further contended that the Assessing Officer has made addition solely on the basis of conditional surrender statement which cannot be relied on, as it was conditional one and was not accepted in toto. 11. The ld. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as balance token amount towards damages, totaling to an amount of US $ 75000 or ₹ 32,51,697/-, having agreed not to do business of export of any commodities from India to Russian Federation for a period of 7 years from the date of agreement. 14. The issue arose before the Assessing Officer is whether the receipt of the said amount of ₹ 32,51,697/- as revenue receipt or capital receipt. The Assessing Officer has made detailed investigation during the course of assessment proceedings and the glaring fact noticed by the Assessing Officer was that the initial agreement for exporting commodities to Russian Federation are executed between the assessee and USA company, GADA for a period of 10 years was signed by the son of promoter of the assesseecompany, Shri. Rajiv Gosain. After execution of this agreement, the assessee did not export even a single commodity to Russian Federation, as the USA company went into bankruptcy. The ld. CIT(A) took note of this fact and has observed that when the agreement with USA company was signed by the son of the promoter of the assessee-company, it is impossible that the financial condition of the USA company was not known to the assessee- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 9. Therefore, the origin of source of fund has been found to be from USA where Shri. Rajiv Gosain used to live, but this payment by Swiss company, M/s Tanaiga Real Estate Corporation could not be established. 15. During the course of assessment proceedings, the assessee was asked to produce Shri. K. K. Gosain, promoter of the assessee company, but he was not produced. Shri. Deepak Babbar was produced and in his statement he has categorically stated that he did not know much about the activities of the assessee company and he was the Accountant prior to becoming as Director. It was also deposed by him that the affairs of the company was managed by Shri. K. K. Gosain, father of Shri. Rajiv Gosain who has signed on behalf of the USA Company. Therefore, it was concluded by the ld. CIT(A) that Shri. Deepak Babbar was a dummy Director of the assessee company and he has no knowledge of the affairs of the assessee company, as all its affairs were managed by Shri. K.K. Gosain and his son Shri. Rajiv Gosain. When the assessee was cornered with all these facts collected by the Assessing Officer, the assessee came forward and made a surrender of ₹ 32,51,697/- through its letter dated ..... X X X X Extracts X X X X X X X X Extracts X X X X
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