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TMI Blog2017 (2) TMI 1007X X X X Extracts X X X X X X X X Extracts X X X X ..... orrowed from ICICI Bank and invested the same money in the CCPS issued by the assessee. We are convinced from the materials available on record that Biometrix borrowed from ICICI Bank and invested the same in the CCPS invested by the assessee. As assessee able to prove conclusively that the CCPS issued by it to Biometrix is directly financed by ICICI Bank, Singapore. In view of these facts and circumstance and precedents cited above, we are of the considered view that the Assessing Officer has made this addition of unexplained cash credit without any basis and CIT (A) has rightly deleted the same on the basis of evidences and facts. We confirm the order of CIT(A) and the appeal of Revenue is dismissed.we hold that on review of the materials available on record, we are satisfied that the requirements of section 68 of the Act viz., nature, source and genuineness of the transaction including the identity and the creditworthiness of the investor, are fulfilled. - Decided in favour of assessee - ITA No.223/Mum/2016 ITA No.224/Mum/2016 - - - Dated:- 3-2-2017 - SRI MAHAVIR SINGH, JM AND SRI RAJESH KUMAR, AM For The Revenue : Shri. ShirDhamija, CIT DR For The Assessee : S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... thereby clearly attract the provisions of section 68 of the I.T Act 4 Whether on the facts circumstances of the case and in law, the learned Commissioner of Income Tax(A) is correct in completely ignoring the fact that Biometrix is ultimately subsidiary of one of the Reliance group company, taking a view that it's an independent company and following the laws of Singapore, completely disregarding the fact that its an arrangement within Reliance group companies and biometric is just a conduit 5 Whether on the facts circumstances of the case and in law, the learned Commissioner of Income Tax(A) is correct in completely ignoring the fact regarding the valuation of the CCPS. The Biometrix has sold CCPS of all the 4 Indian companies, including that of assessee's, to much lower price than the market value as shown by the Biometrix to ICICI bank in the last submission before selling of these CCPS. 6 Whether on the facts circumstances of the case and in law, the learned Commissioner of Income Tax(A) is correct in completely ignoring the fact that flaws in monitoring the terms of loan by ICICI bank by just saying that it is not making any impact with r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation in the matter and the findings in its report dated 10.07.2012 are extracted by the AO in para 10 of the assessment order. It was ascertained that the investment made by Biometrix in the CCPS of the assessee through the Foreign Direct Investment route was not out of equity capital of Biometrix but was out of a loan of USD 1700 million taken by Biometrix from ICICI Bank, Singapore. The said loan was secured by contractually binding a group company of the assessee to purchase the CCPS upon exercise of option to sell those shares by Biometrix. The investigation wing had also obtained copies of acknowledgements of the income tax returns and goods services tax returns filed by Biometrix with the authorities in Singapore. It was also observed that Biometrix subsequently repaid the loan to ICICI Bank, Singapore by selling the investments it made in the CCPS to other group companies of the assessee and the said group companies which purchased the CCPS from Biometrix have provided the details and explained the sources for the monetary consideration paid to Biometrix. Upon receipt of the above investigation report from DGIT (Inv.), Mumbai, the AO recorded the reasons, which essentiall ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n various group companies. There is also information gathered from Singapore regarding the identity of the shareholders of Biometrix, which are corporate entities, the individuals who had invested in one such shareholder entity in Singapore and the mode used for such investment. The report also states that the bank account statement of Biometrix, its financial accounts and KYC documents could not be obtained from the investee companies, which include the assessee. The report also narrated the failed attempts to obtain information about the identity of current shareholders and directors in the corporate entity in Singapore, which held substantial shares in Biometrix. These information and efforts of the Investigation Wing are outlined by the AO in the order in Para 16 to 32 of the Assessment Order. 5. Accordingly, assessment proceedings were conducted in view of the aforesaid information in the possession of the AO. The notice dated 09.06.2014 had a questionnaire calling for complete details / supporting evidences in respect of receipt of investments amounting to ₹ 700 crores from Biometrix and thus the assessee was required to prove the identity and creditworthiness of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n Overseas Chinese Corporation Bank, Singapore ( OCBC ). Following this a fresh reference was made to IRAS through the Competent Authority on 16.09.2014. The bank statement of the account held by Biometrix in OCBC sent by IRAS contained entries only from 01.01.2008. It was not possible to obtain the bank statement pertaining to earlier period as per the India Singapore Exchange of Information Protocol. The AO made enquiries from assessee and issued summons under section 131 of the Act to directors of Biometrix who were resident in India, the shareholders of the parent entity of Biometrix and officials of ICICI Bank Limited. While the directors and shareholders of Biometrix omitted to attend and ICICI Bank Limited expressed inability to divulge information on account of restrictions imposed by Banking Secrecy Act of Singapore in respect of bank account statements and KYC documents of Biometrix. The AO also found that the receipt of share application money by the assessee for the issue of CCPS is an international transaction between two associated enterprises which the assessee failed to report in the prescribed form and with the prior approval of the CIT, the AO referred the transa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee Company is not explained and therefore treated as unexplained cash credit of the assessee? 9. The CIT(A) deleted the addition on merits by observing as under:- 5.4 Before I embark to discuss the grounds and contentions raised, it may be fit and proper to first refer to certain facts and findings as recorded in the assessment order. The short question for consideration is whether the Appellants have proved the source of the investments in their company. 5.5 The assessment order records in paragraph 10, the enquiries conducted by DDIT (Inv) - Unit-2(1), Mumbai who had vide report dated 10.07.2012 has given the following findings: a) The investment in shares (CCPS) in India, through FDI route was not out of equity capital of M/s. Biometrix Marketing P Ltd., but it was out of loan of UDS 1700 million from ICICI Bank, Singapore, which was secured with options agreement to sell the shares to M/s. Ekansha, a group company of M/s. Reliance Industries Limited (RIL) b) M/s. Biometrix is said to be filing the income tax returns, goods service tax returns and other regulatory returns with the authorities in Singapore and copies of acknowledgements were ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... transaction in question which has been examined is one where a loan of USD 1.7 billion was taken from ICICI Bank, Singapore and routed into India as FDI. The investment in India is by way of CCPS issued by four unlisted private limited companies of Mukesh Ambani group. Subsequently, the CCPS held by Biometrix were purchased by three companies of Mukesh Ambani group. The principal amount of loan from ICICI Bank was also repaid out of remittances from Mukesh Ambani group. The sources of funds of Mukesh Ambani group companies which purchased the CCPS from Biometrix has been explained by way of redemption of mutual funds. 5.9 Of course, the same report also says that however it was suggested that deeper look may be taken by the assessing officer and the application of funds received from Mukesh Ambani group companies from ICICI Bank, Singapore through Biometrix is not clear. 5.10 The AO has then proceeded to pass a detailed assessment order holding that the source and genuineness of the investment does not stand proved and therefore needs to be taxed as income under section 68 of the Act in the hands of the Appellants. 5.11 The main contention of the Appellants ar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Appellant. Since these are crucial documents which indicate the actual movement of funds from ICICI Bank, Singapore into OCBC Bank, Singapore and from OCBC Bank, Singapore into the bank account of the Appellant with HDFC Bank, Mumbai, these swift messages are extracted below. The relevant swift messages are reproduced at para ----at page---- of this order. Narration for the first swift message: 5.14 The bank account number of Biometrix with OCBC Bank, Singapore is 662001767301. A sum of USD 383,500,000 has been credited by ICICI Bank, Singapore into this account. Likewise, ICICI Bank, Singapore has credited the entire loan of USD 1673,367,325 on the following dates. Date USD 18.09.2007 383,500,000 03.10.2007 220,000,000 16.10.2007 576,625,325 16.11.2207 672,000 12.12.2007 492,570,000 Total 1673,367,325 5.15 Out of the said amount of USD 383,500,000 disbursed by ICICI Bank, Singa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g the movement of funds from ICICI Bank, Singapore to Biometrix and from Biometrix to the Appellants. 5.17 The Appellants had placed on record several documents and evidences during the assessment and also before me which according to them go to aid and support the irrefutable conclusion that the investment by Biometrix in the CCPS issued by the Appellants is out of the loan raised by Biometrix from ICICI Bank, Singapore. 5.18 I would now examine these documents and evidences one after the other. Even though the Appellants have produced it in the form of list of dates and events, I would like to deal it with reference to the entities and the action points involved. ICICI Bank, Singapore 5.19 ICICI bank is a premier independent financial institution which is regulated both in India and Singapore. Both the reports of DDIT (Inv) dated 10.07.2012 and 05.02.2014 confirm that Biometrix had sourced the funds by way of a loan from this bank. ICICI Bank is not a group company or a related party of Biometrix. It is an independent public bank. The genuineness of the loan as sanctioned by ICICI Bank to Biometrix cannot be. In fact, the assessment order also does not d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5 995 772 38 937 226 29 760 302 110 377 287 Annual expenditure (in USD) 5 995 772 39 040 176 29 760 302 110 377 287 Negative tests: An entity is deemed no to be a shell/conduit company if: (4) it is listed on a recognised stock exchange of the Contracting State; or No No No No (5) its total annual expenditure on operations is equal to or more then S$200,000 in the immediately preceeding period of 24 months from the date the gains arise. Yes Yes Yes Yes Salary Employee benefits (in USD) 102 950 Administrative expenses other operating expenses (in USD) 5 995 772 38 937 226 29 543 845 110 377 287 Annual exp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f Biometrix during the relevant period under the laws of Singapore stands proved. The Loan transaction 5.22 The Appellants have submitted the following: The credit committee of ICICI Bank giving an in-principle approval on 28.06.2007 for a loan of USD 1.2 billion. This In-principle approval has been given based on the list of investees, running projects, valuation of the equities in the -project and putting in place a Put/Call arrangement with a non-disposal undertaking permitting the borrower to enter into suitable hedging arrangements. Biometrix has passed a board resolution on 24.09.2007 to invest in CCPS of the Appellant. In line with the terms and conditions issued by ICICI Bank, Singapore a put and call option agreement was entered into between Ekansha Enterprise P Ltd and Biometrix on 31 .08.2007. The board of directors of Biometrix passed a resolution on 05.09.2007 to accept the facility from ICICI Bank for the borrowing of USD 1.2 billion in three tranches. On 07.09.2007, Biometrix and ICICI Bank entered into a Facility Agreement and on the same day, a deed of assignment of contract rights between Biometrix and ICICI Bank was en ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... agreement on 31.08.2007 between Biometrix and Appellant identifying the investment, subscription amount, warranties of promoters and investors. The Appellant passed special resolution on 20.08.2007 and the same was filed with the Registrar of Companies on 14.09.2007 The FIRC dated 21.09.2007 issued by HDFC Bank vide serial numbers 420599 evidencing receipt of INR 700 crore. On 25.09.2007, the board of directors of the Appellant authorised allotment of CCPS and on 20.10.2007 Appellants filed Form 2 with ROC upon allotment of CCPS to Biometrix thus satisfying the conditions under section 75 of the Companies Act, 1956. In compliance with section 84 of the Companies Act, 1956, on 25.09.2007 Appellants issued six preference share certificates for the value of ₹ 700 crores. On 18.12.2007, the RBI acknowledged the filings made by the Appellants with RBI for allotment of CCPS to Biometrix . 5.26 The movement of funds from ICICI Bank through OCBC Bank into the bank account of the Appellant with HDFC Bank, Mumbal have already been dealt in detail earlier. None of the above have been disputed either in the assessment order or in the remand report. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Appellant and other group entities of the Appellant. In the circumstances, I hold that the source and genuineness of the investment in the CCPS issued by the Appellant stands proved. 5.28 In fact, a similar analysis has been done by the AO in the assessment order. Para 48 to 55 very cogently appreciates these evidences in a sequence and para 55 gives a finding that the loan so availed by Biometrix has been utilised for investment in CCPS of the four Reliance group companies . For the sake of convenience paras 48 to 55 are extracted below: 48. ICICI Bank Singapore has disbursed a loan of USD 1.7 billion to Biometrix. As per information received from FT TR division, the IRAS has provided swift messages showing that loan proceeds have been remitted to the Overseas Chinese Banking Corporation, Singapore, SG Bank Account No. 662001767301 of Biometrix. The date wise details of the disbursal are as under: S.No Date Amount in USD 1 18.09.2007 38,35,00,000 2 03.10.2007 22,00,00,000 3 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion Obligor) as follows: (a) Put Option: Subject to the applicable law, the SPV shall have the right to sell to the Promoter Group companies the CCDs/CCPS anytime post subscription of the CCDs/CCPS by the SPV. (b) Call Option: Subject to the applicable law, the promoter group company shall have the right to purchase CCDs/CCPS anytime post subscription of the CCDs/CCPS by the SPV. 54. Thereafter Facility Agreements were entered into between ICICI Bank Limited and Biometrix. As per the Facility Agreements of September, 2007 and December 2007 between ICICI Bank Ltd., and M/s. Biometrix Marketing Pvt. Ltd., (the Borrower) it is seen that the Original Lender is ICICI Bank Ltd., Singapore Branch. It is also mentioned that the original lender is a company organized and existing under the laws of India (ICICI Bank Ltd.). Therefore, it is clear that the loan has been advanced to the borrower by ICICI Bank Ltd., through its overseas branches and ICICI Bank Ltd., Singapore has acted as an Agent for facilitating the loan. 55. The loans so availed by Biometrix has been utilized for investment in the CCPS of four Reliance Group companies Monitoring of the loan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ort so as to aid Biometrix to submit CCP valuation report to ICICI Bank. Appellants therefore prepared valuation reports both under A value and B value methods and provided the same to Biometrix and Biometrix in turn took the higher of the two as per the terms of the Facility Agreement for ascertaining the debt cover. The Appellants in short submit that debt cover has been more than the requirement contemplated in the facility agreement. The AO in his remand report does not dispute this position. In the circumstances, the analysis by the AO in the assessment order does not in any manner dispute the source of funding and on the contrary concedes in a way that it is only ICICI Bank which funded Biometrix has no relevance to the dispute under question, especially when the entire loan has been repaid. Other reasons in the assessment order 5.32 The assessment order has provided few more reasons while confirming the addition. These are dealt with below: 1) The contention of the AO that Biometrix was yet to be formed when the loan was sanctioned by ICICI Bank is factually wrong. The submission of the Appellant that Biometrix was incorporated on 15-05-2007 whereas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ceeds from the sale of such investments. I find nothing unusual that obligations under the loan agreement have been discharged by selling a part of the investments financed by the loan. Interestingly, the finding of the AO that interest on the loan by Biometrix to ICICI Bank, Singapore Branch is met by selling a portion of the CCPS only reaffirms the indebtedness of Biometrix to ICICI Bank, Singapore Branch for investing in the CCPS. 5) The observation that the loan has been sanctioned only by ICICI Bank, India and not by ICICI Bank, Singapore branch and the non-receipt of information from IRAS and ICICI Bank, Singapore relating to bank statements and KYC cannot work to the detriment of the Appellant. Biometrix is a non-resident. IRAS Singapore is governed by the provisions of DTAA and the connected protocols. ICICI Bank Singapore is governed by banking secrecy norms and regulations as per Singapore laws. Non receipt of information based on DTAA and bank secrecy constraints cannot go against the Appellants. In fact, there is more than adequate evidence to prove source and genuineness of the investment. I have already referred to various paras in the assessment order wherein t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... loan was repaid by Biometrix out of sale proceeds/remittances from Mukesh Ambani's group companies. However, the information on source of interest payment on the loan by Biometrix was not clear as reply from Singapore Authorities to the FT TR Reference was awaited. 3) Para 4A(vii) of the remand report states The ICICI Bank secured the loan by creating exclusive charge over all cash flows and assets excluding the CCPS and CCDs invested in from the proceeds of the loan; (ii) Non disposal undertaking on the shareholding of the borrower company in a form and manner acceptable to ICICI Bank and (iii) assignment of Put Option with respect of sale/transfer of CCPS/CCDs. 4) Para 4A(viii) of the remand report states An understanding was also entered with ICICI Bank, agreeing that the outstanding Put Option obligation shall be backed by a Non Disposable Undertaking on equity shares of RIL such that the same gives a cover of at least 1.75 times of the outstanding Put Option obligation or face value of the outstanding CCPS/CCDs or the face value of the outstanding CCPS/CCDs, whichever is high. 5) Para 4A(ix) of the remand report states Accordingly, on approval of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not, in the opinion of the assessing officer, satisfactory, the sum so credited may be charged to income tax as the income of the assessee of that previous year. 5.35 Thus, the conditions for applicability of section 68 are as under:- (i) Existence of books of account; (ii) A credit of sum in the books of account of an assessee; and (iii) Absence of a satisfactory explanation or no explanation by the assessee about the nature and source of the sum credited. 5.36 Clearly, in the instant case, the conditions at (i) and (ii) above are existing. The appellant has offered extensive explanation. In addition there are several other pieces of evidence and documents available on record as discussed above. It is on the third condition that the A.O. has made the addition and concluded that the explanation is not satisfactory. It is this conclusion that needs to be objectively examined in this appeal. 5.37 Section 68 of the Act obligates an assessee to show evidence both on the nature and source of any sum credited in the books of the said assessee. It needs no elaboration that through a catena of decisions the Courts have laid down the following three fund ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... are application money cannot be treated as unexplained cash credit and no addition can be made under section 68. vi. Shree Barkha Synthetics Ltd. v. Asstt. CIT [2006) 283 ITR 377 / 155 Taxman 289 (Raj.), Uma Polymers (P.) Ltd. v. Dy. CIT[2006] 101 TTJ 124 (Jodh.)(TM): Where the share application money is received by the assessee-company through banking channel the assessee has only to prove the existence of person in whose name share application money is received. Once the existence of investor is proved it is no further burden of assessee to prove whether the person itself has invested the said money or some other person has made investment in name of that person. The burden then shifts on the Revenue to establish that such an investment has come from assessee-company itself. vii. CIT v. Gangour Investment Ltd. [2009] 179 Taxman 1 (Delhi), CIT v. Victor Electrodes Ltd. [2010] 329 JTR 271 (Delhi), Dy. CIT v. Dolphine Marbles (P.) Ltd. [2011] 129 ITD 163/ 10 taxmann.com 75 (Jab.)(TM), Bharti Syntex Ltd. v. Dy. CIT 52 DTR 73 (Jp.): Assessee-company filed letters of the share applicant companies wrote to the ACIT confirming that they had applied for shares in t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the transaction which originated as a loan from ICICI Bank which was invested by Biometrix in the Appellant as CPPS. The nature of the transaction is a loan becoming an investment. As regards the source, Biometrix has invested this fund into the Appellant and other group companies as CCPS and Biometrix had borrowed the said fund from ICICI Bank, Singapore and ICICI Bank, Singapore has lend the money as per the terms and conditions of the Facility Agreement. The twin requirements viz., nature and source as envisaged in section 68 of the Act stands fulfilled and therefore the order of assessment making additions on account of this transaction needs to be set aside. Aggrieved, now revenue is in second appeal before the Tribunal. 10. We have heard rival contentions and gone through facts and circumstances of the case. We have perused the case records and material placed before us. The facts not under dispute or controversy are that a sum of ₹ 700 crores was received from Biometrix. As against this amount, the assessee has allotted 7.0 crores CCPS (Series A, B C) of ₹ 100 each (face value of ₹ 10 each and premium of ₹ 90 each).Biometrix had borrowed th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y post the decision taken on 28.06.2007 whereas the material on record proves Biometrix had already been formed on 15.05.2007.Further the minutes bring out the following aspects clearly: it has taken cognizance of the fact of the host of businesses carried out by the Reliance MDA Group (Investee companies). It states that Reliance group had identified investment opportunities in infrastructure projects like RUL, RG TIL and RPTL. It factors the valuation report of Ernst Young which had valued the equities in the project at about USD 8 Billion. The minutes further state that the SPV would invest CCPS/ CCDs of the infrastructure projects and also stipulates that the SPV would enter into anytime Put Call arrangement for sale of CCPS/CCDs with Reliance MDA Group Company and the put option obligor would provide credit support for meeting its obligation by way of a Non-Disposal Undertaking ( NDU ). In essence the minutes conclude the following: It identifies the investees and projects; It takes into account the valuation report where the equities in projects are valued at USD 8 billion That the loan to be sanctioned to the SPV would be invested in CCPS/CCDs, thus identifying t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... x. 5 20.08.2007 Board of Directors of Appellant authorize the issue of 7,00,00,000 CCPS. Resolution passed at the Board Meeting of RUL is annexed as Exhibit 5 Company Records Taking forward the resolution dated 20.08.2007 passed in the EGM, the Board of Directors of the assessee authorized the issuance of 7.0 crores CCPS of ₹ 10/- each at a premium of ₹ 90/- (total 100) aggregating to 700 crores by way of private placement to Biometrix This resolution identifies the subscriber as Biometrix, the quantum and price of allotment and besides stipulating the terms and conditions of the CCPS. 6 24.08.2007 Resolution by Board of Directors of Biometrix to invest in CCPS of RGTIL, RUL RPTL Resolution passed at the Board Meeting of Biometrix is annexed as Exhibit 6 Assessing Officer Vol 3, Page 164 The Board of Directors of Biometrix had given authority to invest by subscribing to the issue of CCPS up to an aggregate of ₹ 5000 crores in one or more of the follo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... determined by the statutory auditor and the Valuation Expert. Alternative Pricing Guideline Price is based on the net asset value or the earnings per share of the assessee as per the FEMA Pricing Guidelines The purchase price should be the lower of all the above and therefore will always be as per the prevailing FEMA pricing guidelines. Section 6 deals with a non-disposal arrangement under which Ekansha irrevocably and unconditionally agreed to be the sole legal and beneficial owner of the NDU shares, to be deposited in the DP Account with ICCI Bank. NDU share is defined as RIL shares and DP defined as depository participant shall mean ICCI Bank Limited, It also obligates Ekansha issues instruction to ICCI Bank to freeze the DP Account and not permit clearance of any encumbrance or disposal on the NDU shares. Section 7 obligate a threshold maintenance value of the NDU shares which has to be 1.75 times of the loan borrowed by the investor viz. Biometrix. 9 05.09.2007 Board of Directors of Biometrix accept the term loan facility provided by ICICI Bank Singapore for USD 1.2 billion Resolution passed at the B ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 90 days after the end of each half of its financial year. As per para 61(i) of the Assessment Order, Biometrix has supplied its audited financial statements for three years. Clause 18.2 of the Facility Agreement requires the borrower to supply to the agent with each set of financial statements delivered pursuant to Clause 18.1, a CCPS valuation certificate signed by an authorised signatory and reported on by the borrowers auditor. As per paragraph 61(u) of the Assessment Order, Biometrix has failed to supply the CCPS valuation certificate to ICICI Bank. However, paragraph 61(iii) of the Assessment Order contradicts the conclusion drawn in paragraph 61(u) by listing the various valuation reports filed by Biometrix. Clause 18.3 of the Facility Agreement requires the borrower to deliver to the agent the Cop valuation certificate on or before 15 January 15 July of each year dated as of 31 December and 31 June respectively. Clause 18.4 of the Facility Agreement requires the higher of A Value and B Value shall be used by the agent for the purpose of determining whether the borrower has complied with the applicable provisions of this Agreement. Clause 18.5 of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 13 15.09.2007 Biometrix raising Utilization Request for USD 402,702,500 to ICICI Bank Singapore Utilization Request letter is annexed as Exhibit 13 Assessing Officer Vol 3, Page 188 The utilization request made by Biometrix on 15 September, 2007 pursuant to section 3 of the Facility Agreement was disbursed by ICICI on 19 September, 2007 and the same was used by Biometrix to invest in the CCPS of RUL on 11 October, 2007 and 17 October, 2007 as evidenced by the certificate of Foreign Inward Remittance issued by HDFC Bank Limited Serial Number 427679 dated 12.10.2007 and 429497 dated 18. 10. 2007. 14 19.09.2007 ICICI Bank disbursing the loan Disbursement letter is annexed as Exhibit 14 Company Records 15 20.09.2007 Board of Directors of RUL authorize allotment of CCPS Resolution passed at the Board meeting of RUL is annexed as Exhibit 15 Company Records The Board of Directors of the assessee Company authorizes ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 20 15.10.2007 From filed with RBI for allotment of 7,00,00,000 CCPS to Biometrix on 11.10.2007 FC GPR is annexed as Exhibit 20 Company Records Foreign Investment in India is governed by Section 6(3) of FEMA 1999 read with notification no. FEMA 20/2000 - RB dated 03.05.2000 as amended from time to time. Above regulation requires Form FC-GPR to be filed by a company issuing shares to a person resident outside India along with a certificate from the Company Secretary of the company accepting investment from person resident outside India, a certificate from Statutory Auditors or Chartered Accountants indicating the manner of arriving at the price of shares issued to the person resident outside India. Accordingly, the assessee company filed form FC-GPR with RBI on 15.10.2007 21 10.12.2007 Security Trustee Agreement between Biometrix and Axis Bank signed Security Trustee Agreement is annexed as Exhibit 21 Assessing Officer Vol 3, Page 495 Biometrix (as Borrower), Axis Bank Singapore (as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ccountant) as per FEMA pricing guidelines. The valuation report prepared by the Valuation Expert and Statutory Auditor was the A Value and valuation report prepared by SR. Batliboi was the B Value respectively as per Clause 19.1 of the Facility Agreement between Biometrix ICICI Bank, Singapore. Based on the above valuation report, considering the higher of the A Value and B Value, Biometrix submitted the CCPS Valuation report as per Clause 18.3 of the Facility Agreement entered into with ICICI Bank, Singapore duly reported on by its Statutory Auditor. The CCPS valuation report was submitted disclosing the total debt cover as given below: S.No Date of CCP Valuation Report Valuation as of Debt Cover Percentage 1 January 15, 2008 December 31, 2007 421.23 2 January 9, 2009 December 31, 2008 403.24 3 June 30, 2009 March 31, 2009 353.07 4 January 15, 2010 December 31, 20 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nferences drawn by the AO were justified and warranted that the respondent did not fulfill the requirements of section 68 of the Act. 12. He also submitted the facts and circumstances of each case, which are to be weighed and examined as to whether a particular ratio decided in a particular case could be applied. As noted above, the initial onus is upon the assessee to establish three things necessary to obviate the mischief of Section 68 of the Act. These are: (i) Identity of investors; (ii) their creditworthiness/investments and (iii) genuineness of the transaction. Only when these three ingredients are established prima facie, only then the Department is required to undertake further exercise as discussed above. In the instant case, no such documents are filed and no steps taken by the assessee which could establish the aforesaid three ingredients. The respondent has not even furnished basic requirements of i.e. cheque number, date, amount(s), details of drawee bank etc. for the money received from Biometrix. The bank account of Biometrix was also not produced. Hence the respondents claim regarding investment by the Biometrix remained unverifiable. The AO has noted that the b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ended by Finance Act 2012, w.e.f. 01-04-2013 whereby the onus is on the assessee to prove source of source in the case of receipt of share subscription to the satisfaction of the AO. Reliance is placed on the decision of ITAT, Kolkata Bench in the case of Subhlakshmi Vanijya(P.) Ltd. v. CII, [2015] 60 taxmann.com 60 (Kol. Trib) whereby amendment to section 68 of the Act by insertion of proviso by Finance Act, 2012 was held to clarificatory in the case of closely held companies in which public are not substantially interested and applicable with retrospective effect. The Hon'ble Delhi High Court in the case of Commissioner Of Income Tax v Focus Exports Pvt. Ltd. on 16 September, 2014 ITA No. 218/2012 Date of Decision 16th September, 2014 has noted that: Referring to the term identity reference was made to the observations of the Assessing Officer in the remand report that the word identity meant the condition or fact of a person or a thing being that specified unique person or thing . PAN number or card is relevant but cannot be blindly and without considering surrounding circumstances in all cases be sufficient to treat as a discharge of the onus. Identity is not establis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... elationship between the parties, statutory postulates etc. However, when there is surrounding evidence and material manifesting and revealing involvement of the assessee in the 'transaction and that it was not entirely an arms length transaction, resort or reliance to the said doctrine may be counter-productive and contrary to equity and justice. The doctrine is not an eldritch or a camouflage to circulate ill gotten and unrecorded money. Without being oblivious to the constraints of the assessee, an objective and fair approach/determination is required. Thus, no assessee should be harassed and harried but any dishonest fa ade and smokescreens which masquerade as pretence should be exposed and not accepted. It has also been held:- What we perceive and regard as correct position of law is that the court or tribunal should be convinced about the identity, creditworthiness and genuineness of the transaction. The onus to prove the three factum is on the assessee as the facts are within the assessee's knowledge. Mere production of incorporation details, PAN Nos. or the fact that third persons or company had filed income tax details in case of a private limited com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is section would apply only for such transactions which involve a resident assessee. It would not apply to a non-resident and neither the assessee nor the non-resident is under any obligation to disclose the nature and source of the sums found to be credited in the books of the assessee. He referred to the clarification issued by the CBDT dated 26.11.2001 to M/s. Chaturvedi and Shah, Chartered Accountants and copy marked to the CCIT, Mumbai wherein it was clarified that it is not possible to take any action under the Act unless there is linkage between remittance and any source of income in India thus clarifying there is no obligation on the assessee to show or prove the nature and source of the amounts credited in the Books in the case of non-resident. In other words even the amended section introducing the proviso to section 68 of the Act applies only to a resident investor and not a non-resident investor to explain the nature and source of the sums so credited. Hence, he argued that the proceedings attempting to enquire into the nature and source of funding by Biometrix, a non-resident and a tax resident of Singapore is completely without jurisdiction and therefore liable to be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ory bodies such as RBI and ROC by the assessee also go to show that the linkage has been duly reported to the Regulators. It was further argued that the Revenue without furnishing any basis or evidence and without dislodging or discrediting, the unassailable evidence available in its record as gathered meticulously by it from IRJAS, Singapore and ICICI Bank has without reasons and basis had unilaterally concluded that the investments of Biometrix in the assessee company is not a genuine transaction of investment and therefore an unexplained cash credit in terms of section 68 of the Act. 17. Ld. Senior Counsel further argued that Biometrix is not a Shell or Conduit for the reason that the Government of Republic of Singapore and the Government of Republic of India had entered into double taxation avoidance agreement ( DTAA ) on 20.04.1981 which is getting extended periodically. This DTAA had undergone a few amendments through various protocols. One such protocol was signed on 29.06.2005. Article 3 of the protocol introduced few tests to conclude whether an entity had come into existence lawfully or created as a shell or a conduit company only to derive undue benefits and advantag ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ecognised stock exchange of the Contracting State; or No No No No (5) its total annual expenditure on operations is equal to or more than S$200,000 in the immediately preceding period of 24 months from the date the gains arise Yes Yes Yes Yes salary Employee beneifts (in USD) 102 950 Administrative expenses other operating expenses (in USD) 5 995 772 38 937 226 29 543 845 110 377 287 Annual expenditure (in USD) 5 995 772 39 040 176 29 543 845 110 377 287 It was stated that the financial statements of Biometrix provided by the AO for the periods 30.09.2008, 30.09.2009, 31.12.2010 and 31.10.2011 is being filed and assessee filed the same in the paper book annexure 25. According to him scrutiny of the above data would indicate that Biometrix had passed the requisi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Date Value per RGTIL CCPS as per FEMA Pricing Guidelines for transfer from non-resident to resident (Rs.) Price at which RPTL purchased the RGTIL CCPS from non-resident (Rs.) 1 29-12-2008 77.72 75.00 2 25-06-2009 88.00 81.55 3 24-12-2009 92.80 85.88 4 31.05.2010 123.63 90.24 It was explained that the entire analysis and finding on this issue is misconceived both on law and in facts. The issue under consideration for the purpose of section 68 of the Act is to explain the nature and source of the sums credited in the books of the assessee. This has been explained more than adequately in the above paragraphs. The sale and purchase of CCPS by Biometrix and RPTL respectively has no relevance and even the remotest connection to pass the contemplated tests under section 68 of the Act. Any reliance on this segment of the transaction is totally alien and extra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... valuation expert. B Value means the net asset value or the earnings per share or any other valuation methodology prescribed under the Pricing Guidelines of FEMA. Consequently, Biometrix had provided the CCPS Valuation Report prepared in terms of the above methodology and considering the higher of the A Value and B Value as required by clause 18.4 of the Facility Agreement. The investment Agreement between the assessee and Biometrix also envisage preparation of the valuation reports by the assessee under both the methodologies. 20. Ld. Counsel stated that the valuation reports based on which RPTL purchased the RGTIL COPS are prepared in accordance with the FEMA Pricing Guidelines prescribed by RBI whereas the valuation report and valuation certificate submitted by Biometrix to ICICI Bank are as per the requirement of the Facility Agreement. 21. In view of the above undisputed facts Ld. Counsel explained that the AO wrongly presumed the ownership of Biometrix as referred to in paragraph 6 of the assessment order. The balance sheet of Biometrix as furnished by the AO to the assessee indicates that the Reliance Genemedix Plc owns 99% and Strasbourg Holdings P Ltd owns 1% bu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s agreement and the statement of charge filed with IRAS, Singapore. Paragraph 20 also states that the report of the DDIT on the perusal of the documents filed show that the whole transaction has been done through a SPV from a tax efficient jurisdiction. 22. Ld. Counsel also drew our attention to paragraph 33 which brings on record the various documents secured by the CIT Mumbai from IRAS, Singapore. The assessee has already placed on record the list of dates and events on the basis of these records and documents, provided later to the assessee by the AO on the basis of an application dated 15-4-2015.The proceedings concede to the fact that Biometrix is a tax resident of Singapore and information provided by IRAS, Singapore does not dispute the legal and genuine existence of Biometrix. Unless the Protocol tests envisaged vide Article 1 and 3 of the India Singapore DTAA are passed, IRAS would not have approved the tax residency and legal existence of Biometrix. The Revenue officials of Singapore had not drawn any adverse inference against Biometrix as is evident from the list of documents and records furnished. The genuineness of a non-resident entity, if at all, can be doubted or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the transfer pricing officer had dropped the proceedings vide order dated 29-01-2015 against the assessee. 23. Paragraphs 47 to 55 is again a sequential capture of the pattern of the transaction bringing, to light the source of source of the funds, the source of the funds, the methodology resorted to for investing the funds in the assessee's entity by Biometrix and the requisite safeguards undertaken in the form of investment agreements, put and call option agreements and assignment of contract rights agreement thus once again bring to the fore the identity of the parties, the actual sources of funding besides the genuineness of the transaction. In fact, once the identity of the party and the source of funding is known, it would automatically lead to the inference that the transaction is only genuine. The presumption vide paragraph 58 that the SPV is yet to be formed based on the extract of the minutes of the Credit Committee dated 28-06-2007 is factually incorrect. Biometrix has come into existence with effect from 15-05-2007 and therefore on the date of preparing of the minutes of the credit committee, the SPV was in fact in existence. The prudent commercial decision take ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ettled law that an assessing officer cannot be substituting himself as any other regulator like RBI so as to construe adversely an approved transaction by the regulator. The finding is without jurisdiction and certainly travelling beyond the realms of Act. The remand report of the AO and comments of the assessee are clearly reproduced in the appellate order of First Appellate Authority and the same is being reproduced for the sake of clarity as under:- 4.9 Remand Report----- 4.91 In the course of the hearing held on 29-05-2015, my predecessor had sought to clarify on few issues. The Appellants had clarified and placed the documents and evidence in support of the same which were already on record. My predecessor permitted the Appellant to file further submissions on the clarification sought for during the hearing. In pursuance of the same, the Appellants filed further submissions on 29/05/2015 and the same are extracted below: This Appeal was heard today (29.05.2015) by the Hon ble Commissioner of Income Tax (Appeals), Mumbai - 8. The matter was argued extensively and the Appellants placed on record written submissions along with Annexures and Support Documents and an exe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 181 - 183 of the Written Submissions of RUL and RPTL respectively). The Appellant had placed all the records in support of the above submission except the Swift messages issued by ICICI Bank, Singapore. To recapitulate, the linkage is as follows: At the first instance, Biometrix had placed a utilization request to avail the sanctioned loaned amount in tranches. Disbursement Certificate issued by ICICI Bank agreeing to transfer the amount to Biometrix. The swift message or wire transfer message of lClCl containing the following information viz. The name and address of ordering customer as Biometrix and the name of the Bank of Biometrix to which the credit has been given i.e. Overseas Chinese Banking Corporation Limited (OCBC). Since it is a Dollar transfer, the same is done through Correspondent Banks viz. Bank of New York and J.P. Morgan Chase Bank as intermediaries. Copy of the FIRC (Page 276 Page 275-276 of the written submissions of RUL and RPTL respectively) issued by HDFC Bank Ltd. (Appellant's Bankers) confirming the receipt of the amount credited by Biometrix towards investment against which CCPS were issued. The Appellants al ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt and Option Agreement) including all rights and benefits in espect of amounts receivable by or accruing to the borrower. It is respect-fully prayed that Honourable Commissioner of income Tax (Appeals) may kindly take on record these Additional Submissions and documents and may kindly read these submissions as part and parcel of the Written Submissions filed today and set aside the Assessment Order dated 31.03.2015 and allow the Appeal. 4.9.2 These submissions of the Appellant were forwarded by my predecessor to the AO u/s. 250(4) to enable him file a remand report. The AO filed the remand report dated 04-08-2015 which is reproduced below: Kindly refer to the above. Vide above referred letter, your goodself has forwarded copies of written submissions and other documents filed by the assessee, with a direction to make further enquiry u/ s.250(4) of the Act on the addition of 700,00,00000 made under Sec.68 of the I.T Act; 1961 in the assessment order dated 31.03.2015. Your goodself has also asked this office to give reasonable opportunity to the assessee before finalizing the remand report. Before considering the documents, your kind attention is drawn ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion Wing of the Income Tax Department, Mumbai has carried out its investigation in the matter and subsequently the material gathered by the Investigation Wing was forwarded to the Assessing Officer to look into the matter and take appropriate action. It was ascertained therein that the investment was made by the Biometrix out of loan taken from ICICI Bank, Singapore branch and not out of its own capital. It was also observed that the Biometrix has subsequently repaid the loan from the money raised by sale of Investment made by it in the CCPs of Reliance Gas Transportation Infrastructure Ltd., Reliance Ports Terminals Ltd and Ekansha Enterprises Pvt. Ltd. On the basis of the above material in possession, the Assessing Officer reopened the assessment for A.Y.2008-09 on 04.01 .2013, after recording his satisfaction that income to the tune of 700 crores has escaped assessment. Subsequently, the Investigation Wing vide its letter dated 05.02.2014 forwarded its report, informing that Biometrix has taken a loan of USD 1.7 billion from ICICI Bank, Singapore and the same was routed to India through FDI by way of investment in Compulsorily Convertible Preference Shares {CCPS) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ity of Singapore (IRAS) forwarded the information vide letters dated 12.05.2014 19.06.2014 providing following information: Biometrix's certificates of residence List of directors employees of Biometrix Financial Statements I.T Returns of Biometrix Director's Resolution/KYC documents ICICI Bank Statements with details of inward creditors (not for transaction of investment in CPPS) Disbursement related documents Principal Interest repayment related documents Credit Appraisal Notes Facility Documents etc., From the information it was noticed that the ICICI Bank loan was disbursed to Overseas Chinese Banking Corporation, Singapore. Since complete information sought has not been received, another reference seeking further information has been sent to the FT TR Division, CBDT, New Delhi. However, in response to said request, the IRAS provided the bank statement only from the period 01.01.2008 onwards, citing that the information pertaining to earlier period could not be provided as per Singapore Exchange of Information Protocol. During the assessment proceedings, the AO noticed that the directors of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... genuine in absence of certain important documentary evidences and the approach of the Indian lender bank in safeguarding its interest in lending a huge amount to a newly created overseas company through its overseas branch, still not come forward with relevant extract and/or copies of such bank account statement to refute the conclusions drawn by the Assessing Officer and holding the amount to be unexplained cash credit uls.68 of the Income Tax Act, 1961. While remanding the matter to the undersigned, your goodself has asked to make further inquiries with respect to additions made under section 68 of the Act. As mentioned in para 4(8) above, the assessing officer has tried all possible avenues for gathering information before making the additions Apparently, the AO has explored all possible sources for enquiry for deciding the issue under consideration. While remanding the matter, no directions are given for making any specific enquiry by your goodself. In the light of the above, it is requested that this office may kindly be, given suitable directions with regard to further investigation, if any, to be carried out by this office so that further necessary action can be taken ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ies Limited (RUL ), (Assessee) up to an aggregate of ₹ 5000 crores. The Investment Agreement was entered into between the assessee and Biometrix identifying the investment, subscription amount, warranties of the company, promoters and investors etc. On 31.08.2007, a Put and Call Option Agreement was entered into between Ekansha Enterprise Private Limited (Ekansha) and Biometrix as per the terms and conditions of the letter of intent issued by ICICI Bank, Singapore. The Put and Call Option Agreement contained a non-disposal clause through which Ekansha would be the sole legal and beneficial owners of the NDU shares to be deposited in the DP account with ICICI Bank and Ekansha had to maintain a threshold value of NDU shares which had to be 1.75 times of the loan borrowed by Biometrix. On 05.09.2007, the Board of Directors of Biometrix passed a resolution to accept the facility from ICICI Bank for the borrowal of USD 1.2 billion in 3 tranches. On 07.092007 Biometrix and ICICI Bank entered into a facility agreement. That Section 2 of the above referred Facility Agreement allowed to provide to the borrower, a loan in 3 tranches of USO 275 million USD 200 million and USD 225 millio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... om ICICI Bank, Singapore. Para 4(A)(v) remand report is again an admission and confession both on the source and the source of source of investment and the impugned proceedings initiated u/s 68 of the Act is without any basis. What is mandated u/s 68 of the Act is the source of funds of the money raised by the assessee and not the repayment of the loan taken by the investor for making investment into the assessee especially after conceding the fact that the loans taken by the investor has been repaid which fact has also been confirmed by ICICI Bank. Consequently, any reference to interest payment and awaiting information from Singapore authorities is clearly out of place, irrelevant lending no credibility to the proceedings. Para 4(A)(vi) to Pare 4(A)(x) of the report are facts ascertained by the revenue, lending only credence to the fact that Biometrix borrowed money for the purpose of investment in the CCPS issued by assessee. Further para 4(A)(xiii) and (xiv) of the remand report observes that ICICI Bank has expressed its inability to produce the bank account statement of Biometrix i.e. Overseas Chinese Banking Corporation ( OCBC Bank ) account and/ or ICICI Bank account reflect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ank has disbursed the said money to the bank account of HDFC Bank of the assessee is already on record. This is additional information over and above the voluminous evidence already available on record proving the source of funds and also the source of source of funds. However, the disbursal of the loans from the respective bank accounts at each stage till it is finally credited to the HDFC Bank account of the assessee stands clearly proved. To reiterate, ICICI Bank, Singapore has disbursed the loan into the bank account of Biometrix with ICICI Bank, Singapore. Swift message clearly establishes that OCBC Bank, Singapore has in turn disbursed the money into the bank account of the assessee which is HDFC Bank. The swift message provided by HDFC Bank evidencing the disbursement from and out of the bank account of Biometrix with OCBC Bank is also on record. Consequently, even the remotest presumption will be legally not maintainable. As regards safeguards of the loan by the lender viz., ICICI Bank, Singapore, the bank has taken more than abundant care in ensuring that its risk is covered and mitigated through various clauses in the Facility Agreement which at this point in time is not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 000 700,00,00,000 3. M/s Reliance Gas Transportation Infrastructure Pvt Ltd. 31,28,44,149 31,28,44,14,900 4. MIs Relogistics Infrastructure Ltd 18,51,91,300 18,51,91,30,000 29. We also find that the DDIT(lnv)-Unit 11(1), Mumbai conducted enquiries in this case and vide his report dated 10.07.2012 he has given the following findings: The investment in shares (CCPS) in India, through FDI route was not out of equity capital of M/s Biometrix Marketing P Ltd., but was out of loan of USD 1700 million from ICICI Bank, Singapore, which was secured with options agreement to sell the shares to M/s. Ekansha, a group company of M/s. Reliance Industries Limited (RIL). (page 702 of the paper book) (emphasis supplied) We find that ICICI Bank Singapore has disbursed a loan of USD 1.7 billion to Biometrix. As per information received from FT TR division, the IRAS has provided swift messages showing that loan proceeds have been remitted to the Overseas Chinese Banking Corporation, Singapore, SG Bank account No. 6620017673 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... were duly obtained. The assessee even during the hearing placed on record a financial chart to demonstrate the sequence commencing from the date of utilization request by Biometrix till its ultimate credit into the assessee's bank account. The very same chart is being reproduced as under:- The swift messages covering the entire transaction have been placed on record. It is made clear that all the swift messages are forming part of the this Appellate order the details of which can found in pages 76 to 81.- 30. To sum up the whole issue in the present appeal by Revenue, is about the source, nature and genuineness of the transaction to determine whether the addition made by the AO under section 68 of the Act is sustainable. Admittedly, in this case, there is no dispute that the assessee issued Compulsory Convertible Preference Shares (CCPS) and the same was subscribed by Biometrix Marketing Private limited, Singapore (Biometrix). It is also not in dispute that for making this investment Biometrix borrowed the money from ICICI Bank, Singapore. All the documents relating to Biometrix were procured by the AO from Inland Revenue Authority of Singapore and ICICI Bank. At ev ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lfilled by Biometrix during every year of its existence. The Revenue has not contested this position. The CIT (A) has upheld that Biometrix is not a shell/ conduit company. We concur with the finding of the CIT(A) though we are of the considered view, that that this issue is not at all relevant for the purpose of section 68 of the Act in the facts and circumstances of the case, since it is abundantly clear from the materials on record that Biometrix was to be an SPV. Next, we will deal with the fifth and sixth ground of appeal by the Revenue. It concerns as to how Biometrix sold the CCPS at lower than the market value disclosed by them to ICICI Bank. The CIT(A) has dealt with these and observed that the debt-cover ratio at all times was more than that prescribed in the Facility Agreement based on the higher of two different valuation reports furnished using different methods of valuation and that the loan has been repaid by Biometrix to ICICI Bank and hence these issues are not relevant for the purpose of section 68 of the Act. We are unable to fathom as to how these events that relate to periods post the investment are relevant for ascertaining the source nature and genuineness of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that Biometrix borrowed from ICICI Bank and invested the same money in the CCPS issued by the assessee. We are convinced from the materials available on record that Biometrix borrowed from ICICI Bank and invested the same in the CCPS invested by the assessee. Regarding the first ground of appeal questioning the deletion of the addition made under section 68 of the Act, we hold that on review of the materials available on record, we are satisfied that the requirements of section 68 of the Act viz., nature, source and genuineness of the transaction including the identity and the creditworthiness of the investor, are fulfilled. Few questions of law raised by the Revenue are not dealt with for the reasons stated below: a) The initial onus is upon the assessee to establish three things to obviate the mischief of section 68 of the Act viz., identity of investors; creditworthiness of investors and genuineness of the transaction. The assessee is in agreement with this proposition and has not contested the same. So, we do not find it necessary to record a finding on this. b) The onus is on the assessee to prove the source of the source in case of receipt of share subscription to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... direct or circumstantial evidence on record that the said loan amount actually belong to, or were owned by, the assessee. 34. Further, Hon ble Supreme Court in the case Sreelekha Banerjee (supra) has also held that if the explanation given by the assessee shows that the receipt was not of an income nature, the department cannot act unreasonably and reject the explanation to hold that it was income. If, however, the explanation is unconvincing one which deserved to be rejected, the revenue can reject it and draw inference that the amount represents income either from sources already disclosed by assessee or from some undisclosed sources. But in the present case before us the assessee has directly established the nexus of loan taken by Biometrix from ICICI Bank, Singapore and this was invested in the CCPS issued by assessee and this is proved by the swift messages (above reproduced) that the money has actually travelled to assessee. Here the assessee is able to prove the source of the source despite the fact the assessee cannot be presumed to have special knowledge about the source of source or the origin of origin. It is to be mentioned that the case is discussed in the above wer ..... X X X X Extracts X X X X X X X X Extracts X X X X
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