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TMI Blog2019 (12) TMI 972X X X X Extracts X X X X X X X X Extracts X X X X ..... cid analysis of the record available before her, and appreciated the controversy in right perspective. We do not find any merit in the ground of appeal raised by the Revenue challenging deletion of 9.33 crores as well as ground of appeal raised by the assessee pleading therein that the income of 1,57,10,000/- ought to have been assessed as business income instead of income from other sources . Not to grant set off of unabsorbed depreciation and business loss from granite business under the head income from business - We do not find any merit in this ground of appeal, because, the ld.CIT(A) has rightly observed that the income of 1,57,10,000/- is not a income from any regular source of business, rather it is income from other sources, and therefore, it would not qualify for grant of set off. No details have been supplied by the assessee before us in this regard. Retaining income which was offered to tax by the appellant - CIT-A not restricting the same at loss from rotation of funds in the guise of software business by ignoring the principles of real income theory - HELD THAT:- Since no explanation was furnished by the assessee regarding this entry, the same was treated non-genuine ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts and in law in confirming retaining income of ₹ 1,57,10,000/- which was offered to tax by the appellant instead of restricting the same at ₹ 2,57,500/- from rotation of funds in the guise of software business by ignoring the principles of real income theory. 2. The ld.CIT(A) has erred on facts and in law in directing the AO not to grant set of unabsorbed depreciation and business loss from granite business assessed under the head "income from business" against income held to be assessable under the head 'income from other sources." 5. Ground no.1 of Revenue's appeal and the assesee's appeal is interconnected, therefore we dispose of both these grounds together. 6. Brief facts of the case emerging from the case record are that assessee is a public limited company engaged in the business of processing, polishing and trading of granites. Besides this regular business, the assessee has also routed certain transactions viz. sales and purchases of software during the relevant period, which stated to be carried out on behalf of one Trans-Techno group. For this assessee has provided invoices indicating purchases of software by the assessee, which in turn, sold to other pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iated fresh assessment. In the fresh assessment assessee furnished detailed submissions and chart indicating circular movement of funds through specific bank accounts. After considering the details and submissions of the assessee, the ld.AO held that the assessee failed to establish genuineness of the so-called creditors software transaction of ₹ 9,33,00,000/- and made under section 68 of the Act. He also made addition of ₹ 1,57,10,000/- income earned from software activities. In holding so, the ld.AO observed that no new facts emerged during the fresh assessment, and even the assessee failed to prove that trading of customized software was for rotation of transaction of companies belonging to Trans Techno group or these transactions were accommodation entries or back to back transactions and treated the transaction as bogus and non-genuine. It was further observed by the AO that as on the date of balance sheet there was no credit balance against the creditors claimed. The assessee had in fact discharged its liability by paying with cash. The balance of shown in the balance sheet no longer exists, and the same is liable to the treated as income of the assessee. In short ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ransactions section 68 will apply or the entire turnover and be considered for the purpose of assessment. It was further directed that the AO should also examine that whether the transactions were back-to-back transaction or accommodation entries. It was also directed that the AO should verify whether the appellant's income was income was income from other sources or income from business. The AO in his order passed in consequence to the set-aside proceedings has held that the appellant had failed to establish the genuineness of the creditors. He held that the appellant had claimed creditors for software of ₹ 9.33 crores and it had failed to prove the genuineness of so-sailed creditors. It is also pointed out by the AO that during the course of assessment proceedings the creditor Gap Corporate Services Pvt. Ltd had denied for entering any business transactions with the appellant. Further letters issued under Section 133(6) Carrier Information Technology and Maxim Info Systems were returned unserved. He accordingly held that no new facts emerged during the course of fresh assessment proceedings and appellant could not prove that the trading of customized software was for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted that an amount of ₹ 2,57,500/- should be brought to tax the against the income of ₹ 1,57,10,000/- recorded in the books of accounts applying principles of real income theory. I have carefully considered all the facts on record and various submissions, it is noted that there is no dispute that both purchase and sales transactions recorded in the books of the appellant in relation to software business were sham merely on paper and were bogus. These facts are clearly brought out as a result of the enquiry, made by the AO in first-round of assessment. It is also noted from the chart given by the appellant which show the rotation of fund started from bank accounts of Trance Techno Group and the funds have reached back to that account again. These transitions were conducted in the subsequent financial year and therefore, the creditors were shown as outstanding in the books of accounts of the appellant company. Since these creditors have actually been paid through cheque and the transactions have also been placed by the AO on record during the first round of assessment proceedings the addition under section 68 in the name of three parties that is Carrier Information Te ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e brought in the books in the name of Shri Nilesh Xadiwala. Therefore, the appellant and accordingly claimed that the/only income earned but not disclosed in the books worked out to ₹ 2,57,500/-. On examination of the flow of funds mentioned in the paper book it is noted that the appellant had explained the sources of funds received in HDFC, Vejalpur branch from Trance Techno Foods Ltd and Skyiid Telecommunications Ltd amounting to ₹ 1.46 crores as we!! as payment of ROC fees of ₹ 7500/- by Trance Techno Foods Ltd for the appellant and therefore, these sums cannot be taxed under section 68 as unexplained credit as contra accounts, PAN and confirmations have been furnished. However, it is noted that the appellant had not been able to establish the payment of ₹ 1,11,50,000/- and ₹ 33,50,000/- which are claimed to have been made to A&A Software and Carrier Information Technology as part of circulation of funds in the guise of software business as neither confirmation have been furnished nor the bank account of both the forms have been given so that the claim of the appellant regarding onward movement of funds to Trance Techno Group could be established. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... after observed that addition under section 68 was not required to be made in the hands of the assessee. In other words the ld.CIT(A) has recorded a finding of fact that nothing has been retained by the assessee, which has been considered as unexplained cash credit. The assessee has explained fund flow i.e. demonstrating transactions were back to back, and were in the nature of accommodation entries. Similarly, the ld.CIT(A) has held that alleged ₹ 1,57,10,000/- was not earned from any business activity but from other sources of income. This was to be assessed under the head "income from other sources". Contrary to the above factual finding of the ld.CIT(A), neither Revenue has filed any evidence, nor assessee has filed any paper book. It has not been brought to our notice, as to how these analyses are contrary to the record. Therefore, we are of the view that the ld.CIT(A) has made a lucid analysis of the record available before her, and appreciated the controversy in right perspective. We do not find any merit in the ground of appeal raised by the Revenue challenging deletion of ₹ 9.33 crores as well as ground of appeal raised by the assessee pleading therein that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mmunication Ltd and retained by the appellant ₹ 70,000/- Amount received by cheque no 200026 on 03/05/2001 in Vijaya Bank Account from Trans Techno Foods Ltd and retained by the appellant ₹ 6,00,000/- Amount received by cheque no 200037 on 03/05/2001 in Vijaya Bank Account from Trans Techno Foods Ltd and retained by the appellant ₹ 87,000/- Total ₹ 7,79,000/- 15. The ld.CIT(A) treated the above amount as income of the assessee. Besides that, he also observed that assessee has also introduced funds in the name of Ganesh Infotech amounting to ₹ 13,20,934/-, which was disclosed as software sales. Since no explanation was furnished by the assessee regarding this entry, the same was treated non-genuine and made addition to that extent and worked out a total addition of ₹ 20,99,934/-. However, the ld.CIT(A) observed that since the assessee has already offered an income of ₹ 45,53,000/- in the books of accounts, which is more than the addition worked out, no separate addition was required. Accordingly, the ld.CIT(A) restricted the addition to ₹ 45,53,00/- which was disclosed by the assessee in the return of income. To contradict ..... X X X X Extracts X X X X X X X X Extracts X X X X
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