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TMI Blog2021 (6) TMI 67X X X X Extracts X X X X X X X X Extracts X X X X ..... pital of ₹ 1 lakh and nobody would invest in such a company of the sum to the magnitude of ₹ 67 crores remains merely conjectures and surmises in view of the overwhelming evidences submitted by the assessee and absence of any inquiry by the revenue. for several years , assessee, Investor, Investor in the investor are assessed u/s 143 (3) of the act , such assessment orders are produced by the assessee before the assessing officer, it cannot be said that the investment made by Infotel technologies Ltd in the assessee company of ₹ 67 crores is failing the test of genuineness u/s 68 Accordingly, we direct the learned assessing officer to delete the addition in the hands of the assessee made u/s 68 of the income tax act with respect to the optionally convertible debentures issued to the Infotel technologies Ltd. Thus, we reverse the finding of the lower authorities and allow ground of assessee. - ITA No. 275/Del/2020 - - - Dated:- 31-5-2021 - Shri Amit Shukla, Judicial Member And Shri Prashant Maharishi, Accountant Member For the Assessee : Shri Rakesh Joshi, Adv For the Revenue : Ms. Paramita M. Viswas, CIT DR ORDER PER PRASHANT MAHARISHI ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y proceeding initiated by the AO u/s 271(1 )(c) of the Income Tax Act, 1961. 3. Facts culled out from the orders of lower authorities shows that assessee is a company, filed its return of income on 30 September 2011 declaring loss of ₹ 15,565/ . This return was processed u/s 143 (1) of the income tax act. 4. Subsequently, information was received from the office of The Deputy Director Of Income Tax (Investigation), New Delhi that despite having an equity capital of only ₹ 1 lakh and in absence of any business activity during the period Under consideration, assessee has raised ₹ 67 crores by way of debentures from unknown entities in financial year 2010 11 and had given a loan of ₹ 63 crores to certain persons during the same financial year. It was noted that assessee company has shown a loss of ₹ 15,565/ because of statutory expenses incurred, however, the company had shown unsecured loan of ₹ 67 crores and has also shown advances of ₹ 62.90 crores. The learned Deputy Director of Income Tax obtained bank statement of the assessee with Union Bank of India finding that the transaction of huge unsecured loan received by the assessee w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... with the lender. He submitted that lender has received sum from Sun visions Engineering Co Pvt Ltd. Thus, Assessee submitted that a. Assessee Company has received a loan in the form of 0% optionally convertible debentures of ₹ 1000 each to the tune of ₹ 67 crores from Infotel Technologies Private Limited through cheque/RTGS of different amount. Assessee submitted, confirmation, bank account, annual accounts i.e. balance sheet and Profit and loss account, Income tax return, Assessment orders of the lenders. Summons issued were also complied with and confirmed by the lender and submitted various details. Source of the funds of the lenders were also explained along with the balance sheet and annual accounts of the lender to the lender i.e. Sun vision Engineering Pvt Ltd and assessment orders of the lenders to the lender were also produced, b. Assessee company has during the period under consideration has disperse the loan of ₹ 62.90 crores two different parties of ₹ 25 lakhs each; along with an advance of ₹ 12.90 crores as advance against purchase of Floor space Index. Assessee also stated that both the parties are regularly assessed with the income tax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an addition of ₹ 67 crores on account of bogus/unexplained expenditure. 6. Assessee aggrieved with the order of the learned assessing officer preferred an appeal before the learned CIT A wherein assessee objected reopening of assessment as well as contested addition on the merits. With respect to the challenge of grounds on reopening of the assessment, Ld CIT (A) dealt with the same in paragraph number 4 and held that there is no infirmity in the reopening of the assessment. She noted that the return was processed u/s 143 (1) of the Act and no assessment order was passed u/s 143 (3) of the Act , as information was received from investigation wing, in view of the decision of the honourable Supreme Court in case of Raymond woolen Mills Ltd versus ITO (236 ITR 34) as well as of honourable Delhi High Court in case of Sonia Gandhi versus ACIT 97 taxmann.com 150 and the decision of the honourable Supreme Court in case of DCIT versus Zuari estate development investment company Ltd (2015) 63 taxmann.com 177 (SC) as well as host of other judicial precedents, the reopening of the assessment was upheld. On the merits of the addition of ₹ 67 crores, she noted that during ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s sold subsequently to Super Alliance Marketing Private Limited during financial year 2011 12 and the profit of ₹ 52.50 crores has been offered for taxation in the income tax return, the copy of the agreement was also furnished along with the mode of payment details of payment et cetera. 8. She, However, relying on the decision of the Honourable Supreme Court in case of Principal Commissioner Of Income Tax Versus NRA Iron Steel Private Limited [2019]103 taxmann.com 48 (SC), ITO versus synergy Fin lease private limited ITA number 4778/del/2013 and Decision of Pee Aar Securities Limited other judicial precedent, held that there is overwhelming evidence that the transaction on which adverse view has been taken was prearranged transactions undertaken with the sole motive to evade tax. In view of this, she held that the documents submitted as evidence to prove the genuineness of the transactions are themselves found to serve as a smokescreen to cover up the true nature of the transaction. Thus, she confirmed that the learned assessing officer was justified in making the addition of ₹ 67 crores as income of the assessee from undisclosed source u/s 68. Thus, she dismiss ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... conducted by the learned assessing officer or by the learned CIT A on evidences submitted by the assessee, no addition could be made in the hands of the assessee. He further stated that merely as a merger acquisition process undergone by the lender of the depositor, it cannot lead an evidence against the assessee that the amount is chargeable to tax u/s 68 of the act. He also referred to the judicial precedents cited by the dl CIT A) and submitted that it does not apply. In view of this, he submitted that the addition confirmed by the learned CIT A made by the learned assessing officer deserves to be deleted. 11. The learned department representative vehemently supported the orders of the lower authorities. For reopening of the assessment, she referred to the paragraph number 4.1 of the order of the learned CIT A and also stated that in para number 4.1.8 the learned CIT appeal, relying upon the decision of the honourable Supreme Court in case of Rajesh Jhaveri, stating that the original assessment was passed u/s 143 (1) of the act, upheld the reopening. She further submitted that there was a tangible material available with the assessing officer to reopen the case of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat this company had:- i. equity capital of ₹ 1 lakh and had no business activity during the period Under consideration ii. raised ₹ 67 crore by debentures from unknown entities in financial year 2010 11 relevant to assessment year 2011 12 iii. gave loan of ₹ 63 crore to unknown persons in financial year 2010 11 relevant to assessment year 2011 12 The DDIT (investigation), unit 7 (2), New Delhi has further informed the assessee company has shown loss of ₹ 15,565/ in its return for the AY 2011 12 owing to statutory expenses incurred by it. During AY 2011 12, it has shown unsecured loan (long-term) of ₹ 67 crore and it has shown advances given at ₹ 62.90 crores. During the course of verification by DDIT (investigation), unit 7 (2), New Delhi, copy of bank statement of account number 307901010078194 with Union Bank of India, Karol Bagh was called on it was noticed that the information received in his office regarding huge unsecured loan was correct. However in the directions given in the bank statement for the credit entries, it is seen that only cheque number, and bank name is given and the name of the part ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cted by DDIT (investigation), unit 7 (2), New Delhi. Accordingly, income amounting to ₹ 67 crores has escaped assessment within the meaning of Section 147 of the income tax act, 1961. Coming to the provisions of reopening of assessment proceedings, prior to 1989, Section 147 provided for two grounds to reopen concluded assessments:- i. On basis of information received by the assessing officer, assessment could be reopened. This had to be within four years. ii. Where facts material for assessments are not disclosed in the course of assessment, whether within or beyond four Years. Supervening these two requirements in the alternative, the initial condition is that the assessing officer has reason to believe that there is escapement of income. The first requirement regarding information has now dropped by 1989 amendment and therefore for reopening of assessment within a period of four years from the end of assessment year the only requirement is reason to believe. For a period beyond four years in case where an original assessment was made u/s 143 (3), further requirement is the nondisclosure of material facts necessary for assessment by the assessee. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any has made an investment of ₹ 67 crores being 6,70,000 0% optionally convertible debentures of ₹ 1000 each. The source of the fund is also available in schedule 2 of the balance sheet wherein a sum of ₹ 1440 000000/ was received being 0% compulsorily convertible zero-coupon bonds of ₹ 1000 each received by that company. Assessee also submitted the bank account of the lender with HDFC bank Ltd to demonstrate the funds received by the assessee from the bank account of the lender. Assessee also submitted its own bank account with Union Bank of India wherein the above sum was credited. Assessee also submitted the loans given to 2 different companies submitting their balance sheets, income tax returns et cetera. Assessee also submitted the assessment order passed in case of Infotel technologies Ltd for assessment year 2015 16 on 23 December 2017 passed u/s 143 (3) of the act wherein the income of the lender was assessed at ₹ 4,028,604/ . The assessee also produced the representative of the Infotel technologies Ltd in response to summons issued u/s 131 of the act wherein, in answer to question number 5, he has categorically confirmed that Infotel tec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e limited. Further the amount of investment made by the assessee was also proved by the assessee by submitting the annual accounts, income tax return and the assessment order passed u/s 143 (3) of the act of those parties as well as taxation of FSI Income in subsequent years and due payment of tax thereon. The learned CIT A has held that assessee has not furnished any information about the conversion of the original issued optionally convertible debentures of 0% interest rate to 6%, however said certificates have been placed in paper book page number 422 which was furnished before the learned CIT A. Respective interest has already been taxed in the hands of the lender and allowed as a deduction to the assessee, therefore, the above finding does not have any relevance. The learned lower authorities were also concerned that sun vision engineering Co private limited which is a loss-making entity has made an investment in Infotel technologies Ltd that in turn has further made investment in the assessee company. The Hon‟ble jurisdictional Delhi High Court in the case of CIT vs. Vrindavan Farms Pvt. Ltd., etc. ITA.No.71 of 2015 dated 12th August, 2015 (Del.), in which it was he ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Tax Act. 16. Coming to the decision of the coordinate bench in case of Pee Aar securities Ltd versus deputy Commissioner of income tax [2018] 96 taxmann.com 602 (Delhi - Trib.)[23-08-2018] heavily relied upon by the learned departmental representative before us and cited by the learned CIT A, we find that there is a stark difference between the facts of the case before the coordinate bench as well as before the us. In that, particular case there was a specific allegation that one, Mr. Tarun Goel, accommodation entry operator, was used by the assessee for introducing unaccounted income in the form of share capital in the above company. The assessee could not give any clue about the investors in that company and did not produce such investors before the assessing officer. Further with respect to the bank statement of the investors furnished by the assessee before the assessing officer there was no explanation available about the source of such funds. In these peculiar facts, the coordinate bench confirmed the addition of ₹ 80 lakhs in the hands of the assessee u/s 68 of the income tax act for issue of share capital at a premium by a private limited company, which were ..... X X X X Extracts X X X X X X X X Extracts X X X X
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