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TMI Blog2022 (2) TMI 866X X X X Extracts X X X X X X X X Extracts X X X X ..... he case of CIT v. Continental Warehousing All Cargo Global logistics [ 2015 (5) TMI 656 - BOMBAY HIGH We do not find any reason to interfere with the finding of the Ld.CIT(A) as per which Assessing Officer has not made the addition based on any incriminating material found during search. Therefore, ground raised by the revenue is dismissed. X X X X Extracts X X X X X X X X Extracts X X X X ..... lared loss as per original return of income. Subsequently notices u/s. 143(2) and 142(1) of the Act were issued and served on the assessee. The assessment was completed u/s. 143(3) r.w.s. 153C of the Act by making addition u/s. 68 of the Act and further additions were made relating to brokerage of ₹.1,30,00,000/-, sales and marketing at ₹.1,24,53,166/-, finance cost at ₹.11,86,093/- and legal and professional fess of ₹.42,77,037/-. Above additions were made by the Assessing Officer with the observation that the above said expenses which were incurred for the projects carried on by the assessee therefore it should be debited to the work in progress pertaining to the projects carried on by the assessee. Accordingly, he disallowed the above said expenditures. 4. Aggrieved assessee preferred an appeal before the Ld.CIT(A), before the Ld.CIT(A) assessee filed detailed submissions and for the sake of clarity it is reproduced below: - "FACTS: 1. The Appellant is a Company and is regularly assessed to tax by Dy. Commissioner of Income Tax CC 2(1), Mumbai, (hereafter referred to as the DCIT.) Before that the case of the Appellant was with ACIT-15(2)-I, Mumbai (h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing the order U/S 143(3) dated 09/03/2017, the then assessing officer (Ld. ACIT), made addition of share application and share premium received from M/S Aanya Properties (I) Ltd of ₹ 15,86,06,125/- holding the same as unexplained cash credit within the meaning of section 68 without properly considering the supporting evidences furnished by the appellant to prove identity, creditworthiness and genuineness in respect of sources of funds of the shareholders. 5. During the assessment proceedings, the then assessing officer (Ld. ACIT) required the Appellant to submit certain documents which were called by him and the Appellant submitted all the supporting evidences called for. 6. The Appellant submitted (i) financial statements of Aanya Properties (J) Ltd, (ii) Incorporation Certificate of Aanya Properties (I) Ltd, (iii) details of ultimate beneficiary owners through Aanya Holdings Ltd., (iv) Bank Statements of Appellant Company reflecting the payments received towards share application money from Aanya Properties (1) Ltd., (v) bank Statements of Aanya Properties (I) Ltd reflecting payments received from its holding company namely Aanya Holdings Ltd., (vi) correspondence with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of Aanya Properties (I) Ltd that the company did not have any self generating source of Income. These information were not complete therefore the predecessor Assessing Officer of LRPL sent another letter dated 17/10/2016 to Mauritius Authority through FT and TR Division. The reply in this regard had not been received till the date of passing the date of Assessment Order under this Appeal. 10. In this connection the Appellant most humbly submits before your Honour that the Mauritius Report might be in the opinion the Ld. D.C.I.T. partial in nature but the findings of the report no where give any negative clue. On the contrary the findings of the Mauritius Report were very categorical that the funds were provided by Investors i.e. Aanya Properties (1) Ltd. through capital money raised from sole share holder M/s Aanya Holding Ltd. and not out of self generating source of Income, in this connection the Appellant draws your kind attention to the fact that the prime question under consideration was to satisfy the genuine source and not to ascertain whether the funds were received out of capital investment or out of profit booked. The report clearly says that the money received was ou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h is factually incorrect. In this connection we bring it to your notice that the correct quantity of equity shares as stated in share certificate on the above pages are as under: Page Numbers Number of Shares 19-20 4,00,297 21-22 22,42,305 29-30 53,85,577 31-32 90,696 33-34 8,69,688 35-36 3,18,260 The above facts can be verified from the seized materials in your possession. ii. In this connection, we enclose herewith a statement showing allotment of shares to API which include the above shares (Annexure 1) iii. In order to prove the identity capacity, creditworthiness and genuineness we enclose herewith the following documents for your kind perusal and record a. Certificate of incorporation of API (Annexure 2) b. Copy of the constitution documents of API (Annexure 3) c. Statement of remittances received from time to time from API to LRPL towards share capital and copy of the ledger of API in the books of LRPL (Annexure 4 & 5) d. Copy of bank statements of LRPL reflecting receipt of funds towards shares allotted to API (Annexure 6) e. Copy of remittance certificates issued by bank (Annexure 7) f. Copy of returns of allotment (Annexure 8) g. C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... XYZ m/s R.P. Gandhi& Co. chartered accountants (Annexure XYZ) d. Certificate dated XYZ m/s R.P.Gandhi& Co. chartered accountants (Annexure XYZ) e. Certificate dated XYZ m/s R.P.Gandhi& Co. chartered accountants (Annexure XYZ) f. Certificate dated XYZ m/s R.P.Gandhi& Co. chartered accountants (Annexure XYZ) g. Certificate dated XYZ m/s R.P.Gandhi& Co. chartered accountants Repeat (Annexure XYZ) v Thus you will observe the value of the shares have been determined on the basis of the certificates issued by m/s R.P.Gandhi & Co. chartered accountants. " A copy of letter dated 15/12/2017 along with relevant supporting documents are enclosed herewith for your honour's kind and ready reference / Annexure The aforesaid details were furnished to the Ld. D.C.I. T. to prove the identity, capacity and genuineness of such investments 18. To sum up, the Appellant tried its level best to satisfy to the Ld. D.C.I.T. on Account of Identity, Capacity and genuineness of such investments made by Aanya Properties (1) Ltd. To summaries before your Honour, the Appellant submitted following documents/ evidence in support of its stand to prove and satisfy the Ld. D.C.I.T. i. Copy ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... produced. iii. All the foreign remittance certificates issued by banks were produced. iv. The shareholding pattern of investee company (i.e. The Appellant Company), were produced. v. The shareholding pattern of investor company (i.e. Aanya Properties (I) Ltd were produced vi. The shareholding pattern of Aanya Holdings Ltd., Mauritius, (which is 100% holding company of Aanya Properties (I) Ltd.). vii. In addition to item no. vi the details of ultimate beneficiaries of Aanya Holding Ltd. along with supporting evidence were produced which proves not only source but source of source. Viii Proof of incorporation of Aanya Properties (I) Ltd. their constitution were produced. ix. The Financial Statements of Aanya Properties (I) Ltd. where such investments in the Appellant Company were duly reflected were produced. These financial statements also reflected the source of such investments. This financial statements were produced x. The basis of the premium amount in the form of a Certificates from a Chartered Accountant were also produced. 21. Ignoring the submissions made by the Appellant, the Ld. D.C.I.T. made addition of ₹ 15,86,06,125/- received from M/S.Aanya Pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... i.e., that of M/s. Ananya Holdings Ltd., a Mauritius based company. The appellant has furnished a number of details which were all filed before the Ld. A.O that is being summed up as follows: i. Confirmation of Aanya Properties (1) Ltd. confirming the investments made in the Appellant company (Annexure 7 (iii) of this paper book) ii. Bank statements of Aanya Properties (1) Ltd. reflecting such investments made (Annexure 7(iv) to 7 (VI) of this paper book) iii. Copy of certificate of incorporation of Aanya Properties (I) Ltd. (Annexure 7(viii) of this paper book) iv. Copy of Memorandum of Association of Aanya Properties (I) Ltd. (Annexure 7(ix) of this paper book) v. Bank statement of the Appellant company reflecting the payment received from Aanya Properties (I) Ltd. (Annexure 8(xxxvi) of this paper book) vi. Bank statements of Aanya Holding Ltd reflecting payments made to Aanya Properties (I) Ltd. (Annexure 8(xiii) of this paper book) vii. Foreign Inward remittance certificates in respect of remittance by Aanya Properties (I) Ltd. {Annexure 8(xlvi) of this paper book) viii. Copy of FIPB approval for condonation of Delay in FDI and copy of compounding application to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... epting the explanation offered by the assessee as not satisfactory is required to be based on proper appreciation of material and other attending circumstances available on the record. The opinion of the Assessing Officer is required to be formed objectively with reference to the material on record. Once the explanation of the assessee is found unbelievable or false, the Assessing Officer is not required to bring positive evidence on record to treat amount in question as income of the assessee. However, while considering the. explanation of the assessee, the Assessing Officer has to act reasonably - application of mind is the sine qua non for forming the opinion. (iii) Phrase appearing in the section - "nature and sources of such credits" - should be understood in fight perspective, so that genuineness of the transaction can be decided on merits and not on prejudices. Courts are of the firm, view that the evidence produced by the assessee cannot be brushed aside in a castral manner. Assesses cannot be asked to prove the impossible. Explanation about 'source of source ' or 'origins of the origin' cannot and should not be called for while making inquiry un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted through the sub-creditors, actually belongs to, or was of, the assessee himself." Thereafter, the High Court, on a harmonious construction of Section 106 of the Evidence Act and Section 68 of the Act, held as under: What, thus, transpires from the above discussion is that while Section 106 of the Evidence Act limits the onus of the Assesses to the extent of his proving the source from which he has received the cash credit, Section 68 gives ample freedom to the Assessing Officer to make inquiry not only into the source(s) of the creditor, but also of his (creditor's) sub-creditors and prove, as a result, of such inquiry, that the money received by the Assessee, in the form of loan from the creditor; though routed through the sub-creditors, actually belongs to, or was oft the Assessee himself. In other words, while Section 68 gives the liberty to the Assessing Officer to enquire into the source/sources from where the creditor has received the money, Section 106 makes the Assessee liable to disclose only the source(s) from where he has himself received the credit and it is not the burden of the Assessee to show the source(s) of his creditor nor is it the burden of the A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ticity of transactions as executed between the Assessee and its creditors. It is no part of the Assessee's burden to prove either the genuineness of the transactions executed between the creditors and the sub-creditors nor is it the burden of the Assessee to prove the creditworthiness of the sub-creditors." 14. In Mod. Creations (P) Ltd. (supra) this Court negatived the case of the Revenue that the onus was on the Assessee to prove the source of the sub-creditor. It was observed as under: "14. With this material on record in our view as far as the Assessee web concerned, it had discharged initial onus placed on it. In the event the revenue still had a doubt with regard to the genuineness of the transactions in issue, or as regards the creditworthiness of the creditors, it would have have to discharge the onus which had shifted on to it. A bald assertion by the A.O. that the credits were a circular route adopted by the Assessee to plough back its own undisclosed Income into Its accounts, can be of no avail. The revenue was required to prove this allegation. An allegation by itself which is based an assumption will not pass muster in law. The revenue would be requir ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is trite law that the AO cannot brush aside the evidences submitted during assessment proceedings and make additions on mere whims and fancies. Even the Hon'ble Supreme Court-in the case of State of Kerala v. C Velukutty Co. [1966] 60 ITR 239 has held that the judgment is a faculty to decide the matters with wisdom truly and legally and not to depend on the arbitrary caprice of a Judge, but on settled and invariable principles of justice. 2.4.8 Further, Hon'ble Supreme Court in the case of MahabirPrasad SantoshKumar v. State of U.P. AIR 1970 SC 1302 has observed as under: ''Recording of reasons in support of a decision on a disputed claim by a quasi-judicial authority ensures that the decision is reached according to law and is not the result of caprice, whim or fancy or reached on grounds of policy or expediency. A party to the dispute is ordinarily entitled to know the grounds on which the authority has rejected his claim. If the order is subject to appeal, the necessity to record reasons is greater, for without recorded reasons the appellate authority has no material on which it may determine whether the facts were properly ascertained, the relevant law was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the CIT(A), we hereby affirm the same. Thus, on this aspect the Revenue fails. 2.4.11 Similarly in the case of CIT vs Tulip Finance Ltd. [2009] 178 Taxman 182 (Delhi), the Hon'ble Delhi High Court confirmed the finding of the IT AT on the basis of remittance certificates submitted to the RBI and in doing so it was, inter alia, held as under: "3 ....... As regards the remaining shareholder, that is 8, it was noted that he was an NRI and the share capital of ₹ 15 lacs received from him was through his NRE account. The remittances were through three separate cheques, of which details were available. The assessee had also filed bank certificates submitted to the RBI presumably for the purpose of remittance of dividend to said 8. In the light of such evidence, the C1T(A) as also the Tribunal had come to a conclusion of fact that the assessee had discharged the burden which lay upon it 'for establishing the identity of the shareholders as well as the genuineness of the transactions. As such, the Tribunal confirmed the findings of the CIT(A) and deleted the addition which had been made by the AO. It is obvious that the findings returned by the CIT(A) as well as the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rent that the source of the funds which was routed through banking channels and reported to the RBI stands explained. Lt Ld. A.O wanted to bring certain other information or evidence on record to negate the appellant's claim,' he was not precluded from doing so. However, as brought out earlier, it is seen that he has not even cared to discuss the facts available on record and has merely gone by his whims and fancies. Accordingly, in view of the overwhelming factual and legal support in favour of the appellant, Ground Nos. 2 and 3 are allowed. 24. In addition to the above your Honour's kind attention is also drawn to c judgment of the Apex Court wherein Hon'ble Supreme Court in the case of CIT Vs Lovely Export 120081216 CTR 195 (SO upheld the order of the Delhi High Court that once the identity of the shareholder have been established even if there is a case of bogus share capital, if cannot be added in the hands of the Company unless any adverse evidence is not on record. 25. Hon'ble Gujarat High Court,in the case of Nemichaod Kothari Vs. CIT (2003) 264 ITR 254 (Gauh), wherein it was held that it is a settled law that the burden of the assessee to prove the genu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2. The Appellant Company is developing a residential project called Crystal Spires in the city of Thane. 3. Since project 'was under construction, major expenses related to project were debited to work in progress and not claimed as revenue expenditure . 4. During the year under Appeal, the Appellant incurred certain expenses, such as Brokerage ₹ 1,30,00,000/-, Sales & Marketing Expenses ₹ 1,24,53,166/-, Finance Cos: ₹ 11,86,093/- and legal & Professional fee ₹ 42,77,037/- aggregating to ₹ 3,09,16,296/- which were not directly related to the project and therefore, as per the Accounting Standards issued by Institute of chartered Accountants, the Appellant claimed such expenses as revenue expenditure and debited to profit and loss account. 5. During the assessment proceedings, the Appellant submitted all the details called for. 6. The Ld. D.C.I.T. made addition of ₹ 1,09,16,296/- stating that the Appellant failed to justify the claim of the said expenses as revenue expenditure. Accordingly The Ld. D.C.I.T, the Ld. D.C.I.T. disallowed the said expenses as revenue expenditure and added to work in progress. 7. The assessment order U/S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... attention drawn to the decision in the case of Ideal Appliances Co. Pvt. Ltd Vs DCIT Central Circle-44, of the Hon'ble ITAT, Mumbai held that since no incriminating material was unearthed during the search, no additions could have made to the income already assessed. The gist of the aforesaid judgement published on www.taxguru .in is enclosed herewith for your Honour's kind and ready reference /Annexure. 10. Your Honour's kind attention is also drawn to a decision of Hon'ble Delhi High court in the case of CIT Vs Kabul Chawla (2016) 380ITR 573 (Delhi) held that since no incriminating material was unearthed during the search, no additions could have been made to the income already assessed. The gist of the aforesaid judgement published on www. itatonline. org is enclosed herewith for your Honour's kind and ready reference Annexure. 11.. Without prejudice, presuming that the stand taken by the Ld. D.C.I.T. as correct, Ld. D.C.I.T. should have increased the work in progress by ₹ 3,09,16,296/-, same not done and the income earned out of surplus fund be reduced from work in progress. 12. The Appellant therefore prays before your Honour to kindly delete the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... material without considering the fact that on this issue, he decision in the case of Commissioner of Income Tax s. Continental Warehousing & All Cargo Global logistics has not been accepted by the Revenue & SLP been filed in the Apex Court which is pending for adjudication." 7. Before us, revenue raised the grounds of appeal contesting that Ld.CIT(A) was not justified in deleting the addition and holding that the Assessing Officer could not make addition without incriminating material and he failed to consider the fact that once the assessment is initiated u/s.153A or 153C of the Act, it is open for the Assessing Officer to make addition on any issue whether any incriminating material related is found in the course of search or not and further the Hon'ble Jurisdictional High Court decision in the case of CIT v. Continental Warehousing & All Cargo Global logistics [374 ITR 0645] which has not been accepted by the revenue and it is in appeal before on Hon'ble Apex court. 8. At the time of hearing, Ld. DR heavily relied on the order passed by the Assessing Officer and he relied on the case law submitted by him which are as below: - S. No. [A] On the issue of addition bein ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ure Pvt. Ltd. and Group Companies on the basis of which jurisdiction is assumed in the case of assessee u/s 153C. F) In absence of incriminating material no jurisdiction with A.O. to make any addition in respect to assessment year which has achieved finality u/s 143(3) of I.T. Act 1961. In the case of assessee for Asstt. Year 2013-14 regular assessment has been completed u/s 143(3) on 09/03/2017 i.e before initiation of proceedings u/s 153C on 16/11/2017. Thus addition made in absence of incriminating material in the assessment framed u/s 153C for Asstt. Year 2013-14 is bad in law. Hon'ble CIT(A) has rightly deleted addition made by A.O. Reliance on: i) (2017) 397 ITR 0344 (SC) CIT vs. Sinhgad Technical Education Society (P-2). ii) Hon'ble Bombay High Court, Bench at Nagpur in ITA No.50/2017 in the case of M/s. Marytime Suppliers Pvt. Ltd., Nagpur. (P-11 & 12) iii) Hon'ble Bombay High Court, Bench at Nagpur in ITA No.54/2017 in the case of Dnarampal Agrawal, Nagpur. (P-15) iv) (2015) 374 ITR 0645 (Bom.) CIT vs. Continental Warehousing Corporation (P-26)" 10. Considered the rival submissions and material placed on record, we observe that the original assessm ..... X X X X Extracts X X X X X X X X Extracts X X X X
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